[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: 7CFR277.16]

[Page 884-885]
 
                          TITLE 7--AGRICULTURE
 
    CHAPTER II--FOOD AND NUTRITION SERVICE, DEPARTMENT OF AGRICULTURE
 
PART 277_PAYMENTS OF CERTAIN ADMINISTRATIVE COSTS OF STATE AGENCIES--Table of Contents
 
Sec.  277.16  Suspension, disallowance and program closeout.

    (a) Suspension. When a State agency has materially failed to comply 
with any of the provisions contained in the Act, regulations, or FNS-
approved State Plan of Operation, FNS may, after written notification to 
the State agency, temporarily withhold some or all Federal 
reimbursements for costs of administration of the Food Stamp Program in 
accordance with Sec.  276.4. Adjustments will be made either by 
adjusting the Letter of Credit authorization or by not allowing the 
State agency to withdraw funds.
    (b) Disallowance. (1) FNS may disallow costs in accordance with part 
276 and effect nonpayment for some or all costs incurred by a State 
agency which are normally allowable but are determined by FNS to be 
nonreimbursable because the State agency has failed to comply with any 
of the provisions contained in the Act, regulations, or FNS-approved 
State Plan of Operation.
    (2) FNS may also disallow costs and institute recovery of Federal 
funds when a State agency fails to adhere to the cost principles of this 
part and appendix A.
    (c) Offsets to the Letter of Credit. (1) FNS may recover funds when 
owed by the State agency to FNS through offsets to the Letter of Credit. 
Offsets shall include:
    (i) Costs determined by FNS to be disallowed under the provisions of 
this part;
    (ii) Unallowable costs resulting from audit or investigation 
findings;
    (iii) Amounts owed which have been billed to the State agency and 
which the State agency has failed to pay without cause acceptable to 
FNS; or
    (iv) Amounts owed to FNS for title IV reimbursements and recipient 
claims collections which were reported on the FNS-209 and which the 
State agency has failed to pay.
    (2) The amounts recovered through the offset procedure should be in 
one lump sum. If recovery of funds through the offset procedure is not 
possible in one lump sum, FNS shall make appropriate adjustments to 
recover the funds in not more than three fiscal years.
    (d) Program transfer or termination. (1) When termination or 
transfer of a State program has been agreed upon by FNS, the following 
closeout procedure shall be observed:
    (i) Upon request, FNS shall make or arrange for prompt payment to 
the State agency for allowable costs not covered by previous payments.
    (ii) The State agency shall immediately refund to FNS any 
unobligated balance of cash withdrawn by the State agency for the 
administration of the program in the affected State or Indian 
reservation.
    (iii) The State agency shall submit to FNS within 90 days after the 
date of termination of the program, all required financial, performance, 
and other reports. FNS may grant extensions when requested by the State 
agency.
    (iv) FNS shall adjust the amount authorized by the Letter of Credit 
in order to effect payment of any amounts due the State agency, and if 
appropriate, shall bill the State agency for any amounts due to FNS. The 
amounts of such billings shall be promptly remitted to FNS.

[[Page 885]]

    (v) In the event a final audit has not been performed prior to the 
closeout of the program, FNS shall retain the right to disallow costs or 
recover funds resulting from the final audit findings.
    (2) Provisions of Sec.  277.13 apply for any property acquired with 
program funds or received from the Federal Government in connection with 
the program and which was in use in the affected project area or areas.

[Amdt. 188, 45 FR 85702, Dec. 30, 1980, as amended by Amdt. 342, 59 FR 
2733, Jan. 19, 1994]