Food Stamp Program: 1995 Quality Control Technical Amendments

DEPARTMENT OF AGRICULTURE

Food and Nutrition Service

7 CFR Parts 271 through 285

[Amdt. No. 373]

RIN 0584-AB38

Food Stamp Program: 1995 Quality Control Technical Amendments

AGENCY: Food and Nutrition Service, USDA.

ACTION: Final rule.

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SUMMARY: On September 10, 1996, the Department of Agriculture published

proposed technical changes to the Food Stamp Program's quality control

system which were intended to reduce the workload on State agencies and

improve the efficiency of the quality control system. This final rule

addresses significant comments received in response to the regulatory

changes proposed in the proposed rule and finalizes regulatory changes

to the Food Stamp Program's quality control system in the following

areas: negative case reviews, State agency minimum sample sizes for

active and negative case reviews, state sampling procedures, Federal

subsample size formulas, error dollar tolerance level, home visits,

case completion standards, and miscellaneous technical corrections.

DATES: Effective Dates: 7 CFR 275.23(e)(6)(iii) is effective on July

16, 1999. All remaining provisions are effective on October 1, 1999.

Implementation Dates: 7 CFR 275.23(e)(6)(iii) is to be implemented

on July 16, 1999. The following provisions are to be implemented on

October 1, 2000, with the start of the Fiscal Year 2001 quality control

review period: 7 CFR 271.2; 7 CFR 275.3(c)(3)(ii); 7 CFR 275.10(a); 7

CFR 275.11(c)(1); 275.11(e)(2); 7 CFR 275.11(f)(2); 7 CFR 275.13(a);

275.13(b); 275.13(c)(1); 275.13(c)(2); 7 CFR 275.13(f) and

275.23(c)(4). All remaining provisions are to be implemented October 1,

1999, with the start of the Fiscal Year 2000 quality control review

period.

FOR FURTHER INFORMATION CONTACT: Retha Oliver, Chief, Quality Control

Branch, Program Accountability Division, Food Stamp Program, Food and

Nutrition Service, USDA, 3101 Park Center Drive, Room 904, Alexandria,

Virginia 22302, (703) 305-2474.

SUPPLEMENTARY INFORMATION:

Executive Order 12866

This rule has been determined to be significant and was reviewed by

the Office of Management and Budget (OMB) under Executive Order 12866.

It has been determined that the following cost-benefits would result

from adoption of the provisions of this rule:

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

sample size for active and negative case reviews will benefit those

State agencies opting to use the ``smaller range'' in their sample

plans when their minimum active or negative case sample sizes are

currently above the new minimum sample sizes. In Fiscal Year (FY) 1992,

before the waiver to reduce current minimum sample sizes was available,

State agencies reviewed nearly 52,000 active and over 30,000 negative

cases. Assuming a 15 percentage reduction in cases, under this change

to the regulatory provision, State agencies will be required to review

nearly 8,000 fewer active cases and about 4,500 fewer negative cases.

Estimating that each active case review costs $180 and each negative

case review costs $40, combined potential savings for State agencies

and Food and Nutrition Service (FNS) is an estimated $1.6 million.

Savings for State agencies are estimated at $800,000.

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

control (QC) expenditures will result from this provision, as it is

expected that State agencies will channel the resources into other

aspects of quality control operations.

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

dollar tolerance level from $5.00 to $25.00 will benefit those State

agencies which qualify for enhanced funding. Based on FY 1997 data, it

is estimated that State agencies could qualify for an additional $7.5

million in enhanced funding with this modification.

The Department has examined the impact on potential State agency

liability calculations from the effect of changing the error dollar

tolerance level. Data from FY 1997 has been analyzed to determine how

the $25 tolerance could effect liability amounts. The data shows that

in 1997 the estimated liability would increase by $3.9 million if there

are no other changes made to the QC system.

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

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

State agencies or FNS.

Executive Order 12372

The Food Stamp Program (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), this Program is excluded from the scope of

Executive Order 12372 which requires intergovernmental consultation

with State and local officials.

Executive Order 12988

This 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 Effective Date section of this preamble.

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

application of its provisions, all applicable administrative procedures

must be exhausted. In the FSP the administrative procedures are as

follows: (1) For program benefit recipients--State administrative

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

(2) for State agencies--administrative procedures issued pursuant to 7

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

liabilities) or Part 283 (for rules related to QC liabilities); (3) for

program retailers and wholesalers--administrative procedures issued

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

[[Page 38288]]

Regulatory Flexibility Act

This action has also been reviewed in relation to the requirements

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

612). Samuel Chambers, Administrator of the Food and Nutrition Service,

has certified that this rule does not have a significant economic

impact on a substantial number of small entities. The requirements will

affect State and local agencies that administer the FSP.

Paperwork Reduction Act

This rule contains information collection requirements subject to

approval by OMB under the Paperwork Reduction Act of 1995. In the

proposed rule (61 FR 47680), FNS solicited comment from the general

public and other public agencies on a related information collection,

form FNS 380, the QC Review Worksheet (OMB Number 0584-0074). The

proposed rule did not change the reporting and recordkeeping burden for

0584-0074. However, OMB's approval for the burden, contained in 0584-

0074, was scheduled to expire. The comment period for 0584-0074 closed

November 12, 1996. No comments were received. OMB approved the burden

of 558,019 hours through November 30, 1999.

Unfunded Mandates Reform Act

Title II of the Unfunded Mandates Reform Act of 1995 (UMRA), Public

Law 104-4, establishes requirements for Federal agencies to assess the

effects of their regulatory actions on State, local, and tribal

governments and the private sector. Under section 202 of the UMRA, FNS

generally must prepare a written statement, including a cost-benefit

analysis, for proposed and final rules with ``Federal mandates'' that

may result in expenditures to State, local, or tribal governments, in

the aggregate, or to the private sector, of $100 million or more in any

one year. When such a statement is needed for a rule, section 205 of

the UMRA generally requires FNS to identify and consider a reasonable

number of regulatory alternatives and adopt the least costly, the more

cost-effective or the least burdensome alternative that achieves the

objectives of the rule.

