[Code of Federal Regulations]
[Title 7, Volume 4]
[Revised as of January 1, 2006]
From the U.S. Government Printing Office via GPO Access
[CITE: 7CFR275.23]
[Page 864-875]
TITLE 7--AGRICULTURE
CHAPTER II--FOOD AND NUTRITION SERVICE, DEPARTMENT OF AGRICULTURE
PART 275_PERFORMANCE REPORTING SYSTEM--Table of Contents
Subpart G_Program Performance
Sec. 275.23 Determination of State agency program performance.
(a) FNS shall determine the efficiency and effectiveness of a
State's administration of the Food Stamp Program by measuring:
(1) State compliance with the standards contained in the Food Stamp
Act, regulations, and the State Plan of Operation; and
(2) State efforts to improve program operations through corrective
action.
(b) This determination shall be made based on:
(1) Reports submitted to FNS by the State;
(2) FNS reviews of State agency operations;
(3) State performance reporting systems and corrective action
efforts; and
(4) Other available information such as Federal audits and
investigations, civil rights reviews, administrative cost data,
complaints, and any pending litigation.
(c) State agency error rates. FNS shall estimate each State agency's
error rates based on the results of quality control review reports
submitted in accordance with the requirements outlined in Sec. 275.21.
The State agency's active case error, payment error, underissuance
error, and negative case error rates shall be estimated as follows:
(1) Active case error rate. The active case error rate shall include
the proportion of active sample cases which were reported as ineligible
or as receiving an incorrect allotment (as described in Sec. 275.12(e))
based upon certification policy as set forth in part 273.
(2) Payment error rate. (i) For fiscal years prior to Fiscal Year
1986, the payment error rate shall include the value of the allotments
overissued, including overissuances to ineligible cases, for those cases
included in the active error rate.
(ii) For Fiscal Year 1986 and subsequent fiscal years, the payment
error
[[Page 865]]
rate shall include the value of the allotments overissued, including
those to ineligible cases, and the value of allotments underissued for
those cases included in the active error rate.
(3) Underissuance error rate. Prior to Fiscal Year 1986, the
underissuance error rate shall include the value of the allotments
reported as underissued for those cases included in the active case
error rate.
(4) Negative case error rate. The negative case error rate shall be
the proportion of negative sample cases which were reported as having
been eligible at the time of denial, suspension or termination (as
described in Sec. 275.13(c)) based upon certification policy as set
forth in part 273.
(5) Demonstration projects/SSA processing. The reported results of
reviews of active and negative demonstration project/SSA processed
cases, as described in Sec. 275.11(g), shall be excluded from the
estimate of the active case error rate, payment error rate,
underissuance error rate, and negative case error rate.
(d) Federal enhanced funding. (1) Before making enhanced funding
available to a State agency, as described in Sec. 277.4(b), FNS will:
(i) Validate the State agency's estimated payment error rate,
underissuance error rate, and negative case error rate, as provided for
in Sec. 275.3(c);
(ii) Ensure that the sampling techniques used by the State agency
are FNS-approved procedures, as established in Sec. 275.11; and
(iii) Validate the State agency's quality control completion rate to
ensure that all of the minimum required sample cases, of both active and
negative quality control samples, have been completed. This completion
standard is applied separately to the active and negative case samples,
and the State agency's estimated payment and underissuance error rates
will be adjusted separately, if necessary, to account for those required
cases not completed, in accordance with the procedures described in
paragraph (e)(6)(iii) of this section for adjustment of the payment
error rate.
(2) After validation and any necessary adjustment of estimated error
rates:
(i) A State agency with a combined payment error rate and
underissuance error rate of less than five percent for an annual review
period for Fiscal Year 1983 through Fiscal Year 1985, or a payment error
rate of less than five percent for an annual review period for Fiscal
Year 1986 through Fiscal Year 1988, shall be eligible for a 60 percent
Federally funded share of administrative costs, provided that the State
agency's negative case error rate for that period is less than the
national weighted mean negative case error rate for the prior fiscal
year;
(ii) Beginning with Fiscal Year 1989, a State agency with a payment
error rate less than or equal to 5.90 percent and with a negative case
error rate less than the national weighted mean negative case rate for
the prior fiscal year will have its Federally funded share of
administrative costs increased by one percentage point to a maximum of
60 percent for each full one-tenth of a percentage point by which the
payment error rate is less than six percent.
