[Federal Register Volume 62, Number 105 (Monday, June 2, 1997)]
[Rules and Regulations]
[Pages 29652-29662]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-13946]


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DEPARTMENT OF AGRICULTURE

Food and Consumer Service

7 CFR Parts 272 and 275

[Amdt. No. 366]
RIN 0584-AB75


Food Stamp Program: Quality Control Provisions of the Mickey 
Leland Childhood Hunger Relief Act

AGENCY: Food and Consumer Service, USDA.

ACTION: Final rule.

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SUMMARY: On June 23, 1995 the Department of Agriculture published 
proposed changes to Food Stamp Program regulations based on section 
13951 of the Mickey Leland Childhood Hunger Relief Act. This final rule 
addresses significant comments received in response to the regulatory 
changes proposed in the rule published June 23, 1995, and finalizes 
regulatory changes to the quality control system of the Food Stamp 
Program in the following areas: timeframes for completion of all review 
activity, exclusion of variances resulting from the application of new 
regulations, the tolerance level for excessive error rates, the 
calculation of liability amounts, interest charges on liability 
amounts, good cause relief from liabilities, and the authority of the 
Administrative Law Judges to determine good cause. These changes will 
enhance the efficiency and equity of the quality control system.

DATES: Effective Dates: Section 13971 of the Mickey Leland Childhood 
Hunger Relief Act sets effective dates for the various provisions of 
the Leland Act addressed in this rule. The amendment to 7 CFR 
275.12(d)(2)(vii) was effective October 1, 1992. The amendments to 7 
CFR 275.23(e)(4), and newly designated (e)(5), (e)(7), (e)(9), and 
(e)(10)(i) were effective October 1, 1991. The amendments to 7 CFR 
272.1(g), 275.3(c) (Introductory text), 275.3(c)(1)(iii), 275.11(g), 
275.23(d)(1)(iii), 275.23(e)(1), and newly designated 
275.23(e)(8)(i)(D), 275.23(e)(8)(ii), 275.23(e)(8)(iii)(A), 
275.23(e)(8)(iii)(B), and 275.23(e)(11)(iii) are effective July 2, 
1997. The provisions of Sec. 275.3(c)(4) will become effective after 
approval by OMB.
    Implementation Dates: With the exception of the provisions 
contained in 7 CFR 275.3(c)(4) [Arbitration], 275.23(e)(5) [State 
agencies' liabilities for payment error-Fiscal Year 1992 and beyond], 
and newly designated 275.23(e)(7) [Good Cause], and 275.23(e)(9) 
[Timeframes], all provisions of this rule shall be implemented July 2, 
1997. The provisions contained in Secs. 275.3(c)(4), 275.23(e)(5), and 
newly designated 275.23(e)(7), and 275.23(e)(9) shall be implemented 
after approval of the provisions of Secs. 275.3(c)(4) and newly 
designated 275.23(e)(7) by OMB under the Paperwork Reduction Act of 
1995.
    OMB Submissions: The provisions contained in 7 CFR 275.3(c)(4), and 
newly designated 275.23(e)(7) shall be submitted to the Office of 
Management and Budget for approval under the Paperwork Reduction Act of 
1995. FCS will publish a notice in the Federal Register announcing the 
effective and implementation dates, which will be dates occurring after 
the publication date of that notice. FCS can not issue billing letters 
for the review periods of Fiscal Years 1992 and beyond until such time 
as these provisions have been implemented by the publication of the 
notice.

FOR FURTHER INFORMATION CONTACT: John H. Knaus, Chief, Quality Control 
Branch, Program Accountability Division, Food and Consumer Service, 
USDA, 3101 Park Center Drive, Room 904, Alexandria, Virginia 22302, 
(703) 305-2472.

SUPPLEMENTARY INFORMATION:

Executive Order 12866

    This rule has been determined to be significant and was reviewed by 
the Office of Management and Budget under Executive Order 12866.

Executive Order 12372

    The Food Stamp Program is listed in the Catalog of Federal Domestic 
Assistance under No. 10.551. For the reasons set forth in the final 
rule at 7 CFR 3015, Subpart V and related notice (48 FR 29115, June 24, 
1983), this Program is excluded from the scope of Executive Order 12372 
which requires intergovernmental consultation with State and local 
officials.

Executive Order 12988

    This action has been reviewed under Executive Order 12988, Civil 
Justice Reform. This rule is intended to have preemptive effect with 
respect to any state or local laws, regulations or policies which 
conflict with its provisions or which would otherwise impede its full 
implementation. This rule is not intended to have retroactive effect 
unless so specified in the ``Implementation'' section of this preamble. 
Prior to any judicial challenge to the provisions of this final rule or 
the application of its provisions, all applicable administrative 
procedures must be exhausted. In the Food Stamp Program the 
administrative procedures are as follows: (1) For program benefit 
recipients--State administrative procedures issued pursuant to 7 U.S.C. 
2020(e)(10) and 7 CFR 273.15; (2) for State agencies--administrative 
procedures issued pursuant to 7 U.S.C. 2023 set out at 7 CFR 276.7 (for 
rules related to non-QC liabilities) or Part 283 (for rules related to 
QC liabilities); (3) for program retailers wholesalers--administrative 
procedures issued pursuant to 7 U.S.C. 2023 set out at 7 CFR 278.8.

