Food Stamp Program: Food Stamp Recipient Claim Establishment and Collection Standards

SUMMARY: The Food and Nutrition Service (FNS) is proposing to revise

Food Stamp Program (FSP) regulations that cover the establishment and

collection of food stamp recipient claims, including collections at the

Federal level. This rule aims to improve claims management in the FSP

while providing State agencies with increased flexibility in their

efforts to increase claims collections. The provisions of the Personal

Responsibility and Work Opportunity Reconciliation Act of 1996 (PRWORA)

affecting recipient claims are incorporated into this rulemaking and

this action is consistent with the President's regulatory reform

effort. This proposed rule also strives to achieve a balance between

State agency flexibility and fiscal accountability.

Food stamp recipient claims are established against households that

receive more benefits than they are entitled to receive. The last major

revision to these regulations was in 1983. Recent legislation,

technological advances and changes in Federal debt management

regulations have rendered many portions of the current regulations

obsolete. In addition, the current regulations place unnecessary

burdens on State agencies. The proposed changes are intended to:

incorporate changes mandated by PRWORA; simplify presentation of

policy; incorporate Federal debt management regulations and statutory

revisions into food stamp recipient claim management; and provide State

agencies with additional tools to facilitate the establishment,

collection and disposition of food stamp recipient claims.

DATES: Comments on this proposed rulemaking must be received by August

26, 1998 to be assured of consideration.

ADDRESSES: Comments should be submitted to James I. Porter, Recipient

Claims Coordinator, Program Accountability Division, Food Stamp

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

Alexandria, Virginia 22302. Only written comments will be accepted. All

written comments will be open for public inspection during regular

business hours (8:30am to 5:00pm, Monday through Friday) at 3101 Park

Center Drive, Alexandria, Virginia, Room 905.

FOR FURTHER INFORMATION CONTACT: Questions regarding this proposed

rulemaking should be directed to Mr. Porter at the above address or by

telephone at (703) 305-2385.

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.

Executive Order 12372

The FSP 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),

the FSP is excluded from the scope of Executive Order 12372 which

requires intergovernmental consultation with State and local officials.

Regulatory Flexibility Act

This rule has been reviewed with regard to the requirements of the

Regulatory Flexibility Act of 1980 (5 U.S.C. 601-612). Shirley R.

Watkins, Under Secretary for Food, Nutrition and Consumer Services, has

certified that this rule will not have a significant impact on a

substantial number of small entities.

Executive Order 12988

This proposed rule has been reviewed under Executive Order 12988,

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 ``Implementation'' section of this preamble.

Prior to any judicial challenge to the provisions of this proposed rule

or the application of its provisions, all applicable administrative

procedures must be exhausted.

Public Law 104-4

This proposed rule contains no Federal mandates under the

regulatory provisions of title II of the Unfunded Mandates Reform Act

of 1995 (UMRA), Pub. L. 104-4, for State, local and tribal governments

or the private sector of $100 million or more in any one year.

Therefore, this rule is not subject to the requirements of sections 202

and 205 of the UMRA.

Paperwork Reduction Act: Recipient Claims and Reporting Format

Redesign

The following constitutes a 60 day notice being issued by FNS,

USDA.

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

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

proposal to consolidate several existing collection burdens by

requesting a new burden.

Written comments must be submitted on or before July 27, 1998.

Send comments and requests for copies of this information

collection to James I. Porter, Recipient Claims Coordinator, Program

Accountability Division, Food Stamp Program, Food and Nutrition

Service, USDA, 3101 Park Center Drive, Alexandria, Virginia 22302 and

to Wendy Taylor, FNS Desk Officer, Office of Information and Regulatory

Affairs, OMB, Room 10235, New Executive Office Building, Washington, DC

20503. For further information regarding this notice, Mr. Porter may be

contacted at (703) 305-2385.

Comments regarding these burden estimates 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 appropriate 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 Office of Management and Budget (OMB) approval. All

comments will also become a matter of public record.

Title: Food Stamp Data Collection.

OMB Number: A new burden number is being requested This burden will

consolidate burden associated with 0584-0069, 0584-0080, 0584-0009,

0584-0015, 0584-0081 and 0584-0025. The existing burden under 0584-0064

is not being changed.

Form Number: New request for FNS-695 which will consolidate the

FNS-

[[Page 29305]]

209, FNS-46, FNS-250, FNS-259, FNS-388, FNS-388a and FNS-101 reports.

Type of Request: Consolidation of several collection and record

keeping burdens into one burden.

Abstract: In accordance with the Paperwork Reduction Act of 1995,

the reporting and recordkeeping burden associated with the Notice of

Adverse Action, the demand letter for recipient claims and general

case/claim recordkeeping has been approved by OMB under OMB number

0584-0064. The Department recognizes that, under this proposed rule,

State agencies would be required to track claim referrals. The

Department does not consider this to be an additional recordkeeping

burden because tracking referrals is part of efficient and effective

general case recordkeeping and management that has already been

approved under OMB 0584-0064.

The burden associated with the reporting of claims under OMB number

0584-0069 consists of the submission of the Status of Claims Against

Households (FNS-209) report. In an effort to reduce the number of

reports and/or data elements to be reported, the Department is

proposing to request OMB to combine and consolidate this reporting

function with a number of other FNS reports with the result being one

electronic reporting format. The reports with which the FNS-209 would

be consolidated include the Issuance Reconciliation Report (FNS-46),

Food Stamp Accountability Report (FNS-250), Food Stamp Mail Issuance

Report (FNS-259), State Issuance and Participation Estimates (FNS-388),

Project Area Issuance and Participation Estimates (FNS-388a) and

Participation in Food Programs--by Race (FNS-101) as it pertains to the

FSP. All of these reports, including the FNS-209, currently have

assigned to them a unique OMB burden approval number: 0584-0069 for the

FNS-209; 0584-0080 for the FNS-46; 0584-0009 for the FNS-250; 0584-0015

for the FNS-259; 0584-0081 for the FNS-388 and FNS-388a; and 0584-0025

for the FNS-101. To facilitate the report consolidation effort, the

Department is requesting that OMB cancel all of the above approval

numbers (with the exception of OMB number 0584-0025) and assign a

single burden approval number for the new electronic reporting format.

Since the burden associated with OMB number 0584-0025 also pertains to

activity in the Food Distribution Program, the Department is not

requesting that this number be canceled. However, the portion of this

burden relating to the FSP would be removed and transferred to the

newly assigned number.

The number of annual data reporting elements associated with this

reporting burden will change dramatically. Currently, the forms

proposed to be replaced have a cumulative total of 3,121,124 annual

data reporting elements resulting in a reporting and recordkeeping

burden of 110,122 hours. The proposed reporting format, on the other

hand, would only have 15,300 annual data reporting elements.

Even though the number of data elements would be reduced

significantly, the reporting and recordkeeping burden hours would

increase by an average one hour per State agency per report submission.

This is because much of the data proposed to be reported in the new

reporting format is summational. Under the proposed reporting format,

State agencies would need to retrieve and record the detailed data,

compute the summational amounts and maintain the records necessary for

audit purposes. Many States are already performing this consolidation

function as part of their existing reporting procedures and therefore

would experience no increase in burden. The one-hour increase in burden

is to accommodate the remaining states who would need to perform some

consolidation work to carry out this function.

Affected Public: State and local governments.

Estimated Number of Respondents: 37,973.

Estimated Time per Response: 2.90 hours.

Estimated Total Annual Burden: 110,758 hours.

Paperwork Reduction Act: Federal Collection Methods for Food Stamp

Program Recipient Claims

The following constitutes a 60-day notice being issued by FNS,

USDA.

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

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

proposal to change an information collection burden related to Federal

claims collection methods (FCCM's).

Written comments must be submitted on or before July 27, 1998.

Send comments and requests for copies of this information

collection to James I. Porter, Recipient Claims Coordinator, Program

Accountability Division, Food Stamp Program, Food and Nutrition

Service, USDA, 3101 Park Center Drive, Alexandria, Virginia 22302 and

to Wendy Taylor, FNS Desk Officer, Office of Information and Regulatory

Affairs, OMB, Room 10235, New Executive Office Building, Washington, DC

20503. For further information regarding this notice, Mr. Porter may be

contacted at (703) 305-2385.

Comments regarding these burden estimates 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 appropriate 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 Office of Management and Budget (OMB) approval. All

comments will also become a matter of public record.

Title: Federal Collection Methods for Food Stamp Program Recipient

Claims.

OMB Number: 5084-0446.

Expiration date: September 30, 1999.

Type of request: Revision to a currently approved collection.

Abstract: Changes to the collection burden would result from two

changes proposed in this rule. One proposed change is the consolidation

of the 60-day notice for Federal Income Tax Refund Offset Program

(FTROP)(See 7 U.S.C. Sec. 2022(b)(1)(C); 7 CFR 273.18(g)(5)) into an

all inclusive 60-day notice for all types of Federal offsets. The other

is the increased number of 60-day notices due to the proposed inclusion

of agency error (AE) claims as a type of claim subject to collection

under Federal offset.

Estimate of Burden: The proposed rule would increase the annual

burden on State agencies from an average of 450 to 500 hours and for

debtors would decrease from an average of 8 to 6 minutes.

Respondents: The collection would continue to impact two groups,

State agencies that administer the FSP and certain individuals who are

liable for overissued food stamp benefits.

Estimated Number of Respondents: The number of State agency

respondents increase from 52 to 53. The number of debtor respondents

would increase from 370,000 to 425,000.

Estimated Number of Responses per respondent: As under current

rules, for State agencies the number of responses would vary from once

for such activities

[[Page 29306]]

as certifying files to FNS to 380,000 for mailing out due process

notices. For debtors the number of responses would continue to vary

from once for such things as due process notices to three or four in

the case of debtors making informal inquiries and requesting reviews.

Estimated Total Annual Burden on Respondents: Under this proposed

rule the annual reporting and recordkeeping burden would decrease from

72,862 to 71,803 hours (1,059 hours).

Background

The tolerance of abuse, or even the perception of such, undermines

the fundamental mission of the FSP. The efficient and effective

establishment and collection of recipient claims is essential to

program integrity. This rule aims to improve and increase claims

establishment and also to increase the collection rate of established

claims, while providing State agencies with increased flexibility in

their efforts to increase claims collections.

The PRWORA (Pub. L. 104-193) amended the Food Stamp Act of 1977 (7

U.S.C. 2011-2032) (the FSA) in a number of ways. This rule proposes to

implement the provisions of the PRWORA relating to recipient claims.

This rule also proposes to incorporate certain provisions of the

Federal Debt Collection Improvement Act of 1996 (DCIA)(Pub. L. 104-134,

Chapter 10, signed April 26, 1996) as discussed later in this preamble

in connection with Federal claim collection methods. The DCIA amended

the Debt Collection Act of 1982 (31 U.S.C. 3701)(DCA).

In addition to the revisions mandated by the enactment of the

PRWORA, the Department is proposing a number of significant changes in

discretionary FSP policy regarding recipient claims. This rule also

proposes certain changes in FTROP and the Federal Salary Offset

Program, 7 U.S.C. 2022(b)(1)(C)(FSOP), in response to the amended DCA.

Furthermore, this proposed rule would extensively reorganize the

current regulations at 7 CFR 273.18. To assist in the regulatory

reorganization and in the development of the discretionary policy

changes being proposed, the Department, in an effort to maintain

consistency with the treatment of other Federal debts, utilized the

Federal Claims Collection Standards (FCCS) issued by the Department of

Treasury (Treasury) (See 4 CFR Parts 101-105). The Department also drew

upon a number of other sources including the policies and regulations

of other social programs, private and public sector accounting

standards, technological advances, recommendations by the Department's

Office of the Inspector General (OIG) and Office of General Counsel,

and suggestions from State agencies.

Responsibility for Recovering Overpayments

Current regulations at 7 CFR 273.18(a) discuss the State agency's

responsibility for establishing claims as well as the household's

liability for the amount of the claim. It also defines the three types

of claims. The Department is proposing to revise the structure of this

paragraph. The first structural revision would change the title of the

paragraph from Establishing claims against households to Responsibility

for recovering overpayments. This is being proposed because the new

title more accurately portrays the purpose of the paragraph. In

addition, the Department feels that keeping the current title would

lead to confusion because other paragraphs of the proposed rule discuss

``establishing'' claims in much greater detail.

The second structural revision would involve the breakout of the

single introductory paragraph into two paragraphs. The first paragraph

of the proposed rule, Sec. 273.18(a)(1), would establish household

liability for overissuances. Section 273.18(a)(2) would establish State

agency responsibility for establishing and recovering overissuances.

Even though the responsibility for establishment and collection of

overpayments has been delegated to State agencies, food stamp recipient

claims remain debts to the Federal government. Section 273.18(a)(2) of

the proposed rule would specify this in detail. This proposal is not

intended to change policy but simply to clarify existing policy. As

Federal debts, unless superseded by this or other Departmental

regulation, food stamp recipient claims are subject to the same debt

collection processes and procedures as are all other Federal debts.

Claim Types and Definitions

In the current regulations, there are three claim types:

intentional Program violation (IPV), inadvertent household error (IHE)

and administrative error. The proposed rule would keep the same

designations for IPV and IHE claims. Administrative error claims, on

the other hand, would be renamed and referred to as agency error (AE)

claims. This is being proposed to be consistent with the term most

commonly used for this type of claim.

Paragraphs 7 CFR 273.18(a)(1), (a)(2) and (a)(3) of the current

regulations provide the specific definitions for IPV, IHE and AE

claims. As part of the regulatory reorganization, this rule proposes to

split out these paragraphs from 7 CFR 273.18(a) into their own

respective paragraphs: Sec. 273.18(b) for IPV claims; Sec. 273.18(c)

for IHE claims; and Sec. 273.18(d) for AE claims.

IPV Claims

Current regulations at 7 CFR 273.18(a)(3) provide the definition

for an IPV claim. The paragraph contains specific instructions as to

what must have occurred for an overissuance to be handled as an IPV

claim. Since the basis for IPV claims is set by statute, this rule

proposes no change in current policy about the basis for such claims.

However, as part of the regulatory reorganization, the Department is

proposing to list the criteria for defining an IPV claim in separate

paragraphs, Sec. Sec. 273.18(b)(1) through 273.18(b)(4).

The proposed rule contains one change regarding IPV claims in an

area in which the Department has discretion. Current regulations at 7

CFR 273.18(a)(3) mandate that prior to the determination of IPV the

claim shall be handled as an IHE claim. The Department is proposing to

delete this mandate thereby making this practice a State agency option

on a case-by-case basis as long as the claim is established within the

required timeframe (See the Claim Referral and Backlog section of this

preamble for details on timeframe).

IHE Claims

Current regulations at 7 CFR 273.18(a)(1) provide the definition

for an IHE claim. Under these regulations, an IHE claim generally

results from an overissuance that was caused by a misunderstanding or

unintended error on the part of the household. As part of the

regulatory reorganization and in an effort to enhance FSP

simplification, the Department is proposing to eliminate much of the

definitional language in the current regulations and simply use the

specific language at Sec. 273.18(c) in the proposed rule.

AE Claims

Current regulations at 7 CFR 273.18(a)(2) define an AE claim. Under

these current regulations, an AE claim results from an overissuance

that was caused by a State agency action or failure to take action. As

with the proposal regarding the definition of an IHE claim, the

Department is proposing to eliminate unnecessary definitional language

in this paragraph and simply use the specific language at

Sec. 273.18(d) in this proposed rule.

Section 844 of the PRWORA eliminated all legislative limitations on

[[Page 29307]]

the collection options available for AE claims. This ends a previous

inconsistency wherein State agencies were required to collect AE claims

but were precluded from using the most effective and efficient

collection tool, involuntary allotment reduction.

