[Code of Federal Regulations] [Title 7, Volume 4] [Revised as of January 1, 2002] From the U.S. Government Printing Office via GPO Access [CITE: 7CFR274.7] [Page 777-780] TITLE 7--AGRICULTURE CHAPTER II--FOOD AND NUTRITION SERVICE, DEPARTMENT OF AGRICULTURE PART 274--ISSUANCE AND USE OF COUPONS--Table of Contents Sec. 274.7 Coupon management. (a) Coupon inventory management. State agencies shall establish coupon inventory management systems which ensure that coupons are requisitioned and inventories are maintained in accordance with the requirements of these regulations. (1) State agencies shall monitor the coupon inventories of coupon issuers and bulk storage points to ensure that inventories are neither excessive nor insufficient to meet the issuance needs and requirements. In determining reasonable inventory needs, State agencies shall consider, among other things, the ease and feasibility of resupplying such inventories from bulk storage points within the State. The inventory levels at coupon issuers and bulk storage points should not exceed a six-month supply, taking into account coupons on hand and on order. (2) State agencies shall establish accounting systems for monitoring the inventory activities of coupon issuers. State agencies shall review the Form FNS-250, from coupon issuers and bulk storage points, to determine the propriety and reasonableness of the inventories. Forms FNS-261, Advice of Shipment, Forms FNS-300, Advice of Transfer (or an approved State agency form), and reports of returned mail-issued coupons, reports of replacements of mail-issued coupons, reports of improperly manufactured or mutilated coupons, reports of shortage or overage of food coupon books and physical inventory controls shall be used by State agencies to assure the accuracy of monthly reports, issuers' compliance with required inventory levels, and the accuracy and reasonableness of coupon orders. (b) Coupon controls. State agencies shall establish control and security [[Page 778]] procedures to safeguard coupons that are similar to those used to protect currency. The exact nature of security arrangements will depend on State agency evaluation of local coupon issuance and storage facilities. These arrangements must permit the timely issuance of coupons while affording a reasonable degree of coupon security. The State agencies, as well as all persons or organizations acting on their behalf, shall: (1) Safeguard coupons from theft, embezzlement, loss, damage, or destruction; (2) Avoid unauthorized transfer, negotiation, or use of coupons; (3) Avoid issuance and transfer of altered or counterfeit coupons; and (4) Promptly report in writing to FNS any loss, theft, or embezzlement of coupons. (c) Coupon requisitioning, shipping and transferring. (1) State agencies shall arrange for the ordering of coupons on the Form FNS-260, Requisition for Food Coupon Books, and the prompt verification and written acceptance of each coupon shipment. FNS shall be furnished with appropriate delivery hours and the names of the persons authorized to sign delivery acknowledgements. (2) FNS shall assess the reasonableness and propriety of food stamp requisitions submitted by State agencies based on prior inventory changes and shall notify the State agency of any adjustments made to requisitions. (3) FNS shall ship coupons, in such denominations as it may determine necessary, directly to State agency receiving points approved by FNS. FNS shall promptly advise the State agency in writing when coupons are shipped to receiving points using Form FNS-261, Advice of Shipment. Coupons shall be considered delivered to the State agency when FNS or its carrier has a signed receipt. (4) Once coupons have been accepted by receiving points within the State, any further movement of the coupons between coupon issuers and bulk storage points within the State is at the risk of the State agency. To minimize the risk of loss, coupons should be shipped by armored vehicle or some other method of transportation that affords the State agency the maximum security available. (5) In every instance when coupons are transported within a State, the person(s) transporting coupons shall: (i) Acknowledge in writing the receipt of the coupons; (ii) Provide as much protection for the coupons as is reasonable; (iii) Advise issuance supervisors of the routes to be taken, the shipment departure time and the estimated arrival time. This information, if in written form, may be destroyed after the coupons have been received. (d) Specimen coupons. FNS may provide upon written request, non- negotiable specimen coupons to State agencies for the administration of the Program and enforcement of the rules, and to authorized food firms for the purpose of educating and training employees on Program operations. (1) The State agency or firm shall store specimen coupons in secure storage with access limited to authorized personnel. The State agency or firm should maintain a record of specimen coupons received. (2) Specimen coupons that are mutilated, improperly manufactured, or otherwise unusable, shall not be distributed by the State agency. Such coupons shall be destroyed by the State agency and the destruction shall be witnessed by two persons and noted on the perpetual inventory records maintained by the FNS regional offices for specimen coupons. (3) Specimen coupons shall not be issued to private individuals or firms for the purpose of collection or display. (e) Replacement and destruction of coupons and authorization documents by issuance points. (1) The State agency shall provide for the replacement to issuers of improperly manufactured or mutilated coupons as provided below. Replacement provisions pertaining to households are contained in Sec. 274.6. (i) The State agency shall examine the improperly manufactured or mutilated coupons to determine the validity of the claim and the amount of coupons to be replaced. (ii) If the State agency can determine the value of an