Regulatory Flexibility Act

    This action has been reviewed with regard to the requirements of 
the Regulatory Flexibility Act of 1980 (5 U.S.C. Sec. 601 through 612). 
William E. Ludwig, Administrator of the Food and Consumer Service, has 
certified that this rule does not have a significant economic impact on 
a substantial number of small entities. The requirements will affect 
State and local agencies that administer the Food Stamp Program.

Paperwork Reduction Act

    This final rule contains information collection requirements 
subject to review by the Office of Management and Budget (OMB) under 
the Paperwork Reduction Act of 1995 (Pub. L. 104-13). The reporting and 
recordkeeping burden associated with the Food Stamp

[[Page 29653]]

Program Quality Control System is approved under OMB No. 0584-0303. The 
burden for the Quality Control System is estimated to average 10.4 
hours per response. There are 53 respondents. This is an increase of 
5246 hours from the previously approved burden.
    The Quality Control System contains procedures for resolving 
differences in review findings between State agencies and FCS. This is 
referred to as the arbitration process. Section 7 CFR 275.3(c) of this 
rule modifies the current arbitration process. We believe that the 
modifications made by this rule to the arbitration process do not 
represent an increase in burden from current practice.
    The Quality Control System contains procedures which provide relief 
for State agencies from all or a part of a quality control liability 
when a State agency can demonstrate that a part or all of an excessive 
error rate was due to an unusual event which had an uncontrollable 
impact on the State agency's payment error rate. Section 7 CFR 
275.23(e)(7) of this rule modifies the current good cause process. We 
believe that the modifications made by this rule to the good cause 
process do not represent an increase in burden from current practice.
    FCS will solicit comment on these information collections through a 
separate notice published in the Federal Register.

Background

    On June 23, 1995 (60 FR 32615) the Department of Agriculture (the 
``Department'') proposed regulations to amend the food stamp quality 
control (``QC'') system, based on mandatory changes contained in 
section 13951 of the Mickey Leland Childhood Hunger Relief Act (the 
``Leland Act''), Chapter 3, Title XIII of the Omnibus Budget 
Reconciliation Act of 1993 (Pub. L. 103-66), which revised sections 
13(a)(1), 14(a), and 16(c) of the Food Stamp Act of 1977, as amended 
(the ``Act''). A full explanation of the rationale and purpose of these 
regulatory changes was provided in the preamble of the proposed 
rulemaking. The Department received comment letters from thirty-four 
organizations concerning the proposed rule. The preamble of this final 
rule deals with significant issues raised by commenters and the changes 
made as a result of comments. It is recommended that the reader 
reference the proposed rulemaking, as well as this final rulemaking for 
a more complete understanding of the regulatory changes that the 
Department is implementing.

Validation of State Agency Error Rates--Sec. 275.3(c)

    Nineteen organizations provided comments on the proposed regulatory 
change to Sec. 275.3(c) regarding the requirement that Food and 
Consumer Service (``FCS'') Regional Offices assist State agencies in 
completing active case reviews that State agencies were unable to 
complete due to refusal on the part of a household to cooperate with 
the State agency QC reviewer. Seventeen of the commenters supported the 
proposed change making Federal assistance in completing these cases 
optional. FCS Regional Offices would only assist a State agency in 
attempting to complete a refusal-to-cooperate case at the request of 
the State agency. One commenter opposed the proposal, stating that FCS 
should either assist 100% of the time, or not at all. The commenter's 
concern was the potential for bias which could be introduced into the 
quality control system by allowing State agencies to pick which cases 
FCS would assist the State agency in completing. One commenter was 
neither in favor of, nor opposed to the proposal. This commenter 
requested clarification that FCS would continue to review cases that 
are dropped for refusal-to-cooperate to determine whether the case was 
appropriately dropped. The commenter was concerned that some states 
might use an unsupervised system of drops in a way that biases the 
sample. The Department has considered the comments and decided to adopt 
the provision as proposed. FCS Regional Offices will continue the 
current practice of reviewing all cases disposed of by State agencies 
as Not Subject to Review, or Not Completed (including those disposed of 
as Not Completed due to refusal by the household to cooperate with a 
State agency reviewer) in order to insure the validity of the 
disposition. It is felt that the continued monitoring of ``drop'' cases 
will prevent the possibility of any bias in the QC system. Only upon 
the specific request of the State agency will FCS attempt to gain the 
cooperation of such households.