Some groups maintain that, since the reason for the overissuance

resulting in the AE claim was an error by the State agency, the

household should not be responsible for the overissuance under laws in

a number of States under the legal concept of equitable estoppel. The

Department disagrees with this position. The FSP is administered under

Federal law and the Department provides 100 percent of the value of the

benefits. Section 13(a)(2) of the FSA (7 U.S.C. 2022(a)(2)), which was

unchanged by the PRWORA, clearly and unconditionally provides that

adult members of a household that receive any overissuance shall be

jointly and severally liable for the value of the overissuance. Thus,

Federal law permits no exception for equitable estoppel in the case of

an overissuance caused by State agency error.

Claims for Recipient Trafficking

In a significant policy change, the Department is proposing, in

Sec. 273.18(a) of this rule, to provide for establishing a claim

against a household for the value of benefits that are trafficked

rather than redeemed for authorized food purchases.

Trafficking has long been an IPV subject to disqualification from

FSP participation. However, the advent of electronic benefits transfer

(EBT) has provided a source of data that makes it easier to identify

both parties to trafficking transactions. The availability of EBT data

has already increased the number of disqualifications for trafficking.

In addition to disqualification penalties, the Department believes that

trafficking can also be deterred by the development and use of

additional enforcement tools. Assessing a claim for the amount of

trafficked benefits offers such a tool.

The authority for this determination is found in section 13(a)(1)

of the FSA (7 U.S.C. 2022(a)(1)) which states that the Department ``* *

* shall have the power to determine the amount of and settle and adjust

any claim * * * arising under the provisions of this Act or the

regulations issued pursuant to this Act, including, but not limited to,

claims arising from fraudulent and nonfraudulent overissuances to

recipients * * * (emphasis added)'' Generally, a recipient claim is

established when a household receives more coupons than the household

is entitled to receive. However, as indicated above, section 13 of the

FSA (7 U.S.C. 2022) does not limit the Department to establishing

claims against individuals solely because of overissuances. Clearly,

recipient misuse, such as trafficking, falls within the definition of

an IPV as specified in 7 CFR 273.16(c)(2). The Department is thus

proposing in this rule that claims would be established for all IPV's,

including those caused by trafficking offenses.

The Department would like to clarify that this change in policy

would have no effect on the current policy regarding the establishment

and collection of fines and penalties from authorized retailers and

unauthorized third parties who are found to have illegally obtained

coupons via trafficking. (See 7 CFR 278.6). Retailer fines and claims

act as a deterrent and punish retailers and unauthorized third parties

for engaging in prohibited activity. The current regulations on

retailer fines and claims at 7 CFR 278.6 provide for monetary penalties

significantly larger than the amount trafficked. The proposed policy

change providing for recipient trafficking claims, on the other hand,

would directly correlate with the benefit amount that was trafficked.

The procedure for calculating a recipient trafficking claim is

discussed elsewhere in this preamble.

The Department also proposes to establish a second category of

claims for trafficking that is analogous to the inadvertent household

error claim established for household-caused overpayments that do not

warrant IPV determinations. A State agency can assert an

``inadvertent'' misuse claim in situations where the State agency

chooses not to obtain or cannot obtain a formal designation of

trafficking through an administrative or court determination but can

document the transaction sufficiently to sustain the claim. The

Department is therefore proposing that instances of inadvertent

recipient misuse be appropriately treated as IHE's as described in 7

CFR 273.18(a)(1)(i) of the current regulations and Sec. 273.18(c) in

the proposed rule. This rule would provide the authority for State

agencies to specifically include trafficking and recipient misuse in

benefit transactions as a basis for establishing a claim against a

household.

Claim Calculation

Current regulations at 7 CFR 273.18(c)(1) and 7 CFR 273.18(c)(2)

discuss the procedures for calculating the amount of a claim due to an

overissuance. Under the proposed reorganization of 7 CFR 273.18, the

paragraphs on calculating claims would be combined under

Sec. 273.18(e)(1). In addition, some policy revisions are being

proposed in this area and are outlined below. The current paragraph

also does not include a provision for calculating claims for

trafficking. The proposed rule at Sec. 273.18(e)(2) addresses this

issue.

Calculating Recipient Trafficking Claims

The Department is proposing, in Sec. 273.18(e)(2), to include a

procedure for determining the value of a misused benefit caused by

trafficking. The amount of the misused benefit would be the value of

the trafficked benefit as determined by: the individual's admission;

adjudication; or the documentation, such as detailed electronic

benefits transfer (EBT) transaction listings, which forms the basis for

the benefit misuse determination. Trafficking claims could be either an

IPV or IHE claim depending on the nature of the procedure under which

trafficking was established.

Calculating Overissuance Claims

For an IPV claim due to an overissuance, current regulations at 7

CFR 273.18(c)(2) provide the parameters for claim calculation. Current

regulations at 7 CFR 273.18(c)(1) establish the procedures for

calculating claims for IHE and AE overissuances. In an effort to

provide a better structure, the Department is proposing to combine

these paragraphs into a single procedure in Sec. 273.18(e)(1)(i)

through (vi) in this rule. As part of this reorganization and general

streamlining effort, some unnecessary prescriptive language would also

be removed. In addition to these structural and streamlining revisions,

several policy changes are also being proposed in this rule.

The PRWORA included a change in the calculation of claims caused by

unreported earned income. Section 809 of the PRWORA amended section 5

of the FSA (7 U.S.C. 2014) by specifying that the earned income

deduction ``* * * shall not be allowed with respect to determining an

overissuance due to the failure of a household to report earned income

in a timely manner.'' This changed current policy by removing the

stipulation that the failure to properly report income must be willful

or fraudulent. As a result, the Department is proposing, in

Sec. 273.18(e)(1)(iii) of this rule, that, in calculating an IHE claim,

the State agency would not apply the earned income deduction to that

part of any earned income that the household failed

[[Page 29308]]

to report in a timely manner. This would be the same policy that the

Department currently has for calculating IPV claims with unreported

earned income.

In addition to the earned income revision necessitated by the

PRWORA, the Department is proposing two additional policy changes

related to claim calculation: (1) Under the proposed rule, a State

agency would be able to waive up to 20 percent of any claim if the

household cooperates with the establishment of the claim; and (2) the

amount of the claim would be offset by the amount of any expunged EBT

benefits. These two policy revisions are discussed in greater detail in

other sections of this preamble.

Current regulations at 7 CFR 273.18(c)(1)(iii) and (c)(2)(iii)

discuss offsetting the claim amount against any amount of lost benefits

that have not yet been restored to the household. This proposed rule

does not change this policy. However, as part of the regulatory

reorganization and since this area applies more to collecting rather

than calculating claims, the Department proposes to move this paragraph

to the claims collection section of this rule.

Pre-Establishment Cost Effectiveness Determination Methodologies

Section 844 of the PRWORA amended section 13 of the FSA (7 U.S.C.

2022(b)) by stating that the collection of any overissuance does not

apply ``* * * if the State agency demonstrates to the satisfaction of

the Secretary * * *'' that it is not cost effective to collect that

claim. This establishes that interest in program integrity must be

tempered by administrative costs considerations. This provision implies

that some test must be established to assess or demonstrate the degree

of cost effectiveness for a claim. However, the Department strongly

believes that this provision (as well as the implementing language in

this rule) by no means implies that a household has an automatic

``right'' to an overpayment without fear of collection, even if the

overpayment is not cost effective for the State agency to pursue

collection. This rule addresses standards for determining which claims

must be pursued. For smaller claims State agencies should continue to

maintain some probability of collection. Knowledge that even small

overpayments may be collected increases payment accuracy by holding

households responsible for accurate reporting of their circumstances.

The Department believes that a cost effectiveness test can be

applied both prior to and after establishing a claim. This section of

the preamble discusses assessing cost effectiveness prior to

establishment and the initiation of collection action. Assessing cost

effectiveness subsequent to the initiation of collection action as a

means to determine whether a claim should be terminated and written off

is discussed elsewhere in this preamble.

In Federal fiscal year 1995 alone, over 775,000 recipient claims

were established nationwide. The Department recognizes that this sheer

volume negates any notion of a State agency demonstrating to FNS the

degree of cost effectiveness for claims on an individual basis.

Therefore, the Department is proposing in this rule that, in lieu of

demonstrating cost-effectiveness to FNS on an individual claim basis,

State agencies would use standards approved by FNS to assess the cost

effectiveness of collecting claims.

In determining these standards, the Department is proposing to

present State agencies with a choice. The first would be for a State

agency to design its own standard (subject to FNS approval). The second

option would be for a State agency to use an updated version of the

existing FNS recipient claim threshold. Both options are discussed

below.

State Agency-Developed Methodology for Cost Effectiveness

Determination

The Department is proposing, in Sec. 273.18(h)(2) of this rule, how

a State agency could adopt its own procedure, threshold, and/or

methodology for use in determining whether to pursue the establishment

of any claim and subsequent collection of the overissuance. A State

agency would need to submit a detailed analysis of costs over time and

obtain prior approval from FNS for use of this procedure, threshold

and/or methodology. Cost effectiveness should reflect total returns to

the Federal and State government and the total cost of the State claims

collection effort.

The concept of having a State agency develop its own methodology is

an expansion of current policy. The reason for this policy expansion is

twofold. First, this option would be consistent with the spirit of

section 844 of the PRWORA which increases State agency control over its

claims. The stipulation requiring prior FNS approval of the methodology

to be utilized would be needed because the provision in the PRWORA

requires that cost effectiveness be demonstrated to the satisfaction of

FNS, thus reinforcing the Federal government's interest in State

stewardship of FSP resources.

The second reason for this policy expansion is that cost

effectiveness varies significantly from one State agency to another

depending on factors such as the degree of automated processing, the

amount of historical case record information, the degree of

centralization, features of administrative structures, salaries, and

the number and size of claims established. This observation is

supported by a contracted study released by FNS in June 1996 entitled,

``Optimal Thresholds in the Collection of Food Stamp Program Claims.''

While State agencies have a responsibility to adopt cost-effective

claims management systems, this proposal would allow a State agency to

establish a cost-effectiveness methodology (subject to FNS approval) to

reflect the State agency's own situation and expenses.

FNS Threshold for Establishing and Collecting Overissuances

Current regulations at 7 CFR 273.18(d)(1)(i)(A) require that,

except for those IHE and AE claims which (1) are collected through

offset of restored benefits or (2) are less than $35 and cannot be

collected through allotment reduction, State agencies shall initiate

collection action on all IHE and AE claims. This $35 exception

represents the current FNS threshold for recipient claim collection.

Since 1982, 12 State agencies participating in the FSP have

received waivers increasing the $35 FNS threshold. State agencies have

maintained that the current threshold is too low because the cost of

establishing and collecting claims exceeded the thresholds.

Administrative costs relating to claims actions are the cost of

establishing a claim; calculating the claim; posting the claim into the

State agency accounting and reporting system; initiating the various

demand letters and notices; and managing collections. Economic factors,

such as inflation, in addition to fluctuations in salary and staffing

levels and automation start-up and maintenance costs cause changes

(usually increases) in the amount of administrative funding expended

for food stamp claim activity within each respective State agency over

a given time period. In addition, the aforementioned contractor study

on recipient claim collection thresholds found that the optimal

thresholds in the State agencies surveyed were higher than the current

collection threshold. The study also found that it was more appropriate

to apply the threshold to the costs of the combined process of

establishing and collecting claims. Including only the cost of

collection led

[[Page 29309]]

to setting too low a threshold from an economic perspective.

As a result, the Department is proposing to increase the FNS

threshold for collecting food stamp recipient IHE and AE claims. In

addition, the Department is proposing to extend this threshold to IPV

claims. The Department is also proposing utilizing the same threshold

for both establishing and collecting claims. Current regulatory

language refers only to the collection of claims and implies there is

no threshold below which claims need not be established.

In its reorganization of 7 CFR 273.18, the Department is proposing

to break out and expand the paragraph in the current regulations

dealing with the threshold, 7 CFR 273.18(d)(1)(i)(A), into

Sec. 273.18(g)(2)(ii) of the proposed rule. In Sec. 273.18(g)(2)(ii),

the threshold would be defined as the maximum dollar amount of a claim

or a claim referral that a State agency may decide not to pursue

establishment and/or collection solely based on the amount of the

referral. The purpose of the threshold is to maximize cost

effectiveness in the establishment, pursuit and recovery of

overissuances in the FSP. The Department originally considered

proposing to raise this threshold from $35 to $100. Then the Department

considered establishing a threshold that would change periodically

depending on the rate of inflation or some similar economic factor. The

Department decided to strike a balance between increased State costs

and the uncertainty of a fluctuating threshold by proposing a fixed

threshold of $125. This proposed threshold is reflected in

Sec. 273.18(g)(2)(ii) of this rule.

In addition, as noted earlier and reflected in

Sec. 273.18(g)(2)(ii) of the proposed rule, this threshold would also

apply to IPV claims. The authority to include IPV's under the threshold

is found in section 13(a)(1) of the FSA (7 U.S.C. 2022(a)(1)) which

provides the Department with the authority to delegate to State

agencies the power to ``* * * settle and adjust any [recipient] claim *

* * if the [Department] determines that to do so would serve the

purposes of this Act.'' The proposed inclusion of IPV claims under the

threshold would increase the waiver authority delegated to State

agencies.

Currently, procedures for establishing and pursuing IPV claims vary

significantly from jurisdiction to jurisdiction. By including IPV

claims under the threshold, the Department would like to reduce this

degree of variability. However, the Department would like to emphasize

that no jurisdiction would be prevented from establishing and/or

pursuing the collection of any claim that falls under this threshold.

State agencies are encouraged to pursue claims on selected bases which

would act as a deterrent or be in the best interest of the FSP or

agency to establish or collect.

Finally, the current regulations at 7 CFR 273.18(d)(1)(i)(A) do not

allow the FNS threshold to be applied to claims that can be recovered

by reducing the household's allotment. Since the utilization of this

claim collection method incurs relatively little post-establishment

costs, the Department is not proposing any changes to this policy.

The Department is interested in receiving comments on these

proposals concerning the determination of cost effectiveness for the

establishment and collection of recipient claims. In addition, the

Department is particularly interested is receiving actual cost data

from State agencies.

Claim Establishment

Claim Referral and Backlog

Under current regulations, no time frame exists for State agencies

to follow for initiating collection action by establishing claims. This

has resulted in a number of State agencies either not establishing or

not enforcing internal time frames for addressing potential claims,

thereby causing a backlog of claim referrals. These claim referral

backlogs have been cited as deficiencies and problem areas in Federal

and State-level management evaluations and audits conducted by the

Department's OIG. Potential debts that are not timely developed into

claims become less collectible the longer they remain undeveloped.

In an effort to reduce the number of claims which are not

established in a timely manner, the Department believes that it is

necessary to develop a minimum timeliness standard for establishing

claims which incorporates a standardized methodology for measuring the

length of time it takes to establish a claim after the potential

overissuance is discovered. To accomplish this, the Department must

initially set the parameters by defining the starting and ending points

of the process.

The Department is proposing that the starting point for calculating

the length of time that it takes to establish a claim would be the date

the potential claim is initially detected. This would be known as the

date of discovery and is being defined as such in Sec. 273.18(f) of

this proposed rule.

The Department considered and rejected one other alternative in its

determination of the appropriate starting point. This alternative was

to use the date of occurrence of the change that caused the

overissuance. For example, if a household was overissued benefits

because of a decrease in household size, the starting point would be

the date that the individual(s) left the household. The Department

decided not to propose this alternative because the State agency may

not become aware of the change that caused the overissuance for some

time.

