Food Stamp Program: 1995 Quality Control Technical Amendments

DEPARTMENT OF AGRICULTURE

Food and Consumer Service

7 CFR Parts 271 and 275

[Amdt No. 373]

RIN 0584-AB38

Food Stamp Program: 1995 Quality Control Technical Amendments

AGENCY: Food and Consumer Service, USDA.

ACTION: Proposed rule.

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SUMMARY: The Food and Consumer Service is proposing technical changes

to the Food Stamp Program's Quality Control System which will reduce

the workload on State agencies and improve the efficiency of the

quality control system.

DATES: Comments must be received by November 12, 1996, in order to be

assured of consideration.

ADDRESSES: Please address all comments to John H. Knaus, Branch Chief,

Quality Control Branch, Program Accountability Division, Food Stamp

Program, Food and Consumer Service, USDA, 3101 Park Center Drive,

Alexandria, Virginia 22302. All written comments will be open to public

inspection during regular business hours (8:30 a.m. to 5 p.m., Monday

through Friday) at Room 904, 3101 Park Center Drive, Alexandria,

Virginia.

FOR FURTHER INFORMATION CONTACT: John H. Knaus, at the above address,

or by telephone at (703) 305-2472.

SUPPLEMENTARY INFORMATION:

Executive Order 12866.

This proposed rule has been determined to be significant and was

reviewed by the Office of Management and Budget under Executive Order

12866. It has been determined that the following cost-benefits would

result from adoption of the provisions of this rule:

1. State agency sample size. The provision reducing the minimum

sample size for active and negative case reviews will benefit those

State agencies who will be required to review fewer cases. These are

States choosing the ``smaller range'' in their sample plans with

current minimum active or negative case sample sizes above the minimum

sample size. In Fiscal Year 1992, before the waiver was available,

States reviewed nearly 52,000 active and over 30,000 negative cases.

Assuming a 15 percent reduction in cases, under this provision, States

will be required to review nearly 8,000 fewer active cases and about

4,500 fewer negative cases. Assuming that each active case review costs

$180 and each negative case review costs $40 (taken from studies of

active and negative case reviews and adjusted to account for wage

inflation), total potential savings for States and FCS combined is an

estimated $1.6 million. Savings for States are estimated at $800,000.

2. Home visits. It is estimated that minimal savings in quality

control expenditures will result from this provision as it is expected

that State agencies will channel the resources into other aspects of

quality control operations.

3. Error dollar tolerance level. The provision to modify the

tolerance level from $5.00 to $10.00 for excluding small errors will

benefit those State agencies which qualify for enhanced funding. Based

on Fiscal Year 1995 data, State agencies would qualify for an

additional $562,811.

The Department has examined the impact on potential State agency

liability calculations from the combined effect of changing the error

dollar tolerance level and the case completion standard. Data from two

fiscal years has been analyzed to determine how these changes would

effect liability amounts. The data shows that in one year the potential

liability would have been higher, and in another year it would have

been lower. In both situations the amount of the change was under one

million dollars.

It is not anticipated that any other provisions of this rule will

have any significant impact on the costs or benefits to either the

State agencies or FCS.

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 at 7 CFR part 3015, subpart V and related Notice (48 FR 29115,

June 24, 1983), this Program is excluded from the scope of Executive

Order 12372 which requires intergovernmental consultation with State

and local officials.

[[Page 47681]]

Executive Order 12778.

This proposed 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. 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 liabilities) or Part 283 (for rules related to

quality control liabilities); (3) for program retailers and

wholesalers--administrative procedures issued pursuant to 7 U.S.C. 2023

set out at 7 CFR 278.8.

Regulatory Flexibility Act

This action has also been reviewed in relation to the requirements

of the Regulatory Flexibility Act of 1980 (5 U.S.C. 601 through 612).

William E. Ludwig, Administrator of the Food and Consumer Service, has

certified that this rule does not have a significant economic impact on

a substantial number of small entities. The requirements will affect

State and local agencies that administer the Food Stamp Program.

Paperwork Reduction Act

Agency Information Collection Activities: Proposed Collection; Comment

Request; FCS-380, Integrated Quality Control Review Worksheet

In accordance with the Paperwork Reduction Act of 1995, this notice

invites the general public and other public agencies to comment on the

proposal to extend approval for information collection used on form

FCS-380, the Integrated Quality Control Review Worksheet. The

provisions of this rule do not impact on the approved information

collection burden.

Written comments must be submitted on or before November 12, 1996.

Send comments and requests for copies of this information

collection to: John H. Knaus, Chief, Quality Control Branch, Program

Accountability Division, Food and Consumer Service, U.S. Department of

Agriculture, Room 904, 3101 Park Center Drive, Alexandria, VA 22302.

Comments are invited on: (a) Whether the proposed collection of

information is necessary for the proper performance of the functions of

the agency, including whether the information will have practical

utility; (b) the accuracy of the agency's estimate of the burden of the

proposed collection of information, including the validity of the

methodology and assumptions used; (c) ways to enhance the quality,

utility, and clarity of the information to be collected; and (d) ways

to minimize the burden of the collection of information on those who

are to respond, including through the use of automated, electronic,

mechanical, or other technological collection techniques or other forms

of information technology.

All responses to this notice will be summarized and included in the

request for OMB approval. All comments will also become a matter of

public record.

For further information contact: John H. Knaus, (703) 305-2474.

Title: Integrated Quality Control Review Worksheet.

OMB Number: 0584-0074.

Form Number: FCS-380.

Expiration Date: 03/31/97.

Type of Request: Extension of a currently approved information

collection.

Abstract: Quality Control monitors and reduces the rate of error in

determining basic eligibility and benefit levels for the Food Stamp

Program. The form FCS-380 serves as the source document from which

other reports are compiled by State officials to be sent to the federal

office in Washington, DC.

Affected Public: Individuals or households; State or local

governments.

Estimated Number of Respondents: 61,840.

Estimated Time per Response: 9 Hours.

Estimated Total Annual Burden: 558,019 Hours.

Background

Since 1988, the Food and Consumer Service (``FCS'') has published a

number of proposed and final rules, all of which implemented changes in

the Food Stamp Act of 1977, as amended, 7 U.S.C. 2011, et seq., (the

``Act''). These changes, required by the Hunger Prevention Act of 1988,

Pub. L. 100-435 (the ``HPA'') and/or the Mickey Leland Childhood Hunger

Relief Act of 1993, Chapter 3, Title XIII of the Omnibus Budget

Reconciliation Act of 1993, Pub. L. 103-66 (the ``Leland Act'')

affected the way FCS calculates liabilities and enhanced funding, and

the way State agencies may appeal those liabilities.

During this time, certain operational issues have arisen in quality

control (``QC''). This action proposes to resolve these issues. FCS'

intentions are to reduce the workload on both the State agencies and on

itself and to arrive at final review findings, error rates,

liabilities, and enhanced funding amounts more efficiently. The

proposed changes would: (1) Clarify the process for conducting a

quality control review of negative cases and add suspended cases, which

are cases that are certified for the Food Stamp Program (``Program'')

but do not receive benefits, to the sample universe of negative cases;

(2) permit State agencies to reduce their sample sizes; (3) clarify the

minimum size of the Federal subsample; (4) clarify State sampling

procedures; (5) change the formulas for calculating Federal subsample

sizes; (6) increase the current tolerance level for excluding small

errors; (7) modify the current requirement that requires that most

quality control interviews be conducted in the recipient's home; (8)

adjust the standard for the completion of quality control reviews from

the current standard of 100 percent to a 98 percent completion

requirement; and (9) clarify the circumstances under which the Federal

findings of subsampled reviews will be changed.