Arbitration--Sec. 275.3(c)(4)

    All thirty-four organizations submitting comments provided remarks 
on the proposed regulatory change to Sec. 275.3(c)(4) regarding the 
system for arbitrating differences between State agency and Federal 
findings and/or disposition in quality control reviews. All the 
commenters were opposed to some aspect of the proposed changes to the 
system. Under current procedures, a State agency which disagrees with 
the FCS review findings for an individual case has a maximum of 28 
calendar days after receipt of the Federal findings to request 
reevaluation of the Federal findings by a Regional arbitrator. The 
Regional arbitrator has 30 days from the date of such a request to 
determine the correctness of the Federal findings or to notify the 
State agency of the status of the arbitration case. A State agency 
which disagrees with a Regional arbitrator's review findings for an 
individual case has a maximum of 28 calendar days after receipt of the 
Regional arbitrator's decision to request a reevaluation of the 
Regional arbitrator's decision by a National arbitrator. The National 
arbitrator has no established time limit for rendering decisions on the 
correctness of the Regional arbitrator's findings. Section 13951 of the 
Leland Act amends the Food Stamp Act by specifying that ``not later 
than 180 days after the end of the fiscal year [March 29th, or March 
28th in leap years], the case review and all arbitrations of State-
Federal difference cases shall be completed.'' The Department concluded 
that the deadlines mandated by the Leland Act for the completion of 
arbitration for a fiscal year could not be achieved without a 
restructuring of the arbitration system.
    The Department proposed to replace the two-tier arbitration process 
with a one-tier arbitration system which would require State agencies 
to submit requests for arbitration to their appropriate FCS Regional 
offices within 10 days of receipt of the Federal QC findings for a 
case. The FCS Regional office QC staff would be permitted to submit to 
the arbitrator(s) a response to the State agency's request either 
agreeing with the State agency or explaining why the State agency's 
position was incorrect. The arbitrator(s) would be allowed a maximum of 
35 calendar days from the date a request is received to render a 
decision regarding the accuracy of the Federal QC findings and 
disposition in a case.
    Thirteen commenters specifically indicated that they opposed a one-
tier system. Four commenters supported a one-tier system, although all 
suggested some modification to the one-tier system that was proposed. 
Six commenters indicated that a one-tier system should be at the 
national level. One commenter indicated a preference for one-tier at 
the Regional Office level. Ten commenters proposed an arbitration 
system similar to the AFDC Program with informal resolution at the 
regional level and formal arbitration by a panel at the national level. 
The Department has considered these comments and decided that it must

[[Page 29654]]