In addition to proposing a starting point to gauge the length of

time it takes to establish a claim after the potential overissuance is

discovered, the Department is also proposing to define an ending point

for tracking and reporting purposes. This would be the date of

establishment. The Department is proposing, in Sec. 273.18(f)(3) of

this rule, to have the date of establishment be the date that the

initial written claim notification or demand letter is issued to the

household. This is being proposed because the Department feels that

this is the final step in establishing a claim.

The Department considered one other alternative as the ending

point. This alternative would define the date of establishment as the

date that the claim is posted as a receivable in the State agency's

claim collection and tracking system. However, while it is integral to

the establishment of a receivable, this is not being proposed because

the Department believes that a claim is not truly established until the

demand letter is sent to the household.

The Department is proposing that the length of time it takes to

establish the claim would simply be the number of days between the date

of discovery (starting point) and the date of establishment (ending

point).

Now that the mechanism for measuring the length of time it takes to

establish a claim has been proposed, the Department is proposing a

standard for the timely establishment of claims.

Originally, the Department considered a 90-day standard for

establishing claims with an allowance for up to 180 days if the State

agency needs to secure additional documentation from uncooperative

sources. However, this was not considered feasible because it would be

difficult to track and gauge its effectiveness given the additional

time allowance that would be allotted for certain claim referrals.

Instead, the Department is proposing in Sec. 273.18(f) of this rule to

conform with time frames used in other assistance programs. The

proposed rule would have the same standard as one that was in place for

[[Page 29310]]

initiating collection action in the Aid to Families with Dependent

Children (AFDC) Program in July of 1996. Specifically, claims would

need to be established before the end of the quarter following the

quarter of the discovery of the claim. As an example, if the date of

discovery is in October, November or December, the last day for sending

the demand letter in a timely manner would be March 31.

The Department is aware that a number of State agencies are either

not establishing or not consistently enforcing internal time frames for

addressing potential claims. This has resulted in what many State and

Departmental officials perceive as a ``backlog'' of claim referrals.

However, the measure of what actually constitutes a claim referral

backlog has never been defined by the Department and State agencies

have no clear regulatory guidance on this issue. With its proposed time

frame for establishing claims, the Department feels that it now has the

mechanism to propose clear guidance as to what would constitute a claim

backlog.

The Department is proposing in Sec. 273.18(f) of this rule to

define a claim backlog as existing when more than 10 percent of the

claim referrals are not established in a timely manner. The Department

chose 10 percent because it feels that an absolute zero tolerance in

this area would not account for the claims which would not be able to

be timely established based on circumstances (such as uncooperative

employers, etc.) which would be out of the State agency's control. The

Department did not choose a percentage greater than 10 percent because

it felt it would be too tolerant and condone inefficient and

ineffective claim management.

The Department would like to emphasize that the purpose of

establishing a standard for what is considered an acceptable as opposed

to an excessive backlog is not to penalize a State agency with an

excessive backlog but to provide a management tool for gauging the

State agency's claim establishment efforts.

The Department is proposing in Sec. 273.18(f) that State agencies,

in order to assess the age of referrals, be required to record the date

of discovery and the establishment date in the claim case file and/or

referral tracking system. The Department feels that this is not placing

an additional or unnecessary burden on a State agency as prudent claim

management would dictate that the State agency would have a system to

internally track referrals already in place.

Even though the Department is proposing a new standard for

determining the existence of a claim backlog, the Department would not

require State agencies to report this information to FNS. Monitoring

would be achieved in the same manner that other areas of the FSP are

reviewed and evaluated. The Department feels that the most effective

way for State agencies to address a deficiency in this area would be to

initially concentrate on preventing future backlogs by adhering to the

standards proposed in this rule. Once this is accomplished, corrective

action for the elimination of existing backlogs could be addressed.

The Department is interested in receiving comments on the proposed

standard for establishing claims and measuring a claims backlog.

Initiating Collection Action When the Household Cannot Initially Be

Located

The current regulations at 7 CFR 273.18(d)(1) contain the criteria

for initiating collection action on IHE and AE claims. This criteria

includes applying the dollar threshold for collecting claims, not

taking action on households that cannot be located and postponing

collection action on suspected IPV's. Proposed changes to the dollar

threshold and the treatment of suspected IPV's are discussed in detail

elsewhere in this preamble. In addition to these changes, the

Department is also proposing a change in policy on initiating

collection action if the household cannot be located.

The current regulations at 7 CFR 273.18(d)(1)(i)(B) provide that

the State agency shall initiate collection action for IHE and AE claims

unless the household cannot be located. The Department is proposing to

delete this paragraph and have the State agency initiate collection

action on these claims. The reason for this is that, with the advent of

innovative collection methods such as Federal and State tax refund

offset, it is much easier for State agencies to eventually locate the

household and collect the claim. In addition, the household would be

subject to allotment reduction if it returns to the FSP prior to the

claim being terminated and written off. Terminating and writing off

claims is discussed elsewhere in this preamble.

The current regulations at 7 CFR 273.18(d)(2) discuss the criteria

for initiating collection action on IPV claims. This criteria includes

making personal contact with the household. The Department is proposing

to delete this clause. This is being proposed to increase the

flexibility afforded State agencies in their collection efforts.

As with IHE and AE claims, the Department is also proposing to

delete the clause in 7 CFR 273.18(d)(2) that allows State agencies not

to pursue collection action against IPV claims if the household cannot

be located. The reason for this being proposed is the same as with IHE

and AE claims: the increased possibility of collection via Federal and

State tax refund offset and the possibility of allotment reduction if

the household returns to the FSP before the claim is terminated.

Household Notification

Requirements at Certification

In the Department's efforts to afford State agencies maximum

flexibility, the Department is taking steps to ensure that household

notification requirements (as required by the Privacy Act of 1964 at 5

U.S.C. 552a and the Debt Collection Act of 1982 (DCA), as amended by

the DCIA at 31 U.S.C. 3716(a)) are not compromised. Proper notification

involves informing the household of its rights regarding the claim and

informing the household at the time of FSP application of the potential

uses of information provided by the household to collect the claim.

Households initially provide identifying information (such as

names, addresses and social security numbers) as well as other

information regarding household circumstances at the time of

application. This information is used by State agencies for program

purposes including verification and eligibility and to refer delinquent

claims to other agencies for various collection tools and methodologies

such as tax refund, salary and administrative offset. The Department is

proposing in this rule to require that State agencies inform households

of this potential use of provided information at the time of

application in a new paragraph, Sec. 273.2(b)(4).

Demand Letter Requirements

Under the proposed rule at Sec. 273.18(g)(3), a State agency would

simply develop and use its own demand letter for claim notification and

repayment solicitation. The Department is proposing several

requirements to ensure that proper notification and due process

conditions are met when the household is informed of the existence of

the claim via the demand letter.

The first requirement being proposed by the Department in this rule

is that the claim notification or initial demand letter would continue

to contain a notice of adverse action (see Sec. 273.18(g)(3)(v)). This

notice of adverse action can either be an attachment or

[[Page 29311]]

contained in the body of the initial demand letter itself. This notice

would also provide the household with the opportunity for a fair

hearing on the validity and amount of the claim. At a fair hearing (or

at an administrative disqualification hearing for some IPVs), the

household currently is provided the opportunity to inspect and copy

agency records and review with the agency the circumstances relating to

the claim. This conforms with the information availability requirements

in the DCA at 31 U.S.C. 3716(a)(2) and (a)(3). The current regulations

regarding fair hearings (7 CFR 273.15) and administrative

disqualification hearings (7 CFR 273.16) are not affected by this

proposed rule.

In addition, to ensure proper notification per 31 U.S.C. 3716(a)(1)

and (a)(4), the demand letter or accompanying notice of adverse action

would contain information to provide the household with written notice

of: (1) The type and amount of the claim, the intent to collect the

claim, if not paid, by referral to other agencies, including private

collection agencies, for various claims collection actions including,

but not limited to, administrative offset, tax refund offset and salary

offset; (2) the opportunity to inspect and copy the records related to

the claim; (3) the opportunity for an administrative review (fair

hearing) of the decision related to the claim; and (4) the opportunity

to make a written agreement to repay the amount of the claim prior to

the claim being referred for Federal collection methods. The Department

is also proposing that the demand letter contain language specifying

that, if the claim becomes delinquent, the household may be subject to

additional delinquent and/or processing charges. Finally, the

Department is proposing that the demand letter provide notification

that all adult household members are equally liable for the claim and

that the claim, if not otherwise collected, may be referred to the

Department of Justice for litigation. These proposals are reflected in

Sec. 273.18(g)(3)(iii) and (g)(3)(iv) of this rule.

Elimination of Repayment Option Choice in the Demand Letter

Prior to the enactment of the PRWORA, section 13(b) of the FSA (7

U.S.C. 2022(a)(1)) contained the stipulation that the household had the

option of selecting the method of payment. This resulted in the

formulation of detailed regulations at 7 CFR 273.18(d)(3) implementing

this legislative requirement. In section 844 of the PRWORA, Congress

removed all references in section 13 of the FSA (7 U.S.C. 2022) which

pertained to allowing the household to select the method of payment. In

their place, Congress provided the State agency (and not the household)

with the prerogative to select the appropriate payment method. In

addition, section 844 of the PRWORA gave the State agency the authority

to establish its own requirements for providing notice to a household

with an overissuance. Although State agencies will have greater

flexibility in providing notice, the Department is proposing the

minimum due process notice requirements specified in the DCA, as

discussed above, in order to assure that collection through Federal

administrative offset and other methods are available to State

agencies. These changes are reflected in Sec. 273.18(g)(3) of this

proposed rule.

In addition, other prescriptive language in 7 CFR 273.18(d)(3)

regarding demand letter content unrelated to household notification

rights discussed above would also be removed to conform to allow for

greater State agency flexibility in this area.

Claim Management

Delinquency and Due Date

In most accounts receivable systems, certain actions beyond the

original demand letter or claim notification generally occur when a

receivable is not paid timely and becomes delinquent. These actions

usually facilitate further collection action and/or disposition of the

receivable. The Department believes that the processing of food stamp

recipient claims should be no different from other receivables in this

regard.

The Department is proposing in this rule to clearly define what

constitutes delinquency in food stamp recipient claims. This is being

proposed in an effort to increase consistency among State agencies in

the treatment of food stamp claims with outstanding balances. This lack

of consistency undermines the integrity of the aggregate receivable

data compiled by the Department as part of its financial statement. The

Department also feels that standardization is necessary in this

instance because recipient claims are ultimately Federal debts and the

individualized approach by State agencies results in inconsistent

treatment. In addition, the proper aging of claims (which is a Treasury

requirement for all Federal debts) facilitates optimal claim management

from establishment through collection and final disposition. Therefore,

the first step in effective and consistent post-establishment claims

management requires a definition of delinquency that then triggers

subsequent steps in the claims collection process.

The current regulations governing food stamp recipient claims at 7

CFR 273.18 do not define or even utilize the terms delinquent or

delinquency. Delinquency, however, is defined at 4 CFR 101.2(b) in

Treasury's FCCS as occurring when a claim ``* * * has not been paid by

the date specified in the agency's initial written notification* * *

unless other satisfactory payment arrangements have been made by that

date, or if, at any time thereafter, the debtor fails to satisfy

obligations under a payment agreement with the creditor agency.'' The

Department is planning to use this definition as a basis for defining

delinquency for food stamp recipient claims.

Delinquency, in the FCCS's definition, is determined contingent

upon the non-receipt of payment by the ``date specified'' in the

notification unless other arrangements have been made. The ``date

specified'' is commonly known as the due date. To have a delinquent

claim based on the initial demand letter, according to the FCCS, the

agency should have a due date specified in its initial demand letter.

Therefore, in an effort to establish delinquency in conformance with

the FCCS on this issue, the Department is proposing in

Sec. 273.18(g)(3)(v) to require that all initial demand letters contain

a due date in their text. The due date would be up to 30 days after the

date of the initial demand letter. This conforms with the response time

frame established by the FCCS at 4 CFR 102.2(b).

The paragraph at 7 CFR 273.18(g)(2) in the current regulations

governing recipient claims discusses the procedures when a household

fails to make an installment payment in accordance with the established

repayment schedule. This is the same situation as specified in the

second part of the FCCS's definition of delinquency which states that a

claim is considered delinquent when ``* * * the debtor fails to satisfy

obligations under a payment agreement* * * '' In this instance, the due

date would be the date that payment was to have been received in

accordance with the installment agreement. The Department is therefore

proposing, in Sec. 273.18(g)(4) of this rule, that all repayment

agreements specify when payments are to be due and that the claim will

be considered delinquent and may be subject to involuntary collection

actions if payment is not received by the due date.

[[Page 29312]]

The proposals in this rule to require a due date in both initial

demand letters and installment agreements would give the Department the

ability to define delinquency in a manner that is consistent with the

FCCS's definition. While the Department recognizes that it has the

authority to define terms and establish policy that differ from the

FCCS, it feels that it would be in the best interest of the FSP to be

consistent with the FCCS on this issue. Therefore, the Department, in

Sec. 273.18(g)(5) of this rule, is proposing to define a delinquent

food stamp recipient claim as a claim: (1) Which has not been paid by

the due date specified in the State agency's initial written demand

letter and a satisfactory payment arrangement has not been made; or (2)

if a satisfactory payment arrangement has been made, a claim for which

a payment has not been paid by a date required payment in accordance

with an established repayment schedule. A claim would remain delinquent

under either of these criteria until payment is received in full, a

satisfactory payment agreement is negotiated (or renegotiated), or

allotment reduction is invoked.

The Department is proposing to have two exceptions to its

definition of delinquency. The first exception involves multiple

claims. The Department is proposing in Sec. 273.18(g)(5)(iv) that a

claim would not be considered delinquent if another claim or claims for

the same household exists and the other claim(s) is currently being

paid either through an installment agreement or allotment reduction. In

addition, the State agency would have to expect to begin collection on

the claim once the other claim(s) is settled. This is being proposed to

ensure that claims that are collectible and simply ``waiting their

turn'' would not be subjected to activities such as involuntary

collection actions and termination.

The second exception to the definition of delinquency involves IPV

claims where the collection is coordinated through the court system.

The Department is proposing this exception in Sec. 273.18(g)(5)(iv)

because it recognizes that the State agency which is responsible for

overall food stamp recipient claim collecting and reporting may be

limited in its control over this type of claim. This exception to the

definition would be optional depending upon the collection system and

coordination between the court and State agency.

The Department is interested in receiving comments on this proposal

to define delinquency.

Delinquency and Fair Hearing Requests

Current regulations governing fair hearing requests at 7 CFR

273.15(g) state that the ``* * * household shall be allowed to request

a (fair) hearing on any action * * * which occurred in the prior 90

days.'' For food stamp recipient claims, the 90-day fair hearing

standard is applicable to the initial demand letter. Therefore, the

Department is proposing in Sec. 273.18(g)(6) of this rule to specify

that, once a household timely requests a fair hearing, all attempts to

collect the claim would cease. This would be done to protect the rights

of the household. If, when the hearing decision is rendered, it is

determined that a claim does, in fact, exist against the household, the

household would be sent another demand letter. This demand letter may

be combined with the notice of the hearing decision. The determination

of delinquency would then be based on whether payment is received or an

agreement to pay is reached by the due date on this subsequent demand

letter.

If, when the hearing decision is rendered, it is determined that a

claim does not exist, the Department is proposing in Sec. 273.18(g)(8)

that the claim be terminated and written-off. This is discussed in

greater detail in another section of this preamble.