(3) State agencies entitled to enhanced funding shall receive the
additional funding on a retroactive basis only for the review period in
which their error rates are less than the levels described in paragraph
(d)(2) of this section.
(e) State agencies' liabilities for payment error rates. (1) At the
end of each fiscal year, each State agency's payment error rate over the
entire fiscal year will be computed, as described in paragraph (e)(6) of
this section, and evaluated to determine whether the payment error rate
goals established in the following paragraphs have been met.
(2) State agencies' liabilities for payment error--Fiscal Year 1992
through Fiscal Year 2002. Each State agency that fails to achieve its
payment error rate goal during a fiscal year shall be liable as
specified in the following paragraphs.
(i) For Fiscal Year 1992 through Fiscal Year 2002, FNS shall
announce a national performance measure within 30 days following the
completion of the
[[Page 866]]
case review and the arbitration processes for the fiscal year. The
national performance measure is the sum of the products of each State
agency's payment error rate times that State agency's proportion of the
total value of national allotments issued for the fiscal year using the
most recent issuance data available at the time the State agency is
notified of its payment error rate. Once announced, the national
performance measure for a given fiscal year will not be subject to
change.
(ii) For any fiscal year in which a State agency's payment error
rate exceeds the national performance measure for the fiscal year, the
State agency shall pay or have its share of administrative funding
reduced by an amount equal to the product of:
(A) The value of all allotments issued by the State agency in the
fiscal year; multiplied by
(B) The lesser of--
(1) The ratio of the amount by which the payment error rate of the
State agency for the fiscal year exceeds the national performance
measure for the fiscal year, to the national performance measure for the
fiscal year, or
(2) One; multiplied by
(C) The amount by which the payment error rate of the State agency
for the fiscal year exceeds the national performance measure for the
fiscal year.
(3) Establishment of payment error rates and liability. For Fiscal
Year 2003 and subsequent years, FNS shall announce a national
performance measure not later than June 30 after the end of the fiscal
year. The national performance measure is the sum of the products of
each State agency's error rate times that State agency's proportion of
the total value of national allotments issued for the fiscal year using
the most recent issuance data available at the time the State agency is
notified of its payment error rate. Once announced, the national
performance measure for a given fiscal year will not be subject to
change. The national performance measure announced under this paragraph
(e)(3) is not subject to administrative or judicial review. Liability
for payment shall be established for Fiscal Year 2004 and beyond
whenever there is a 95 percent statistical probability that, for the
second or subsequent consecutive fiscal year, a State agency's payment
error rate exceeds 105 percent of the national performance measure. The
amount of the liability shall be equal to the product of:
(i) The value of all allotments issued by the State agency in the
(second or subsequent consecutive) fiscal year; multiplied by
(ii) The difference between the State agency's payment error rate
and 6 percent; multiplied by
(iii) 10 percent.
(4) Relationship to warning process and negligence. (i) States'
liability for payment error rates as determined above are not subject to
the warning process of Sec. 276.4(d).
(ii) FNS shall not determine negligence (as described in Sec.
276.3) based on the overall payment error rate for issuances to
ineligible households and overissuances to eligible households in a
State or political subdivision thereof. FNS may only establish a claim
under Sec. 276.3 for dollar losses from failure to comply, due to
negligence on the part of the State agency (as defined under Sec.
276.3), with specific certification requirements. Thus, FNS will not use
the results of States' QC reviews to determine negligence.
(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.
(5) Good cause--(i) Events. When a State agency with otherwise
effective administration exceeds the tolerance level for payment errors
as described in this section, the State agency may seek relief from
liability claims that would otherwise be levied under this
[[Page 867]]
section on the basis that the State agency had good cause for not
achieving the payment error rate tolerance. State agencies desiring such
relief must file an appeal with the Department's Administrative Law
Judge (ALJ) in accordance with the procedures established under part 283
of this chapter. The five unusual events described below are considered
to have a potential for disputing program operations and increasing
error rates to an extent that relief from a resulting liability or
increased liability is appropriate. The occurrence of an event(s) does
not automatically result in a determination of good cause for an error
rate in excess of the national performance measure. The State agency
must demonstrate that the event had an adverse and uncontrollable impact
on program operations during the relevant period, and the event caused
an uncontrollable increase in the error rate. Good cause relief will
only be considered for that portion of the error rate/liability
attributable to the unusual event. The following are unusual events
which State agencies may use as a basis for requesting good cause relief
and specific information that must be submitted to justify such requests
for relief:
(A) Natural disasters such as those under the authority of the
Stafford Act of 1988 (Pub. L. 100-707), which amended the Disaster
Relief Act of 1974 (Pub. L. 93-288) or civil disorders that adversely
affect program operations.
