[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: 7CFR276.2]



[Page 877-879]

 

                          TITLE 7--AGRICULTURE

 

    CHAPTER II--FOOD AND NUTRITION SERVICE, DEPARTMENT OF AGRICULTURE

 

PART 276_STATE AGENCY LIABILITIES AND FEDERAL SANCTIONS--Table of Contents

 

Sec. 276.2  State agency liabilities.



    (a) General provisions. Notwithstanding any other provision of this 

subchapter, State agencies shall be responsible to FNS for any financial 

losses involved in the acceptance, storage and issuance of coupons. All 

coupon issuance shall be documented, and the State agency shall make 

available to the Department all primary documentation (or secondary, if 

the primary has been inadvertently destroyed) when required to do so. 

State



[[Page 878]]



agencies shall pay to FNS, upon demand, the amount of any such losses.

    (b) Coupon shortages, losses, unauthorized issuances, overissuances 

and undocumented issuances. (1) State agencies shall be strictly liable 

for:

    (i) Coupon shortages and losses that occur any time after coupons 

have been accepted by receiving points within the State and that occur 

during storage or the movement of coupons between bulk storage point 

issuers and claims collection points within the State;

    (ii) Losses resulting from authorization documents lost in transit 

from a manufacturer to the State agency and untransacted authorization 

documents lost in transit from an issuer to the State agency; and

    (iii) The value of coupons overissued and coupons issued without 

authorization, except for those duplicate issuances in the correct 

amount that are the result of replacement issuances made in accordance 

with Sec. 274.6. Overissuances and unauthorized issuances for which 

State agencies are liable include, but are not limited to: Single 

unmatched issuances, duplicates made that are not in accordance with 

Sec. 274.6, and transacted authorization documents that are altered, 

counterfeit, from out-of-State or expired (including those unsigned by 

the designated household member and/or not date stamped by the issuer).

    (2) Coupon shortages and/or losses for which State agencies shall be 

held strictly liable include, but are not limited to, the following:

    (i) Thefts;

    (ii) Embezzlements;

    (iii) Cashier errors (e.g., errors by the personnel of issuance 

offices in the counting of coupon books);

    (iv) Coupons lost in natural disasters if a State agency cannot 

provide reasonable evidence that the coupons were destroyed and not 

redeemed;

    (v) Issuances which cannot be supported by the required 

documentation;

    (vi) Issuances made to households not currently certified;

    (vii) Issuance loss during an official investigation, unless the 

investigation was reported directly to FNS prior to the loss; and

    (viii) Unexplained causes.

    (3) State agencies shall submit written reports on significant 

losses unless those losses were investigated by the Office of the 

Inspector General, USDA.

    (4) A State agency shall be held strictly liable for mail issuance 

losses that are in excess of the tolerance level that corresponds to the 

preselected reporting unit. Each State agency shall select one of the 

three following units annually and report the selection as provided in 

Sec. Sec. 272.2(a)(2) and 272.2(d)(1)(iii). Where reporting units issue 

less than $300,000 in mail issuance in a quarter, the State agency shall 

be liable for all losses in excess of $1,500 for the quarter.

    (i) If a State agency elects to report and have liabilities based on 

an existing county or project area level of mail issuance, then the 

State agency shall be strictly liable to FNS for the value of all mail 

issuance losses in excess of five-tenths (.5) percent of the dollar 

value of each reporting unit's quarterly mail issuance. This level shall 

be used if the State agency does not designate one of the three levels 

herein by May 15, 1989, and by August 15 in years thereafter.

    (ii) If a State agency elects to report and have liabilities based 

on an existing administrative level higher than the county or project 

area provided in paragraph (b)(4)(i) of this section, but lower than the 

Statewide level of mail issuance provided in paragraph (b)(4)(iii) of 

this section, then the State agency shall be strictly liable to FNS for 

the value of all mail issuance losses in excess of thirty-five hundreths 

(.35) percent per quarter of the dollar value of each reporting unit's 

quarterly mail issuance. State agencies shall not create new 

administrative units for the sole purpose of reporting mail issuance 

losses.