Claim Termination and Write-off

Section 13(a)(1) of the FSA (7 U.S.C. 2022(a)(1)) authorizes the

Department to settle and adjust all or part of any food stamp recipient

claim if it serves the purposes of the FSP. Current regulations at 7

CFR 273.18(e) specify the conditions by which collection action on

claims may be suspended and terminated. Suspended claims are claims in

which no more collection action will be actively taken. A suspended

claim may be terminated after it has been held in suspense for three

years.

In many State agencies, claims that are currently under

``suspension'' are being or soon will be subjected to a variety of

collection methods. These methods include such collection alternatives

as salary offset and State and Federal tax refund offset. The

Department feels that, with the introduction of these innovative

collection methods, it would be unlikely in an effective claims

collection environment for a claim to fall under the definition of a

suspended claim as per 7 CFR 273.18(e) in the current regulations.

Therefore, the Department is proposing in this rule to eliminate all

references to the concept of suspending food stamp recipient claims.

Having a designation for claims that will be inactive for three years

without any subsequent collection action being planned serves no

purpose, especially with the advent of the additional collection

methods.

In the current regulations, there is no requirement to terminate

claims and there is no clear definition of this term. The regulations

at 7 CFR 273.18(e)(ii)(3) simply state that a ``* * * claim may be

determined uncollectible after it is held in suspense for 3 years

(emphasis added).'' The lack of a requirement or clear definition has

resulted in a large number of uncollectible claims being included in

reports submitted to FNS and sizable account receivables being

unnecessarily maintained in State agencies' ledgers. In addition,

efficient and effective claims management advocates timely and

aggressive action on a debt but with a quick disposition through

termination when the probability of collection proves low.

A study released by a Departmental contractor in August 1994

entitled, ``Standard Operating Principles and Detailed Standard

Operating Procedures for Food Stamp Recipient Claims,'' recommended

that terminating and writing-off claims be made a requirement if the

claims meet certain criteria. The study compared the current approach

to food stamp recipient claim accounting with generally accepted

accounting principles. These generally accepted accounting principles

included statements from the Federal Accounting Standards Advisory

Board, Acts of Congress, Treasury regulations (including the FCCS), and

other authoritative documents. Page 15 of the Departmental contractor

study specified that an organization's termination and write-off policy

should ``* * * include the collection agent's definition of an

uncollectible claim specifying which circumstances require a claim to

be written-off and under which circumstances a claim may be deemed

uncollectible by the decision of management. The write-off policy * * *

should be strictly applied.''

The Department, in Sec. 273.18(g)(9) of this rule, is therefore

proposing to define a terminated claim as one in which all collection

action has ceased. Under the proposed rule, a terminated claim would be

immediately written-off, that is, it would be no longer considered a

receivable subject to continued Federal and State agency collection and

reporting requirements. A claim would have to fit one of the five

criteria listed below to be terminated and written-off.

In determining which criteria should be used to terminate a claim,

the Department considered the

[[Page 29313]]

requirements found in 4 CFR 104.3 in the current FCCS published by

Treasury. This paragraph of the FCCS contains five specific standards

for terminating and writing-off claims: (a) The inability to collect

any substantial amount; (b) the inability to locate the debtor; (c) the

cost will exceed recovery; (d) the claim is legally without merit; or

(e) the claim cannot be substantiated by evidence.

In determining the Department's termination and write-off policy,

FCCS standard (a), the inability to collect any substantial amount, was

considered as it is of fundamental concern when the debtors primarily

consist of households which are currently participating or were

recently eligible to participate in a means tested program such as the

FSP.

FCCS standard (b), the inability to locate the debtor, was also

considered in the development of the Department's proposed termination

and write-off policy. The Department's termination and write-off policy

being proposed in this rule takes into account the capabilities of the

tax refund and other automated offset programs that are very effective

in collecting from difficult-to-locate household members.

FCCS standard (c), cost will exceed recovery, is certainly a factor

in the Department's proposal. Food stamp claims, by nature, are usually

relatively small with the average claim established in Federal fiscal

year 1995 being $464. This is also a predominant factor in a proposal

discussed in another section of this preamble regarding cost

effectiveness determination prior to claim establishment.

Food stamp recipient claim terminations and write-offs that may be

applicable under FCCS standards (d), claim legally without merit, and

(e), claim cannot be substantiated by evidence, are usually handled

under the fair hearing process in the FSP. Administrative

disqualification hearing and court determinations that specifically

find that no overissuance occurred are also pertinent to these

standards.

Taking into account FCCS standards (a) through (e), the Department

is proposing in Sec. 273.18(g)(9) to require State agencies to

terminate and write-off a food stamp recipient claim if it meets any

one of the following five criteria: (1) Any claim which is found to be

invalid in a fair hearing, administrative disqualification hearing or

court determination; (2) Any claim in which all adult household members

are deceased and the State agency is not planning to pursue collection

from the estate; (3) Any claim which has an outstanding balance of $25

or less and has been delinquent for 90 days or more; (4) Any claim that

the State agency has determined is not cost effective to collect; or

(5) Any claim that has been delinquent for three years.

The fourth Departmental criterion states that any claim that the

State agency has determined not to be cost effective to collect shall

be terminated and written off. To determine cost effectiveness, the

Department believes that a State agency should use the standards

already in use for food stamp recipient claims. If no standards

currently exist, the State agency shall develop standards subject to

FNS approval.

In the fifth Departmental criterion, a State agency would be

required to terminate and write-off any claim that has been delinquent

for three years. The decision to require termination and write-off

after three years of delinquency is based on a recommendation in the

aforementioned contractor study (August 1994). Page 16 of the study

specifies that ``* * * three years of delinquency is a reasonable

amount of time to collect on outstanding debts, and that debts

exceeding this time limit will likely not be collected with additional

effort or time and should be written-off.''

In addition, for the fifth criterion, the Department is proposing

to add a qualifier that the State agency may opt not to terminate a

claim which has been delinquent for three years or more if prior

collections have been realized through Federal or state tax refund

offset, salary offset or any other similar collection mechanism. This

proposed qualifier was added because, even though these claims

technically remain delinquent, the probability of collection via offset

in the future may be relatively high because a portion of the claim has

already been collected via this collection method.

An issue has been raised concerning the possible reinstatement of

terminated claims if an additional collection methodology is introduced

or an event (such as lottery winnings) occurs to substantially increase

the likelihood of future collections. In such cases State agencies may

reinstate the claim.

Compromising Claims

The areas in the current regulations at 7 CFR 273.18(g)(2) and

(g)(4) concerning compromising claims would be consolidated into its

own section, Sec. 273.18(g)(7) in the proposed rule. The Department is

proposing two revisions in this area to increase consistency with the

FCCS at 4 CFR Part 103. The first proposed revision would limit the

authority to compromise to claims under $20,000. The second proposed

revision would provide that, if a claim becomes delinquent, any

compromised portion of that claim would be reinstated to the claim

balance.

Acceptable Forms of Payment

Current regulations at 7 CFR 273.18(g) indicate that payments for

claims shall be accepted in various forms of cash, food coupons,

offsets, intercepts and reductions to the household's allotment. The

Department is proposing some policy clarifications and changes in this

area.

``Cash'' Payments

The Department would like to clarify in Sec. 273.18(h)(2)(i) of

this rule that acceptable ``cash'' payments for food stamp claims

actually take several forms. In addition to traditional forms of cash

payments such as cash, check or money order, the Department also

considers payments made via credit and/or debit cards as acceptable

methods of payment if the State agency has the capability to accept

such payments. Payment in these and other generally accepted formats

are acceptable for both lump sum and installment payments. Offering

alternative forms of payment increases the possibility of collection

and State agencies are encouraged to explore these alternative payment

methods.

Currently, no policy exists regarding the issue of crediting cash

collections received as general lump sum or installment payments for

joint food stamp/other social service program recipient claims. In an

effort to ensure that each program receives its fair share in joint

collections, the Department is proposing, in Sec. 273.18(h)(2)(ii) of

this rule, to require that each program receive its appropriate pro

rata share of any installment collection. For example, under the

proposed rule, if a $700 public assistance and $300 food stamp claim

were combined into a $1,000 claim, 30 percent of an undesignated

payment would be credited to the food stamp portion of the claim while

70 percent would be credited to the public assistance portion. This

proposal would not pertain to any designated payment or agreement that

includes the specific withholding of public assistance or food stamp

benefits to satisfy a claim.

Coupon and EBT Payments

The Department is not proposing any changes to the current

regulations regarding payments made using paper food coupons. The

Department is also not proposing any changes regarding the handling of

coupons or coupon books collected as payments. However, EBT

[[Page 29314]]

benefits are also included under the definition of coupon in the

current regulations at 7 CFR 271.2. The Department believes that the

distinctive characteristics of EBT, as opposed to those of the

traditional paper food coupon system, warrant special attention in the

area of recipient claims collection.

An active EBT benefit account is one in which benefits have been

accessed within the last three months. The Department is proposing, in

Sec. 273.18(h)(4)(iii) of this rule, to make the policy concerning

active EBT benefit accounts and claims collection consistent with the

current policy regarding claim repayment via paper coupons. This would

allow a household to voluntarily pay all or part of its outstanding

claim with funds taken from its EBT benefit account. This would differ

from allotment reduction in that the payment is being made subsequent

to the allotment being issued and credited to the household's EBT

benefit account.

The actual methodology and procedure to enact this transaction

regarding the use of Point-of-Sale devices, administrative terminals or

any other acceptable method to conduct these transactions would be

determined by the State agency and included in its EBT system design.

In addition to the above, the Department is proposing an additional

requirement to safeguard the rights of households by ensuring that

involuntary payments would not be made from EBT benefit accounts. The

proposed rule, in Sec. 273.18(h)(4)(iii), would require that the State

agency secure and retain a statement or document signed by a household

member or representative authorizing the transaction. A signed document

for each transaction would not be necessary, however, if each

transaction was completed in accordance with a signed repayment

agreement or similar document. The signed agreement would serve as

adequate documentation.

The same policy that applies to active EBT benefit accounts also

applies to inactive or stale EBT benefit accounts. Inactive or stale

EBT benefit accounts are those accounts that have not been accessed for

three months or longer and have yet to be expunged. The Department, in

Sec. 273.18(h)(4) of this rule, is proposing that voluntary payments

from inactive or stale accounts be accepted once the account is

reactivated at the request of the household in accordance with 7 CFR

274.12(f)(7).

The Department recognizes that some State agencies may have

difficulty assimilating this change into already existing EBT

environments. However, State agencies, by complying with the current

requirements in 7 CFR 274.12(e)(1), should already have a system in

place to administratively adjust amounts in EBT benefit accounts.

Adapting this system for paying off claims may not be a major

undertaking. The Department believes that, in addition to maintaining

consistency with the current policy regarding paper coupons,

cooperating households should be afforded maximum flexibility in their

efforts to voluntarily repay a claim.

The Department would also like to take this opportunity to stress

that the collection of claims using EBT benefits is considered a non-

cash collection and corresponding funds should not be drawn from the

Federal EBT benefit account by the State agency when this type of

collection is made.

EBT benefit accounts that have not been accessed by the household

for one year are expunged and households lose all entitlement to these

benefits. These benefits are then returned to FNS in accordance with 7

CFR 274.12(f)(7) of the current regulations. The Department considered

allowing State agencies to treat already expunged EBT benefits as a

``collection'' and therefore allow State agencies to retain their

appropriate share of the collection. However, since the accounts were

already expunged and returned to FNS, a complex system and reporting

mechanism would need to be designed and implemented to ensure that

these ``collected'' but expunged (and therefore essentially

nonexistent) funds are properly accounted for in FNS and State agency

reporting. The Department feels that this would be inefficient and not

cost effective from both a Federal and State agency perspective.

However, the Department does recognize that these are benefits that

the household never used. This presents the possibility that a

household may have consciously not used its benefits because it was

aware of the existence of an overissuance and, essentially placed these

funds ``in escrow'' to make good on the error. The Department believes

that including this amount in a claim to repay the overissuance is

inappropriate. Therefore, the Department is proposing, in

Sec. 273.18(e), to allow a State agency to subtract the value of

expunged EBT benefits from overissuances prior to the establishment of

the claim. This would be the final step in the claim calculation

process and would not be considered a ``collection'' for Federal

reporting purposes. In instances where the claim is already established

and benefits become expunged, the State would subtract the amount of

the expunged benefits from the claim balance. This is reflected in

Sec. 273.18(h)(4)(v) of this proposed rule. Again, this adjustment

would not be considered a ``collection'' for Federal reporting

purposes.

The Department is interested in receiving comments on the use of

funds from EBT benefit accounts to repay outstanding recipient claims.

Collection and Payment Methods

Section 844 of the PRWORA made significant changes to the FSA (7

U.S.C. 2011-2032) in the areas of collections and payments. One

revision to section 13 of the FSA (7 U.S.C. 2022) states that a State

agency shall collect a claim ``* * * in accordance with requirements

established by the State agency for * * * electing a means of payment,

and establishing a time schedule for payment.'' This change is

significant in two areas. First, the State agency, and not the

household, now determines the appropriate collection method, including

whether to provide options to the household, when the claim is

initially established. Second, this revision also provides the State

agency with the ability to involuntarily subject all claims to all

collection methods--including those such as allotment reduction for AE

claims that, until the enactment of the PRWORA, could only be collected

on a voluntary basis. These changes are reflected in each applicable

paragraph in Sec. 273.18(i) in this proposed rule.

The PRWORA addresses specific collection methodologies by stating

that a claim shall be collected by ``* * * (A) reducing the allotment

of the household; (B) withholding amounts from unemployment

compensation * * *; (C) recovering from Federal pay or Federal income

tax refund * * *; or (D) any other means.'' The PRWORA further states

that these methods shall not be applicable if the State agency can

demonstrate ``* * * that all of the means are not cost effective.''

This proposed rule includes a paragraph in Sec. 273.18(i) for each of

the collection methods (allotment reduction, unemployment compensation,

and Federal salary and Federal income tax refund offsets) specified in

the PRWORA. Federal salary and Federal income tax refund offsets are

also discussed in much greater detail elsewhere in this preamble and in

Sec. 273.18(p). In addition, other means of payment, notably lump sum

and via installments, are included in Sec. 273.18(i). Cost

effectiveness is addressed in the detailed discussion for each payment

method as well as in the discussions in

[[Page 29315]]

this preamble regarding pre-establishment cost effectiveness

determination and claim termination and write-off.

Allotment Reduction

A major change in section 13 of the FSA (7 U.S.C. 2022) brought

about by section 844 of the PRWORA involves the use of allotment

reduction to collect claims. Prior to the enactment of the PRWORA, a

participating household with any type of claim could opt to pay its

claim using a method other than allotment reduction. In addition, a

State agency was statutorily prohibited from invoking involuntary

allotment reduction against a household with an AE claim. Section 844

of the PRWORA removed the household's right to choose the payment

option for any type of claim. As a result, this places allotment

reduction, which is widely recognized by State and local agencies as

the most cost effective and efficient food stamp recipient claim

collection method, in the forefront as the primary collection method.

This is being reflected in this rule. The Department is proposing,

in Sec. 273.18(i)(1), to require that a State agency automatically

collect payment from a participating household for any established

claim, including an AE claim, through allotment reduction. There would

only be two stipulations to this proposal. The first would be that the

household would need to be initially notified of the existence of the

claim. This is discussed in greater detail elsewhere in this preamble.

The second stipulation would be that a household's initial allotment

shall not be reduced to collect the claim. This stipulation is included

because the initial allotment is usually pro rated and therefore has

already been reduced. This is not a change from current policy.

Some may argue that it is unfair to a household to collect an AE

claim through involuntary allotment reduction since the reason for the

overissuance was not the fault of the household. The Department

believes that, since Congress specifically removed the prohibition from

the FSA, that it is clearly the intent of Congress to allow this type

of collection.