This rule contains no Federal mandates (under the regulatory

provisions of Title II of the UMRA) for State, local, and tribal

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

year. This rule is not subject to the requirements of sections 202 and

205 of the UMRA.

Civil Rights Impact Analysis

In accordance with USDA Regulation 4300-4, ``Civil Rights Impact

Analysis'', Samuel Chambers, Administrator of the Food and Nutrition

Service, has determined that this rule does not in any way limit or

deny participation in benefits, conferences, or training opportunities

or employment benefits on the basis of an individual or group's race,

color, national origin, sex, religion, age, disability, or political

beliefs. This rule makes discretionary technical changes to the Food

Stamp Program (FSP) quality control process. FSP applicants and

participants are selected randomly for a QC review.

Background

On September 10, 1996, the Department of Agriculture's (the

``Department'') Food and Nutrition Service (FNS) proposed regulations

(61 FR 47680) to amend the food stamp QC system in order to reduce the

workload on State agencies and enhance the efficiency of the system. A

full explanation of the rationale and purpose of these regulatory

changes was provided in the preamble of the proposed rulemaking. The

Department received comment letters from twenty-one organizations. The

preamble of this final rule addresses significant issues raised by

those comments. It is recommended that the reader reference the

proposed rulemaking, as well as this final rulemaking for a more

complete understanding of the regulatory changes that the Department is

implementing.

Negative Case Reviews

The proposed rule clarified issues surrounding the review of

negative cases and expanded the universe of cases to be reviewed. These

clarifications were the culmination of FNS' examination of the QC

review process for negative cases, which included, in part the results

of research undertaken by Abt Associates on behalf of FNS to develop

and pilot test alternative approaches to measuring the extent of

nonpayments to eligible households. The proposed clarifications also

took into consideration recommendations made by the General Accounting

Office on the accuracy of State reported error rates.

Sixteen organizations commented on the proposed regulatory changes

to clarify issues surrounding the review of negative cases and the

expansion of the universe of cases to be reviewed.

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

Reviews

The Department clarifies in this final rule the requirements and

procedures for Federal monitoring of the negative case reviews

conducted by State agencies. Regulations at 7 CFR 275.3(c) are revised

to clarify that FNS has the authority to review negative cases as

determined appropriate. Section 275.3(c) also is modified to indicate

that negative cases would require validation when the State agency's

payment error rate appears to entitle the State agency to enhanced

funding and when the negative error rate is less than two percentage

points above the national weighted mean negative case error rate for

the prior period.

The Department received twelve comments on these clarifications.

Three comments supported the proposed clarifications. Four were neutral

or commented that the clarifications would have no impact on their

States. Five comments opposed the clarifications. Of the opposition

comments, one objected to any increase in Federal review beyond the

current minimum level. Another was concerned about an anticipated

increase in workload for QC staff. A third comment questioned the

greater scrutiny that negative cases receive for States potentially

eligible for enhanced funding. Two comments opposed the revisions on

the basis that Federal validation of negative cases should be required

for all States to ensure the accuracy of the negative error rate.

In response to these concerns, it should be noted that the proposed

changes do not increase Federal authority for review activities beyond

what can be or has been done under current practice or is permitted

under current statutory and regulatory authority. State and Federal

agencies have always had the option to expand their reviews beyond the

guidelines in the regulations to the extent necessary to assure the

validity of error rates. Given that these revisions do not extend

authority for Federal reviews, FNS does not anticipate a significant

increase in Federal review activity as a result of this clarification.

Any increase in Federal review activity should have a minimal impact on

a State agency's QC staff since Federal reviewers conduct this

activity.

Validation of the negative error rate for States potentially

eligible for enhanced funding is not only justified but has the

potential to benefit State agencies. State agencies achieving a certain

level of accuracy in their negative cases could be entitled to receive

additional funds.

The Department determined that Federal validation of negative cases

for all States, as recommended in two comments, is not necessary at

this time.

[[Page 38289]]

However, if such validations are determined to be prudent in the

future, FNS has the authority to conduct them.

The changes to this section will be adopted as proposed, effective

October 1, 1999, for the FY 2000 QC review period.

2. Inclusion of Suspended Cases in the Negative Sample Universe

The Department proposed to include suspended cases in the negative

case universe and sample frame. There were twelve comments on this

proposal. Four favored the change, four were neutral (although three of

the four raised concerns about having adequate lead time for

implementation should the proposal be adopted), and four opposed the

proposal. Comments that objected to the inclusion of suspended cases

said reviewing these cases is not cost effective, implementing this

change would be difficult or time consuming (generally because of

computer changes), or including suspended cases in the negative

universe could increase the negative error rate.

The Department must ensure that all households served by the FSP

are handled in accordance with federal law and regulations. The

Department has determined that an examination of suspended cases

through the QC review process is an efficient way to determine whether

these cases are dealt with properly. Inclusion of suspended cases in

the negative universe would not increase subsample sizes, and therefore

would not adversely impact on the workload of QC reviewers. There is no

data to indicate whether suspended cases are more or less error prone

than other classes of cases in the negative case universe. Since the

number of suspended cases is thought to be relatively small, these

cases should have only a negligible impact on the negative error rate.

Thus, the Department has concluded that the review of suspended cases

as a negative case will not significantly impact the negative error

rate.

In the matter of implementing this change, there is a general

Federal effort to avoid computer changes, other than Y2K improvements,

until March 2000. Since adding suspended cases to the negative frame

requires a computer change, suspended cases will not be included in the

negative frame until October 1, 2000, for the first full QC review

period after March 2000. No State agency can include suspensions in the

negative frame until that date. The delay in implementing this change

should address State concerns about having enough notice to make the

necessary computer changes.