Negative Case Reviews

This action proposes to clarify issues surrounding the review of

negative cases and to expand the universe of cases to be reviewed.

These proposals are the culmination of an FCS look at the quality

control review process for negative cases, including an examination of

that process in response to Congress' request contained in the HPA, 7

U.S.C. 2025(d). As a result of that request, FCS entered into a

research contract with Abt Associates to develop and pilot test

alternative approaches to measuring the extent of nonpayments to

eligible households. In addition, prior to the study conducted by Abt

Associates, the General Accounting Office (GAO) was asked by the

Chairman, Subcommittee on Domestic Marketing, Consumer Relations, and

Nutrition, House Committee on Agriculture, to review the accuracy of

State reported error rates for improper denials and terminations. As a

result of its review, GAO made three recommendations: (1) That FCS

annually review a sample of each State's quality control reviews of

denials or terminations and adjust States' reported denial or

termination error rates accordingly; (2) that FCS examine alternatives

to encourage States

[[Page 47682]]

to reduce improper denial or termination error rates, including seeking

authority to hold States financially liable for their improper denials

or terminations; (3) that FCS monitor States' quality control review

practices to ensure that the appropriate cases are reviewed and the

required number of reviews are completed on time. Based on the results

of the study, FCS determined to strengthen monitoring of the negative

action review process, renew emphasis on corrective action to reduce

improper negative actions, and hold States accountable within existing

statutory and regulatory authorities.

With this background information in mind, FCS determined that

certain changes to the regulations governing negative case reviews are

warranted.

1. Federal Monitoring of State Agency Error Rates for Negative Case

Reviews

FCS is proposing to clarify the requirements and procedures for

Federal monitoring of the negative case reviews conducted by State

agencies. Currently under regulations at 7 CFR 275.3(c) FCS is required

to validate a State agency's negative case error rate only when the

State agency's payment and underissuance rate appear to entitle it to

enhanced funding and its reported negative case error rate is less than

the national weighted mean negative case error rate for the prior

fiscal year.

The regulation at 7 CFR 275.3(c) only provides the minimum level at

which case review and validation are required. In practice, as

circumstances warranted, review activity has been expanded. For

example, review activities were expanded in response to the GAO audit.

In addition, regional offices periodically review the quality of State

agencies' negative case review processes. Unlike the results of the

validation reviews, the results of these periodic reviews are not used

to determine eligibility for enhanced funding, but rather to ensure the

accuracy of States' procedures in conducting reviews. FCS is proposing

changes to clarify that FCS retains its authority to conduct these

periodic reviews, independent of the minimum validation activity

required by regulation. The proposal is to require validation when

both: (1) A State agency's reported negative case error rate is below

or within two percentage points above the national weighted mean

negative case error rate for the prior fiscal year; and (2) its payment

error rate appears to entitle it to enhanced funding. It is anticipated

that this increased validation activity will have a minimal impact on a

State agency's workload. It will increase the number of cases reviewed

by some FCS Regional offices. The proposed regulation clarifies that

FCS may review a portion or all of a State agency's cases as FCS deems

appropriate.

2. Inclusion of Suspended Cases in the Negative Sample Universe

The quality control system has two sampling universes: the active

case universe and the negative case universe. The universe for active

cases includes households which have been certified eligible for food

stamp benefits and which have received benefits for the sample month.

The negative case universe includes households whose applications for

food stamp benefits were denied or whose certification for

participation in the Program has been terminated.

In certain cases, State agencies are allowed or required to suspend

a food stamp household instead of denying its application or

terminating its participation in the Program. Suspended households are

certified for the Program, but do not receive any benefits. Households

under monthly reporting systems may be suspended for one month rather

than terminated if they become temporarily ineligible due to a periodic

increase in recurring income, such as receipt of a fifth weekly

paycheck during a month (7 CFR 273.21(n)(1)). Non-categorically

eligible households of three or more persons which are eligible but

entitled to zero benefits because of excess income may be certified and

suspended rather than denied, and categorically eligible households who

are entitled to zero benefits due to excess income must be suspended,

since they cannot be denied under the provisions of the Act 7 U.S.C.

2014(a) and regulations (7 CFR 273.10(e)(2)(iii)(B); 7 CFR

273.2(j)(2)(vii)(F); 7 CFR 273.2(j)(4)(iii)(C)).

Under current regulations, suspended cases are excluded from both

the active and negative case universes of the Program quality control

system. FCS believes that these cases should be reviewed because of the

potential for underissuances, and that it is more logical to review

these cases with denied and terminated cases (negative cases) rather

than with cases that received benefits (active cases). With this rule,

FCS is proposing to include suspended cases in the negative case

universe.

3. Use of the Action Date To Determine the Month in Which Negative

Cases Are Included in the Sample Universe; Clarification of Meaning of

``Break in Participation'' for Suspended and Terminated Cases

In order to have an accurate measure of the correctness of negative

actions, consistency in application of quality control procedures is

necessary. FCS is concerned that problems State agencies have

experienced in constructing the sample frame for negative cases may

have resulted in failure to include certain cases in the negative

sample universe. For example, in some cases when a household is denied

and subsequently reapplies and is certified, the initial denial or

denials have not been considered to be subject to review as negative

actions. FCS is also concerned that there be consistency in the

procedures used to determine whether an action to suspend or terminate

a household has actually resulted in a suspension or termination.

Current regulations include a negative case in the sample universe

for the month for which the denial or termination is effective. The

regulations exclude from the negative universe any negative actions

which were taken against a household which did not result in the

household actually being denied or terminated. Sampling problems occur

if States cannot sample the months for which the action is effective.

This occurs because the actions themselves may occur after, during, or

before the month for which the action is effective. FCS proposes to

allow State agencies to sample the action date rather than the

effective date to make sampling easier.

As a result of our review of these issues, FCS is proposing to

revise the regulations to include denied, suspended, and terminated

cases in the negative case universe in the month in which the action to

deny, suspend, or terminate food stamp benefits was taken, and clarify

that an action to terminate or suspend a household has actually

resulted in a suspension or termination if the household experiences a

break in participation in the program as a result of deliberate State

agency action. The intent of these changes is to allow State agencies

to construct consistent and reliable sampling plans for negative

actions, and to ensure that negative actions which have the result of

denying benefits to clients are subject to review, even if the actions

are subsequently reversed, unless the reversal occurs under specified

conditions and within specified timeframes.

[[Page 47683]]

FCS will allow State agencies to specify in their sampling plans

the date on which the negative action would be considered to have taken

place, and which would be considered the review date. Depending on the

characteristics of individual State systems, this could be the date on

which the eligibility worker makes the decision to suspend, deny, or

terminate the case, the date on which the decision is entered into the

data processing system, the date of the notice to the client, or the

date the negative action becomes effective. A State may choose to use

different dates as the date of the action for denials and suspensions/

terminations. For example, it may choose to sample denials based on the

date of the eligibility worker's decision, but sample suspensions and

terminations based on the date the action goes into effect, to avoid

sampling cases which are not subject to review because the negative

action was never implemented. FCS' concern is not with the particular

date which the State agency considers to be the action date, but rather

the identification of a specific date associated with each negative

action which can be applied consistently across all negative cases of a

given type, and which will allow the State agency to ensure that all

negative actions which are subject to review are included in the

negative sample frame. Thus, if the State agency elects to use a date

other than the decision date to construct its sample frame for negative

cases, it is possible that the review date for these cases may fall

outside the sample month. Negative cases shall not be dropped from the

sample frame because the review date falls outside the sample month.