In addition to the above, the Department is proposing to make three

additional policy and several structural revisions to the paragraph

governing allotment reduction at 7 CFR 273.18(g)(4) in the current

regulations. The structural revisions are being proposed to avoid

repetition by eliminating much of the language in the introductory

paragraph that may be found elsewhere in the rule. This includes the

notification procedures and the acceptance of lump sum payments.

Two of the three additional policy changes in allotment reduction

being proposed concern the current benefit reduction procedures and IPV

claims. The current regulations at 7 CFR 273.18(g)(4)(i) provide that

benefit reduction for an IHE claim is to be computed from the monthly

allotment. The allotment is the benefit level that the household is

scheduled to receive. Benefit reduction (in current 7 CFR

273.18(g)(4)(iii)) for an IPV claim, on the other hand, is to be

computed from the monthly entitlement. The entitlement is the benefit

amount that the household would have received if the household member

was not disqualified for committing the IPV. Several State agencies

have obtained waivers to use the allotment rather than the entitlement

as the basis for reducing the household's benefits. For the purposes of

administrative efficiency, which was the basis for the Department

approving the waivers, this rule, in Sec. 273.18(i)(1)(ii), would allow

all State agencies to determine the benefit reduction amount for IPV

claims based on either the allotment or entitlement as long as all

areas within the State handles the calculation of benefit reductions in

the same manner.

Current regulations at 7 CFR 273.18(g)(4)(iii) limit the reduction

amount for an IPV claim to the greater of 20 percent of a household's

monthly entitlement or $10 per month. In the second policy change, the

Department is proposing, in Sec. 273.18(i)(1)(ii), to increase the

maximum recoupment amount for an IPV claim to the greater of $20 per

month or 20 percent of a household's monthly entitlement or allotment.

This is being proposed as an effort to expedite the collection of

claims stemming from intentional violations. The rule also proposes in

Sec. 273.18(i)(1)(i) to provide that individuals in households subject

to allotment reduction are not subject to involuntary collection by any

other methods.

The final policy change being proposed in this rule is to

specifically include a paragraph (Sec. 273.18(i)(1)(v)) which would

provide a State agency with the prerogative to pursue additional

collection methods against individuals who are past household members

and who are severally responsible for repayment of this claim. This is

being proposed because of the dynamic nature of households in regard to

make-up and participation in the FSP.

Intercept of Unemployment Compensation Benefits

Current regulations at 7 CFR 273.18(d)(3)(vi) state that a State

agency may implement the intercept of unemployment compensation

benefits as a voluntary payment option for IPV claims. In addition, the

current regulations at 7 CFR 272.12 also discuss collecting claims via

this method. In an effort to streamline this area of the regulations,

the Department is proposing, in this rule, to remove the paragraph

currently at 7 CFR 272.12.

In addition to the above streamlining effort, a change in policy,

brought about by section 844 of the PRWORA, is being proposed regarding

collection via an intercept of unemployment compensation benefits.

Currently, the intercept of unemployment benefits is allowed only

for IPV claims. Section 273.18(i)(5) of the proposed rule would extend

this collection method to any claim. This is being proposed to conform

with the requirement in section 840 of the PRWORA that provides for a

State agency to use any collection method to collect any type of claim.

Currently, unemployment compensation intercept is optional and

State agencies are not mandated to use this collection method. The

Department is not proposing to change this policy in this rule. The

reason for the Department not proposing to mandate this collection

method is that the intercept of unemployment compensation benefits is

State-specific and therefore it may not be cost effective to implement

in some State agencies. Even though this would remain an option under

this proposed rule, the Department strongly urges State agencies to

pursue this avenue of claims collection.

Coordination with Federal Claim Collection Methods

Current rules specify requirements for FTROP and FSOP at 7 CFR

273.18(g)(5) and (g)(6). This rule would include proposed requirements

for these as well as other Federal collection programs such as the

Treasury Offset Program (TOP) at Sec. 273.18(p). To the extent that it

is feasible, the Department wants State agencies to use these and other

Federal collection methods concurrently with State agency methods.

Accordingly, this rule proposes at Sec. 273.18(i)(7) to authorize such

concurrent collection.

Lump Sum Payments

Current regulations at 7 CFR 273.18(g)(1)(i) through (iii) allow

for the full or partial collection of claims via a

[[Page 29316]]

lump sum cash or coupon payment. As part of the regulatory

reorganization, these three paragraphs would be consolidated into one

paragraph (Sec. 273.18(i)(3)) in the proposed rule. The proposed rule

would also include using funds in an EBT benefit account as a lump sum

payment. This is discussed in greater detail elsewhere in this

preamble.

Installment Payments

Current regulations at 7 CFR 273.18(g)(2) provide the procedures

for installment payments. The Department is not proposing to make any

substantial change to the procedure found in the first paragraph (7 CFR

273.18(g)(2)(i)) of this section. Paragraphs (ii) through (iv) of 7 CFR

273.18(g)(2) in the current regulations provide detailed procedures for

when the household fails to make a scheduled payment. These procedures

currently call for providing a household with another notice and an

opportunity to renegotiate its payment schedule if it fails to make a

payment. The Department, in an effort to streamline this area of the

regulations, is proposing to increase State agency flexibility by

eliminating much of the language contained in these paragraphs.

The Department believes that installment payments should be made

available but also should be at least as efficient and effective as

allotment reduction and other collection methods. Consequently, the

proposed rule at Sec. 273.18(i) would permit a State agency to take

whatever action it feels is appropriate if a household fails to make an

installment payment provided the household was previously notified of a

potential adverse action if payments are not made in accordance with

the terms of the original repayment agreement.

Additional Collection Actions

The Department is proposing in Sec. 273.18(i)(6) to add a paragraph

stating that State agencies may employ any additional collection

methods to collect claims. These actions would include, but would not

be limited to, referral to a collection agency, state tax refund and

lottery offsets, wage garnishments, property liens and small claims

court. This is being proposed to clarify that State agencies are able

to employ any other means of collection for all types of claims.

Retention Rates

The applicable retention rates in the current regulations at 7 CFR

273.18(h) for collections by a State agency are 50 percent for IPV

claims and 25 percent for IHE claims. Section 844 of the PRWORA changes

these rates by amending section 16(a) of the FSA (7 U.S.C. 2025(a)) to

replace the current rates with 35 percent retention for IPV claims and

20 percent retention for IHE claims. In addition, as indicated in

section 13 of the newly amended FSA (7 U.S.C. 2025), if an IHE claim is

collected via unemployment compensation, that collection would also

have a 35 percent retention rate. The Department is proposing, in

Sec. 273.18(m) of this rule to make the adjustments in the rates

accordingly.

Submission of Payments

Current regulations at 7 CFR 273.18(i) discuss the procedures for

the submission of State agency payments for claims collections to FNS

and payments from FNS to the State agency. The only change that the

Department is proposing in this area is to eliminate the State agency

option of receiving a Federal check for payment of claims collection

retention and replace it with electronic funds transfer. The Department

is proposing this change to comply with the DCIA. The DCIA requires

Federal agencies to convert from checks to electronic funds transfer.

In addition, as part of the regulatory reorganization, much of the

prescriptive language would be removed and this paragraph would be

moved to Sec. 273.18(n) in this proposed rule.

The current regulations at 7 CFR 273.18(i)(4) discuss providing

refunds for overpaid claims. As part of the regulatory reorganization,

this is broken out into its own paragraph, Sec. 273.18(j), in the

proposed rule.

Bankruptcy

Current regulations at 7 CFR 273.18(k) discuss the procedures for

proceeding against households with claims which file for bankruptcy.

The current policy authorizes State agencies to act on FNS's behalf to

recover claims when households file for bankruptcy. The Department is

not proposing to make any changes in policy regarding this area of the

regulations. However, as part of the regulatory reorganization, this

paragraph would be moved to Sec. 273.18(l) in this rule.

Accounting Procedures

Current regulations at 7 CFR 273.18(l) discuss the accounting

requirements and procedures to be maintained by State agencies. Further

procedural clarification is being provided on this issue and this

paragraph is being moved to in Sec. 273.18(o) in this rule.

Interstate Claim Collection

Current regulations at 7 CFR 273.18(m) discuss the continuation of

collection action against households that have an outstanding claim and

move from one State agency's jurisdiction to another. The regulations

state that a receiving State agency should initiate or continue

collection action when it ascertains that the originating State agency

does not intend to pursue collection. Feedback received from State

agencies indicates that this policy has not been successful in

recovering interstate claims and needs to be strengthened to assure

cooperation among State agencies. A number of State agencies have

entered into claim-transferring agreements among themselves on their

own initiative but it has not been a nationwide effort. This has

resulted in a household being able to avoid paying its claim simply by

relocating to another State. Federal tax refund offset does address

this issue to some extent by conducting a nationwide search and

subsequently collecting claims against household members regardless of

where they currently reside. However, Federal tax refund offset is

limited to those households with members who file a Federal income tax

return and are due a refund.

The Department believes that food stamp recipient claims, as

Federal debts, should be more vigorously pursued by State agencies when

households move across State borders. Therefore, the Department is

proposing to amend 7 CFR 273.18(m) by breaking it out into separate

paragraphs to specifically outline the responsibilities of the

originating and receiving State agencies. This amendment is intended to

maximize collection potential while maintaining State agency

flexibility.

The Department is proposing that, unless an actual interstate

transfer takes place, the originating State agency will continue to

have the responsibility for collection action on any recipient claim

regardless of whether the household remains in its jurisdiction. State

agencies, however, would be able to formally transfer this

responsibility for individual claims to receiving State agencies under

certain circumstances. The types of interstate transfers being proposed

are discussed in the succeeding paragraphs of this preamble.

To strengthen the interstate claim collection process for

participating households, the Department is proposing to further amend

7 CFR 273.18(m) to require that a State agency must accept the transfer

of the remaining balance of any claim from another State agency if it

is discovered that the household is participating in the FSP in the

receiving State. This ensures efficient claims collection since

allotment reduction, a highly effective

[[Page 29317]]

collection tool, is available to the receiving State agency. Once the

transfer takes place, the claim would then no longer be the

responsibility of the originating State agency and the receiving State

agency would be able to retain any applicable retention amounts for

subsequent collections. The amended regulatory text being proposed is

being designated as its own paragraph, Sec. 273.18(k)(3) in the

proposed rule.

In addition, to facilitate this process, the Department is

proposing, in a new paragraph, Sec. 273.18(k)(2), to require that State

agencies timely respond to inquiries concerning household participation

received from State agencies who have reason to believe that a

household or adult members of a household with an outstanding claim

have relocated to that State. A response would be considered timely if

a determination is made within 30 days. If an examination of the

receiving State agency's caseload does reveal that the household (or

any of its adult members) are, in fact, receiving benefits in that

State, the State agency would then accept the transfer of the claim

balance from the originating State agency and continue collection

action efforts including allotment reduction. The receiving State would

keep any retention amounts for transferred claims.

The Department is also proposing to add another new paragraph,

Sec. 273.18(k)(4), to allow, but not require, receiving State agencies

to accept the transfer of any claim if the household is not

participating. This policy is being maintained to maximize flexibility

as well as facilitate the new claim termination process being proposed

in another section of this rule.

Federal Claim Collection Methods (FCCM's)

This rule proposes changes to current regulations on FTROP and

FSOP. These changes are proposed to incorporate certain legislative

changes and to implement certain other changes based on experience

operating these programs. The Department believes that these changes

will enhance the collection of recipient claims and will make that

collection more efficient, especially for State agencies. In summary,

these changes would:

--Require all State agencies to use FCCM's (unless the methods are

shown to be not cost beneficial).

--Require that all claims that meet the criteria, including AE claims,

be submitted for collection under FCCM.

--Provide that claims may be collected by FTROP and/or administrative

offset (ADOP), or by FSOP and/or ADOP.

--Provide that FTROP 60-day notices and FSOP advance notices advise

debtors that their claims are subject to ADOP.

--Comply with the hearing requirements for ADOP with the hearing

opportunities currently provided under FTROP and FSOP.

Federal Claim Collection Methods (FCCM's)

This rule would introduce the phrase ``Federal claim collection

methods'' and its acronym ``FCCM's'' at Sec. 273.18(p)(1). Currently

there are two such collection methods, FTROP and FSOP. As discussed

later in this preamble, this rule is proposing an additional collection

method that would be operated at the Federal level. The new method is

ADOP. There are several policies and procedures that would become

common to these three collection methods. As discussed in this preamble

several paragraphs below, FNS plans to develop a single manual which

for all three programs would contain such things as computer system

record layout and production schedules and guidance on procedures for

handling special cases and for fiscal and accounting matters. The rule

would also specify that under FCCM's State agencies would retain their

recipient claims responsibilities, that would provide certain

information on claims subject to FCCM's and would receive amounts

collected based on the currently authorized retention rates.

Mandated Participation

Section 844 of PRWORA amended section 13(b) of the FSA (7 U.S.C.

2022(b)) to require that, unless State agencies can demonstrate that

the methods are not cost effective, they must collect overissued food

coupons (recipient claims) from Federal pay or Federal income tax

refunds.

Currently, these two collection methods, FTROP and FSOP are

optional for State agencies. Regulations at 7 CFR 273.18(g)(5)(i)

provide that State agencies which choose to implement FTROP must submit

an amendment to their Plan of Operation stating that they will comply

with FTROP regulations. Choosing to implement FTROP entails

implementing FSOP because current regulations at 7 CFR 273.18(g)(6)(i)

provide that all claims submitted for FTROP are also subject to FSOP.

This rule proposes to delete the language on State agency option to

implement FTROP. At Sec. 273.18(p)(2)(i), the rule would require that

all State agencies submit all claims which meet certain criteria for

collection by FCCM's.

Mandatory implementation of FCCM's will affect few State agencies.

In calendar year 1998, of the 52 State agencies who could use FCCM's,

47 are doing so. As discussed under the paragraph on Implementation at

the end of this preamble, this rule would be required to be implemented

180 days after its publication is final. The Department expects that

this implementation period would be sufficient for State agencies to

implement FCCM's during calendar year 1999.

Consistent with mandatory implementation of FCCM's, this rule

proposes deleting the requirement (in current rules at 7 CFR

272.2(a)(2) and (d)(1)(xii) and 7 CFR 273.18(g)(5)(i)(A)) that State

agencies choosing to implement FTROP and FSOP submit an amendment to

their Plan of Operations.

Administrative Offset

Prior to the DCIA, under administrative offset, debts owed by

persons to the Federal government are collected from payments due those

persons from the Federal government. The DCA at 31 U.S.C. 3716 as

amended by the DCIA greatly expanded the Federal government's authority

to collect Federal debts through ADOP.

The Department believes that implementing the DCIA's provisions

relating to ADOP would significantly enhance collection of FSP

recipient claims. First, the amended DCA at 31 U.S.C. 3716(c)(1)(A)

requires that, with certain exceptions, disbursing officials of Federal

government agencies must at least annually offset from Federal payments

claims submitted by creditor agencies. Heretofore, while there has been

general authority for administrative offset, there has not been a

general requirement that Federal payments due to individuals be offset

against debts those individuals owe the Federal Government. Second, the

amended DCA at 31 U.S.C. 3716(c)(3)(A)(ii) provides that, except for a

$9,000 annual exemption, all payments due a debtor under the Social

Security Act are subject to ADOP. Third, the amended DCA at 31 U.S.C.

3716(c) centralized the ADOP procedures in a single Federal agency, the

Department of the Treasury.