This final rule includes suspended cases in the negative sample

effective for the FY 2001 review period, which begins October 1,2000.

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

Cases are Included in the Sample Universe; and Clarification of the

Meaning of ``Break in Participation'' for Suspended and Terminated

Cases

The Department proposed to allow State agencies to sample by the

action date rather than the effective date to make sampling easier. In

addition, the Department proposed to revise the regulations to include

denied, suspended, and terminated cases in the negative case universe

in the month in which the action to deny, suspend, or terminate food

stamp benefits was taken. The Department also clarifies that an action

to terminate or suspend a household has actually resulted in a

suspension or termination if the household experiences a break in

participation in the program as a result of deliberate State agency

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

construct consistent and reliable sampling plans for negative actions,

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

benefits to clients are subject to review. These cases are subject to

review even if the actions are subsequently reversed, unless their

reversal comes under specified conditions (e.g. the State reverses

itself without a new application by the client) and within specified

time frames (e.g. before the effective date of the termination or

suspension action).

There were eight comments on these modifications. None were opposed

to the change or clarification. Two comments recommended that the

options discussed in the preamble to the proposed rule be included in

the regulatory language. The Department agrees that the regulatory

language should be revised to include the guidance discussed in the

preamble. Therefore, the Department revised the definitions of

``negative case'' and ``review date'' at Sec. 271.2, added language at

Sec. 275.11(e)(2)(i) and (ii) concerning negative cases in the sample

frame, and added clarifying language in the general section at

Sec. 275.13(a).

In this final rule the Department is also further clarifying the

definition of ``review date'' at Sec. 271.2. The first sentence in this

definition will read as follows: ``Review date for quality control

active cases means a day within the sample month, either the first day

of the calendar or fiscal month or the day a certification action was

taken to authorize the allotment, whichever is later.'' The

clarification is in bold print. The meaning of the term ``review date''

is not affected by this clarification.

As mentioned under (2) above, there is a general Federal effort to

avoid computer changes other than Y2K improvements until March 2000.

The revisions discussed in the paragraphs above include references to

suspended cases. Since suspended cases cannot be added to the negative

sample frame until October 1, 2000, for the Fiscal Year 2001 quality

control review period, these changes will be implemented October 1,

2000.

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

One aspect of negative case reviews that was of interest to

Congress was the establishment of a dollar loss rate. For reasons

specified in the preamble to the proposed rule, the Department decided

not to pursue this option. All four comments on this decision supported

not establishing a dollar loss rate for negative cases.

State Agency Minimum Sample Sizes for Active and Negative Case Reviews

FNS has previously granted waivers of the regulations on the

minimum sample sizes for active case reviews to improve the efficiency

of the QC system without impairing the reliability of QC information.

The Department proposed: (1) To include the terms of these waivers in

the FSP regulations; (2) to offer State agencies a choice of ranges to

use in determining minimum sample sizes for negative case reviews that

is similar to the choice of ranges for determining minimum sample sizes

for active case reviews; and (3) to reduce the size of the ``smaller

range'' for minimum sample sizes for active case reviews.

The proposed range for the minimum sample size for active cases is

300 to 1020 reviews, a 15 percent reduction from the top of the current

range. To use the minimum sample size, a State agency would be required

to include in its sampling plan the statement from current

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

chosen as a basis for challenging the resulting error rate.'' The

purpose of the statement, as described in the February 17, 1984,

preamble to the rule that established the requirement for the

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

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

are no other conditions on a State agency's use of the revised smaller

range. State agencies may elect to review more cases than the minimum

sample defined in

[[Page 38290]]

regulations. State agencies may also continue to use the current

smaller range of 300 to 1200 reviews per year.

FNS also proposed the creation of a ``smaller range'' for the

minimum sample size for negative case reviews. The ``smaller range'',

representing a 15 percent reduction from the highest end of current

requirements, would be 150 to 680 reviews per year.

The current required range of 150 to 800 reviews per year would be

retained as the larger range for minimum sample sizes for negative case

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

calculate its minimum sample size for negative case reviews, it would

also be required to include in its sampling plan the statement that it

``will not use the size of the sample chosen as a basis for challenging

the resulting error rates.'' If a State agency did not include that

statement, it would be required to calculate its minimum sample size

for negative case reviews according to the larger range. As with active

cases, there would be no other conditions on a State agency's use of

the revised smaller range. Also, as with active cases the ranges define

minimum sample sizes, State agencies may select more.

The Department received ten comments on the proposed changes to

State sampling requirements. All ten supported the changes. One

comment, while favoring the changes, stipulated that the statement that

the State agency would not use the size of the sample chosen as the

basis for challenging the resulting error rates should apply only to

challenges directly attributable to the reduced sample size and not

other statistical issues. The Department did not intend that this

statement preclude States from making other statistical challenges to

the error rate, only those that can be attributed to use of the smaller

sample size.

In addition to the above, one comment identified an incorrect

reference to active cases in proposed regulatory language at

Sec. 275.11(b)(2)(i). The Department corrected this error in the final

rule.

The proposed revisions to State sample sizes are adopted in the

final rule, to be implemented October 1, 1999, for the FY 2000 QC

review period.

Federal Sample Sizes

The Department proposed to change the headings to the tables which

set out the formulas for calculation of the Federal subsample size.

These tables appear at Sec. 275.3(c)(1)(i) and Sec. 275.3(c)(3)(i) in

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

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

subsample target'' would appear, rather than the current phrase

``Federal annual sample size.'' This change would not permit FNS to

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

failure to complete the minimum number of reviews in its required

sample size. There were no significant comments on this change. It is

adopted in the final rule, effective October 1, 1999, the start of the

FY 2000 review period.