4. FCS Will Not Establish a Dollar Loss Rate for Negative Cases

One aspect of negative case reviews that was of interest to

Congress was the establishment of a dollar loss rate. During its study,

Abt Associates looked at the possibility of developing a reliable

dollar loss figure. In its recommendations, Abt stated a partial

measure of loss could be determined by the frequency and amount of

benefits restored to improperly denied or terminated households. While

FCS recognizes the possibility of establishing a partial measure, it

does not believe that an effort to obtain such limited information is

warranted in light of the increased workload and reporting burdens that

would fall to the State agencies. In addition, FCS does not believe

that the use of restored benefit information translates directly to a

dollar loss figure for these cases. We have not proposed the

establishment of a dollar loss rate in this rulemaking.

State Agency Minimum Sample Sizes for Active and Negative Case

Reviews

FCS now requires each State agency to choose one of two ranges for

calculating its minimum sample size for active case reviews. One is a

range of 300 to 2400 reviews per year. The other, the ``smaller

range'', is a range of 300 to 1200 reviews per year. The exact size of

each State agency's minimum sample size for each range is determined by

formulas that base sample size on the size of State Program caseloads

(7 CFR 275.11(b)(1)).

If a State agency wants to choose the ``smaller range'' it must

include in its sampling plan a statement that it ``will not use the

size of the sample chosen as a basis for challenging the resulting

error rates'' (currently at 7 CFR 275.11(a)(2)(iv)). If a State agency

does not include that statement in its sampling plan, it must calculate

its minimum sample size for active case reviews using the 300 to 2400

review range.

The regulations now offer State agencies only one range for

determining minimum sample size for negative case reviews. That is a

range of 150 to 800 reviews (7 CFR 275.11(b)(2)).

There are no maximum sample sizes; a State agency may select and

review any number of cases above its minimum.

FCS has granted waivers of the regulations on minimum sample sizes

for active case reviews, in order to improve the efficiency of the

quality control system without significantly affecting the reliability

of quality control information. In order to make these temporary

reductions permanent and to determine the appropriate conditions for

these reductions, FCS is proposing to include the terms of these

waivers in the Food Stamp Program regulations. FCS is also proposing to

offer State agencies a choice of ranges to use in determining minimum

sample sizes for negative case reviews that is similar to the choice of

ranges for determining minimum sample sizes for active case reviews.

FCS is proposing to reduce the size of the ``smaller range'' for

minimum sample sizes for active case reviews. The proposed range would

be 300 to 1020 reviews, a 15 percent reduction at the top from the

current range.

In order to use the minimum sample size calculated from the 300 to

1020 case range, a State agency would still have to include in its

sampling plan the statement from current 7 CFR 275.11(a)(2)(iv) quoted

above. The purpose of the statement, as described in the February 17,

1984 preamble to the rule that established the requirement for the

statement, was to serve as ``a means of assuring that State agencies

consider what degree of reliability they need.'' (49 FR 6295).

There would be no other conditions on a State agency's use of the

revised ``smaller range''. It would be up to the State agency to

determine the most effective use of available resources.

FCS is not proposing to reduce the lower bound of the minimum

sample size ranges for active case reviews. For those State agencies

whose sample size is at the lower bound of the ranges, a reduction in

sample size would mean a reduction in reliability of quality control

information which would be unacceptable to FCS.

FCS is likewise also proposing the creation of a ``smaller range''

for minimum sample sizes for negative case reviews. The ``smaller

range'', representing a 15 percent reduction at the top from current

requirements, would be 150 to 680 reviews per year. The current

required range of 150 to 800 reviews per year would be retained as the

larger range for minimum sample sizes for negative case reviews.

If a State agency chose to use the ``smaller range'' to calculate

its minimum sample size for negative case reviews, it would be required

to include in its sampling plan the statement in proposed new

Sec. 275.11(a)(2)(iv) that it ``will not use the size of the sample

chosen as a basis for challenging the resulting error rates.'' If a

State agency did not include that statement, it would be required to

calculate its minimum sample size for negative case reviews according

to the larger range. As with active case reviews, the ranges would

define minimum sample sizes; State agencies could always select more.

FCS is not proposing to reduce the lower bound of the minimum

sample size ranges for negative case reviews. For those State agencies

whose sample size is at the lower bound of the ranges, a reduction in

sample size would mean a reduction in reliability of quality control

information which would be unacceptable to FCS.

Federal Sample Sizes

On November 27, 1991, FCS published a final rule entitled

``Miscellaneous Quality Control Provisions of the Hunger Prevention Act

of 1988'' (56 FR 60045). This rule permits FCS to select and to review

samples smaller than those indicated by the tables if the State agency

fails to complete its required sample.

FCS is proposing to change the headings to the tables which set out

the

[[Page 47684]]

formulas for calculation of the Federal subsample size. These tables

appear at 7 CFR 275.3(c)(1)(i) and 7 CFR 275.2(c)(3)(i) in current

regulations; they appear in paragraphs 275.3(c)(1)(i)(A) and (B) and

275.3(c)(3)(i) in the proposed rule. The phrase ``Federal subsample

target'' would appear, rather than the current phrase ``Federal annual

sample size''. This change would not permit FCS to select and to review

a smaller subsample for any reason other than a State agency's failure

to complete the minimum number of reviews in its required sample size.

State Sampling Procedures

FCS is proposing four sets of technical clarifications to the

sampling regulations so that the regulations will match the way State

agencies design and implement their sampling plans.

1. Selection of One-Twelfth of the Sample Each Month

Current regulations require State agencies to explain the basis of

each month's sample if it is ``other than one twelfth of the active and

negative sample sizes.'' Some State agencies have expressed concern

that the regulations require that the agency select exactly one-twelfth

of its sample in each month. This was never FCS' intent. It is

inevitable that caseloads will fluctuate, and that the number of

sampled households will rise and fall slightly each month. FCS' concern

is not with these variations, but rather with the accuracy and

integrity of the error rate estimate generated from the quality control

samples. FCS has reviewed this provision in conjunction with the other

regulatory provisions governing State sampling plans, and has

determined that provisions requiring that sampling procedures conform

to the standard principles of probability sampling and that state

samples produce estimates with an acceptable, mandated level of

reliability are sufficient to ensure that deviations, minor or

otherwise, from equal monthly sample sizes will not jeopardize the

validity nor the precision of those error rate estimates. Therefore, in

Sec. 275.11, FCS proposes to delete paragraph (a)(2)(iii) and renumber

paragraph (a)(2)(iv) as (a)(2)(iii). We are also making technical

corrections to regulatory references appearing in Sec. 275.11(b)(1)(ii)

and (b)(1)(iii). Each of these paragraphs currently contains an

erroneous reference to Sec. 275.11(a)(2)(viii), which should be to

current Sec. 275.11(a)(2)(iv). Since paragraph Sec. 275.11(a)(2)(iv)

will now be renumbered, the reference will be corrected to refer to

(a)(2)(iii).

2. Sampling Plans Must Conform to Accepted Statistical Theory

FCS is proposing to amend the regulations at 7 CFR 275.11(a)(3) to

require that all sample designs conform to commonly acceptable

statistical theory and application.