(1) When submitting a request for good cause relief based on this
example, the State agency shall provide the following information:
(i) The nature of the disaster(s) (e.g. a tornado, hurricane,
earthquake, flood, etc.) or civil disorder(s)) and evidence that the
President has declared a disaster;
(ii) The date(s) of the occurrence;
(iii) The date(s) after the occurrence when program operations were
affected;
(iv) The geographic extent of the occurrence (i.e. the county or
counties where the disaster occurred);
(v) The proportion of the food stamp caseload whose management was
affected;
(vi) The reason(s) why the State agency was unable to control the
effects of the disaster on program administration and errors;
(vii) The identification and explanation of the uncontrollable
nature of errors caused by the event (types of errors, geographic
location of the errors, time period during which the errors occurred,
etc.).
(viii) The percentage of the payment error rate that resulted from
the occurrence and how this figure was derived; and
(ix) The degree to which the payment error rate exceeded the
national performance measure in the subject fiscal year.
(2) The following criteria and methodology will be used to assess
and evaluate good cause in conjunction with the appeals process, and to
determine that portion of the error rate/liability attributable to the
uncontrollable effects of a disaster or civil disorder: Geographical
impact of the disaster; State efforts to control impact on program
operations; the proportion of food stamp caseload affected; and/or the
duration of the disaster and its impact on program operations.
Adjustments for these factors may result in a waiver of all, part, or
none of the error rate liabilities for the applicable period. As
appropriate, the waiver amount will be adjusted to reflect States'
otherwise effective administration of the program based upon the degree
to which the error rate exceeds the national performance measure. For
example, a reduction in the amount may be made when a State agency's
recent error rate history indicates that even absent the events
described, the State agency would have exceeded the national performance
measure in the review period.
(3) If a State agency has provided insufficient information to
determine a waiver amount for the uncontrollable effects of a natural
disaster or civil disorder using factual analysis, the waiver amount
shall be evaluated using the following formula and methodology which
measures both the duration and intensity of the event: Duration will be
measured by the number of months the event had an adverse impact on
program operations. Intensity will be a
[[Page 868]]
proportional measurement of the issuances for the counties affected to
the State's total issuance. This ratio will be determined using issuance
figures for the first full month immediately preceding the disaster.
This figure will not include issuances made to households participating
under disaster certification authorized by FNS and already excluded from
the error rate calculations under Sec. 275.12(g)(2)(vi). ``Counties
affected'' will include counties where the disaster/civil disorder
occurred, and any other county that the State agency can demonstrate had
program operations adversely impacted due to the event (such as a county
that diverted significant numbers of food stamp certification or
administrative staff). The amount of the waiver of liability will be
determined using the following linear equation: Ia/Ib x [M/12 or Mp/18]
x L, where Ia is the issuance for the first full month immediately
preceding the unusual event for the county affected; Ib is the State's
total issuance for the first full month immediately preceding the
unusual event; M/12 is the number of months in the subject fiscal year
that the unusual event had an adverse impact on program operations; Mp/
18 is the number of months in the last half (April through September) of
the prior fiscal year that the unusual event had an adverse impact on
program operations; L is the total amount of the liability for the
fiscal year. Mathematically this formula could result in a waiver of
more than 100% of the liability, however, no more than 100% of a State's
liability will be waived for any one fiscal year. Under this approach,
unless the State agency can demonstrate a direct uncontrollable impact
on the error rate, the effects of disasters or civil disorders that
ended prior to the second half of the prior fiscal year will not be
considered.
(B) Strikes by State agency staff necessary to determine Food Stamp
Program eligibility and process case changes.
(1) When submitting a request for good cause relief based on this
example, the State agency shall provide the following information:
(i) Which workers (i.e. eligibility workers, clerks, data input
staff, etc.) and how many (number and percentage of total staff) were on
strike or refused to cross picket lines;
(ii) The date(s) and nature of the strike (i.e., the issues
surrounding the strike);
(iii) The date(s) after the occurrence when program operations were
affected;
(iv) The geographic extent of the strike (i.e. the county or
counties where the strike occurred);
(v) The proportion of the food stamp caseload whose management was
affected;
(vi) The reason(s) why the State agency was unable to control the
effects of the strike on program administration and errors;
(vii) Identification and explanation of the uncontrollable nature of
errors caused by the event (types of errors, geographic location of the
errors, time period during which the errors occurred, etc.);
(viii) The percentage of the payment error rate that resulted from
the strike and how this figure was derived; and
(ix) The degree to which the payment error rate exceeded the
national performance measure in the subject fiscal year.