State Sampling Procedures

The Department proposed four sets of technical clarifications to

the sampling regulations so that the regulations will match the way

State agencies design and implement their sampling plans.

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

The Department determined that provisions requiring that sampling

procedures conform to the standard principles of probability sampling

and that state samples produce estimates with an acceptable, mandated

level of reliability are sufficient to ensure that deviations, minor or

otherwise, from equal monthly sample sizes will not jeopardize the

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

Sec. 275.11, the Department proposed to delete paragraph (a)(2)(iii)

and renumber paragraph (a)(2)(iv) as (a)(2)(iii). The Department also

proposed technical corrections to regulatory references appearing in

Sec. 275.11(b)(1)(ii) and (b)(1)(iii). There were no significant

comments on these proposed changes so they are adopted as proposed in

the final rule, effective for the FY 2000 QC review period, which

begins October 1, 1999.

2. Sampling Plans Must Conform to Accepted Statistical Theory

The Department proposed to amend the regulations at

Sec. 275.11(a)(3) to require that all sample designs conform to

commonly acceptable statistical theory and application. There were no

significant comments on these proposed changes so they are adopted as

proposed in the final rule, effective for the FY 2000 QC review period,

which begins October 1, 1999.

3. Basis for Final Sample Size

Current regulations at Sec. 275.11(b)(3) provide that FNS will not

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

percent from the estimated caseload number that the State agency used

to determine the size of its sample. The Department proposed to clarify

that this estimated caseload number was the one initially used to

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

at least the minimum required sample size for the estimated caseload is

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

caseload. There were no significant comments on this proposed change so

it is adopted as proposed in the final rule, effective for the FY 2000

QC review period, which begins October 1, 1999.

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

Size

The Department proposed to clarify the wording in the headings in

the tables in proposed Sec. 275.3(c)(1)(i)(A) and (B), and in current

Sec. 275.3(c)(3)(i), Sec. 275.11 (b)(1)(ii) and (iii), and proposed

Sec. 275.11(b)(2)(i) and (ii). There were no significant comments on

these proposed changes so the changes are adopted as proposed in the

final rule, effective for the FY 2000 QC review period, which begins

October 1, 1999.

Federal Subsample Size Formulas

Because the Department proposed a change in the State sampling

size, use of the current formulas for calculating subsample sizes would

result in a decrease in the size of the minimum Federal subsample for a

State agency that chooses the proposed ``smaller ranges.'' However, the

Department does not intend to reduce the Federal subsample. Without a

regulatory change, the formula for determining FNS' minimum subsample

sizes would not accurately indicate the number of reviews that FNS

would actually select for the subsample.

The Department proposed revised formulas for the minimum active and

negative Federal subsamples. These proposed formulas, when applied to

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

current ranges for the Federal subsample. Federal reviewers could still

select and review more cases than the minimum subsample.

The Department received four comments on this provision. Two

favored the change, one was neutral and one opposed the change. The

opposition was based on a concern about FNS having the authority to

review more cases than the minimum subsample. However, the authority to

review active or negative cases to the extent necessary is an existing

authority and was not introduced or increased by the proposed

modifications to regulatory language in this rule.

The proposed changes to the formulas are adopted in the final rule,

to be

[[Page 38291]]

implemented October 1, 1999, effective for the FY 2000 QC review

period.

Error Dollar Tolerance Level

The Department proposed to raise the tolerance for excluding small

dollar errors at Sec. 275.12(f)(2) from $5.00 to $10.00 to address

State agency concerns about inflation and the increases in the Thrifty

Food Plan. Only those overissuances to eligible households or

underissuances to eligible households which exceeded the $10.00

tolerance figure would be reported and coded in the completion of QC

reviews.

Eighteen organizations commented on this proposed regulatory

change. All eighteen comments supported an increase in the tolerance

level. Four comments recommended that the tolerance level be increased

further, two recommended a $25 tolerance, one recommended a $20

tolerance and another recommended a higher tolerance without specifying

a figure. State reasons given for a higher tolerance included a need to

account for inflation more fully and that the focus of administration

should be on larger error amounts.

Since the Department's original proposal of a $10 tolerance,

circumstances have changed. The strength of the economy, the success of

welfare reform in moving families from welfare to work and restrictions

on eligibility for many legal immigrants and unemployed childless

adults have led to a decrease in Food Stamp Program participation. For

many people, Food Stamps can make the difference between living in

poverty and moving beyond it. It is imperative to the success of

welfare reform, and more fundamentally the nutritional well-being of

eligible persons, that the Program serves eligible low-income families,

particularly the working poor. However, since the income and deductions

for working poor families tend to be volatile, these households are

more error prone and their participation could increase error rates of

States trying hardest to serve them. The Department believes that

increasing the tolerance to $25 will support State efforts to serve

eligible needy families by reducing State concerns about increased

error rates attributable to the participation of working poor families.

In view of State comments and the above, the QC tolerance will be

increased to $25.

In the final rule, a $25 tolerance will be implemented by all State

agencies on October 1, 1999, effective for the FY 2000 QC review

period.

Home Visit Requirement

The Department proposed to amend the regulatory requirement for the

face-to-face interview to take place at the client's home in most

instances. The proposed revision would simply require a face-to-face

interview. There were 19 comments on this proposal.

The Department considers face-to-face interviews an essential

component to ensure the accuracy of certification decisions. There was

no change or intent to change the requirement that a face-to-face

interview be conducted, only a revision of the location of the face-to-

face interview. However, the Department received nine comments that

proposed alternatives to the face-to-face interview. Suggested

alternatives included phone interviews, questionnaires or elimination

of face-to-face interviews for some categories of cases. None of these

alternatives are considered acceptable.