3. Basis for Final Sample Size

A State agency must calculate its required sample sizes at least

twice for each review period. The first calculation occurs before the

review period begins, when the State agency anticipates what its

average monthly caseload will be. The second calculation occurs after

the review period ends, when the State agency knows exactly what its

average monthly caseload was. FCS is proposing to delete the word

``anticipated'' from paragraph 275.11(b)(1)(iv) and current (b)(2)(ii)

(revised (b)(2)(iv)), to clarify that the final sample size depends

upon the State agency's actual average monthly caseload.

Current regulations at 7 CFR 275.11(b)(3) provide that FCS will not

penalize a State agency if its caseload increases by less than 20

percent from the estimated caseload number that the State agency used

to determine the size of its sample. FCS is proposing to clarify that

this estimated caseload number is the one initially used to determine

the sample size. Sample sizes will be found to be adequate if at least

the minimum required sample size for the estimated caseload is chosen,

and the actual caseload is no larger than 120% of the estimated

caseload.

4. Number of Households Subject to Review is the Basis for the Sample

Size

Currently, the tables that describe the State agency's required

sample sizes use the phrase ``average monthly active households'' and

``average monthly negative households''. However, the actual practice

is to use the ``average monthly reviewable caseload'' as the basis for

calculating minimum sample sizes for both active and negative case

reviews. Therefore, FCS is proposing to clarify the wording in the

headings in the tables in proposed 7 CFR 275.3(c)(1)(i) (A) and (B),

and in current 7 CFR 275.3 (c)(3)(i), 7 CFR 275.11 (b)(1) (ii) and

(iii), and proposed 7 CFR 275.11 (b)(2) (i) and (ii). Please see FNS

Handbook 311, section 3121.

Federal Subsample Size Formulas

For both active and negative case reviews, FCS reviews a subsample

of the State agency's completed reviews. The minimum Federal subsample

sizes are determined by formulas that are based on the number of

reviews that a State agency has completed. For example, if a State

agency completed 1000 active case reviews, FCS would select a minimum

subsample of 344 active case reviews. The range of the minimum

subsample size for active case reviews is 150 to 400. The range of the

minimum subsample size for negative case reviews is 75 to 160.

Because FCS is proposing a change in the number of cases that a

State agency is required to complete, use of the current formulas for

calculating subsample sizes would result in a decrease in the size of

the minimum Federal subsample for a State agency that chooses the

``smaller ranges'' which FCS has proposed. However, FCS does not intend

to reduce the size of the Federal subsample. Without a regulatory

change, the formula for determining FCS' minimum subsample sizes would

not accurately indicate the number of reviews that FCS would actually

select for the subsample.

So that the public is aware of FCS' actual minimum subsample sizes,

FCS is proposing revised formulas for the minimum active and negative

Federal subsamples. These proposed formulas, when applied to the new

proposed ``smaller ranges'' for State samples, would yield the current

ranges for the Federal subsample. Under FCS' proposal, Federal

reviewers could still select and review more cases than the minimum

subsample.

Error Dollar Tolerance Level

Current regulations at 7 CFR 275.12(f)(2), first published August

3, 1979 (44 FR 45887) provide that only overissuances or underissuances

to eligible households in an amount greater than $5.00 shall be coded

and reported in completing the quality control review of a sampled

case. In the proposed regulations published April 10, 1979 (44 FR

21517) the Department cited as one of the primary reasons for the

proposed $5.00 tolerance the intention to ``obviate the need to expend

funds to correct minor variations between the reviewer's and the

eligibility worker's allotment figures.'' Since its inception 15 years

ago the $5.00 tolerance figure has not been adjusted to take into

account either increases in the Thrifty Food Plan, upon which food

stamp allotments are based, or inflation in general. The Department has

determined that because of the inflation to food stamp allotments which

has occurred over the past 15 years an adjustment must be made to the

tolerance level figure, in order to insure that minor variations

between the reviewer's and eligibility worker's allotment figures

continue to be

[[Page 47685]]

excluded from the error determination process.

The Department proposes to raise the $5.00 tolerance level to

$10.00, in order to compensate for the inflation which has occurred

since the $5.00 tolerance was first established. Only those

overissuances to eligible households, or underissuances to eligible

households which exceeded the $10.00 tolerance figure would be reported

and coded in the completion of quality control reviews. Based on an

analysis of Fiscal Year 1993 quality control case review figures, an

increase of the tolerance level to $10.00 would have the overall effect

of decreasing the quality control National Average Payment Error Rate

by .17 percent, and an increase in total liability amounts of $650,000.

The slight increase in total liability amounts is due to the fact that

liability figures are based, in part, on the percentage that an

individual State agency's Payment Error Rate exceeds the National

Average Payment Error Rate.

Home Visit Requirement

Current regulations at 7 CFR 275.12(c)(1), first published August

3, 1979, (44 FR 45895) specify that a face-to-face, personal interview,

between the quality control reviewer and a responsible member of the

household under review, is a required component of all active quality

control reviews conducted. The regulations specify that most of these

personal interviews shall take place in the participant's home, what is

commonly referred to as a ``home visit''. The Department believes that

the need for the personal interview to take place in the participant's

home is no longer as great as it was when these provisions were first

implemented. This is due, in part, to the greater variety of

information sources, including computer data bases, which have been

developed over the years to aid the reviewer in verifying the

circumstances of the food stamp household under quality control review.

The Department is proposing to amend the requirement for personal

interviews to simply require a face-to-face personal interview. It is

expected that the personal interview would take place at an appropriate

State agency certification office, in the participant's home, or at a

mutually agreed upon alternative location. The State agency would

determine the best location for the interview to take place, but would

be subject to the same provisions as those regarding certification

interviews at 7 CFR 273.2(e)(2). These regulations provide that an

office interview shall be waived under certain hardship conditions (for

example, if all household members are disabled or elderly). Under such

hardship conditions the quality control reviewer would conduct the

personal interview either with an authorized representative (if one has

been appointed by the household) or conduct the personal interview in

the participant's home.

Conducting Quality Control Reviews Against Federal Regulations

Current regulations at 7 CFR 275.3(c) for Federal validation

reviews, published February 4, 1987 (52 FR 3402) and 7 CFR 275.10(a)

for quality control reviews conducted by the State agencies, published

February 17, 1984, (49 FR 6294) specify that all active and negative

quality control reviews shall be conducted by ``reviewing against the

Food Stamp Act and the regulations, taking into account any FNS-

authorized waivers to deviate from specific regulatory provisions.''

This provision was made because the Department no longer had authority

to require approval of State agency manuals prior to their use. It was

the intent of the Department to eliminate the use of the State agency

manuals in the quality control review process. In the preamble to the

February 17, 1984, final rulemaking it is stated that although the

Department no longer had the authority to require approval of manuals

prior to their use, the rule did not prohibit their use for quality

control review purposes. The Department expected that most State

agencies would continue to use their manuals as the basis for quality

control reviews. Commenters pointed out that this would result in

Federal quality control reviewers finding errors in manuals before

State agencies were otherwise notified of them, and that these errors

would affect the regressed error rates. The commenters objected to this

use of quality control reviews and requested that State agencies be

given time to correct manuals before an error is counted. These

comments were not adopted because the Department believed that if State

agencies were not liable for certification errors resulting from manual

materials from the date those materials were in effect, there would

have been less of an incentive to implement regulations on time and in

conformance with the regulations.