(2) The following criteria shall be used to assess, evaluate and
respond to claims by the State agency for a good cause waiver of
liability in conjunction with the appeals process, and to determine that
portion of the error rate/liability attributable to the uncontrollable
effects of the strike: Geographical impact of the strike; State efforts
to control impact on program operations; the proportion of food stamp
caseload affected; and/or the duration of the strike and its impact on
program operations. Adjustments for these factors may result in a waiver
of all, part, or none of the error rate liabilities for the applicable
period. For example, the amount of the waiver might be reduced for a
strike that was limited to a small area of the State. As appropriate,
the waiver amount will be adjusted to reflect States' otherwise
effective administration of the program upon the degree to which the
error rate exceeded the national performance measure.
(3) If a State agency has provided insufficient information to
determine a
[[Page 869]]
waiver amount for the uncontrollable effects of a strike using factual
analysis, a waiver amount shall be evaluated by using the formula
described in paragraph (e)(5)(i)(A) of this section. Under this
approach, unless the State agency can demonstrate a direct
uncontrollable impact on the error rate, the effects of strikes that
ended prior to the second half of the prior fiscal year will not be
considered.
(C) A significant growth in food stamp caseload in a State prior to
or during a fiscal year, such as a 15 percent growth in caseload.
Caseload growth which historically increases during certain periods of
the year will not be considered unusual or beyond the State agency's
control.
(1) When submitting a request for good cause relief based on this
example, the State agency shall provide the following information:
(i) The amount of growth (both actual and percentage);
(ii) The time the growth occurred (what month(s)/year);
(iii) The date(s) after the occurrence when program operations were
affected;
(iv) The geographic extent of the caseload growth (i.e. Statewide or
in which particular counties);
(v) The impact of caseload growth;
(vi) The reason(s) why the State agency was unable to control the
effects of caseload growth on program administration and errors;
(vii) The percentage of the payment error rate that resulted from
the caseload growth and how this figure was derived; and
(viii) The degree to which the error rate exceeded the national
performance measure in the subject fiscal year.
(2) The following criteria and methodology shall be used to assess
and evaluate good cause in conjunction with the appeals process, and to
determine that portion of the error rate/liability attributable to the
uncontrollable effects of unusual caseload growth: Geographical impact
of the caseload growth; State efforts to control impact on program
operations; the proportion of food stamp caseload affected; and/or the
duration of the caseload growth and its impact on program operations.
Adjustments for these factors may result in a waiver of all, part, or
none of the error rate liabilities for the applicable period. As
appropriate, the waiver amount will be adjusted to reflect States'
otherwise effective administration of the program based upon the degree
to which the error rate exceeded the national performance measure. For
example, a reduction in the amount may be made when a State agency's
recent error rate history indicates that even absent the events
described, the State agency would have exceeded the national performance
measure in the review period. Under this approach, unless the State
agency can demonstrate a direct uncontrollable impact on the error rate,
the effects of caseload growth that ended prior to the second half of
the prior fiscal year will not be considered.
(3) If the State agency has provided insufficient information to
determine a waiver amount for the uncontrollable effects of caseload
growth using factual analysis, the waiver amount shall be evaluated
using the following five-step calculation:
(i) Step 1, determine the average number of households certified to
participate statewide in the Food Stamp Program for the base period
consisting of the twelve consecutive months ending with March of the
prior fiscal year;
(ii) Step 2, determine the percentage of increase in caseload growth
from the base period (Step 1) using the average number of households
certified to participate statewide in the Food Stamp Program for any
twelve consecutive months in the period beginning with April of the
prior fiscal year and ending with June of the current fiscal year;
(iii) Step 3, determine the percentage the error rate for the
subject fiscal year, as calculated under paragraph (e)(2)(i) of this
section, exceeds the national performance measure determined in
accordance with paragraph (e)(2)(i) of this section;
(iv) Step 4, divide the percentage of caseload growth increase
arrived at in step 2 by the percentage the error rate for the subject
fiscal year exceeds the national performance measure as determined in
step 3; and
(v) Step 5, multiply the quotient arrived at in step 4 by the
liability
[[Page 870]]
amount for the current fiscal year to determine the amount of waiver of
liability.