adopt a one-tier system, with certain modifications as discussed in the 
following paragraphs. The Department has determined that the deadlines 
mandated by section 13951 of the Leland Act do not provide sufficient 
time for a two-tier system of arbitration, or an arbitration panel. In 
regards to the matter of whether arbitration will be conducted at the 
Regional Office or National Office level, the Department has decided to 
leave the language in the final regulatory change adaptable enough to 
allow for one-tier arbitration at either the Regional or National 
level. Recognizing that the arbitrator(s) will have a very short time 
frame in which to render accurate decisions (as detailed in the 
following paragraphs), the Department has determined that the 
arbitration system must be structured with the maximum possible 
flexibility so that it can respond to fluctuations in the number of 
arbitration requests.
    Thirty-three commenters expressed serious concern that 10 days was 
insufficient to prepare a case for arbitration. Nineteen commenters 
offered various suggestions for reducing the amount of time the 
arbitrator(s) would have to render a decision, in favor of more time 
for the State agency to submit its request. The Department has 
considered these comments and has modified the final rules. Instead of 
the 10 days contained in the proposed rule, State agencies shall have 
20 days from the date of receipt of the Federal quality control 
findings to submit requests for arbitration to their appropriate FCS 
Regional office. Instead of the 35 days contained in the proposed rule, 
the arbitrator(s) shall have 20 days to render a decision. Of the 15 
day reduction in the time allotted for the arbitrator(s) to render a 
decision, 10 of those days have been allotted to the State agencies as 
additional time to submit an arbitration request, and 5 of those days 
have been allotted as additional time for State agencies to conduct 
reviews and transmit findings to the National Computer Center's (NCC) 
Integrated Quality Control System (IQCS) (for details of this change 
see the paragraph entitled ``Quality Control Review Reports--
Sec. 275.21''). The Department has determined that the increased time 
frame for the State agencies to request arbitration would ensure the 
continued accuracy of the arbitration process by providing more time to 
gather facts and material pertinent to a case. In addition, the 
increased time frame for the State agencies to request arbitration 
would allow the continuation of the current practice of informal 
resolution of differences through discussions between State agency and 
FCS Regional office QC staffs. The informal resolution process offers 
an alternative to the more time and resource intensive arbitration 
process.
    Ten commenters recommended putting into the regulations specific 
time frames for completion of Federal reviews. Four commenters 
recommended that FCS be required to return case records to the State 
agencies at the time that Federal findings are transmitted, or that the 
time frames for requesting arbitration not start until such time as the 
case record is received by the State agency. The FCS-315, Federal 
Quality Control Validation Review Handbook, contains specific time 
frames for FCS reviewers to complete the review of sub-sampled cases. 
In addition, the Handbook contains specific instructions that State 
agencies records are to be returned to the State agency no later than 
the time that Federal case findings are issued to the State agency. The 
Department has determined that inclusion in the regulations of the time 
frames for completion of the Federal reviews, and instructions on 
returning State agency records, are unnecessary.
    Three commenters recommended that State agencies be given the 
opportunity to refute any submittal made by the FCS Regional Office to 
the arbitrator(s). One commenter recommended that FCS Regional Offices 
be prohibited from submitting any additional material or response to 
the State agency's arbitration request. The Department has determined 
that because of the shortened time frames for rendering the arbitration 
decision, the arbitrator(s) will not be able to consider any additional 
materials, submitted by the State agency following the arbitration 
request. The State agency should ensure that arbitration requests 
sufficiently explain and support the position of the State agency 
without the need for additional submissions or rebuttals. Further, the 
Department has determined that the accuracy of the arbitration system 
would be impaired if the FCS Regional Office was prohibited from 
submitting material to the arbitrator(s) which set forth the Federal 
position in the case under review. For these reasons, the Department 
has retained the provisions in the proposed rule that State agencies 
will not be allowed to submit additional material after the arbitration 
request, and that the FCS Regional Offices will be allowed to submit 
material explaining the Federal position.
    The Department proposed to limit requests for arbitration to those 
cases where the State agency's findings or disposition, as transmitted 
to the NCC's IQCS, differed from the Federal findings or disposition 
transmitted to NCC. These cases are commonly referred to as ``disagree 
cases''. Under the proposal State agencies would not be permitted to 
arbitrate cases where the State agency's and Federal findings or 
disposition were the same (``agree'' cases). Fourteen commenters 
expressed concern with the proposal to exclude arbitration of agree 
cases. Primarily the commenters argued in favor of being able to 
arbitrate agree cases in the interest of maximum accuracy for the QC 
system. The argument was that new information may become available 
after the completion of both the State agency and Federal reviews which 
indicates that the earlier review findings were in error. Given that 
the arbitrator(s) will be facing a greatly shortened time frame for 
rendering arbitration decisions, the Department has determined that the 
potential workload of ``agree'' cases, in addition to the ``disagree'' 
cases, would adversely impact the accuracy and timeliness of the 
arbitration process, and impair the quality control system's ability to 
meet the deadlines mandated by section 13951 of the Leland Act. The 
Department has determined that State agencies may provide the Federal 
quality control reviewer with any new information which becomes 
available regarding the circumstances in a case up until the time that 
the Federal findings are transmitted to the State agency. In addition, 
during the 20 day period following the receipt of Federal review 
findings (the period in which a State agency may prepare an arbitration 
request on ``disagree'' cases) a State agency may request informal 
resolution of any ``agree'' cases. If the FCS Regional Office QC staff 
concede through informal resolution that the Federal findings should be 
changed, the case will be retransmitted to the State agency (this time 
as a ``disagree'' case) which would be eligible for arbitration. 
Following the 20 day period for informal resolution, FCS Regional 
Offices would not be permitted to reconsider or change the Federal 
findings of any ``agree'' case.
    To maximize the efficiency of the arbitration system, the 
Department proposed that State agencies be required to submit specific 
documents to ensure that their arbitration requests were complete. Five 
commenters supported the proposal for a checklist. Sixteen commenters 
opposed the requirement for a specific checklist for arbitration. Many 
of the commenters indicated that the state agencies are in a better 
position to determine what information must be

[[Page 29655]]

submitted in order to support State findings in arbitration. The 
commenters considered the checklist to be burdensome in light of the 
reduced time frame for submittal of arbitration requests. The 
Department is dropping the proposal to require State agencies to submit 
a specific checklist of documents as a part of each arbitration 
request. It should be noted that guidelines and recommendations for the 
submittal of arbitration requests are contained in the FCS-310, The 
Food Stamp Program Quality Control Review Handbook. As indicated in the 
proposed rule, if a State agency submits an incomplete request for 
arbitration the arbitrator(s) will render a decision based on the 
available information. The shortened time frames for rendering the 
arbitration decision will not allow for the request (by the 
arbitrator(s)) or submission (by the State agency) of any additional 
materials following the arbitration request. The arbitrator(s) will 
make an independent judgment of the request, based upon the information 
the State agency and Regional office have provided.
    The Department proposed that arbitration be limited to those cases 
where the State agency's findings and disposition were transmitted to 
the NCC's IQCS in a timely manner. The Department maintained that State 
agency reviews which were not completed and transmitted into the IQCS 
in a timely manner impaired the QC system's ability to meet the 
deadlines mandated by the Leland Act for the completion of all case 
review and arbitration activity. Twenty-six commenters opposed the 
proposal to restrict arbitration to cases which have been timely 
submitted to IQCS. In general, the commenters argued in favor of being 
able to arbitrate these cases in the interest of maximum accuracy for 
the QC system. The commenters indicated that the cases most likely to 
be in need of arbitration are the cases which take longer to complete 
(due to uncooperative households, the need for follow-up investigations 
or field work, or the need for intricate policy analysis) and are more 
likely to be submitted to IQCS late. Based upon these comments, the 
Department has modified the original proposal. State agencies may 
continue to request arbitration of cases transmitted late to the IQCS. 
However, the number of days that a State agency has to submit such a 
request will be reduced by the number of days that the State agency was 
late transmitting the case to the IQCS. As an example: If a State 
agency does not submit the review findings of a case until the 100th 
day after the end of the sample month for the case (5 days late), then 
the State agency would have 15 days from the date of receipt of the 
Federal findings (the standard 20 days provided for by this rule minus 
the 5 days that the case was submitted late in the IQCS) to request 
arbitration. The Department has determined that this alternative 
responds to the concerns raised by the commenters, and ensures that the 
quality control system's ability to meet the deadlines mandated by the 
Leland Act are met. The Department has also determined that because of 
the withdrawal of the proposal to limit arbitration to cases which have 
been timely submitted to IQCS, there is no longer any need to exempt 
certain cases from the restriction, as was considered in the proposed 
rule (cases in which household members had refused to cooperate with 
the quality control reviewer was the class of such cases identified in 
the proposed rule).