The Department believes that changes over the years in other areas

of the regulations, including the provisions at 7 CFR 275.12(d)(2)(vii)

published November 23, 1990, (55 FR 48831) which provide a variance

exclusion for the timely implementation of new regulations, provide the

incentive to the State agencies to implement regulatory changes in a

timely manner. Therefore, the Department is considering amending

regulations in order to provide a variance exclusion for any erroneous

payments which result from the State agency having followed State

agency policies or directives, provided that these policies or

directives were provided to FCS prior to implementation and FCS had not

notified the State agency that these policies were contrary to Federal

law or regulations. This would not encompass situations where a State

agency might knowingly violate Federal law or regulations. This

variance exclusion could include changes in the computer programming of

any State agency automated certification system. Providing a variance

exclusion in this area, whether cited by State agency or Federal

quality control reviewers, would have the effect of holding the State

agency harmless from any errors resulting from inaccurate instructions

appearing in State manuals. At the same time, maintaining the current

practice of conducting quality control reviews against the Food Stamp

Act and regulations would assist the State agencies and FCS in

identifying, for corrective action, any erroneous instructions

contained in State agency manuals, policies, or directives.

The Department wishes to solicit comments from all interested

parties on the appropriateness and potential consequences such a

variance exclusion would have on the administration of the Program.

Quality Control Review Case Completion Standard

Current regulations at 7 CFR 275.23(e)(7)(iii), first published

February 17, 1984 (49 FR 6292) provide that an adjustment be made to a

State agency's regressed error rates any time that the State agency

fails to complete 100 percent of its required sample size by assigning

two standard errors of the estimated error rates added to the regressed

error rates, to those cases not completed. (This was ``two standard

deviations'' in prior regulations and has been changed to use the

correct terminology for the adjustment that is done. Standard deviation

refers to the true error rate, while the standard error refers to the

estimate of the error rate.) Prior to the publication of the February

17, 1984 rule the completion standard had been 95 percent. It was the

belief of the Department that the 100 percent completion standard was

the only standard which would minimize any bias which incomplete cases

could cause. In addition, because of changes which reduced the types of

cases which would be considered incomplete, it was

[[Page 47686]]

believed that many State agencies would complete such a high percentage

of their minimum sample size that the impact from the 100 percent

completion standard would be minimal. However, experience has shown

that there remain categories of cases which State agencies are unable

to complete despite all efforts to do so on the part of the quality

control reviewers. These cases include those in which the household

under review refuses to cooperate with the quality control reviewer

despite repeated attempts on the part of the State agency, including

disqualification of the household from the Food Stamp Program, to gain

the household's cooperation. An additional category is cases in which

the reviewer is unable to verify the actual circumstances of the

household for the time period under review, despite repeated attempts

to do so.

The Department proposes to amend the current requirement that a

State agency complete 100 percent of its minimum required sample size.

The new standard for State agency completion will be 98 percent of its

minimum required sample size. In the event that a State agency fails to

complete 98 percent of its minimum required sample size, error rates

would be adjusted using the current regulatory formula which is based

on a 100 percent completion requirement.

Changing Federal Case Findings and Disposition

In active reviews, a finding is the determination of the accuracy

of the State agency's authorized allotment for the household for the

sample month. If the allotment was erroneous, the finding includes the

amount of the error. In negative reviews, a finding is the

determination of the validity of the State agency's decision to deny or

terminate participation in the Food Stamp Program. For both active and

negative reviews the disposition is the determination of whether the

circumstances of the review meet the standards to be considered

completed, not completed, or not subject to review.

Current regulations, FNS Handbook 315, and current administrative

practices describe the following as a typical (although not mandatory)

way to handle a subsampled case that the Federal reviewer has

completed. (1) FCS informs the State agency of the Federal findings and

disposition for the case. This is done within seven days of the

completion of the Federal review. (2) The State agency requests

arbitration if it disagrees with some aspect of the FCS findings or

disposition of the review. Under current regulations the State agency

has 28 days to request arbitration. (3) During the same 28 day period

the State agency may request that FCS reconsider the Federal findings

or disposition in the case. (4) If FCS changes the Federal findings or

disposition during the 28 day period because of the reconsideration,

the new Federal findings/disposition are transmitted to the State

agency, and a new 28 day period to request arbitration is provided for.

There are circumstances under which FCS will currently change

Federal findings/disposition after the 28 day deadline for requesting

arbitration. Generally the reason for any changes are to arrive at

correct Federal findings.

The Department is proposing to codify into regulations the policies

and practices which dictate when, and under what circumstances, FCS

will change the Federal findings or disposition for a specific case.

The Department has two goals in this proposal. First, the Department

wishes to clarify the circumstances under which FCS will change Federal

findings/disposition in order to promote clear, consistent application

of its policies. The second goal in proposing these changes is to

ensure the accurate determination of the error rates for all State

agencies. The proposed changes are as follows:

1. Informal Resolution

FCS would change the Federal findings or disposition if, as a

result of the informal resolution process, both the State agency and

FCS agreed on a new finding or disposition. The informal resolution

process should begin in the period prior to the 28 day deadline which a

State agency has for requesting arbitration. The informal resolution

process may also take place after the 28 day deadline, but prior to any

formal decision by an arbitrator, provided that the State agency has

timely requested arbitration of the case. It should be noted that the

28 day timeframe specified in this proposal is based on current

regulations which provide State agencies with 28 days to request

arbitration. Program changes mandated by the Leland Act regarding the

timeframes for completing all review work and resolving all differences

in review findings may require a modification of the timeframes for

State agencies to request arbitration. If such a modification of the

timeframes for requesting arbitration is made, it will be necessary in

the final rule to adjust the timeframes for informal resolution.

2. Ruling by an Arbitrator

FCS would change the Federal findings or disposition whenever an

arbitrator's decision requires that a change be made.

3. Implementation of a Regulation, Law, or Waiver

Whenever a change in Federal findings or dispositions is the only

way to implement a change in regulations, an amendment to the Food

Stamp Act, or retroactive provisions to a waiver, FCS would make the

change.

4. Correct any Application of Incorrect Written Policy

Current regulations at 7 CFR 275.12(d)(2)(viii) exclude ``any

variance resulting from incorrect written policy that a State agency

acts on that is provided by a Departmental employee authorized to issue

Food Stamp Program policy and that the State agency correctly

applies.'' The regulations go on to describe written policy as that in

regulations, notices, handbooks, category three and four policy

memoranda, and regional policy memoranda. The exclusion of these

variances is required by section 16(c)(3)(B) of the Food Stamp Act (7

U.S.C. 2025).

The Department would change a Federal finding/disposition whenever

it became aware that a variance which had been cited was the result of

correct State application of an incorrect written policy provided by a

Departmental employee authorized to issue FSP policy. It is likely that

the State agency and FCS will not become aware of the problem until

well after the State agency's deadline for requesting arbitration. This

is because almost all parties involved, State agency quality control

and certification policy staff, as well as FCS's regional office staff,

will think that the written policy that they are following is correct.

Therefore, in order to ensure that the State agency is not harmed by

the Department's incorrect policy, the Department is proposing that the

variance exclusion at 7 CFR 275.12(d)(2)(viii) may be made in the

Federal findings at any time that the problem is discovered.

FCS would not make a change based upon new factual information. The

Department is taking this position for three reasons. First, it is the

responsibility of the State agency to obtain all necessary information

at the time the State quality control reviewer conducts the review.

Even if the Federal reviewer obtains conflicting information, the State

reviewer has two more opportunities to resolve

[[Page 47687]]

conflicting information- when the State agency requests regional

arbitration, and again if the dispute moves to national arbitration.

Second, if the household's circumstances were not reasonably

certain at the time of the State agency's review, the case should have

been disposed of as not completed. It does not seem likely that

reasonably verified information would be contradicted at a later time.