Seventeen of the nineteen comments on the proposed change favored

the flexibility to conduct interviews at a location other than the

client's home. Two opposed the change. Opposition was based on concerns

about the impact of this change on the accuracy of error rates. In view

of better monitoring of household circumstances through data bases, the

Department no longer considers an interview at the client's home a

necessity in all cases to ensure the accuracy of the review. However,

interviews with clients at their homes is still the preferred practice

and the Department encourages State reviewers to continue to interview

clients at their homes when practical. One comment stated that using

authorized representatives as information sources for households, as

allowed by this provision, is not always a good practice since they

often just transact authorization to participate cards or coupons for

households. FNS expects that these individuals would be used as a

primary source of information on households only if they can

demonstrate sufficient knowledge about the household's situation in

order to answer questions on the household's behalf. Indiscriminate use

of these individuals as information sources would not be an acceptable

practice.

The changes to regulations are adopted in the final rule as

proposed and are to be implemented effective October 1, 1999, effective

for the FY 2000 QC review period.

Conducting QC Reviews Against Federal Regulations

The Department solicited comments from all interested parties on

the appropriateness and potential consequences of a variance exclusion

for erroneous payments which result from the State agency having

followed State agency policies or directives under certain conditions.

There were 17 comments on this proposal. Fifteen favored the change,

one was noncommittal and one opposed it. Despite their general support

of this proposal, five of the 15 comments favoring the proposal raised

concerns. Three questioned how this provision would be implemented.

Three other comments raised issues concerning what should be excluded

from error, whether all State agencies would be alerted to identified

differences in other State agencies, or whether other current practices

would be maintained. Another comment objected to the proposal,

indicating that a variance exclusion was appropriate when something new

is being implemented but not when errors are made after the

implementation period. In light of the issues raised, FNS has decided

not to pursue this proposal.

QC Review Case Completion Standard

The Department proposed to amend the current requirement that a

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

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

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

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

would be adjusted using the current regulatory formula which is based

on a 100 percent completion requirement.

All 15 comments the Department received on this change supported a

reduction of the completion rate standard. Five recommended that the

standard be lowered to 95 percent. One recommended that the standard be

based on the annual national average instead of a flat percentage.

FNS has modified QC review procedures over the years so that cases

can be completed if sufficient effort is put into conducting the

review. A 98 percent completion rate, permitting a two percent

flexibility, is a reasonable reduction from the current 100 percent

standard. In order to preserve the integrity of the system, the highest

accuracy of error rates must be maintained. The Department does not

support a further reduction in the completion standard as proposed by

these comments.

The 98 percent completion standard will be adopted in the final

rule effective October 1, 1999 for the start of the FY 2000 QC review

period.

[[Page 38292]]

Changing Federal Case Findings and Disposition

The Department proposed to codify into regulations the policies and

practices which dictate when and under what circumstances FNS will

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

organizations commented on this proposal.

There were three comments on the issue of whether FNS should codify

the circumstances under which Federal findings or case dispositions

would be changed. One comment supported codification, another supported

codification but did not agree with some of the proposed practices.

Another comment objected to the codification of this information in

regulations on the basis that more restrictive limitations will be

applied in those instances in which circumstances do not easily fall

into one of the five categories in the proposed regulation. The

Department agrees that codification probably would make it more

difficult for FNS to change Federal findings or dispositions for cases

when their circumstances do not fit in the five categories defined in

regulations. Therefore, the Department has decided against codifying in

regulations the circumstances in which Federal decisions or case

dispositions will be changed.

The comments received on the five proposed policies and practices

for changing Federal findings or disposition of cases are discussed

below.

1. Informal Resolution

FNS proposed to change the Federal finding or disposition if, as a

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

FNS agreed on a new finding or disposition. The Department received

seven comments on the informal resolution process. There were no

comments that objected to this practice. Two offered general support of

the process while five relayed concerns about a reduction of time

frames for informal resolution as a result of the Mickey Leland

Childhood Hunger Relief Act of 1993, (``Leland Act''), Chapter 3, Title

XIII of the Omnibus Reconciliation Act of 1993, Public Law 103-66.

Due to changes mandated by the Leland Act, FNS shortened the period

of time State agencies have to request arbitration from 28 days to 20

days in the rule entitled FSP: QC Provisions of the Leland Act

(``Leland Rule'') (62 FR 29652) published June 2, 1997.

It should be noted that the Department is required to implement

changes that enable it to meet requirements set by law, such as the

deadlines set by the Leland Act. Shortening timeframes for informal

resolution was necessary to ensure that the timeframes in the Leland

Act could be met. The preamble to the Leland Rule discusses these

timeframes in more detail. Please refer to that publication for further

discussion.

2. Ruling by an Arbitrator

FNS proposed to change the Federal finding or disposition whenever

an arbitrator's decision requires that a change be made.

There was one comment on this provision. This comment was concerned

that the arbitrator is an employee of FNS and made two proposals to

address the concern. According to this comment, arbitrator decisions

should be reviewed by the Secretary on request of the State agency and

the arbitrator should be independent of FNS. Arbitration is the final

decision of the process. As such, once the arbitrator has made a

decision, that decision is final, with two exceptions. The first would

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

FNS learned that it had not properly implemented the decision of the

arbitrator. FNS has explored the option of having an arbitrator

independent of the agency. However, given the importance of these

decisions and the tight time periods for making decisions, the

arbitrator needs to be familiar with statutory requirements,

Departmental decisions and policies. After making inquiries with other

organizations/offices about taking over this function, FNS concluded

that outsourcing was not plausible, primarily due to the lack of

technical expertise and anticipated delays in decision-making.

The Final Leland Rule changed the arbitration process from a two-

tiered system to a one-tiered system. This change was driven primarily

by reductions in timeframes for completing cases as required by the

Leland Act.

3. Implementation of a Regulation, Law, or Waiver

FNS proposed to change Federal findings or dispositions to

implement a change in regulations, an amendment to the Food Stamp Act,

or retroactive provisions to a waiver.