Accordingly, as discussed in detail later in this preamble, this

rule proposes to add ADOP to FTROP and FSOP by modifying the required

due process and privacy notices to notify the debtor that, in addition

to being subject to collection from tax refunds and Federal wages, the

claim in question is also subject to

[[Page 29318]]

collection from other payments due the debtor from the Federal

government. The Department expects that there will be little work

impact on State agencies related to referring claims for ADOP. FNS will

refer for collection by ADOP claims submitted by State agencies. FSOP

claims referred to FNS for notices of intent which are referred for

collection from Federal salaries will also be referred for collection

by ADOP. Funds collected through ADOP will be transferred to State

agencies and reported with FTROP and FSOP collections. Current

regulations on FTROP specify update requirements for State agencies,

and FNS has provided State agencies update procedures for FSOP. This

rule proposes a general requirement for updating records of claims

submitted for collection through FCCM's.

Cross Servicing

The amended DCA at 31 U.S.C. 3711(g) requires that debt delinquent

over 180 days be transferred to the Secretary of the Treasury for

``cross servicing.'' Under cross servicing, the Department of the

Treasury (Treasury) would pursue a variety of claims collection actions

such as referring the claim under FTROP and FSOP. Treasury would refer

debts to debt collection centers (selected Federal agencies) which

would pursue these actions.

The Department is currently working with Treasury to determine the

best way to implement this collection strategy. As such, this rule does

not propose adding procedures for cross servicing at this time.

Claims Subject to FCCM's

As part of administrative offset provisions, the amended DCA now

requires at 31 U.S.C. 3716(c)(6) that any Federal agency that is owed a

past due, legally enforceable nontax debt that is over 180 days

delinquent, including nontax debt administered by a third party acting

as an agent for the Federal Government, must notify the Secretary of

the Treasury of all such debt for purposes of administrative offset

(emphasis added). Currently, rules for FTROP and Salary Offset set

criteria for claims which may be submitted for collection under these

procedures. This rule proposes that, subject to two conditions

discussed just below, all delinquent recipient claims be submitted for

collection under FCCM's. The Department is proposing this requirement

because FCCM's are extremely effective. For example, net dollar

collections under FTROP (voluntary payments and collections from

Federal tax refunds less offset fees and Treasury reversals) exceed 20

percent of the dollar value of claims submitted. FSOP offers the only

way to locate and pursue collection against the salaries of Federal

employees who are liable for overissued food stamp benefits. (The

Internal Revenue Service (IRS) currently prohibits referral of debts

for FTROP which can be collected from Federal employees' salaries.)

Finally, and especially with the addition of ADOP, FCCM's provide State

agencies access to sources of significant collections not otherwise

available to them.

In addition, this rule proposes that, unless no liable individual

can be located, State agencies must pursue one or more State agency

claim collection method before submitting a claim for collection under

FCCM's. The rule proposes to specify that demand letters sent to liable

individuals at the most current address known to the State agency and

returned as undeliverable would be sufficient to show that no liable

individual could be located. The requirement for State agency

collection initiative as a condition to the use of FCCM's is being

proposed to make the procedures for the other components of FCCM

consistent with the FTROP requirement that the (Federal) agency satisfy

the Secretary of the Treasury that the agency has made reasonable

efforts to obtain payment of the debt. (See 31 U.S.C. 3720A(b)(4).) In

addition, the Department believes that it is most efficient for State

agencies to attempt collection action with methods available to them

and that if those methods are not successful relatively soon after

initiation, debts should be referred for collection through FCCM's.

As stated above, the amended DCA at 31 U.S.C. 3711(c)(6) requires

that claims 180 days delinquent be submitted for ADOP. State agencies

are establishing claims at a rate of over 775,000 per year. To have a

State agency submit each claim for FCCM's as soon as that claim is 180

days delinquent is not administratively or logistically possible at

this time. Therefore, the Department is proposing that State agencies

be required to submit claims for FCCM's at intervals to be determined

by the Department. The Department will continue to work with Treasury

to fine tune this process to implement this aspect of the DCIA.

Accordingly, this rule proposes at Sec. 273.18(p)(1)(i) that all

claims would be subject to collection by FCCM's only after the State

agency has initiated one or more State agency collection methods. The

rule also proposes that the requirement for a State agency collection

effort will not apply when no liable individual can be located as

indicated by such evidence as demand letters returned as undeliverable.

Finally, in this regard, the rule proposes that State agencies must

submit all delinquent claims for collection by FCCM's.

Procedures and Schedules

Current rules at 7 CFR 273.18(g)(5)(i)(B) specify that State

agencies submit data for FTROP to FNS in the record formats specified

by FNS and/or Treasury, and according to schedules and by means of

magnetic tape, electronic data transmission or other method specified

by FNS. This rule proposes to apply these procedures to FCCM's in

general.

This rule would require that, in addition to following computer

data-related guidance, State agencies follow other technical and

procedural guidelines as specified by FNS. During the testing of FTROP

and FSOP, FNS conducted several national training sessions during which

FNS provided substantial guidance on computer system operations, policy

requirements and the financial reporting and funds processing for FTROP

and FSOP. Following the training sessions, FNS provided packages of

written responses to questions raised during the sessions. On an

ongoing basis, FNS responds to numerous questions from State agencies

concerning how to handle particular cases with respect to computer

systems, collection policies and financial and accounting procedures.

FNS sees a need to continue to provide this material so that all staff,

Federal and State agency, involved with different aspects of FCCM's,

have a single, consolidated operations manual.

This manual will be called the ``Manual for Federal Claims

Collection Methods for the Food Stamp Program'' (the FCCM manual). The

basis of the FCCM manual would be the current manual used for FTROP and

FSOP data management (the Federal Debt Collection Program Revenue

Procedure Manual 1997). As is the case with the current manual, the

FCCM manual would be a vehicle for providing technical guidance for

complying with established regulatory requirements. (See

Sec. 273.18(p)(1)(ii).)

Identification of Type of Claims

Currently State agencies are not required to identify the type of

claim submitted for FTROP and FSOP. This rule proposes to require that

claims submitted for collection under an FCCM be identified as an IPV,

IHE or AE claim. Instructions on how to make such identification will

be provided in the

[[Page 29319]]

FCCM Manual. The new information would be included in currently

required data submissions and record formats. The rule proposes this

new requirement because, effective with implementation of this rule,

for collection made under FCCM's, FNS intends to transfer to State

agencies the dollar amount of each collection to which the State agency

is entitled based on current retention rates for each type of claim.

Currently, FNS transfers gross collections net of IRS fees from FTROP

and FSOP to State agencies. State agencies then report these

collections to FNS on the FNS-209, Status of Claims Against Households,

retain the percentage of the collections to which they are entitled

under section 16(a) of the FSA (7 U.S.C. 2025(a)) and transfer

appropriate amounts back to FNS. With annual FTROP collections of about

$40 million, this process results in significant amounts of Federal

funds not being as promptly transferred to Treasury as they could be.

Current rules allow State agencies to combine claims for an

individual into one claim in order to try to collect on all of the

claims through FTROP or FSOP. This rule would require that for any

claim submitted for collection under FCCM's which is a combination of

more than one type of claim, the State agency must specify the dollar

amounts due to each type of claim.

File Updates

Current rules at 7 CFR 273.18(5)(ix)(A) require that for FTROP

purposes State agencies update Treasury files. As discussed above, this

rule proposes to make that requirement apply to FCCM's in general.

Accordingly, this rule at Sec. 273.18(p)(1)(iv) proposes to require

that, as instructed in the FCCM manual, State agencies must update

files by reducing the amounts of and deleting claims to reflect

payments received, and by deleting claims which for other reasons are

no longer subject to collection.

Hierarchy of Collection Methods

The mechanisms for ADOP are currently being developed.

Consequently, the Department expects that until those mechanisms are in

place, claims submitted for collection under FTROP and FSOP will be

collected through those methods before any remaining debt is collected

through ADOP from other Federal payments. Once ADOP is operational, a

debt submitted under FTROP, for example, might be collected from

another Federal payment if that payment was identified and available

before the tax refund was offset. Accordingly, this rule proposes to

state at Sec. 273.18(p)(2)(v) that claims submitted under FCCM's would

be offset from Federal payments due to debtors as such payments are

identified and are available for offset.

Federal Income Tax Refund Offset Program (FTROP)

Among other things, this rule proposes to simplify the statement of

criteria for claims subject to collection under FTROP, shorten and

restructure the 60-day notice to eliminate unnecessary material, and to

clarify that the 60-day notice is a demand for payment of a debt.

Limitation to IPV and IHE Claims

Current rules at 7 CFR 273.18(g)(5)(ii)(A)(1) limit the types of

claims subject to FTROP to IPV and IHE claims. As discussed earlier in

this preamble, section 844(a) of the PRWORA amended the FSA to provide

that, subject to a State agency's demonstration that the collection

method is not cost effective, all claims collection methods must be

applied to all types of claims. Accordingly, this rule proposes to

remove the limitation of FTROP to IPV and IHE claims.

Properly Established Claims

The regulatory paragraph cited just above also specifies that

claims submitted under FTROP must be properly established no later than

the date the State agency transmits its final request for Treasury

addresses for the particular offset year. This requirement was made to

assure that claims are not referred for collection under FTROP unless

and until an individual has had an opportunity for a fair hearing and

any fair hearing decision is reached. As discussed above, this rule

proposes at Sec. 273.18(g)(6) to require that State agencies cease any

collection action upon timely receipt of a fair hearing request.

Accordingly, this rule proposes not to reiterate the proposed

requirement with respect to FTROP.

Required Documentation

The same regulatory paragraph cited above also elaborates on the

records required for properly established claims. The Department

believes that this language is unnecessary. State agencies will develop

and retain appropriate records of their claims activities as a result

of the various requirements for those activities proposed in this rule.

In addition, the current regulations at 7 CFR 272.1(f) already require

state agencies to retain fiscal records and accountable documents for 3

years from the date of fiscal or administrative closure. This rule does

not propose any changes to this policy. Accordingly, this rule proposes

not to state a records requirement specifically for FTROP or any other

FCCM.

Collection From All Liable Parties

Current rules at 7 CFR 273.18(g)(5)(ii)(A)(2) specify that for a

claim to be subject to FTROP the State agency must have verified that

no individual who is jointly and severally liable for the claim is also

currently participating in the FSP in the State. Since claims owed by

participating households must be recouped from the monthly allotment,

this requirement prohibited the simultaneous collection of a claim from

a participating household through recoupment and from nonparticipating

household members through FTROP.

State agencies objected to this restriction. They argued that with

the restriction the entire burden of paying the claim fell on

participants. State agencies also objected to the restriction because

collection solely by recoupment meant that claims were often paid more

slowly than they could be when there were liable, nonparticipating

individuals with Federal tax refunds. This rule proposes at

Sec. 273.18(i)(1)(v) to allow simultaneous collection through

recoupment from liable, participating households and through other

means from liable, nonparticipating individuals. In addition, this rule

proposes at Sec. 273.18(i)(1)(i) to prohibit additional involuntary

collection from individuals who are in households subject to allotment

reduction. Accordingly, the rule proposes to delete from current rules

the requirement that for a claim to be subject to FTROP the State

agency must have verified that no individual who is jointly and

severally liable for the claim is also currently participating in the

FSP in the State.

Concurrent Collection Efforts

Current rules at 7 CFR 273.18(g)(5)(ii)(A)(5) state that claims are

not subject to FTROP if the State agency is receiving either regular

voluntary payments or involuntary payments such as wage garnishment. In

addition, the rule specifies that claims for which a State agency has

been receiving regular payments (either voluntary or involuntary) are

considered past due and legally enforceable (and so are subject to

FTROP) if the individual does not respond to a notice of default.

As discussed earlier in this preamble, this rule proposes at 7 CFR

273.18(i)(7) that State agencies may continue (State-based) collection

efforts on claims after submitting them for collection under

[[Page 29320]]

FCCM's. Accordingly, this rule proposes to eliminate the requirement

that claims cannot be submitted for FTROP if the State agency is

receiving voluntary or involuntary payments such as wage garnishment.

Under provisions related to voluntary payments which this rule

proposes at 7 CFR 273.18(i)(4), there would no longer be a requirement

that State agencies send households which fail to make scheduled

payments a notice and an opportunity to renegotiate the payment

agreement.

No Reduction in the Dollar Amounts Submitted

Current rules at 7 CFR 273.18(g)(5)(ii)(B)(1) require that all

claims submitted for collection under FTROP must be reduced by any

amounts subject to collection from State income tax refunds or from

other sources which may result in collections during the offset year.

This rule proposes to eliminate this provision because, as discussed

above, this rule proposes to allow State agencies to continue to pursue

State agency collection efforts on claims submitted for collection

under FCCM's. State agencies will have an increased responsibility to

maintain adequate records of collections in order to minimize over

collections and to promptly refund any which might occur.

Claims Apportioned Among Two or More Individuals

Current rules at 7 CFR 273.18(g)(5)(ii)(B)(3) provide that if a

claim submitted under FTROP is apportioned between two or more

individuals who are jointly and severally liable for the claim, the sum

of the amounts submitted cannot exceed the total amount of the claim.

This rule proposes to eliminate this provision. The apportioning of a

claim as prescribed in this provision was required to conform to an

informal IRS policy. The Department believes that the provision for

joint and several liability established by section 13(a)(2) of the FSA

(7 U.S.C. 2022(a)(2)) establishes the Department's authority to pursue

a claim's full amount from all liable adults until the claim is paid.

Debtors are protected by the requirement for State agencies to promptly

post records and provide refunds of any over collections as this rule

proposes at Sec. 273.18(j).

All Delinquent Claims

Current rules at 7 CFR 273.18(g)(5)(ii) provide that State agencies

may submit claims for collection under FTROP recipient claims which are

past due and legally enforceable. As discussed above, this rule would

require that all claims which are delinquent and have been subject to

one or more State agency collection methods are subject to collection

under FCCM's. Accordingly, this rule proposes to state at

Sec. 273.18(p)(2)(i) that State agencies must submit for collection all

recipient claims which are delinquent, which are legally enforceable

and which meet the criteria specified in the subsequent subparagraphs.

Minimum Dollar Value

Current rules at 7 CFR 273.18(g)(5)(ii)(A)(3) require that claims

submitted under FTROP must meet at least the minimum dollar amount

established by Treasury. This minimum continues to be $25. This rule

would make no change in this requirement. FNS would advise State

agencies if the Treasury minimum changes. The requirement is stated at

Sec. 273.18(p)(2)(i)(A) in this proposed rule.

10-year Limit

Current rules at 7 CFR 273.18(g)(5)(ii)(A)(4) require that claims

submitted under FTROP must be claims for which the date of the initial

demand letter is within 10 years of January 31 of the offset year,

except that claims reduced to final court judgments ordering

individuals to pay the debt are not subject to this 10-year limitation.

This rule proposes no changes in this requirement, which is stated at

Sec. 273.18(p)(2)(i)(B).

Voluntary Payments

As discussed above, this rule proposes to state at 7 CFR

273.18(i)(1)(i) that individuals in households subject to allotment

reduction are not subject to involuntary collection by any other means.

As also discussed above, this rule proposes at Sec. 273.18(i)(1)(v)

that collection via allotment reduction does not preclude additional

collection methods being pursued against other liable individuals not

currently members of a participating household. The Department wants to

make clear how these policies apply to collection under FTROP.

Accordingly, this rule proposes at Sec. 273.18(p)(2)(i)(C) that claims

submitted under FTROP cannot include any claim which is submitted for

collection from an individual in a household which is subject to

allotment reduction.

Bankruptcy

The current rule at 7 CFR 273.18(g)(5)(ii)(A)(6) specifies that

claims for which collection is barred by a bankruptcy are not subject

to FTROP. With the exception of redesignating this paragraph as

Sec. 273.18(p)(2)(i)(D), this rule proposes no change to this

provision.