Third, the Department recognizes the need for final closure at some

point in the resolution process. Section 13951 of the Leland Act

specifies that ``no later than 180 days after the end of the fiscal

year, the case review and all arbitrations of State-Federal difference

cases shall be completed.'' The Department believes that without

providing some limits on the resolution process this mandated deadline

cannot be achieved.

5. Conflict in a Federal Finding/Disposition

If, for any reason, the Federal findings or disposition in the

Integrated Quality Control System's (IQCS) data base conflicted with

the finding letter which had been transmitted to the State agency, FCS

would ensure the IQCS data base was correct. If the IQCS coding was

incorrect, it would be corrected. If the finding letter was incorrect,

it would be corrected. Either way, FCS would transmit a new finding

letter to the State agency explaining what had occurred. There would be

a new finding letter because the State agency would be entitled to know

that a change in official error rates would be taking place.

If, in any of the five circumstances which have been specified, FCS

were to make changes to the findings and dispositions of a case these

changes would be made regardless of the effect on the amount of error

in the case. A State agency would be notified of the change and

entitled to arbitration of the new Federal findings or disposition,

with one exception. If FCS changed the Federal findings or disposition

to comply with the decision of a national arbitrator, the State agency

would have no further right to arbitration. This is because the

national arbitrator's decisions are final, with two exceptions. The

first would be to implement a change in law or regulations. The other

would be if FCS learned that it had not properly implemented the

decision of the arbitrator.

Miscellaneous Technical Correction

FCS is taking advantage of the publication of this proposed rule to

eliminate redundant regulatory language at 7 CFR 275.12(g)(2). Six of

the 10 subparagraphs in this paragraph, which lists active cases which

are eliminated from the sample universe during the review process, also

appear at 7 CFR 275.11(f)(1). Therefore, FCS is proposing to (1) revise

paragraph 275.12(g)(2) to reference Sec. 275.11(f); (2) remove

subparagraphs 275.12(g)(2) (i) through (iv), (vi) and (viii), and (3)

renumber the remaining subparagraphs in 275.12(g)(2). These revisions

parallel the proposed revisions to Sec. 275.13(e), which lists negative

cases which are eliminated from the sample universe during the review

process. In addition, FCS is taking advantage of the publication of

this proposed rule to eliminate obsolete regulatory language at 7 CFR

275.23(e)(5)(i). Section 13951(c)(4) of the Leland Act provides that

Administrative Law Judges, in considering a State agency's appeal of

quality control liability consider all grounds for denying the claim,

including the contention of a State agency that the claim should be

waived, in whole or in part, for good cause. This provision was

included in a final rulemaking published July 6, 1994 (59 FR 34553),

and supersedes the regulatory language contained in 7 CFR

275.23(e)(5)(i) dealing with good cause requests and the timing of the

issuance of billings. The Department is also proposing to move, without

change, the regulatory language in 7 CFR 275.23(e)(5)(i) dealing with

the methods of claim collection employed by FCS to 7 CFR 275.23(e)(8).

With the removal of the language dealing with billings from 7 CFR

275.23(e)(5)(i), paragraph (e)(8) becomes the proper location for the

provisions regarding the methods of bill collection to be employed by

FCS.

Implementation

FCS proposes all provisions would be effective with the 1998 fiscal

year, which begins with the October, 1997 sample month.

List of Subjects

7 CFR Part 271

Administrative practice and procedure, Food stamps, Grant programs-

social programs.

7 CFR Part 275

Administrative practice and procedure, Food stamps, Reporting, and

recordkeeping requirements.

For the reasons set out in the preamble, parts 271 and 275 of

Chapter II of Title 7 Code of Federal Regulations are proposed to be

amended as follows:

PART 271--GENERAL INFORMATION AND DEFINITIONS

1. The authority citation for Part 271 continues to read as

follows:

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

2. In Sec. 271.2, the definitions of ``Error'', ``Negative case'',

``Negative case error rate'', ``Quality control review'', and ``Review

date'' are revised to read as follows:

Sec. 271.2 Definitions.

* * * * *

Error for active cases results when a determination is made by a

quality control reviewer that a household which received food coupons

during the sample month is ineligible or received an incorrect

allotment. Thus, errors in active cases involve dollar loss to either

the participant or the government. For negative cases, an ``error''

means that the reviewer determines that the decision to deny, suspend,

or terminate a household was incorrect.

* * * * *

Negative case means a household whose application for food stamp

benefits was denied or whose food stamp benefits were suspended or

terminated by an action in the sample month.

Negative case error rate means an estimate of the proportion of

denied, suspended, or terminated cases where the household was

incorrectly denied, suspended, or terminated. This estimate will be

expressed as a percentage of completed negative quality control reviews

excluding all results from cases processed by SSA personnel or

participating in a demonstration project identified by FCS as having

certification rules that are significantly different from standard

requirements.

* * * * *

Quality control review means a review of a statistically valid

sample of active and negative cases to determine the extent to which

households are receiving the food stamp allotments to which they are

entitled, and to determine the extent to which decisions to deny,

suspend, or terminate cases are correct.

* * * * *

Review date for quality control active cases means a day within the

sample month, either the first day of the calendar or fiscal month or

the day the household was certified, whichever is later. The ``review

date'' for negative cases is the date of the agency's decision to deny,

suspend, or terminate program benefits. For no case is the ``review

[[Page 47688]]

date'' the day the quality control review is conducted.

* * * * *

PART 275--PERFORMANCE REPORTING SYSTEM

3. The authority citation for Part 275 continues to read as

follows:

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

4. In Sec. 275.3:

a. the introductory text of paragraph (c) is amended by revising

the third sentence and adding a new sentence between the third and

fourth sentences;

b. paragraph (c)(1)(i) introductory text is revised, and the table

following the introductory text is removed;

c. paragraphs (c)(1)(i)(A), (c)(1)(i)(B), and (c)(1)(i)(C) are

redesignated as paragraphs (c)(1)(i)(C), (c)(1)(i)(D), and

(c)(1)(i)(E), respectively, and new paragraphs (c)(1)(i)(A) and

(c)(1)(i)(B) are added;

d. newly redesignated paragraph (c)(1)(i)(C) is amended by removing

the words ``n is the'' and adding in their place the words ``n' is

the'';

e. paragraph (c)(3)(i) introductory text is revised, and the table

following the introductory text is revised;

f. paragraph (c)(3)(i)(A), introductory text, is amended by

removing the words ``n is the'' and adding in their place the words

``n' is the'';

g. paragraph (c)(3)(ii) is amended by adding the word ``,

suspend,'' between the words ``deny'' and ``or'';

h. a new paragraph (c)(6) is added.

The revisions and additions read as follows:

Sec. 275.3 Federal monitoring.

* * * * *

(c) Validation of State Agency Error Rates. * * * FCS must validate

the State agency's negative case error rate, as described in

Sec. 275.23(d), when the State agency's payment error rate for an

annual review period appears to entitle it to an increased share of

Federal administrative funding for that period as outlined in

Sec. 277.4(b)(2) of this chapter, and its reported negative case error

rate for that period is less than two percentage points above the

national weighted mean negative case error rate for the prior fiscal

year. However, this requirement will not preclude the federal review of

any negative case for other reasons as determined appropriate by FCS. *

* *

(1) Payment error rate. * * *

(i) FCS will select a subsample of a State agency's completed

active cases, as follows:

(A) For State agencies that determine their active sample sizes in

accordance with Sec. 275.11(b)(1)(ii), the Federal review sample for

completed active cases is determined as follows:

------------------------------------------------------------------------

Federal subsample target

Average monthly reviewable caseload (N) (n')

------------------------------------------------------------------------

31,489 and over........................... n'=400.