Two comments questioned the intent of implementing a regulation or

amendment through changing case findings or dispositions. FNS

anticipates that this action will rarely be necessary. To date this

circumstance has happened only once, when Congress mandated that a

change be implemented retroactively. This action did not negatively

impact State agencies. FNS must implement changes required by Law.

4. Correct any Application of Incorrect Written Policy

The Department would change Federal findings or disposition of a

case whenever it became aware that an error was the result of correct

State application of an incorrect written policy provided by a

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

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

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

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

any potential incorrect policy, the Department proposed that the

variance exclusion at Sec. 275.12(d)(2)(viii) may be made in the

Federal findings at any time that such a problem is discovered.

There was one comment on the discussion of this provision in the

preamble to the proposed rule. While the comment did not object to the

variance exclusion, it did object to FNS not allowing new factual

information to be considered in the final disposition of the case. The

comment characterized FNS' reasons for taking this position as

administrative and stated that those concerns should not outweigh the

system's primary mission of establishing an accurate error rate.

The Department is opposed to making changes based on new

``factual'' information for three reasons. First, State agencies are

responsible for obtaining all necessary information at the time the

State QC reviewer conducts the review.

Second, if the household's circumstances were not reasonably

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

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

reasonably verified information would be contradicted at a later time.

Third, the Department recognizes the need for final closure in the

resolution process. Section 13951 of the Leland Act specifies that ``no

later than 180 days after the end of the fiscal year, the case review

and arbitration of State-Federal difference cases shall be completed.''

The Department believes that without providing some limit on the

resolution process this mandated deadline can not be achieved. For

example, if FNS permitted new ``factual'' information to be presented

after the case was under review for arbitration, FNS would be obligated

to investigate and confirm or repudiate the new ``facts'' even if these

facts were questionable and unlikely to have a

[[Page 38293]]

bearing on the outcome of the case. This would delay resolution of the

case and ultimately the determination of the national average error

rate. The Department maintains that resolution of the ``facts'' of a

case in question should be accomplished prior to it's submission as a

completed case.

5. Conflict in a Federal Finding/Disposition

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

Stamp Quality Control System (FSQCS) conflicted with the finding letter

transmitted to the State agency, FNS would ensure the FSQCS was

correct. If the FSQCS coding was incorrect, it would be corrected. If

the finding letter was incorrect, it would be corrected. Either way,

FNS would transmit a new finding letter to the State agency explaining

what had occurred. There were no comments on this provision.

If, in any of the five circumstances specified above, FNS were to

make changes to the finding and disposition of a case, these changes

would be made as proposed regardless of the effect on the amount of

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

entitled to arbitration of the new Federal finding or disposition, with

one exception. If FNS changed the Federal findings or disposition to

comply with the decision of the arbitrator, the State agency would have

no further right to arbitration. This is because the arbitrator's

decisions are final, with two exceptions. The first would be to

implement a change in law or regulations. The other would be if FNS

learned that it had not properly implemented the decision of the

arbitrator.

As discussed above, the Department has decided against codifying in

regulations the policies and practices which dictate when and under

what circumstances FNS will change Federal findings or the disposition

of a specific case. Therefore, the policies and practices discussed

above are not detailed in the final rule.

Miscellaneous Technical Corrections

The Department received no significant comments regarding the

proposal to effect technical corrections to various paragraphs

appearing in Part 275 of the regulations. These modifications are

retained in this final rule. The Department has adopted all of the

proposed technical changes in this final rule. The modifications will

become effective and are to be implemented October 1, 1999, effective

for the FY 2000 QC review period which begins with the October 1999

sample month. Since publication of the proposed rule, the Department

published a final rule on June 2, 1997, the previously referenced

Leland Rule, which modified regulatory language at Sec. 275.23(e)(9).

In the final rule the Department is making a technical revision to

regulations at Sec. 275.23(e)(6)(iii) to restore language that provides

State agencies protection against double billings for the same dollar

losses under both the QC liability system and the negligence provisions

at Sec. 276.3. This language was inadvertently deleted from this

provision by the final rule entitled ``Food Stamp Program: Hunger

Prevention Act of 1988 and Mickey Leland Childhood Hunger Relief Act;

Rules of Practice; Administrative Law Judges,'' published July 6, 1994.

This change will be effective upon publication of the final rule.

Implementation

The provision at Sec. 275.23(e)(6)(iii) is effective and to be

implemented on July 16, 1999. The following provisions are effective on

October 1, 1999 and are to be implemented on October 1, 2000, with the

start of the Fiscal Year 2001 quality control review period:

Sec. 271.2; Sec. 275.3(c)(3)(ii); Sec. 275.10(a); Sec. 275.11(c)(1);

Sec. 275.11(e)(2); Sec. 275.11(f)(2); Sec. 275.13(a); Sec. 275.13(b);

Sec. 275.13(c)(1); Sec. 275.13(c)(2); Sec. 275.13(f)(2) and

Sec. 275.23(c)(4). The remaining provisions of this rule are effective

and are to be implemented October 1, 1999, with the start of the Fiscal

Year 2000 quality control review period, which begins with the October

1999 sample month.

List of Subjects

7 CFR Part 271

Administrative practice and procedure, Food stamps, Grant programs-

social programs.

7 CFR Part 272

Alaska, Civil rights, Food stamps, Grant programs-social programs,

Reporting and recordkeeping requirements.

7 CFR Part 275

Administrative practice and procedure, Food stamps, Reporting, and

recordkeeping requirements.

For the reasons set out in the preamble, Parts 271 through 285 of

Chapter II of Title 7 Code of Federal Regulations are amended as

follows:

1. The authority citation for Parts 271 through 285 is revised to

read as follows:

Authority: 7 U.S.C. 2011-2036.