All Required Notices

The current rule at 7 CFR 273.18(g)(5)(ii)(A)(7) requires that for

a claim to be subject to FTROP the State agency must have provided the

individual all the notices required. FNS, not the State agency,

provides one of those notices after the FNS decision on a request for a

hearing. Accordingly, this rule would remove the reference to the State

agency in the current criteria. Further this rule proposes that the

criterion for referral under FTROP and FCCM would be that claims are

subject to referral for which individuals have been provided the

opportunities for review and the notifications specified in paragraphs

(p)(2)(iii), (p)(2)(iv), and (p)(2)(v). (See Sec. 273.18(p)(2)(i)(E).)

Combined Claims

Current rules at 7 CFR 273.18(g)(5)(ii)(B)(2) provide that if a

claim to be submitted for collection under FTROP is a combination of

two or more recipient claims, the date of the initial demand letter for

each claim combined must be within the 10-year range and that claims

reduced to judgment shall not be combined with claims which are not

reduced to judgment. This rule proposes to retain this provision. (See

Sec. 273.18(p)(2)(ii).)

Proposed Changes in the General Requirements and Contents of the 60-day

Notice

The proposed rule would combine the general requirements for 60-day

notices and the requirements for contents of the notices (currently in

paragraphs 7 CFR 273.18(g)(5) (iii) and (iv)) into a single paragraph,

Sec. 273.18(p)(2)(iii). The overall goal in this proposed rule is to

enable a single 60-day notice to serve as notification for FTROP, FSOP,

ADOP and any other FCCM. In addition, the rule proposes to delete

several provisions which are obsolete or extraneous, and proposes to

change certain provisions. These proposed deletions and changes are

discussed in the following paragraphs. The Department believes that the

60-day notice will be most effective if State agency notices present

the proposed required contents in the order they appear in the

regulation.

[[Page 29321]]

Implementing Guidelines for 60-day Notices

Current rules at 7 CFR 273.18(g)(5)(iii)(A) specify requirements

for 60-day notices related to implementing the current rule. That

material is obsolete, and this rule proposes to delete it. For the same

reason, this rule proposes to delete the last sentence of 7 CFR

273.18(g)(5)(iii)(B), and the introductory clause of 7 CFR

273.18(g)(5)(iv).

State Agency Records

Current rules at 7 CFR 273.18(g)(5)(iv)(A) require that the 60-day

notice state that the State agency has records documenting that the

individual, identified by name (and Social Security Number), is liable

for a specified unpaid balance of a recipient claim resulting from

overissued food stamp benefits. The Department believes that it is

unnecessary for the 60-day notice to state that the State agency has

records which they are required to develop in the course of

establishing and acting on recipient claims. The Department presumes

that State agencies have the necessary records to support their claims.

Accordingly, the rule proposes to delete the language on this matter in

the just cited paragraph.

One of the requirements in the amended DCA at 31 U.S.C. 3716(a) for

collecting a claim by ADOP provides the debtor with the right to

inspect and copy agency records relating to the claim. This right is

covered under the fair hearing and administrative disqualification

hearing procedures and is available to the debtor when the claim is

initially established. Moreover, the debtor would be provided notice of

this right under the notice requirements for demand letters as

discussed previously in this proposed rule. The current regulations

regarding fair hearings (7 CFR 273.15) and administrative

disqualification hearings (7 CFR 273.16) are not affected by this

proposed rule.

Previous Actions Taken

In the second sentence of 7 CFR 273.18(g)(5)(iv)(A), current rules

require that the 60-day notice state that the State agency has

previously mailed or otherwise delivered demand letters notifying the

individual about the claim, including the right to a fair hearing on

the claim, and has made any other required collection efforts. This

requirement was made to comply with the requirement in DEFRA that the

(Federal) agency satisfy the Secretary of the Treasury that the agency

has made reasonable efforts to obtain payment of the debt. (See 31

U.S.C. 3720A(b)(4).) The Department believes that this requirement is

met by the requirement proposed in this rule and discussed above under

which State agencies must pursue State agency collection methods before

referring claims for collection through FCCM's. In addition, the

Department does not believe that debtors need the information since

they would have already received demand letters and other billing

actions. Accordingly, this rule proposes to delete the language in

question.

Statement on Joint Liability

Current rules at 7 CFR 273.18(g)(5)(iv)(D) require that the 60-day

notice advise individuals that all adults who were household members

when excess food stamp benefits were issued to the household are

jointly and severally liable for the value of those benefits, and

collection of claims for such benefits may be pursued against all such

individuals. The Department believes that questions about this policy

are being effectively answered in telephone conversations between

debtors and State agencies and that inclusion of the statement of the

subject policy unnecessarily lengthens the 60-day notice. In addition,

the initial notification of claim or demand letter would already

include the jointly and severally language. Accordingly, this rule

proposes to delete the currently required language on this matter from

the 60-day notice.

Statement on Voluntary and Involuntary Payments

Current rules at 7 CFR 273.18(g)(5)(iv)(E) require that the 60-day

notice state that State agency records do not show that the claim is

being paid according to either a voluntary agreement or through

scheduled, involuntary payments. The language in question was added to

the 60-day notice in the rulemaking at 60 FR 45990-46001, dated

September 1, 1995. The language was added in response to a public

interest group's concern that debtors be informed of this policy.

As discussed above, this rule proposes allowing State agencies to

pursue collection through FTROP, FSOP, ADOP and other FCCM's while

pursuing other collection efforts except against individuals in

households subject to allotment reduction. In addition, at

Sec. 273.18(p)(2)(i)(C) the rule would prohibit referring claims for

FTROP collection from individuals subject to allotment reduction.

Furthermore, in operating FSOP the Department has found that, in

response to notices of intent issued under that collection procedure,

debtors who are paying the claim call and advise FNS of that fact. The

Department believes that the same issue can be resolved over the

telephone between debtors and State agencies under FTROP. Accordingly,

this rule proposes not to require the language currently required at 7

CFR 273.18(g)(5)(iv)(E).

Summary of Criteria

Current rules in paragraphs 7 CFR 273.18(g)(5)(iv)(I), (J) and (K)

require that the 60-day notice include information intended to inform

individuals about the criteria for claims which are subject to FTROP

and what information they should provide to request a hearing on the

intended collection action. These requirements were made in order to

both assist individuals in understanding the intended collection action

and to reduce State agency workload associated with telephone calls in

response to 60-day notices. The Department does not believe that either

of these purposes were achieved by the additional information, that

individuals' continued to telephone State agencies and that their

concerns were adequately dealt with through that form of communication.

Accordingly, this rule proposes deleting the just cited paragraphs.

The Notice Would Advise

Current rules at 7 CFR 273.18(g)(5)(iii)(B) require that with the

exception of such State-specific information as names and job titles

and information required for State agency contacts, a State agency's

60-day notice must contain only the information specified in paragraph

(g)(5)(iv). The Department believes that it is adequate to require that

State agencies advise individuals of the required information. This

approach should also provide State agencies flexibility in the design

of 60-day notices and also facilitate their production. Accordingly,

Sec. 273.18(p)(2)(iii)(B) requires that the 60-day notice advise

debtors of the matters listed in that paragraph.

Intent to Collect by Various Federal Collection Methodologies

The rule proposes at Sec. 273.18(p)(2)(iii)(B)(3) to include in the

60-day notice ADOP, as one of the methodologies to which the debt is to

be referred. The other methodologies which would utilize the same 60-

day notice are FTROP, FSOP and any other FCCM.

[[Page 29322]]

Collection of the Federal Offset Fee

Current rules at 7 CFR 273.18(g)(5)(iv)(C) require that the 60-day

notice state that if the State agency refers the claim to the IRS, a

charge for the administrative cost of collection will be added to the

claim and that amount will also be deducted if the claim, or any

portion of the claim, is deducted from the debtor's tax refund. This

rule proposes to modify this language to include the cost of any

Federally imposed processing fee. (See Sec. 273.18(p)(2)(iii)(B)(5).)

Citation of Authorities

The rule proposes to require language to the effect that collection

through ADOP is authorized by the Debt Collection Act of 1982, as

amended 31 U.S.C. 3701, and that the 60-day notice meets that statute's

requirements for notice to debtors about ADOP. (See

Sec. 273.18(p)(2)(iii)(B)(7).)

Advice on Joint Tax Returns

Current rules at 7 CFR 273.18(g)(5)(iv)(H) require that the 60-day

notice provide substantial guidance concerning jointly filed Federal

income tax returns and offsets from tax refunds. The Department is

concerned that some of the language may be inappropriately providing

information about filing income tax returns. In addition, the

Department wants to point out that IRS rules concerning FTROP at 26 CFR

301.6402-6(i) state that the IRS will advise non-debtor spouses of

steps to take to protect their share of tax refunds and will refund to

such persons such shares that are offset. Consequently, the Department

believes that the proposed changes will not adversely affect spouses of

debtors who are not liable for the overissued food stamp benefits.

Accordingly, the rule proposes to require that 60-day notices advise

debtors that, if they are filing a joint Federal income tax return,

they may want to contact their local office of the IRS. (See

Sec. 273.18(p)(2)(iii)(B)(9).) In addition, this rule proposes to

delete from the current required language the sentence discussing

spousal liability. The rule also proposes to delete the sentence

concerning liability for Treasury offset fees. The Department believes

that the paragraph already required on Treasury offset fees information

provides adequate information on this matter.

Statement of Compliance

Current rules at 7 CFR 273.18(g)(5)(iii)(B) require that in their

annual certification letters State agencies include a statement that

their 60-day notices conform to the content requirements of that

paragraph. This rule proposes to require that State agencies include in

their annual certification letter a statement that their 60-day notices

comply with the requirements of Sec. 273.18(p)(2)(iii)(B). (See

Sec. 273.18(p)(2)(iii)(C).)

Mailing Schedule

Current rules at 7 CFR 273.18(g)(5)(iii)(C) require that unless

otherwise notified by FNS, the State agency must mail 60-day notices

for claims to be referred for collection through FTROP no later than

October 1 preceding the offset year during which the claims would be

offset. The date for such mailings in 1996 was September 1. The

Department expects that September 1 will continue to be the mailing

date for 60-day notices. Nonetheless, to avoid confusion on this point,

the rule proposes to state that unless otherwise notified by FNS, the

State agency shall mail 60-day notices for claims to be referred for

collection through FTROP, FSOP, ADOP and other FCCM's according to the

schedule provided by FNS. (See Sec. 273.18(p)(2)(iii)(D).)

Deletion of October 31 Cutoff for Reviews

Current rules at 7 CFR 273.18(g)(5)(v)(E) provide that State

agencies may not refer claims for which timely review requests are

received unless by October 31 they have completed the review and

notified the individual that the claim is past due and legally

enforceable. This provision was necessary when 60-day notices were

mailed on October 1 because of the length of time necessary to offer

the opportunity for both State agency and FNS reviews during an annual

processing cycle. Since 60-day notices are now mailed on September 1,

and in the future may be mailed more frequently than annually, this

requirement is now obsolete. This rule proposes to delete this

requirement.

Incorporation of Administrative Offset

Current rules at 7 CFR 273.18(g)(5)(v) state the requirements for

State agency action in response to debtor requests for review of

intended collection action under FTROP. The Department believes that

these requirements exceed the requirements for such action under ADOP.

Accordingly, with the exception of appropriate references, this rule

proposes no additional review procedures for ADOP or any other FCCM.

Notice of Potential Administrative Offset

Current rules at 7 CFR 273.18(g)(5)(v)(C)(2) require that when the

State agency determines that a debt is past due and legally enforceable

the State agency notice to the debtor advise the debtor that the State

agency intends to refer the claim to Treasury for offset. This rule

proposes to require that the notice of the State agency's decision

state that the State agency intends to refer the claim for collection

from the debtor's Federal income tax refund and/or from other payments

which may be payable to the debtor by the Federal government.

No Referral for Federal Collection Pending FNS Review

Under current rules at 7 CFR 273.18(g)(5)(iv)(F), the 60-day notice

provides debtors a 60-day period to request that the State agency

review whether the claim in question is past due and legally

enforceable. The State agency notice of its decision that a claim is

past due and legally enforceable must advise the debtor that the debtor

has 30 days to request that FNS review that decision. The notice must

also advise the debtor that, pending FNS review, the debt will not be

referred to Treasury for offset. The rule proposes to also require that

such notices advise debtors that, pending the FNS decision, the claim

will not be referred for collection from other payments which may be

payable to the debtor by the Federal government.

Regional Office Address

Current rules at 7 CFR 273.18(g)(5)(v)(C)(4) require that the State

agency notice to the debtor provide the appropriate FNS regional office

address, including the phrase ``Tax Offset Review.'' To reflect that

the review may pertain to ADOP situations, this rule proposes to change

that phrase to ``Offset Review.''

FNS Action on Appeals of State Agency Reviews

Current rules at 7 CFR 273.18(g)(5)(vi) specify the actions which

FNS will take in response to appeals of State agency review decisions.

In several places in this section, this rule proposes to conform

regulation citations to the proposed rule. In addition, this rule

proposes to delete the clause in 7 CFR 273.18(g)(5)(v)(B) which sets

the condition that the State agency's decision be dated on or before

October 31, and to delete paragraph (g)(5)(v)(C). That paragraph

currently provides that for timely requests for FNS review of State

agency decisions made after

[[Page 29323]]

October 31, FNS will complete its review but the claim cannot be

referred under FTROP. The clause and the paragraph coordinated with the

October 31 cut-off discussed just above are also obsolete because,

under an annual processing cycle, the 60-day notices are being mailed

September 1. All review requests which FNS receives on State agency

decisions will be acted on. Current rules provide at 7 CFR

273.18(g)(5)(v)(B)(2) that FNS will advise the State agency if it does

not complete its review and the claim must be deleted from the

certified files. This rule would not change that provision.

Referral of Claims for Offset

Current rules at 7 CFR 273.18(g)(5)(vii) specify requirements for

State agency submission of claims under FTROP and the requirements for

the letter certifying that the claims submitted meet the criteria for

collection under FTROP. This rule proposes several changes in this

paragraph, which is Sec. 273.18(p)(2)(vi) in the proposed rule.

The rule proposes to add to the first sentence of the current 7 CFR

273.18(g)(5)(vii)(A) a reference to administrative offset and to change

the paragraph reference to conform to the paragraph in the proposed

rule.

The rest of current rules at 7 CFR 273.18(g)(5)(vii)(A) relate to

the certification letter. The proposed rule would put this material in

a new paragraph, itemize the required contents as subparts of that

paragraph, change the references to conform to the paragraphs in the

proposed rule, and make editorial changes.

Section 273.18(g)(5)(vii)(A) requires State agencies to submit

certification letters to FNS regional offices. State agencies have

found this instruction confusing, some sending the letter with their

data files, some sending it to regional offices. The rule proposes to

require that State agencies submit the letter according to FNS

instructions. FNS plans to direct that the certification letters be

sent to FNS headquarters with, or at the same time as certified files

and to provide in those instructions a specific address for the letter.

Also, the requirement for the statement on the conformance of the 60-

day notice would be changed to reflect the new requirement discussed

earlier in this preamble. Finally, the requirement currently at 7 CFR

273.18(g)(5)(vii)(B) that State agencies include in their certification

letter how they determined that the information about the State agency

contact for debtors is accurate would be included in the list of

required contents for the certification letter.

Current rules at 7 CFR 273.18(g)(5)(vii)(B) require that the State

agency provide to FNS the name, address and toll-free or collect

telephone numbers of State agency contacts to be included in Treasury

notices of offset, and provide FNS updates of that information if and

when that information changes. The rule proposes to modify this

requirement with a reference to FNS instructions. FNS intends to

include such instructions in the expanded Revenue Manual.