Quality Control Review Reports--Sec. 275.21

    Thirty organizations provided comments on the proposed regulatory 
change to Sec. 275.21 regarding the timeframes for State agencies to 
dispose of and report the findings of cases selected for QC review. 
Under current procedures a State agency has 75 calendar days from the 
end of a sample month to dispose of 90 percent of the cases selected 
for review in that month; 100 percent of the cases must be disposed of 
within 95 days of the end of the sample month. The Department proposed 
to modify the deadline for State agencies to dispose of QC cases and 
transmit review findings to NCC's IQCS, by requiring that 100 percent 
of the cases selected for review be disposed of within 90 calendar days 
of the end of the sample month for which the cases were selected for 
review. The Department also proposed conforming changes to regulations 
at 7 CFR 273.2(d)(2) and 7 CFR 273.2(f)(1)(ix). These sections of the 
regulations specify that food stamp households which refuse to 
cooperate with a quality control reviewer shall be determined 
ineligible to participate in the Food Stamp Program until 95 days after 
the end of the annual QC review period, or until the household 
cooperates with the QC reviewer (whichever is earlier). The Department 
proposed to change the period of household ineligibility from 95 to 90 
days after the end of the annual review period, in order to correspond 
to the proposed change to the State agencies timeframes for the 
disposition of QC reviews. Twenty-five of the thirty organizations 
providing comments on the proposal to reduce the timeframes for State 
agencies to dispose of and report the findings of cases selected for QC 
review were opposed to the proposal. The remaining five commenters 
recognized that changes were necessary to meet legislatively mandated 
timeframes, but expressed strong concern about the proposed reduction 
in time. Six commenters remarked on the fact that the proposed 
deadlines were moving away from conformity with the AFDC program, and 
that this caused particular difficulties when reviews were conducted 
jointly between the Food Stamp and AFDC programs. Fifteen commenters 
recommended that the timeframe for the arbitrator to render a decision 
be reduced, or that the federal re-reviewers be put under a strict 
timeframe for the completion of the federal reviews. Fourteen 
commenters indicated that the proposed timeframe would negatively 
impact on review accuracy. Twelve commenters specifically indicated 
that due to staffing and resource limitations it would be extremely 
difficult to meet the shortened deadlines. Nine commenters recommended 
that the 90 day deadline be made to apply only to the last month of the 
review period. Based upon these comments, the Department has decided to 
withdraw the proposal to reduce the timeframe for State agencies to 
dispose of and report the findings of cases selected for QC review. The 
current procedures, under which a State agency has 75 calendar days 
from the end of a sample month to dispose of 90 percent of the cases 
selected for review in that month, and 95 days to dispose of 100 
percent of the cases will be retained. Strict adherence to the current 
75/95 day deadlines and modification of the proposals regarding the 
arbitration system (see the paragraph entitled ``Arbitration--
Sec. 275.3(c)(4)'' for details) will allow FCS and the State agencies 
to meet the deadlines mandated by the Leland Act without shortening the 
timeframe for disposing of QC reviews.

