[Code of Federal Regulations]
[Title 7, Volume 4]
[Revised as of January 1, 2004]
From the U.S. Government Printing Office via GPO Access
[CITE: 7CFR274.3]

[Page 785-787]
 
                          TITLE 7--AGRICULTURE
 
    CHAPTER II--FOOD AND NUTRITION SERVICE, DEPARTMENT OF AGRICULTURE
 
PART 274_ISSUANCE AND USE OF COUPONS--Table of Contents
 
Sec.  274.3  Issuance systems.

    (a) System classification. State agencies may issue benefits to 
households through any of the following systems:

[[Page 786]]

    (1) An authorization document system that uses a document produced 
for each month's issuance. The intermediary document, such as an ATP, 
may be distributed on a monthly basis to each household and surrendered 
by the household to the coupon issuer, or provided monthly to issuers 
with either single household authorizations or multiple household 
authorizations on each (such as a computer-generated listing). For 
reconciliation and identification purposes, the authorization document 
shall contain the following:
    (i) Serial number;
    (ii) Case name and address;
    (iii) Case number;
    (iv) Allotment amount;
    (v) Benefit month or expiration date;
    (vi) Name of issuing project area; and,
    (vii) Space for signature of household member. An additional space 
for an authorized representative may be included.
    (2) A direct access system that directly accesses a master issuance 
file at the time that benefits are issued to households. This system 
shall use manual card access or an automated access to the master 
issuance file. Systems of this type include the manual Household 
Issuance Record (HIR) card system and on-line issuance terminals.
    (3) A mail issuance system that directly delivers coupons through 
the mail to households.
    (4) An on-line Electronic Benefit Transfer system in which food 
stamp benefits are stored in a central computer database and 
electronically accessed by households at the point-of-sale via reusable 
plastic cards.
    (5) An off-line Electronic Benefit Transfer system in which benefit 
allotments can be stored on a card or in a card access device and used 
to purchase authorized items at a point-of-sale terminal without real-
time authorization from a central processor.
    (b) Other systems. A State agency may develop an issuance system 
which cannot be readily categorized into one of the systems described in 
paragraph (a) of this section. FNS shall prescribe the reporting and 
reconciliation requirements which apply to that system.
    (c) Alternative benefit issuance system. (1) If the Secretary, in 
consultation with the Office of the Inspector General, determines that 
Program integrity would be improved by changing the issuance system of a 
State, the Secretary shall require the State agency to issue or deliver 
coupons using another method. The alternative method may be one of the 
methods described in paragraph (a) of this section, or the Secretary may 
require a State agency to issue, in lieu of coupons, reusable documents 
to be used as part of an automated data processing and information 
retrieval system and to be presented by, and returned to, recipients at 
retail food firms for the purpose of purchasing food. The determination 
of which alternative to use will be made by FNS after consultation with 
the State agency. The cost of conversion will be shared by the 
Department and the State agency in accordance with the cost accounting 
provision of part 277.
    (2) The cost of documents or systems which may be required as a 
result of a permanent alternative issuance system pursuant to this 
section shall not be imposed upon retail food firms participating in the 
Program.
    (d) System requirements. (1) The State agency shall establish a 
master issuance file which is a composite of the issuance records of all 
certified food stamp households. The State agency shall establish the 
master issuance file in a manner compatible with its system used for 
maintaining case record information and shall separate the information 
on the master issuance file into active and inactive case file 
categories. The master issuance file shall contain all the information 
needed to identify certified households, issue household benefits, 
record the participation activity for each household and supply all 
information necessary to fulfill the reporting requirements prescribed 
in Sec.  274.4.
    (i) The master issuance file shall be kept current and accurate. It 
shall be updated and maintained through the use of documents such as 
notices of change and controls for expired certification periods.
    (ii) Before entering a household's data on the master issuance file, 
the State agency shall review the master

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issuance file to ensure that the household is not currently 
participating in, or disqualified from, the Program. If an authorization 
document is issued under the expedited service requirements of 
Sec. Sec.  273.2(i) and 274.2(b), the State agency shall complete as 
much of the master issuance file review as possible prior to issuing the 
authorization document. Any uncompleted reviews shall be completed after 
issuance and appropriate corrective action shall be taken to recover 
overissuance.
    (2) State agencies should divide issuance responsibilities between 
at least two persons to prevent any single individual from having 
complete control over the authorization of issuances and the issuances 
themselves. Responsibilities to be divided include maintenance of 
inventory records, assembly of benefits and preparation of envelopes for 
mailing. If issuance functions in an office are handled by one person, a 
second-party review shall be made to verify coupon inventory, the 
reconciliation of the mail log, and the number of mailings prepared.
    (3) State agencies shall establish controls to prevent a household 
from concurrently receiving benefits through more than one issuance 
system.
    (4) State agencies shall clearly identify issuances in their 
accountability systems as initial, supplemental, replacement, or 
restored benefits.
    (5) State agencies shall establish a Statewide record of replacement 
issuances granted to households to prevent a household from receiving 
more than two countable replacement issuances as defined in Sec.  
274.6(b) in a six-month period.
    (6) State agencies which issue benefits by mail shall, at a minimum, 
use first class mail and sturdy nonforwarding envelopes or packages to 
send benefits to households.
    (e) Validity periods. (1) State agencies shall establish validity 
periods for issuances made in both authorization document and direct 
access systems. A validity period is the time frame during which a 
household may obtain benefits by transacting an authorization document, 
or receiving the benefits directly at an issuance point. Generally, the 
validity period coincides with the issuance month or the period of 
intended use, which may or may not be a calendar month. However, in 
instances in which authorization documents are distributed, or benefits 
become available for ongoing households late in the issuance month, the 
State agency shall extend the validity or availability period for either 
twenty (20) additional days, or until the end of the following issuance 
month, at the State agency's option. The State agency may also choose 
one of two dates which will initiate this extension of the validity or 
availability period. The State agency may choose to extend the period 
for authorization documents distributed or for benefits made available, 
on or after the 20th day of the issuance month or after the 15th day of 
the issuance month. Whichever date the State agency chooses to initiate 
the required extension, the State agency must use the date consistently 
for all extensions in this category. A household which does not transact 
its authorization document, or obtain the benefits directly from an 
issuance point during the issuance's validity period, shall lose its 
entitlement to the benefits, and the State agency shall not issue 
benefits to such a household for such a period.
    (2) State agencies experiencing excessive issuance losses may 
develop systems that have authorization documents that expire in shorter 
time frames than those set forth in paragraph (e) of this section. 
However, such systems shall include methods that allow households the 
opportunity to obtain their benefits for the full validity period of a 
month's issuance.

[54 FR 7004, Feb. 15, 1989, as amended at 54 FR 51351, Dec. 15, 1989; 57 
FR 11249, Apr. 1, 1992; 60 FR 20183, Apr. 25, 1995; Amdt. 390, 65 FR 
59110, Oct. 4, 2000]