    (iii) If a State agency elects to report and have liabilities based 

on a State level of mail issuance, then the State agency shall be 

strictly liable to FNS for the value of all mail issuance losses in 

excess of thirty hundreths (.30) percent per quarter of the dollar value 

of each State agency's total quarterly mail issuance.



[[Page 879]]



    (iv) FNS reserves the right to make all determinations on reporting 

requirements and on administrative divisions within the State for the 

purpose of determining and assessing liability for mail issuance losses. 

FNS also reserves the right to revise such determinations as necessary. 

Revisions will be communicated to State agencies by FNS. The liability 

assessment will be based on the revised reporting requirement for the 

next full fiscal quarter.

    (v) For the purpose of this section, ``mail issuance'' means all 

original coupon issuances distributed through the mail. ``Mail loss'' 

means all replacements of mail issuances except for replacements of 

returned mail issuances.

    (vi) The State agency's liability shall be computed using data from 

Form FNS-259, Food Stamp Mail Issuance Report, or alternative reporting 

document accepted in advance by FNS and the State agency, which is 

submitted for the quarter for the particular reporting unit agreed to by 

FNS and the State agency, as provided in Sec. Sec. 272.2(a)(2) and 

272.2(d)(1)(iii).

    (5) State agencies shall be held strictly liable for the following 

overissuances:

    (i) The value of overissued coupons issued as a result of a State 

agency's failure to comply with a directive issued by FNS in accordance 

with the provisions of Sec. 271.7, to reduce, suspend or cancel 

allotments;

    (ii) The value of coupons overissued by the State agency as a result 

of a court order or settlement agreement of a court suit which was not 

reported to FNS in accordance with the provisions of Sec. 272.4(e); and

    (iii) The value of coupons overissued as a result of a State agency 

entering into an out-of-court settlement of a court suit, the terms of 

which violate Federal laws or regulations.

    (6) Coupon shortages and losses shall be determined from the Form 

FNS-250, Food Coupon Accountability Report and its supporting documents 

and from the Form FNS-46, Issuance System Reconciliation Report. Losses 

of Federal moneys resulting from overissuances shall be determined from 

sources such as audits, Performance Reporting System Reviews, Federal 

reviews, investigations and explanatory reports prepared by the State 

agency.

    (7) State agencies shall be held strictly liable for overissuances 

resulting from Electronic Benefit Transfer system errors and 

unauthorized account activities. Such overissuances shall include but 

not be limited to: Overissuances to household accounts that are accessed 

and used by households, replacement benefits to a household's account 

due to unauthorized use of the benefits in a household's account, 

benefits drawn from an EBT account after the household has reported that 

the EBT card is lost or stolen to the State or its agent, overdraft 

situations due to the use of manual back-up procedures approved by the 

State agency, overcredits to a retailer account and transfer of funds to 

an illegitimate account.

    (c) Cash Losses. State agencies are liable to FNS for cash losses 

when money collected by State agencies from recipient claims has been 

lost, stolen or otherwise not remitted to FNS in accordance with the 

provision of Sec. 273.18(h). The amount of such losses shall be 

determined from the sources outlined in paragraph (6) of this section.

    (d) State agency payment to FNS. State agencies shall be billed for 

the exact amount of losses specified in this section. If a State agency 

fails to pay the billing, FNS shall offset the amount of loss from the 

State agency's Letter of Credit in accordance with Sec. 277.16(c).



[54 FR 7016, Feb. 15, 1989, as amended at 54 FR 51351, Dec. 15, 1989; 57 

FR 11259, Apr. 1, 1992; 57 FR 44791, Sept. 29, 1992; Amdt. 342, 59 FR 

2733, Jan. 19, 1994; Amdt. 388, 65 FR 64589, Oct. 30, 2000]