Variances Excluded From Error Analysis--Sec. 275.12(d)(2)

    Eighteen organizations provided comments on the proposed regulatory 
change to Sec. 275.12(d)(2) regarding the exclusion of any errors 
resulting from the application of new regulations promulgated under the 
Act during the first 120 days from the required implementation date. 
Seventeen commenters approved of the proposed change. One commenter 
offered remarks that were neither in favor of, nor opposed to the 
proposal. Two commenters recommended that the time frame be extended to 
180 days. The

[[Page 29656]]

Department has considered this recommendation and determined that it 
cannot be adopted. The Food Stamp Act, as modified by the Leland Act, 
specifies: ``The following errors may be measured for management 
purposes but shall not be included in the payment error rate: (A) Any 
errors resulting in the application of new regulations promulgated 
under this Act during the first 120 days from the required 
implementation date for such regulations'' [7 U.S.C. 2025(c)(3)]. The 
Department has determined that the Act mandates a 120 day variance 
exclusion period, and therefore, a 180 day variance exclusion period 
cannot be considered.
    Five commenters supported the proposal, but the comments clearly 
indicated that the writers thought that the 120 day variance exclusion 
period was to provide relief while a State agency implemented a new 
regulation. The Department wishes to clarify that the 120 day variance 
exclusion can only apply to State agencies which have implemented a new 
regulation. The Department has concluded that an error cannot result 
from the application of a new regulation (as specified in the Act) if a 
State agency has not implemented the new regulation. The current 
regulatory provision at 7 CFR 275.12(d)(2)(vii)(B) which specifies: ``A 
State agency shall not exclude variances which occur prior to the 
States implementation'' has been retained. As an example: If a State 
agency does not implement a new regulation until 100 days after the 
required implementation date then the State agency would have only a 20 
day variance exclusion period (the 120 day exclusion period minus the 
100 days that the new regulation had not been implemented), starting 
with the day the new regulation is actually implemented. The Department 
has determined that the provision regarding a 120 variance exclusion 
period for the application of a new regulations must be adopted as 
proposed.

State Agencies' Liabilities for Payment Error--Fiscal Year 1986 and 
Beyond--Sec. 275.23(e)(4)

    Fifteen organizations provided comments on the proposed regulatory 
change to Sec. 275.23(e)(4) regarding the new system of payment error 
rate goals and liabilities. The payment error rate tolerance level, 
beginning in Fiscal Year 1992 and applying to Fiscal Year 1992 and all 
subsequent fiscal years, is the national performance measure for the 
fiscal year. The national performance measure continues to be defined 
as 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 for that fiscal year at the time the State agency is 
notified of its payment error rate. A State agency which exceeds this 
tolerance level is now subject to a liability equivalent to the total 
value of the allotments issued in the fiscal year by the State agency, 
multiplied by a factor which is 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. This figure is then multiplied by 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. Fourteen of the commenters 
approved of the proposed change. The remarks of one commenter were 
unclear, and FCS was unable to determine if this commenter was in favor 
of or opposed to the proposed provision. The Department has considered 
the comments and determined that the provision must be adopted as 
proposed. These changes have been mandated by Section 13951 of the 
Leland Act.

Good Cause--Sec. 275.23(e)(6)

    Eighteen organizations provided comments on the proposed regulatory 
change to Sec. 275.23(e)(6) regarding relief from all or a part of a 
quality control liability as established under Sec. 275.23(e)(4) when a 
State agency can demonstrate that a part or all of an excessive error 
rate was due to an unusual event which had an uncontrollable impact on 
the State agency's payment error rate. Three commenters were in favor 
of the proposed provisions concerning good cause and three others 
offered remarks which were neither in favor of, nor opposed to the 
proposed provisions. Twelve of the commenters were opposed to some 
aspect of the proposed provisions.
    The Department proposed to transfer the authority to determine good 
cause, and grant waivers of liabilities, from FCS to the Departmental 
Administrative Law Judges (``ALJs''). This transfer of authority was 
mandated by section 13951 of the Leland Act. Ten commenters were in 
favor of this transfer of authority. There were no commenters who 
opposed it. Therefore the provision pertaining to the transfer of 
authority to determine good cause and grant liability waivers from FCS 
to the ALJs is adopted in final form as it was proposed.
    Section 13951 of the Leland Act provides good cause consideration 
for the following unusual events: (A) A natural disaster or civil 
disorder that adversely affects Food Stamp Program operations; (B) a 
strike by employees of a State agency who are necessary for the 
determination of eligibility and processing of case changes under the 
Food Stamp Program; (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; (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; and (E) a significant 
circumstance beyond the control of the State agency. The Department 
proposed to codify into the regulations the unusual events specified in 
the Leland Act which qualify for consideration under good cause relief. 
Eight commenters specifically recommended the addition of new computer 
systems as an unusual event which would qualify a State agency for good 
cause relief. While the Department appreciates the difficulties that 
State agencies may encounter in implementing new computer systems, the 
Department is unable to adopt these comments. The statutory criteria 
for determining good cause (criterion E of the Leland Act specifies 
that it must be ``a significant circumstance beyond the control of the 
State agency'') precludes the Department from considering a new 
computer system as a circumstance which could qualify a State agency 
for good cause relief.
    Current regulations at Sec. 275.23(e)(6)(i) describe the criteria 
and methodology under which FCS will grant good cause waivers. While 
FCS will no longer be making the final determination in good cause 
appeals, FCS retains the authority to establish guidelines under which 
good cause is evaluated. The Department proposed that current criteria 
and methodology, with certain modifications, would continue to serve as 
guidelines for States, FCS, and the ALJs to assess and evaluate good 
cause in conjunction with the appeals process. As under current 
regulations, it was proposed that an alternate methodology would 
continue to be used for certain events when a State agency provided 
insufficient information to demonstrate that the unusual event had an 
uncontrollable impact on the error rate. The Department proposed an 
alternate methodology that would take into account both the duration of 
the unusual event and the magnitude or