10,001 to 31,488.......................... n'=.011634 N+33.66.

10,000 and under.......................... n'=150.

------------------------------------------------------------------------

(B) For State agencies that determine their active sample sizes in

accordance with Sec. 275.11(b)(1)(iii), the Federal review sample for

completed active cases is determined as follows:

------------------------------------------------------------------------

Federal subsample target

Average monthly reviewable caseload (N) (n')

------------------------------------------------------------------------

60,000 and over........................... n'=400.

10,001 to 59,999.......................... n'=.005 N+100.

10,000 and under.......................... n'=150.

------------------------------------------------------------------------

* * * * *

(3) Negative case error rate. * * *

FCS will select a subsample of a State agency's completed negative

cases, as follows:

------------------------------------------------------------------------

Average monthly reviewable negative Federal subsample target

caseload (N) (n')

------------------------------------------------------------------------

5,000 and over............................ n'=160.

501 to 4,999.............................. n'=.0188 N+65.7.

Under 500................................. n'=75.

------------------------------------------------------------------------

* * * * *

(6) Changing Federal Findings. Once FCS has notified a State agency

of a Federal finding, FCS shall change that Federal finding only

according to the following procedures:

(i) FCS shall change a Federal finding only if:

(A) FCS informally resolves with a State agency the differences

between the State agency and Federal findings, and both parties agree

on a single Federal finding. The informal resolution process should

begin prior to the deadline for the State agency to request arbitration

of a case, and may continue after the arbitration deadline, provided

that arbitration of the case has been timely requested by the State

agency; or

(B) An arbitrator's decision necessitates a change; or

(C) A change is the only way to implement a regulation or an

amendment to the Food Stamp Act; or

(D) The change is solely attributable to the variance exclusion for

incorrect written policy, as described at Sec. 275.12(d)(2)(viii).

(ii) FCS shall notify the State agency that the Federal finding has

changed.

(iii) The State agency shall be entitled to arbitration in

accordance with paragraph (c)(4) of this section. However, if FCS

changed the Federal finding or disposition based on a national

arbitrator's decision, the State agency shall not be entitled to

further arbitration.

(iv) If FCS enters a Federal finding into the data base at the

National Computer Center but notifies the State agency of a different

Federal finding for the same case, FCS shall ensure the IQCS data base

contains the correct finding, notify the State agency of the

discrepancy in the IQCS data base and the finding letter, and inform

the State agency that it is entitled to arbitration in accordance with

paragraph (c)(4) of this section.

* * * * *

Sec. 275.10 [Amended]

5. In Sec. 275.10(a):

a. the second sentence is amended by adding the word ``,

suspended,'' between the words ``denied'' and ``or'';

b. the fifth sentence is amended by adding the word ``, suspend,''

between the words ``deny'' and ``or''.

6. In Sec. 275.11:

a. paragraph (a)(2)(iii) is removed, paragraph (a)(2)(iv) is

redesignated as (a)(2)(iii) and a new paragraph (a)(2)(iv) is added;

b. paragraph (a)(3) is revised;

c. in paragraph (b)(1)(ii), the table is revised, and the text is

amended by removing the reference to ``(a)(2)(viii)'' and adding in its

place the reference to ``(a)(2)(iii)'';

d. in paragraph (b)(1)(iii), the table is revised, and the text is

amended by removing the reference to ``(a)(2)(viii)'' and adding in its

place the reference to ``(a)(2)(iii)'';

e. in paragraph (b)(1)(iv) the third sentence is amended by

removing the word ``anticipated'';

f. paragraph (b)(2) is revised;

g. paragraph (b)(3) is revised;

h. the last sentence in paragraph (c)(1) is amended by adding the

word ``, suspension,'' between the words ``denial'' and ``or'';

i. paragraph (e)(2) is revised;

j. the introductory text of paragraph (f)(2) is revised;

k. paragraph (f)(2)(iv) is revised and paragraphs (f)(2)(v) through

(f)(2)(ix) are added.

The additions and revisions read as follows:

Sec. 275.11 Sampling.

(a) Sampling plan. * * *

(2) Criteria. * * *

(iv) If the State agency has chosen a negative sample size as

specified in paragraph (b)(2)(ii) of this section, include a statement

that, whether or not the sample size is increased to reflect an

[[Page 47689]]

increase in negative actions as discussed in paragraph (b)(3) of this

section, the State agency will not use the size of the sample chosen as

a basis for challenging the resulting error rates.

(3) Design. FCS generally recommends a systematic sample design for

both active and negative samples because of its relative ease to

administer, its validity, and because it yields a sample proportional

to variations in the caseload over the course of the annual review

period. (To obtain a systematic sample, a State agency would select

every kth case after a random start between 1 and k. The value of k is

dependent upon the estimated size of the universe and the sample size.)

A State agency may, however, develop an alternative sampling design

better suited for its particular situation. Whatever the design, it

must conform to commonly acceptable statistical theory and application

(see paragraph (b)(4) of this section).

* * * * *

(b) Sample size. * * *

(1) Active cases. * * *

(ii) * * *

------------------------------------------------------------------------

Minimum annual sample size

Average monthly reviewable caseload (N) (n)

------------------------------------------------------------------------

60,000 and over........................... n=2400.

10,000 to 59,999.......................... n=300+[0.042 (N-10,000)].

Under 10,000.............................. n=300.

------------------------------------------------------------------------

(iii) * * *

------------------------------------------------------------------------

Minimum annual sample size

Average monthly reviewable caseload (N) (n)

------------------------------------------------------------------------

60,000 and over........................... n=1020.

12,942 to 59,999.......................... n=300+[0.0153(N-12,941)].

Under 12,942.............................. n=300.

------------------------------------------------------------------------

* * * * *

(2) Negative cases.

(i) Unless a State agency chooses to select and review a number of

active cases determined by the formulas provided in paragraph

(b)(2)(ii) of this section and has included in its sampling plan the

reliability certification required by paragraph (a)(2)(iv) of this

section, the minimum number of negative cases to be selected and

reviewed by a State agency during each annual review period shall be

determined as follows:

------------------------------------------------------------------------

Average monthly reviewable negative Minimum annual sample size

caseload (N) (n)

------------------------------------------------------------------------

5,000 and over............................ n=800.

500 to 4,999.............................. n=150+[0.144 (N-500)].

Under 500................................. n=150.

------------------------------------------------------------------------

(ii) A State agency which includes in its sampling plan the

statement required by paragraph (a)(2)(iv) of this section may

determine the minimum number of negative cases to be selected and

reviewed during each annual review period as follows:

------------------------------------------------------------------------

Average monthly reviewable negative Minimum annual sample size

caseload (N) (n)

------------------------------------------------------------------------

5,000 and over............................ n=680.

684 to 4,999.............................. n=150+[0.1224 (N-683)].

Under 684................................. n=150.

------------------------------------------------------------------------

(iii) In the above formulas, n is the required negative sample

size. This is the minimum number of negative cases subject to review

which must be selected each review period.

(iv) In the above formulas, N is the average monthly number of

negative cases which are subject to quality control review (i.e.,

households which are part of the negative universe defined in paragraph

(e)(2) of this section) during the annual review period.

