[Code of Federal Regulations]
[Title 7, Volume 4]
[Revised as of January 1, 2007]
From the U.S. Government Printing Office via GPO Access
[CITE: 7CFR276.4]

[Page 909-910]
 
                          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suspension, in which event the suspension will be rescinded, or until 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 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

[[Page 910]]

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 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]