(4) Under this methodology, caseload growth of less than 15% and/or
occurring in the last three months of the subject fiscal year will not
be considered. Mathematically this formula could result in a waiver of
more than 100% of the liability however, no more than 100% of a State's
liability will be waived for any one fiscal year.
(D) A change in the Food Stamp Program or other Federal or State
program that has a substantial adverse impact on the management of the
Food Stamp Program of a State. Requests for relief from errors caused by
the uncontrollable effects of unusual program changes other than those
variances already excluded by Sec. 275.12(d)(2)(vii) will be considered
to the extent the program change is not common to all States.
(1) When submitting a request for good cause relief based on unusual
changes in the Food Stamp or other Federal or State programs, the State
agency shall provide the following information:
(i) The type of change(s) that occurred;
(ii) When the change(s) occurred;
(iii) The nature of the adverse effect of the changes on program
operations and the State agency's efforts to mitigate these effects;
(iv) Reason(s) the State agency was unable to adequately handle the
change(s);
(v) Identification and explanation of the uncontrollable errors
caused by the changes (types of errors, geographic location of the
errors, time period during which the errors occurred, etc.);
(vi) The percentage of the payment error rate that resulted from the
adverse impact of the change(s) and how this figure was derived; and
(vii) The degree to which the payment error rate exceeded the
national performance measure in the subject fiscal year.
(2) The following criteria will be used to assess and evaluate good
cause in conjunction with the appeals process, and to determine that
portion of the error rate/liability attributable to the uncontrollable
effects of unusual changes in the Food Stamp Program or other Federal
and State programs; State efforts to control impact on program
operations; the proportion of food stamp caseload affected; and/or the
duration of the unusual changes in the Food Stamp Program or other
Federal and State programs and the impact on program operations.
Adjustments for these factors may result in a waiver of all, part, or
none of the error rate liabilities for the applicable period. As
appropriate, the waiver amount will be adjusted to reflect States'
otherwise effective administrative of the program based upon the degree
to which the error rate exceeded the national performance measure.
(E) A significant circumstance beyond the control of the State
agency. Requests for relief from errors caused by the uncontrollable
effect of the significant circumstance other than those specifically set
forth in paragraphs (e)(5)(i)(A) through (e)(5)(i)(D) of this section
will be considered to the extent that the circumstance is not common to
all States, such as a fire in a certification office.
(1) When submitting a request for good cause relief based on
significant circumstances, the State agency shall provide the following
information:
(i) The significant circumstances that the State agency believes
uncontrollably and adversely affected the payment error rate for the
fiscal year in question;
(ii) Why the State agency had no control over the significant
circumstances;
(iii) How the significant circumstances had an uncontrollable and
adverse impact on the State agency's error rate;
(iv) Where the significant circumstances existed (i.e. Statewide or
in particular counties);
(v) When the significant circumstances existed (provide specific
dates whenever possible);
(vi) The proportion of the food stamp caseload whose management was
affected;
(vii) Identification and explanation of the uncontrollable errors
caused by the event (types of errors, geographic location of the errors,
time period during which the errors occurred, etc.);
[[Page 871]]
(viii) The percentage of the payment error rate that was caused by
the significant circumstances and how this figure was derived; and
(ix) The degree to which the payment error rate exceeded the
national performance measure in the subject fiscal year.
(2) The following criteria shall be used to assess and evaluate good
cause in conjunction with the appeals process, and to determine that
portion of the error rate/liability attributable to the uncontrollable
effects of a significant circumstance beyond the control of the State
agency, other than those set forth in paragraph (e)(5)(i)(E) of this
section: Geographical impact of the significant circumstances; State
efforts to control impact on program operations; the proportion of food
stamp caseload affected; and/or the duration of the significant
circumstances and the impact on program operations. Adjustments for
these factors may result in a waiver of all, part, or none of the error
rate liabilities for the applicable period. As appropriate, the waiver
amount will be adjusted to reflect States' otherwise effective
administration of the program based upon the degree to which the error
rate exceeded the national performance measure.
(ii) Adjustments. When good cause is found under the criteria in
paragraphs (e)(5)(i)(A) through (e)(5)(i)(E) of this section, the waiver
amount may be adjusted to reflect States' otherwise effective
administration of the program based upon the degree to which the error
rate exceeds the national performance measure.