PART 271--GENERAL INFORMATION AND DEFINITIONS

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

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

date'' are revised to read as follows:

Sec. 271.2 Definitions.

* * * * *

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

quality control reviewer that a household which received food stamp

benefits during the sample month is ineligible or received an incorrect

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

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

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

or terminate a household was incorrect.

* * * * *

Negative case means a household whose application for food stamp

benefits was denied or whose food stamp benefits were suspended or

terminated by an action in the sample month or by an action effective

for the sample month.

Negative case error rate means an estimate of the proportion of

denied, suspended, or terminated cases where the household was

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

expressed as a percentage of completed negative quality control reviews

excluding all results from cases processed by SSA personnel or

participating in a demonstration project identified by FNS as having

certification rules that are significantly different from standard

requirements.

* * * * *

Quality control review means a review of a statistically valid

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

households are receiving the food stamp allotments to which they are

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

suspend, or terminate cases are correct.

* * * * *

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

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

the day a certification action was taken to authorize the allotment,

whichever is later. The ``review date'' for negative cases, depending

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

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

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

computer system, the date of the notice

[[Page 38294]]

to the client or the date the negative action becomes effective. For no

case is the ``review date'' the day the quality control review is

conducted.

* * * * *

PART 272--REQUIREMENTS FOR PARTICIPATING STATE AGENCIES

3. In Sec. 272.1, a new paragraph (g)(155) is added in numerical

order to read as follows:

Sec. 272.1 General terms and conditions.

* * * * *

(g) Implementation. * * *

(155) Amendment No. 373. The provision at Sec. 275.23(e)(5)(iii) is

effective and is to be implemented on July 16, 1999. The following

provisions are effective on October 1, 1999 and are to be implemented

on October 1, 2000, with the start of the Fiscal Year 2001 quality

control review period: Sec. 271.2; Sec. 275.3(c)(3)(ii);

Sec. 275.10(a); Sec. 275.11(c)(1); Sec. 275.11(e)(2);

Sec. 275.11(f)(2); Sec. 275.13(a); Sec. 275.13(b); Sec. 275.13(c)(1);

Sec. 275.13(c)(2); Sec. 275.13(f)(2) and Sec. 275.23(c)(4). The

remaining provisions of this rule are effective and are to be

implemented October 1, 1999, with the start of the Fiscal Year 2000

quality control review period, which begins with the October 1999

sample month.

PART 275--PERFORMANCE REPORTING SYSTEM

4. In Sec. 275.3:

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

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

fourth sentences;

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

following the introductory text is removed;

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

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

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

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

d. newly redesignated paragraph (c)(1)(i)(C) introductory text is

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

the words ``n' is the'';

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

the introductory text, are revised;

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

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

the'';

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

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

The revisions and additions read as follows:

Sec. 275.3 Federal monitoring.

* * * * *

(c) Validation of State Agency error rates. * * * FNS must validate

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

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

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

Federal administrative funding for that period as outlined in

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

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

national weighted mean negative case error rate for the prior fiscal

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

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

* *

(1) Payment error rate. * * *

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

active cases, as follows:

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

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

completed active cases is determined as follows:

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

Average monthly reviewable caseload (N) Federal subsample target (n')

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

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

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

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

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

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

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

completed active cases is determined as follows:

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

Average monthly reviewable caseload (N) Federal subsample target (n')

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

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

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

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

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

* * * * *

(3) Negative case error rate. * * *

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

negative cases, as follows:

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

Average monthly reviewable negative caseload

(N) Federal subsample target (n')

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

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

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

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

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

* * * * *

[Sec. 275.10 Amended]

5. In Sec. 275.10(a):

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

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

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

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

6. In Sec. 275.11:

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

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

added;

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

c. paragraph (b)(1)(ii) is amended by removing the reference to

``(a)(2)(viii)'' and adding in its place the reference to

``(a)(2)(iii)'' and by revising the table;

d. paragraph (b)(1)(iii) is amended by removing the reference to

``(a)(2)(viii)'', and adding in its place the reference to

``(a)(2)(iii)'', and by revising the table;

[[Page 38295]]

e. paragraph (b)(1)(iv) is amended by removing the word

``anticipated'' in the third sentence;

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

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

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

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

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

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

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

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

The additions and revisions read as follows:

Sec. 275.11 Sampling.

(a) Sampling plan. * * *

(2) Criteria. * * *

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

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

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

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

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

a basis for challenging the resulting error rates.

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

both active and negative samples because of its relative ease to

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

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

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

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

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

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

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

must conform to commonly acceptable statistical theory and application

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

* * * * *

(b) Sample size. * * *

(1) Active cases. * * *

(ii) * * *

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

Average monthly reviewable caseload (N) Minimum annual sample size (n)

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

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

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

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

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

(iii) * * *

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

Average monthly reviewable caseload (N) Minimum annual sample size (n)

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

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

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

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

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

* * * * *

(2) Negative cases.

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

negative cases determined by the formulas provided in paragraph

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

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

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

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

determined as follows:

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

Average monthly reviewable negative caseload

(N) Minimum annual sample size (n)

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

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

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

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

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

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

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

determine the minimum number of negative cases to be selected and

reviewed during each annual review period as follows:

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

Average monthly reviewable negative caseload

(N) Minimum annual sample size (n)

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

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

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

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

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

(iii) In the formulas in this paragraph (b)(2), n is the required

negative sample size. This is the minimum number of negative cases

subject to review which must be selected each review period.

(iv) In the formulas in this paragraph (b)(2), N is the average

monthly number of negative cases which are subject to quality control

review (i.e., households which are part of the negative universe

defined in paragraph (e)(2) of this section) during the annual review

period.

(3) Unanticipated changes. Since the average monthly caseloads

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

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

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

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

review period is less than 20 percent larger than the estimated

caseload initially used to determine sample size. If the actual

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

the larger

[[Page 38296]]

sample size appropriate for the actual caseload will be used in

computing the sample completion rate.