[[Page 29657]]

intensity of the unusual event. The proposed alternate methodologies 
were also modified to include specific procedures for calculating 
waiver amounts to ensure equity and consistency in these 
determinations. It is recommended that the reader reference the 
proposed rulemaking for a more complete understanding of the 
alternative methodologies that the Department proposed.
    Five commenters specifically objected to the inclusion of the 
``sliding scale'' in the alternative formula for determining the amount 
of relief for which a State agency would qualify in the event of 
unusual caseload growth. Suggested alternatives were elimination of the 
``sliding scale'' from the formula, or elimination of the formula 
(meaning a State agency would qualify for total relief of any liability 
claim if it could demonstrate caseload growth of 15%). The Department 
has not adopted these comments. The Department must emphasize that the 
formula in which the ``sliding scale'' appears is only an alternative 
methodology for demonstrating the extent to which excessive error rates 
can be attributed to caseload growth. If a State agency demonstrates 
(as determined by the ALJ), through other means or data, the impact 
that these events have had on their payment error rate, then the 
formula containing the sliding scale need not be applied.
    Three commenters specifically objected to the fact that the 
alternative formula disregarded caseload growth in the second half 
(April through September) of a fiscal year in determining whether a 
State agency qualified for good cause relief. Suggested alternatives 
included altering the formula to include caseload growth in the second 
half of the fiscal year, and elimination of the formula altogether. The 
Department has decided to modify the final rules by including up to a 
possible nine months of a fiscal year in the formula. Step 2 of the 
formula has been modified to provide for the consideration of any 
twelve consecutive month period falling in the 15 month interval 
between April of the previous fiscal year, and June of the liability 
fiscal year. This will allow caseload growth in as many as nine months 
(October through June) of the current fiscal year to be included in the 
calculations for good cause relief. The Department continues to believe 
that caseload growth in the last three months of a fiscal year would 
rarely have a significant impact on the error rate for that year. In 
addition, the Department again must emphasize that the formula is only 
an alternative methodology for demonstrating the extent to which 
excessive error rates can be attributed to caseload growth.
    Two commenters specifically objected to the fact that the 
alternative formula disregarded caseload growth at any geographic level 
below that of the State as a whole. One commenter emphasized that some 
geographic areas (counties, districts, regions, etc.) within the larger 
states issue more benefits and serve more recipients than an entire 
smaller state. A suggested alternative was the modification of the 
formula or evaluation criteria to provide good cause relief if a State 
agency can demonstrate excessive caseload growth at a lower (project 
area) geographic level. The Department has considered these comments, 
but decided not to adopt them. The Department must again emphasize that 
the formula is only an alternative methodology for demonstrating the 
extent to which excessive error rates can be attributed to caseload 
growth. If a State agency demonstrates (as determined by the ALJ), 
through other means or data, the impact that caseload growth has had on 
their payment error rate, then the formula evaluating only statewide 
growth need not be applied. It was the Department's expectation, as 
expressed in the preamble of the proposed rule, that with modern 
automated systems for data analysis, State agencies would have little 
difficulty in demonstrating the impact on the payment error rate from 
geographic subdivisions within the state, when that impact is 
significant.

FCS Timeframes--Sec. 275.23(e)(8)

    Four organizations provided comments on the proposed regulatory 
change to Sec. 275.23(e)(8) regarding the provision of Section 13951 of 
the Leland Act that specifies that: ``Not later than 180 days after the 
end of the fiscal year, the case review and all arbitrations of State-
Federal difference cases shall be completed. Not later than 30 days 
thereafter, the Secretary shall determine final error rates, the 
national average payment error rate, and the amounts of payment claimed 
against State agencies; and notify State agencies of the payment 
claims.'' All four of the commenters were opposed to the proposed time 
frames. It was the opinion of the commenters that the time frames 
specified in the Leland Act were a mistake, and they urged the 
Department to work with Congress towards passing new legislation which 
would return the deadline for the announcement of error rates to June 
30th in the year following the end of the quality control review 
period. One commenter has recommended that the Department delay 
implementation of these changes until legislation can be adopted to 
repeal the Leland Act provision that requires this regulatory change. 
The Department understands the commenters concerns, but until the 
provisions are amended the provision must be adopted as proposed. This 
change was mandated by Section 13951 of the Leland Act, and the 
Department cannot delay implementing the provisions of the law.