(3) Unanticipated changes. Since the average monthly caseloads

(both active and negative) must be estimated at the beginning of each

annual review period, unanticipated changes can result in the need for

adjustments to the sample size. FCS shall not penalize a State agency

that does not adjust its sample size if the actual caseload during a

review period is less than 20 percent larger than the estimated

caseload initially used to determine sample size. If the actual

caseload is more than 20 percent larger than the estimated caseload,

the larger sample size appropriate for the actual caseload will be used

in computing the sample completion rate.

* * * * *

(e) Sample frame. * * *

(2) Negative cases. The frame for negative cases shall list:

(i) all households whose applications for food stamps benefits were

denied by an action in the sample month except those excluded from the

universe in paragraph (f)(2) of this section. If a household is subject

to more than one denial action in a single sample month, each action

shall be listed separately in the sample frame; and

(ii) all households whose food stamp benefits were suspended or

terminated by an action in the sample month except those excluded from

the universe in paragraph (f)(2) of this section.

* * * * *

(f) Sample universe. * * *

(2) Negative cases. The universe for negative cases shall include

all households whose applications for food stamps were denied or whose

food stamp benefits were suspended or terminated by an action in the

sample month except for the following:

* * * * *

(iv) A household which is under active investigation for

Intentional Program Violation;

(v) A household which was denied, but subsequently certified within

the normal 30 day processing standard, using the same application form;

(vi) A household which was suspended or terminated but the

suspension or termination did not result in a break in participation

that is the result of deliberate State agency action. There would be no

break in participation if the household is authorized to receive its

full allotment in the month for which the suspension or termination was

effective other than continuation of benefits pending a fair hearing.

Pro rated benefits are not considered to be a full allotment;

(vii) A household which has been sent a notice of pending status

but which was not actually denied participation;

(viii) A household which was terminated for failure to file a

complete monthly report by the extended filing date, but reinstated

when it subsequently filed the complete report before the end of the

issuance month.

(ix) Other households excluded from the negative case universe

during the review process as identified in Sec. 275.13(e).

* * * * *

7. In Sec. 275.12:

a. paragraph (c)(1) introductory text is revised;

b. the first sentence of paragraph (f)(2) is amended by removing

the reference to ``$5.00'' and adding in its place a reference to

``$10.00'';

c. paragraph (g)(2) introductory text is revised.

The revisions and additions read as follows:

Sec. 275.12 Review of active cases.

* * * * *

(c) Field investigation. * * *

(1) Personal interviews. Personal interviews shall be conducted in

a manner that respects the rights, privacy, and dignity of the

participants. Prior to conducting the personal interview, the reviewer

shall notify the household that it has been selected, as part of an

[[Page 47690]]

ongoing review process, for review by quality control, and that a

personal face-to-face interview will be conducted in the future. The

method of notifying the household and the specificity of the

notification shall be determined by the State agency, in accordance

with applicable State and Federal laws. The personal interview may take

place at an appropriate State agency certification office, at the

participant's home, or at a mutually agreed upon alternative location.

The State agency shall determine the best location for the interview to

take place, but would be subject to the same provisions as those

regarding certification interviews at 7 CFR 273.2(e)(2). These

regulations provide that an office interview shall be waived under

certain hardship conditions. Under such hardship conditions the quality

control reviewer shall either conduct the personal interview with the

participant's authorized representative, if one has been appointed by

the household, or with the participant in the participant's home.

Except in Alaska, when an exception to the field investigation is made

in accordance with this section, the interview with the participant may

not be conducted by phone. During the personal interview with the

participant, the reviewer shall:

* * * * *

(g) Disposition of case reviews. * * *

(2) Cases not subject to review. Active cases which are not subject

to review, if they have not been eliminated in the sampling process,

shall be eliminated in the review process. In addition to cases listed

in 275.11(f)(1), these shall include:

* * * * *

8. In Sec. 275.13:

a. paragraph (a) is revised;

b. the first sentence of paragraph (b) is revised;

c. the third sentence of paragraph (b) is amended to add the word

``, suspension,'' between the words ``denial'' and ``or'';

d. the first sentence of paragraph (c)(1) is amended by adding the

word ``, suspended,'' between the words ``denied'' and ``or'';

e. the second sentence of paragraph (c)(1) is amended by adding the

word ``, suspend,'' between the words ``deny'' and ``or'';

f. the first sentence of paragraph (c)(2) is amended by adding the

word ``, suspended,'' between the words ``denied'' and ``or'';

g. paragraph (e)(1) is amended by adding a heading to the

paragraph;

h. paragraph (e)(2) is revised;

i. the first sentence of paragraph (f) is amended by adding the

words ``suspended or'' between the words ``been'' and ``terminated''.

The addition and revisions read as follows:

Sec. 275.13 Review of negative cases.

(a) General. A sample of households whose applications for food

stamps benefits were denied or whose food stamp benefits were suspended

or terminated by an action in the sample month shall be selected for

quality control review. These negative cases shall be reviewed to

determine whether the State agency's decision to deny, suspend, or

terminate the household, as of the review date, was correct. For

negative cases, the review date shall be the date of the agency's

decision to deny, suspend, or terminate program benefits. The review of

negative cases shall include a household case record review; an error

analysis; and the reporting of review findings, including procedural

problems with the action regardless of the validity of the decision to

deny, suspend or terminate.

(b) Household case record review. The reviewer shall examine the

household case record and verify through documentation in it whether

the reason given for the denial, suspension, or termination is correct

or whether the denial, suspension, or termination is correct for any

other reason documented in the casefile. * * *

* * * * *

(e) Disposition of case review. * * *

(1) Cases reported as not complete. * * *

(2) Cases not subject to review. Negative cases which are not

subject to review, if they have not been eliminated in the sampling

process, shall be eliminated in the review process. In addition to

cases listed in Sec. 275.11(f)(2), these shall include:

(i) A household which was dropped as a result of a correction for

oversampling;

(ii) A household which was listed incorrectly in the negative

frame.

* * * * *

9. In Sec. 275.23:

a. paragraph (c)(4) is amended by adding the word ``, suspension,''

between the words ``denial'' and ``or'';

b. paragraph (e)(5)(i) is amended by removing everything but the

first sentence;

c. the introductory text of paragraph (e)(7)(iii) is amended by

removing the word ``all'' and adding in its place the words ``98

percent''.

d. paragraph (e)(8) is revised.

The revision reads as follows:

Sec. 275.23 Determination of State agency program performance.

* * * * *

(e) State agencies' liabilities for payment error rates. * * *

(8) FCS Timeframes. FCS shall notify State agencies of their

payment error rates and payment error rate liabilities, if any, within

nine months following the end of each fiscal year reporting period to

which they pertain. FCS shall initiate collection action on each claim

for such liabilities before the end of the fiscal year reporting period

in which the claim arose unless an appeal relating to the claim is

pending. Such appeals include arbitration cases, requests for good

cause waivers, and administrative and judicial appeals pursuant to

Section 14 of the Food Stamp Act. While the amount of a State's

liability may be recovered through offsets to their letter of credit as

identified in Sec. 277.16(c), FCS shall also have the option of billing

a State directly or using other claims collection mechanisms authorized

under the Federal Claims Collection Act, depending upon the amount of

the State's liability. FCS is not bound by the timeframes referenced in

this subparagraph in cases where a State fails to submit QC data

expeditiously to FCS and FCS determines that, as a result, it is unable

to calculate a State's payment error rate and payment error rate

liability within the prescribed timeframe.

* * * * *

Dated: August 28, 1996.

Ellen Haas,

Under Secretary, Food, Nutrition, and Consumer Services.

[FR Doc. 96-22883 Filed 9-9-96; 8:45 am]

BILLING CODE 3410-30-P