* * * * *

(e) Sample frame. * * *

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

(i) All households whose applications for food stamp benefits were

denied by an action in the sample month or effective for the sample

month except those excluded from the universe in paragraph (f)(2) of

this section. If a household is subject to more than one denial action

in a single sample month, each action shall be listed separately in the

sample frame; and

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

terminated by an action in the sample month or effective for the sample

month except those excluded from the universe in paragraph (f)(2) of

this section.

* * * * *

(f) Sample universe. * * *

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

all households whose applications for food stamps were denied or whose

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

sample month or effective for the sample month except for the

following:

* * * * *

(iv) A household which is under active investigation for

Intentional Program Violation;

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

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

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

suspension or termination did not result in a break in participation

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

break in participation if the household is authorized to receive its

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

effective other than continuation of benefits pending a fair hearing.

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

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

but which was not actually denied participation;

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

complete monthly report by the extended filing date, but reinstated

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

issuance month;

(ix) Other households excluded from the negative case universe

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

* * * * *

7. In Sec. 275.12:

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

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

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

``$25.00'';

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

The revisions and additions read as follows:

Sec. 275.12 Review of active cases.

* * * * *

(c) Field investigation. * * *

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

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

participants. Prior to conducting the personal interview, the reviewer

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

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

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

method of notifying the household and the specificity of the

notification shall be determined by the State agency, in accordance

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

place at the participant's home, at an appropriate State agency

certification office, or at a mutually agreed upon alternative

location. The State agency shall determine the best location for the

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

those regarding certification interviews at Sec. 273.2(e)(2) of this

chapter. Those regulations provide that an office interview must be

waived under certain hardship conditions. Under such hardship

conditions the quality control reviewer shall either conduct the

personal interview with the participant's authorized representative, if

one has been appointed by the household, or with the participant in the

participant's home. Except in Alaska, when an exception to the field

investigation is made in accordance with this section, the interview

with the participant may not be conducted by phone. During the personal

interview with the participant, the reviewer shall:

* * * * *

(g) Disposition of case reviews. * * *

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

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

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

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

* * * * *

8. In Sec. 275.13:

a. paragraph (a) is revised;

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

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

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

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

word

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

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

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

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

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

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

paragraph;

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

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

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

The addition and revisions read as follows:

Sec. 275.13 Review of negative cases.

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

stamp benefits were denied or whose food stamp benefits were suspended

or terminated by an action in the sample month or effective for the

sample month shall be selected for quality control review. These

negative cases shall be reviewed to determine whether the State

agency's decision to deny, suspend, or terminate the household, as of

the review date, was correct. Depending on the characteristics of

individual State systems, the review date for negative cases could be

the date of the agency's decision to deny, suspend, or terminate

program benefits, the date on which the decision is entered into the

computer system, the date of the notice to the client, or the date the

negative action becomes effective. However, State agencies must

consistently apply the same definition for review date to all sample

cases of the same classification. The review of negative cases shall

include a household case record review; an error analysis; and the

reporting of review findings, including procedural problems with the

action regardless of the validity of the decision to deny, suspend or

terminate.

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

household case record and verify through documentation in it whether

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

or whether the denial, suspension, or termination is

[[Page 38297]]

correct for any other reason documented in the casefile. * * *

* * * * *

(e) Disposition of case review. * * *

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

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

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

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

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

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

oversampling;

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

frame.

* * * * *

9. In Sec. 275.23:

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

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

b. paragraph (e)(6)(i) is amended by removing everything but the

first sentence;

c. paragraph (e)(6)(iii) is revised.

d. the introductory text of paragraph (e)(8)(iii) is amended by

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

percent''.

e. paragraph (e)(9) is revised.

The revisions read as follows:

Sec. 275.23 Determination of State agency program performance.

* * * * *

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

(6) * * *

(iii) Whenever a State is assessed for an excessive payment error

rate, the State shall have the right to request an appeal in accordance

with procedures set forth in part 283 of this chapter. While FNS may

determine a State to be liable for dollar loss under the provisions of

this section and the negligence provisions of Sec. 276.3 of this

chapter for the same period of time, FNS shall not bill a State for the

same dollar loss under both provisions. If FNS finds a State liable for

dollar loss under both the QC liability system and the negligence

provisions, FNS shall adjust the billings to ensure that two claims are

not made against the State for the same dollar loss.

* * * * *

(9) FNS Timeframes. FNS shall determine and announce the national

average payment error rate for the fiscal year within 30 days following

the completion of the case review process and all arbitrations of State

agency-Federal difference cases for that fiscal year, and at the same

time FNS shall notify all State agencies of their individual payment

error rates and payment error rate liabilities, if any. The case review

process and the arbitration of all difference cases shall be completed

not later than 180 days after the end of the fiscal year. FNS shall

initiate collection action on each claim for such liabilities before

the end of the fiscal year following the reporting period in which the

claim arose unless an administrative appeal relating to the claim is

pending. Such appeals include requests for good cause waivers and

administrative and judicial appeals pursuant to Section 14 of the Food

Stamp Act. While the amount of a State's liability may be recovered

through offsets to their letter of credit as identified in

Sec. 277.16(c) of this chapter, FNS shall also have the option of

billing a State directly or using other claims collection mechanisms

authorized under the Federal Claims Collection Act, depending upon the

amount of the State's liability. FNS is not bound by the timeframes

referenced in this subparagraph in cases where a State fails to submit

QC data expeditiously to FNS and FNS determines that, as a result, it

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

rate liability within the prescribed timeframe.

* * * * *

Dated: July 12, 1999.

Shirley R. Watkins,

Under Secretary for Food, Nutrition and Consumer Services.

[FR Doc. 99-18164 Filed 7-15-99; 8:45 am]

BILLING CODE 3410-30-U