State Agency Actions on Offsets Made

Current rules at 7 CFR 273.18(g)(5)(viii)(A) specify requirements

for State agency actions on offsets made. For the reasons discussed in

the following paragraph, this rule proposes to delete this section

because its contents repeat requirements which this rule proposes to

make elsewhere.

First, current rules at 7 CFR 273.18(g)(5)(viii)(A) require that

State agencies notify debtors about offsets. This rule proposes at

Sec. 273.18(o)(4) to require that State agencies keep debtors advised

of the status of their claims. Also, the Federal agency from whose

payment the debt is offset would advise the debtor of the offset.

Second, current rules at 7 CFR 273.18(g)(5)(viii)(B) require prompt

refunds for over collections due to offsets from Federal income tax

refunds. As already discussed, this rule proposes at Sec. 273.18(j) to

require that State agencies promptly refund all over collections of

recipient claims regardless of the source of the over collection.

Third, current rules at 7 CFR 273.18(g)(5)(viii)(C) address several

matters relating to over collection and refund situations due to State

agency error and Treasury reversals of offsets. FNS periodically issues

procedural guidelines on these and related matters and plans to

continue to address such matters in the FCCM Manual discussed above in

this preamble.

Monitoring and Reporting Offset Activities

Current rules at 7 CFR 273.18(g)(5)(ix) specify several

requirements for State agency reporting on offset activities. As

discussed in the following paragraphs, this rule proposes to delete

several of those requirements because this rule would state the

requirements elsewhere. The section would be renamed ``Reporting FTROP

and ADOP activities.''

As already discussed, this rule proposes to make a general

requirement for the updating of files for FCCM's. Accordingly, this

rule proposes to delete paragraph (g)(5)(ix)(A). Paragraph (B) of the

section in question repeats the requirement for prompt refunds of over

collections. This rule proposes to delete it for reasons discussed

earlier in this preamble. Paragraph (E) of the section in question

reiterates the requirement that State agencies report collections as

required for all recipient claims collection. The rule proposes to

delete this restatement.

Current rules at 7 CFR 273.18(g)(5)(ix)(C) require that State

agencies annually report on 60-day notices no later than the tenth of

October. This rule proposes to require that State agencies make that

report no later than the ten days after mailing 60-day notices. In

paragraph (g)(5)(ix)(D), this rule proposes to delete the reference to

the IRS. The rule proposes to require that State agencies report on 60-

day notices, data security and voluntary payments according to

instructions in the FCCM manual.

Federal Salary Offset Program (FSOP)

In addition to proposing changes in the requirements for FSOP which

are intended to reduce workload on State agencies and to eliminate

provisions of the current rule which are extraneous, this rule proposes

to reorder several paragraphs of this regulations pertaining to FSOP.

Also, whenever possible, the Department's goal is to allow State

agencies to combine FSOP activities with FTROP, ADOP, and other FCCM

activities.

Claims Subject to FSOP

Current rules at 7 CFR 273.18(g)(6)(i) state that all claims

submitted under FTROP are subject to the salary offset match and that

all individuals identified in the match are subject to FSOP procedures.

As discussed earlier in this preamble, this rule proposes to require

that State agencies submit all appropriate claims for collection under

FCCM's thereby combining the FSOP advance notice with the FTROP and

ADOP 60-day notice. Accordingly, this rule proposes to delete this

paragraph as redundant.

Supplemental Information

Current rules at 7 CFR 273.18(g)(6)(iii)(C)(1) specify certain

information which State agencies are encouraged to include in their

advance notices. The Department believes that including such

information may improve the credibility of the advance notice, but

since the Department does not want to require that the information be

included in the advance notice, this

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rule proposes to delete the subject language.

Notice of Review Decision

Current rules at 7 CFR 273.18(g)(6)(iii)(C)(5) require that the

advance notice state that the State agency will notify debtors in

writing when, due to a review decision, claims will not be referred for

collection from salaries. The Department does not believe that the

advance notice needs to advise debtors about the requirements for State

agency notification of review decisions. Accordingly, this rule

proposes to delete the requirement for language on this matter from the

advance notice.

Notice of Right to a Federal-level Hearing

Current rules at 7 CFR 273.18(g)(6)(iii)(C)(5) also require that

the advance notice state: (1) that debtors have the right to a formal

appeal to FNS; and (2) that notification about how to make such appeals

is required and will be provided to debtors before any collection

action from salaries is taken. The Department believes that the notice

of intent which is provided to debtors prior to referral of claims for

collection from Federal salaries provides adequate notice of the right

to a hearing and related matters. Accordingly, this rule proposes to

delete the requirement that the advance notice provide information

about such matters.

Reporting

Current rules at 7 CFR 273.18(g)(6)(iv)(A) specify requirements for

State agency retention of collections, reporting and about how FNS will

report and transfer collections to State agencies. For the reasons

discussed earlier in this preamble in relation to the proposed deletion

of these same requirements for FTROP, this rule proposes to delete this

paragraph.

FNS Recipient Claims Matching Procedures

Current rules at 7 CFR 273.18(g)(6)(ii)(A) describe certain FNS

recipient claims matching procedures. This rule would include this

material unchanged at Sec. 273.18(p)(3)(i).

Security and Confidentiality

Current rules at 7 CFR 273.18(g)(6)(ii)(B) require that State

agencies return security and confidentiality agreements prior to

receiving information about Federal employees identified as subject to

FSOP. This rule would include this material unchanged at

Sec. 273.18(p)(3)(ii).

Except for conforming references to this proposed rule, no changes

are proposed for current rules requiring security and confidentiality

agreements from State agencies as a condition for receiving FSOP debt

information currently at 7 CFR 273.18(g)(6)(iii)(A). (See

Sec. 273.18(p)(3)(iii).)

Review of Claim Status

Current rules at 7 CFR 273.18(g)(6)(ii)(D) require that prior to

taking any action to collect recipient claims under FSOP, State

agencies must review records to verify the amount owed, and to remove

claims which have been paid, which are being paid according to an

agreed to schedule, or which for other reasons are not collectible.

This requirement remains essentially unchanged in this proposed rule.

(See Sec. 273.18(p)(3)(iv).)

Advance Notices

Current rules at 7 CFR 273.18(g)(6)(iii) specify the requirements

for State agency advance notices to Federal employees. This rule

proposes to modify those requirements based on the requirements of DCIA

and combine the FSOP advance notice with 60-day notice proposed in this

rule, and to conform references to the proposed rule.

Current rules at 7 CFR 273.18(g)(6)(iii)(B) prescribe procedures

for referring salary offset claims to FNS following State agency

efforts to collect them through advance notices. This rule proposes to

place this material after the requirements for the contents of the

notice. This rule proposes to reduce the documentation required for

FSOP claims referred to FNS. The rule also proposes to move the

requirements for referring defaulted claims and to specify that such

referrals must include the same documentation as claims referred to FNS

because of no timely or adequate response to the advance notice. (See

Sec. 273.18(p)(3)(vii).)

Current rules at 7 CFR 273.18(g)(6)(iii)(C) state the requirements

for the contents of the advance notice. This rule proposes to require

that the notice advise debtors of certain matters.

Current rules at 7 CFR 273.18(g)(6)(iii)(C)(1) require that the

advance notice state that according to State agency records the debtor

is liable for a claim for a specified dollar amount due to receiving

excess food stamp benefits. This rule proposes to require that the

notice advise debtors of what State agency records indicate is their

name and SSN and that they are liable for a specified unpaid balance of

a recipient claim resulting from overissued food stamp benefits. (See

Sec. 273.18(p)(3)(v)(B)(1) and (2).)

Current rules at 7 CFR 273.18(g)(6)(iii)(C)(2) and the first

sentence of 7 CFR 273.18(g)(6)(iii)(C)(3) discuss procedure and

authorities related to FSOP. This rule proposes to modify this material

and add the citation of the authority for collection through ADOP. (See

Sec. 273.18(p)(3)(v)(B)(7).)

Voluntary Payment

Current rules in the second sentence of 7 CFR

273.18(g)(6)(iii)(C)(3) and in the rest of that paragraph specify that

the advance notice must state that the claim will be referred to FNS

for collection from the debtor's Federal salary unless it is paid in

full within 30 days or in installments of $50 if the claim was greater

than $50. The Department specified an installment structure for FSOP

claims with the intent to relieve State agencies of the need to

negotiate with debtors. Experience with FSOP indicates that the

installment structure did not help in this regard. State agencies often

preferred to have the discretion to negotiate a payment schedule with

debtors. Accordingly, this rule proposes to provide this flexibility

and to incorporate a notice that the claim is subject to administrative

offset. Accordingly, Sec. 273.18(p)(3)(v)(B)(3) would require that the

advance notice advise the debtor that unless the debtor pays the claim

within 30 days of the date of the notice or makes other repayment

arrangements acceptable to the State agency, the State agency intends

to refer the claim for collection from his or her salary and/or by

administrative offset from other Federal payments which may be payable

to the debtor.

Current rules at 7 CFR 273.18(g)(6)(iii)(C)(4) require that the

advance notice include the name, address and a toll-free or collect

telephone number of a State agency contact (an individual or unit) for

repayment and/or discussion of the claim. As in the case of the FTROP

60-day notice, this rule proposes to require that the advance notice

advise debtors that to pay the claim voluntarily or to discuss it, the

debtor should contact the State agency. The advance notice would also

be required to include the name of the State agency contact for this

purpose (such as an office, administrative unit and/or individual), the

contact's street address or post office box, and a toll-free or collect

telephone number for that contact.

Current rules at 7 CFR 273.18(g)(6)(iii)(C)(5) state the required

[[Page 29325]]

contents for the advance notice with respect to the debtors' rights for

review of the intended collection action under FSOP. The second

sentence of that paragraph requires that the advance notice state that

unless the State agency receives documentation that the claim is not

collectible within 30 calendar days the State agency will refer the

claim to FNS for collection from the debtor's salary. This rule

proposes to replace that sentence with the requirement that the advance

notice advise debtors that the State agency must receive the

documentation within 30 days at the address provided in the notice,

that the debtor should provide his or her SSN and that the claim will

not be referred for collection from the debtor's Federal salary of

other Federal payments pending the State agency's review of that

documentation. This rule also proposes to add the requirement that the

advance notice advise debtors that a claim is not collectible if a

bankruptcy filing prevents collection of the claim. (See

Sec. 273.18(p)(3)(v)(B)(5).)

The Department believes that State agencies should notify debtors

of their decision either to refer or not to refer the claim for

collection. Accordingly, this rule proposes to require at

Sec. 273.18(p)(3)(vi) that State agencies notify debtors in writing of

decisions on documentation submitted concerning payments and other

matters relating to the collection of claims under FSOP and ADOP.

FNS Action on Claims Referred by State Agencies

Current rules at 7 CFR 273.18(g)(6)(v) specify pertinent matters

relating to FNS actions on FSOP claims referred by State agencies. This

rule proposes no change in that paragraph except to conform the

references in the introductory sentence of 7 CFR 273.18(g)(6)(v) to the

paragraphs in this proposed rule and to specify that the notice of

intent would advise debtors that their recipient claim is subject to

collection through administrative offset as well as from their Federal

salary, and to cite the authority for that collection action, the DCA,

as amended, 31 U.S.C. 3701.

Administrative Offset Program (ADOP)

As discussed in several places earlier in this preamble, this rule

proposes that claims submitted under FTROP and FSOP, but not collected

under those programs, would be subject to collection through ADOP from

other Federal payments otherwise due debtors. Due process notices for

ADOP would have been provided through separate FTROP and FSOP notices

or through a combined notice which would include FTROP, FSOP, ADOP or

any other FCCM. State agencies would not need to re-submit those claims

for ADOP. State agencies would need to keep their balances updated to

avoid over-collections. (See Sec. 273.18(p)(4).)

Implementation

The PRWORA set the date of enactment, August 22, 1996, as the

effective date for the provisions of the law relating to recipient

claims. In response, the Department, on August 26, 1996, issued an

implementation memorandum stating that these provisions are to be

implemented no later than September 22, 1996.

The Department proposes that State agencies implement the

discretionary aspects of these regulations no later than the first day

of the month 180 days after the publication of the final rule. This

should provide sufficient time to amend food stamp handbooks, demand

letters and forms, make any necessary changes in data processing

systems and administrative procedures, and train affected State and

local agency staff.

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, Employment,

Food stamps, Fraud, Government employees, Grant programs--social

programs, Income taxes, Penalties, Reporting and recordkeeping

requirements, Social security, Students, Supplemental Security Income

(SSI), Wages.

Accordingly, 7 CFR Parts 272 and 273 are proposed to be amended as

follows:

1. The authority citation for Parts 272 and 273 continues to read

as follows:

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

PART 272--REQUIREMENTS FOR PARTICIPATING STATE AGENCIES

Sec. 272.2 [Amended]

2. In Sec. 272.2:

a. Paragraph (a)(2) is amended by removing the last sentence; and

b. Paragraph (d)(1)(xii) is removed.

Sec. 272.12 [Removed]

3. Sec. 272.12 is removed.

PART 273--CERTIFICATION OF ELIGIBLE HOUSEHOLDS

4. In Sec. 273.2, paragraph (b)(4) is added to read as follows:

Sec. 273.2 Application processing.

* * * * *

(b) Food stamp application form. * * *

(4) Privacy Act statement. At the time of application and at each

recertification through a written statement on or provided with the

application form, all applicants for food stamp benefits shall be

notified of the following:

(i) The collection of this information, including the social

security number (SSN) of each household member, is authorized under the

Food Stamp Act of 1977 (7 U.S.C. 2011 et seq.) The information will be

used to determine whether your household is eligible or continually

eligible to participate in the Food Stamp Program and may be subject to

verification through computer matching programs. This information will

also be used to monitor compliance with program regulations and for

program management.

(ii) This information may be disclosed to other Federal assistance

programs or federally assisted State programs, to the Comptroller

General of the United States for authorized audit and examination

purposes and to Federal, State and local law enforcement officials for

the purpose of apprehending persons fleeing to avoid prosecution,

custody or confinement or to a court, magistrate, or administrative

tribunal when required in civil or criminal proceedings.

(iii) If a claim arises against your household as a result of

participation in the Food Stamp Program, the information you provide,

including the SSN of each member of your household, may be referred to

Federal and State agencies, as well as private claims collection

agencies, for claims collection action, including but not limited to

administrative offset, and to the Department of Justice for litigation.

(iv) The providing of the requested information, including the SSN

of each household member, is voluntary. However, failure to provide

this information will result in the denial of food stamp benefits to

your household.

* * * * *

5. Sec. 273.18 is revised to read as follows:

Sec. 273.18 Claims against households.

(a) Responsibility for recovering overpayments--(1) Household and

individual liability. (i) All adult household members shall be jointly

and severally liable for the value of any overissuance of benefits to

the household. All adult household members shall also be responsible

for the amount of any claim established for the trafficking of

benefits.

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(ii) Any sponsor of an alien and the alien's household shall be

jointly and severally liable for the value of any benefits overissued

as a result of incorrect information being provided by the sponsor.

However, if the alien's sponsor had good cause or was without fault,

the alien's household shall be solely liable for repayment of the

overissuance.

(2) State agency responsibility. (i) Unless specified under

paragraph (g)(2) of this section, the State agency shall establish a

claim against:

(A) Any participating household (including former adult members) or

non-participating household that has trafficked benefits or received

more food stamp benefits than it was entitled to receive; and

(B) Any household which contains an adult member who was an adult

member of another household that trafficked benefits or received more

food stamp benefits than it was entitled to receive.

(ii) Even though the establishment and collection of food stamp

recipient claims are delegated to State agencies, these debts

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