[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: 7CFR276.4]



[Page 880-882]

 

                          TITLE 7--AGRICULTURE

 

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

 

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

 

Sec. 276.4  Suspension/disallowance of administrative funds.



    (a) General provisions. (1) FNS shall make determinations of the 

efficiency and effectiveness of State agencies' administration of the 

Food Stamp Program in accordance with the provisions of Sec. 275.25. 

When making such determinations, FNS shall use all information that is 

available relating to State agencies' administration of the Program. 

This information includes, but is not limited to, information received 

from Performance Reporting System reviews, Federal reviews, audits, 

investigations, corrective action plans, financial management reviews, 

and the public.

    (2) FNS may determine a State agency's administration of the Program 

to be inefficient or ineffective if the State agency fails to comply 

with the food stamp requirements established by the Food Stamp Act, the 

regulations issued pursuant to the Act, or the FNS-approved State Plan 

of Operation.

    (3) If FNS determines that a State agency's administration of the 

Program is inefficient or ineffective, FNS may warn the State agency 

that a suspension and/or disallowance of administrative funds is being 

considered. After a State agency receives a warning, FNS may either 

suspend or disallow administrative funds or take both actions in 

sequence, depending on the statement in the warning.

    (b) Suspension. A suspension of funds is an action by FNS to 

temporarily withhold all or a portion of the Federal share of one or 

more of the cost categories of a State agency's budget for 

administration of the Food Stamp Program. Suspensions of funds shall 

remain in effect until FNS determines that a State agency has taken 

adequate corrective action to correct the problem causing the 

suspension, in which event the suspension will be rescinded, or until 

FNS decides to disallow the suspended funds. FNS shall suspend funds in 

accordance with Sec. 277.16.

    (c) Disallowance. (1) A disallowance of funds is an action by FNS in 

which reimbursement is denied for otherwise reimbursable administrative 

costs claimed by a State agency in one or more of the cost categories of 

a State



[[Page 881]]



agency's budget for Program administration.

    (2) In accordance with Sec. 277.16, FNS has the option of 

disallowing funds in another cost category, or all or a portion of the 

entire Letter of Credit if the disallowance is based on a finding that 

the State agency failed to take a required action. FNS may disallow 

funds after previously suspending such funds or may disallow funds 

immediately following the expiration of the formal warning under the 

conditions specified in paragraph (e) of this section.

    (d) Warning process. Prior to taking action to suspend or disallow 

Federal funds, except those funds which are disallowed when a State 

agency fails to adhere to the cost principles of part 277 and appendix 

A, FNS shall provide State agencies with written advance notification 

that such action is being considered. If a State agency does not respond 

to such an advance notification to the satisfaction of FNS, FNS shall 

provide the State agency with a formal warning of the possibility of 

suspension or disallowance action. However, when a State agency fails to 

meet the objectives in a corrective action plan, FNS may omit the 

advance notification and immediately issue a formal warning.

    (1) Advance notification. Immediately upon becoming aware that a 

deficiency or deficiencies in a State agency's administration of the 

Program may warrant the suspension and/or disallowance of Federal funds, 

FNS shall advise the State agency in writing of the deficiency and shall 

provide a specific period of time for correction of such deficiency or 

deficiencies. The time period allowed the State agency for corrective 

action will vary according to the nature of the deficiency.

    (2) Formal warning. FNS shall issue a formal warning to a State 

agency if the State fails to correct to the satisfaction of FNS the 

deficiencies noted in an advance notification within the time specified 

in the advance notification. FNS may also issue a formal warning to a 

State agency without first issuing an advance notification if a State 

agency fails to comply with a corrective action plan.

    (i) Formal warnings shall include the following information:

    (A) Specific descriptions of the deficiencies, explaining how the 

State agency is out of compliance with Program requirements;

    (B) A Statement as to whether Federal funds will be suspended, 

disallowed or both, if appropriate;

    (C) The amount of Federal funds that will be suspended and/or 

disallowed or an estimate of the amount if actual cost are unavailable; 

and

    (D) A statement of FNS' willingness to assist State agencies is 

resolving the deficiencies.

    (ii) A State agency shall have 30 days from receipt of a formal 

warning to submit evidence that it is in compliance or to submit a 

corrective action proposal, including the date the State agency will be 

in compliance.

    (iii) When the deficiency cannot be corrected within 30 days of 

receipt of a formal warning but the State agency submits an acceptable 

plan for correcting the deficiency, FNS shall hold the formal warning in 

abeyance pending completion of the actions contained in the plan within 

the time specified in the plan.

    (iv) FNS shall cancel a formal warning when the State agency submits 

evidence that shows, to the satisfaction of FNS, that the deficiency has 

been eliminated.

    (e) Suspension/disallowance of funds. The Administrator of FNS shall 

notify State agencies in writing by certified mail or through personal 

service that administrative funds are being suspended or disallowed. 

Such action may occur when any of the following situations arise:

    (1) A State agency fails to respond to the deficiencies cited in a 

formal warning within 30 days of receiving the warning;

    (2) The response by a State agency to the deficiencies cited in a 

formal warning is unsatisfactory to FNS; or

    (3) A State agency fails to meet the commitments it made in its 

corrective action proposal and a formal warning had been held in 

abeyance pending completion of that corrective action.

    (f) Appeals. After FNS has taken action to disallow Federal funds 

the State agency may request an appeal in



[[Page 882]]



accordance with the procedures specified in Sec. 276.7.



[Amdt. 168, 45 FR 77263, Nov. 21, 1980, as amended by Amdt. 266, 52 FR 

3410, Feb. 4, 1987]