improperly manufactured or mutilated coupon, the State [[Page 779]] agency shall replace the unusable coupon, dollar for dollar, when at least three-fifths of the coupon is presented by the issuer. After the exchange, the State agency shall destroy the unusable coupon in accordance with the procedures contained in paragraph (f) of this section. (iii) If the State agency cannot determine the value of the improperly manufactured or mutilated coupons, the State agency shall cancel the coupons by writing or stamping ``canceled'' across the face of the coupons and forward the coupons to FNS for a determination of the value by the U.S. Bureau of Engraving and Printing. The dollar amount shall be shown on the Form FNS-250 report. (2) The State agency shall void all authorization documents mutilated or otherwise rejected during the preparation process. The voided authorization documents shall either be filed for audit purposes or destroyed, provided destruction is witnessed by at least two persons and the State agency maintains a list of all destroyed authorization documents. Provisions pertaining to the replacement of authorized documents mutilated subsequent to receipt by a household are provided in Sec. 274.6. (f) Destruction of unusable coupons found in inventory or received as claim payments. (1) The State agency shall require coupon issuers, bulk storage points, and claims collection points to dispose of unusable coupons received from the manufacturer or received as payment for claims within 30 days after the close of the month in which unusable coupons shipped from the manufacturer are discovered, or are received from recipients as payment for claims. There is no dollar limit on the amount of coupons which may be disposed of by the State agency. Disposal shall be by one of the following two methods: (i) Sending unusable coupons to the State agency for destruction; or (ii) Holding the unusable coupons in secure storage pending examination and destruction by the State agency at the coupon issuance, bulk storage, or claims collection point. (2) Prior to the destruction of improperly manufactured or mutilated coupons or coupon books that were exchanged, or collected from households for claims, the State agency shall: (i) Verify that the coupons were improperly manufactured or mutilated. If one or more boxes of coupons were improperly manufactured, the State agency shall contact FNS prior to disposition for instructions on the disposition of the coupons. If FNS has not responded within the 30- day time limit, the State agency shall destroy the box of coupons and document the manufacturing irregularity and the book numbers, and retain a copy of the State agency's request to FNS for permission to destroy. (ii) If either the coupon issuer or bulk storage point, or the State agency cannot determine whether coupons or coupon books were in fact improperly manufactured or cannot establish the value of the coupons involved, the State agency shall promptly forward a written statement of findings and the canceled coupon(s) or coupon book(s) to FNS for determination. (3) The State agency shall destroy the coupons and coupon books by burning, shredding, tearing, or cutting so they are not negotiable. Two State agency officials shall witness and certify the destruction and report the destruction information as follows: (i) The destruction of improperly manufactured, mutilated or exchanged coupons from coupon issuers and bulk storage points shall be reported on the Form FNS-471, Coupon Account and Destruction Report, and submitted with the Form FNS-250 for the appropriate month. For coupons received from recipients, a Form FNS-135 shall be completed and attached to the Form FNS-471. (ii) The destruction of coupons received from claims collection points that are the result of the payment of household claims shall be reported on the Form FNS-471 (with Form FNS-135 documentation) and submitted with the Form FNS-209, Status of Claims Against Households, for the appropriate rnonths. A State agency may consolidate its monthly Form FNS-471 for claims collection destruction reporting by providing one completed Form FNS-471 that reflects the total claims destruction figure for each [[Page 780]] month. However, the State agency must attach a breakdown which reports the required Form FNS-471 information for each reporting point. If a State agency chooses to submit a consolidated Form FNS-471, all individual Forms FNS-471 must be retained by the State agency for future review and audit purposes. The Form FNS-135 may not be consolidated, and all originals of that form must accompany a consolidated Form FNS-471. (g) Undeliverable or returned benefits. The State agency shall exercise the following security and controls for authorization documents and coupons that are undeliverable or returned during the valid issuance period. Forms FNS-471 and FNS-135 shall be completed by the State agencies, as appropriate. (1) Coupons which are in book form, complete, and with original and unsigned covers shall be returned to inventory and noted as such on the issuance log, and the Form FNS-250. (2) Authorization documents shall be recorded in the control log noting the serial number, household name and case number. The documents shall be kept in secure storage with limited access. The documents may be voided as long as households which report nondelivery are provided an immediate replacement. (h) Old series coupon exchange. Households which have old-series (no longer issued) coupons shall be entitled to a dollar-for-dollar exchange of old-series coupons for current series coupons. Households in possession of old-series coupons shall submit the coupons and a request for exchange to the State agency. State agencies may make direct exchange to claimants or request FNS to make the exchange. Forms FNS-471 and FNS-135 shall be completed by the State agencies, as appropriate. [54 FR 7004, Feb. 15, 1989, as amended at 54 FR 51351, Dec. 15, 1989]