(iii) Evidence. When submitting a request to the ALJ for good cause
relief, the State agency shall include such data and documentation as is
necessary to support and verify the information submitted in accordance
with the requirements of paragraph (e)(5) of this section so as to fully
explain how a particular significant circumstance(s) uncontrollable
affected its payment error rate.
(iv) Finality. The initial decision of the ALJ concerning good cause
shall constitute the final determination for purposes of judicial review
without further proceedings as established under the provisions of Sec.
283.17 and Sec. 283.20 of this chapter.
(6) Determination of payment error rates. As specified in Sec.
275.3(c), FNS will validate each State agency's estimated payment error
rate through rereviewing the State agency's active case sample and
ensuring that its sampling, estimation, and data management procedures
are correct.
(i) Once the Federal case reviews have been completed and all
differences with the State agency have been identified, FNS shall
calculate regressed error rates using the following linear regression
equations.
(A) y1'=y1+b1(X1-
x1), where y1' is the average value of allotments
overissued to eligible and ineligible households; y1 is the
average value of allotments overissued to eligible and ineligible
households in the rereview sample according to the Federal finding,
b1 is the estimate of the regression coefficient regressing
the Federal findings of allotments overissued to eligible and ineligible
households on the corresponding State agency findings, x1 is
the average value of allotments overissued to eligible and ineligible
households in the rereview sample according to State agency findings,
and X1 is the average value of allotments overissued to
eligible and ineligible households in the full quality control sample
according to State agency's findings. In stratified sample designs
Y1, X1, and x1 are weighted averages
and b1 is a combined regression coefficient in which stratum
weights sum to 1.0 and are proportional to the estimated stratum
caseloads subject to review.
(B) y2'=y2+b2(X2-
x2), where y2' is the average value of allotments
underissued to households included in the active error rate,
y2 is the average value of allotments underissued to
participating households in the rereview sample according to the Federal
finding, b2 is the estimate of the regression coefficient
regressing the Federal findings of allotments underissued to
participating households on the corresponding State agency findings,
x2 is the average value of allotments underissued to
participating households in the rereview sample according to State
agency findings, and X2 is the
[[Page 872]]
average value of allotments underissued to participating households in
the full quality control sample according to the State agency's
findings. In stratified sample designs y2, X2, and
x2 are weighted averages and b1 is a combined
regression coefficient in which stratum weights sum to 1.0 and are
proportional to the estimated stratum caseloads subject to review.
(C) The regressed error rates are given by
r1'=y1'/u, yielding the regressed overpayment
error rate, and r2'=y2'/u, yielding the regressed
underpayment error rate, where u is the average value of allotments
issued to participating households in the State agency sample.
(D) After application of the adjustment provisions of paragraph
(e)(6)(iii) of this section, the adjusted regressed payment error rate
shall be calculated to yield the State agency's payment error rate for
use in the reduced and enhanced funding determinations described in
paragraphs (d) and (e) of this section. Prior to Fiscal Year 1986, the
adjusted regressed payment error rate is given by r1''. For
Fiscal Year 1986 and after, the adjusted regressed payment error rate is
given by r1''+r2''.
(ii) If FNS determines that a State agency has sampled incorrectly,
estimated improperly, or has deficiencies in its QC data management
system, FNS will correct the State agency's payment error rate based
upon a correction to that aspect of the State agency's QC system which
is deficient. If FNS cannot accurately correct the State agency's
deficiency, FNS will assign the State agency a payment error rate based
upon the best information available. After consultation with the State
agency, this assigned payment error rate will then be used in the above
described liability determination and in determinations for enhanced
funding under paragraph (d) of this section. State agencies shall have
the right to appeal assignment of an error rate in this situation in
accordance with the procedures of part 283.
(iii) Should a State agency fail to complete 98 percent of its
required sample size, FNS shall adjust the State agency's regressed
error rates using the following equations:
(A) r1''=r1'+2(1-C)S1, where
r1'' is the adjusted regressed overpayment error rate,
r1' is the regressed overpayment error rate computed from the
formula in paragraph (e)(6)(i)(C) of this section, C is the State
agency's rate of completion of its required sample size expressed as a
decimal value, and S1 is the standard error of the State
agency sample overpayment error rate. If a State agency completes all of
its required sample size, then r1''=r1'.
(B) r2''=r2'+2(1-C)S2, where
r2'' is the adjusted regressed underpayment error rate,
r2' is the regressed underpayment error rate computed from
the formula in paragraph (e)(6)(i)(C) of this section, C is the State
agency's rate of completion of its required sample size expressed as a
decimal value, and S2 is the standard error of the State
agency sample underpayment error rate. If a State agency completes all
of its required sample size, then r2''=r2'.
(7) FNS Timeframes. The case review process and the arbitration of
all difference cases shall be completed by May 31 following the end of
the fiscal year. FNS shall determine and announce the national average
payment error rate for the fiscal year by June 30 following the end of
the fiscal year. At the same time FNS shall notify all State agencies of
their individual payment error rates and payment error rate liabilities,
if any. FNS shall provide a copy of each State agency's notice to its
respective chief executive officer and legislature. 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
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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.
(8) Interest charges. (i) To the extent that a State agency does not
pay a claim established under paragraphs (e)(2) and (e)(3) of this
section within 30 days from the date on which the bill for collection
(after a determination on any request for a waiver for good cause) is
received by the State agency, the State agency shall be liable for
interest on any unpaid portion of such claim accruing from the date on
which the bill for collection was received by the State agency. This
situation applies unless the State agency appeals the claim under part
283 of the regulations. If the State agency agrees to pay the claim
through reduction in Federal financial participation for administrative
costs, this agreement shall be considered to be paying the claim. If the
State agency appeals such claim (in whole or in part), the interest on
any unpaid portion of the claim shall accrue from the date of the
decision on the administrative appeal, or from a date that is one year
after the date the bill is received, whichever is earlier, until the
date the unpaid portion of the payment is received.
(ii) If the State agency pays such claim (in whole or in part) and
the claim is subsequently overturned through administrative or judicial
appeal, any amounts paid by the State agency above what is actually due
shall be promptly returned with interest, accruing from the date the
payment was received until the date the payment is returned.
(iii) Any interest assessed under this paragraph shall be computed
at a rate determined by the Secretary based on the average of the bond
equivalent of the weekly 90-day Treasury bill auction rates during the
period such interest accrues. The bond equivalent is the discount rate
(i.e., the price the bond is actually sold for as opposed to its face
value) determined by the weekly auction (i.e., the difference between
the discount rate and face value) converted to an annualized figure. The
Secretary shall use the investment rate (i.e., the rate for 365 days)
compounded in simple interest for the period for which the claim is not
paid. Interest billings shall be made quarterly with the initial billing
accruing from the date the interest is first due. Because the discount
rate for Treasury bills is issued weekly, the interest rate for State
agency claims shall be averaged for the appropriate weeks.
(9) Suspension and waiver of liabilities for investments in program
management activities. In connection with the settlement of all or a
portion of a QC liability for FY 1986 through Fiscal Year 2002 QC review
periods, the Department may suspend and subsequently waive all or part
of a State agency's payment error rate liability claim based on the
State agency's offsetting investment in program management activities
intended to reduce errors measured by the QC system. A State agency may
submit a request to the Department for review of planned investments in
program management activities intended to reduce error rates as part of
a proposed settlement of all or a portion of a QC liability at any time
during the QC liability claim process.
(i) The State agency's investment plan activity or activities must
meet the following conditions to be accepted by the Department:
(A) The activity or activities must be directly related to error
reduction in the ongoing program, with specific objectives regarding the
amount of error reduction, and type of errors that will be reduced. The
costs of demonstration, research, or evaluation projects under sections
17 (a) through (c) of the Act will not be accepted. The State agency may
direct the investment plan to a specific project area or implement the
plan on a statewide basis. In addition, the Department will allow an
investment plan to be tested in a limited area, as a pilot project, if
the Department determines it to be appropriate. A request by the State
agency for a waiver of existing rules will not be acceptable as a
component of the investment plan. The State agency must submit any
waiver request through the normal channels for approval and receive
approval of the request prior to
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including the waiver in the investment plan. Waivers that have been
approved for the State agency's use in the ongoing operation of the
program may continue to be used.
(B) The program management activity must represent a new or
increased expenditure. The proposed activity must also represent an
addition to the minimum program administration required by law for State
agency administration including corrective action. Therefore, basic
training of eligibility workers or a continuing corrective action from a
Corrective Action Plan shall not be acceptable. The State agency may
include a previous initiative in its plan; however, the State agency
would have to demonstrate that the initiative is entirely funded by
State money, represents an increase in spending and there are no
remaining Federal funds earmarked for the activity.
(C) Investment activities must be funded in full by the State
agency, without any matching Federal funds until the entire investment
amount agreed to is spent. Amounts spent in excess of the settlement
amount included in the plan may be subject to Federal matching funds.
(ii) The request shall include:
(A) A statement of the amount of money that is a quality control
liability claim that is to be offset by investment in program
improvements;
(B) A detailed description of the planned program management
activity;
(C) Planned expenditures, including time schedule and anticipated
cost breakdown;
(D) Anticipated impact of the activity, identifying the types of
errors expected to be affected;
(E) Documentation that the funds would not replace expenditures
already earmarked for an ongoing effort; and
(F) A statement that the expenditures are not simply a reallocation
of resources.
(iii) The State's and the Department's agreement to settle all,
part, or none of the QC liability claim under this paragraph is final
and not subject to further appeal within the Department. An agreement to
settle all or part of a State agency's QC liability claim will result in
suspension of the claim for the specified amount, pending the State's
satisfactory completion of the initiative or action taken by the
Department under the provisions of paragraph (e)(9)(vi) of this section.
(iv) The State agency shall submit modifications to the plan to the
Department for approval, prior to implementation. Expenditures made
prior to approval by the Department may not be used in offsetting the
liability.
(v) Each State agency which has all or part of a claim suspended
under this provision shall submit periodic documented reports according
to a schedule in its approved investment plan. At a minimum, these
reports shall contain:
(A) A detailed description of the expenditure of funds, including
the source of funds and the actual goods and services purchased or
rented with the funds;
(B) A detailed description of the actual activity; and
(C) An explanation of the activity's effect on errors, including an
explanation of any discrepancy between the planned effect and the actual
effect.
(vi) Any funds that the State agency's reports do not document as
spent as specified in the investment plan may be withdrawn by the
Department from the reduction in QC liability. Before the reduction is
withdrawn, the State agency will be provided an opportunity to provide
the missing documentation.
(vii) If the reduction in QC liability is withdrawn, the Department
shall charge interest on the funds not spent according to the plan, in
accordance with section 602 of the Hunger Prevention Act of 1988, which
amended section 13(a)(1) of the Food Stamp Act of 1977.
(viii) The Department's determination to withdraw a reduction in QC
liability is not appealable within the Department.
(10) Resolution of liabilities for FY 2003 and beyond. FNS may:
waive all or a portion of the liability; require the State agency to
reinvest up to 50 percent of the liability in activities to improve
program administration, which new investment money shall not be matched
by Federal funds; designate up to 50 percent of the liability as ``at-
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risk'' for repayment if a liability is established based on the State
agency's payment error rate for the subsequent fiscal year; or assert
any combination of these options. Once FNS establishes its proposed
liability resolution plan, the amount assigned as at-risk is not subject
to settlement negotiation between FNS and the State agency and may not
be reduced unless an appeal decision revises the total dollar liability.
FNS and the State shall settle any waiver amount or reinvestment amount
before the end of the fiscal year in which the liability amount is
determined unless an administrative appeal relating to the claim is
pending. If a State agency appeals its liability determination, if the
State agency began required reinvestment activities prior to an appeal
determination, and if the liability amount is reduced to $0 through the
appeal, FNS shall pay to the State agency an amount equal to 50 percent
of the new investment amount that was included in the liability amount
subject to the appeal. If FNS wholly prevails on a State agency's
appeal, FNS will require the State agency to invest all or a portion of
the amount designated for reinvestment during the appeal to be
reinvested or to be repaid to the Federal government.
[Amdt. 160, 45 FR 15912, Mar. 11, 1980, as amended by Amdt. 260, 49 FR
6311, Feb. 17, 1984; Amdt. 262, 49 FR 50598, Dec. 31, 1984. Redesignated
and amended at 52 FR 3410, Feb. 4, 1987; Amdt. 295, 52 FR 29659, Aug.
11, 1987; Amdt. 328, 56 FR 60052, Nov. 27, 1991; Amdt. 325, 57 FR 2828,
Jan. 24, 1992; Amdt. 327, 57 FR 44486, Sept. 28, 1992; 57 FR 47163, Oct.
14, 1992; Amdt. 348, 59 FR 34561, July 6, 1994; ; Amdt. 366, 62 FR
29659, June 2, 1997; Amdt. 373, 64 FR 38297, July 16, 1999; 68 FR 59524,
Oct. 16, 2003]