Interest Charges--Sec. 275.23(e)(9)

    Five organizations provided comments on the proposed regulatory 
change to Sec. 275.23(e)(9) regarding the interest charges on any 
unpaid portion of a liability claim. Section 13951 of the Leland Act 
amends the Food Stamp Act by providing that interest will accrue from 
the date of the decision on an administrative appeal of the claim, or 
from the day one year after the date the bill for the claim was 
received by the State agency, whichever is earlier. Four of the 
commenters disapproved of the proposed change. One commenter offered 
remarks that were neither in favor of nor opposed to the proposed 
provision. The Department has considered the comments and determined 
that the provision must be adopted as proposed. This change was 
mandated by Section 13951 of the Leland Act.

Miscellaneous Technical Corrections

    No comments were received regarding the Department's proposal to 
effect technical corrections to various regulatory references appearing 
in part 275 of the regulations. In a number of paragraphs in part 275 
other paragraphs or sections of the regulations are cited as a 
reference for the reader. Over the years many of these references have 
become inaccurate due to revisions and renumbering of various sections 
of the regulations. The Department has decided to adopt all of the 
technical reference changes as proposed.

Implementation

    Effective Dates: Section 13971 of the Mickey Leland Childhood 
Hunger Relief Act sets effective dates for the various provisions of 
the Leland Act addressed in this rule. The amendment to 7 CFR 
275.12(d)(2)(vii) was effective October 1, 1992. The amendments to 7 
CFR 275.23(e)(4), and newly designated (e)(5), (e)(7), (e)(9), and 
(e)(10)(i) were effective October 1, 1991. The amendments to 7 CFR 
272.1(g), 275.3(c) (Introductory text), 275.3(c)(1)(iii), 275.11(g), 
275.23(d)(1)(iii), 275.23(e)(1), and newly designated 
275.23(e)(8)(i)(D), 275.23(e)(8)(ii), 275.23(e)(8)(iii)(A),

[[Page 29658]]

275.23(e)(8)(iii)(B), and 275.23(e)(11)(iii) are effective July 2, 
1997. The provisions of 275.3(c)(4) will become effective after 
approval by OMB.
    Implementation Dates: With the exception of the provisions 
contained in 7 CFR 275.3(c)(4) [Arbitration], 275.23(e)(5) [State 
agencies' liabilities for payment error-Fiscal Year 1992 and beyond], 
and newly designated 275.23(e)(7) [Good Cause], and 275.23(e)(9) 
[Timeframes], all provisions of this rule shall be implemented July 2, 
1997. The provisions contained in 275.3(c)(4), 275.23(e)(5), and newly 
designated 275.23(e)(7), and 275.23(e)(9) shall be implemented after 
approval of the provisions of 275.3(c)(4) and newly designated 
275.23(e)(7) by OMB under the Paperwork Reduction Act of 1995.
    OMB Submissions: The provisions contained in 7 CFR 275.3(c)(4), and 
newly designated 275.23(e)(7) shall be submitted to the Office of 
Management and Budget for approval under the Paperwork Reduction Act of 
1995. FCS will publish a notice in the Federal Register announcing the 
effective and implementation dates, which will be dates occurring after 
the publication date of that notice. FCS can not issue billing letters 
for the review periods of Fiscal Years 1992 and beyond until such time 
as these provisions have been implemented by the publication of the 
notice.

List of Subjects

7 CFR Part 272

    Alaska, Civil rights, Food stamps, Grant programs-social programs, 
Reporting and recordkeeping requirements.

7 CFR Part 275

    Administrative practice and procedure, Food stamps, Reporting, and 
recordkeeping requirements.

    For the reasons set out in the preamble, parts 272 and 275 of 
chapter II of title 7 Code of Federal Regulation are amended as 
follows:

PART 272--REQUIREMENTS FOR PARTICIPATING STATE AGENCIES

    1. The authority citation for part 272 continues to read as 
follows:

    Authority: 7 U.S.C. 2011-2032.

    2. In Sec. 272.1, a new paragraph (g)(153) is added in numerical 
order to read as follows:


Sec. 272.1   General terms and conditions.

* * * * *
    (g) Implementation. * * *
    (153) Amendment No. 366. (i) With the exception of the changes to 
Sec. 275.3(c)(4) [Arbitration], Sec. 275.23(e)(5) [State agencies' 
liabilities for payment error-Fiscal Year 1992 and beyond], 
Sec. 275.23(e)(7)[Good Cause], and Sec. 275.23(e)(9) [timeframes], all 
quality control changes that are made by Amendment No. 366 shall be 
implemented July 2, 1997.
    (ii) The quality control changes to Sec. 275.3(c)(4) [Arbitration], 
Sec. 275.23(e)(5) [State agencies' liabilities for payment error-Fiscal 
Year 1992 and beyond], Sec. 275.23(e)(7) [Good Cause], and 
Sec. 275.23(e)(9) [Timeframes], shall be implemented after approval of 
the provisions at Sec. 275.3(c)(4) [Arbitration], and Sec. 275.23(e)(7) 
[Good Cause] by the Office of Management and Budget under the Paperwork 
Reduction Act of 1995. FCS will publish a notice in the Federal 
Register announcing the implementation date. It shall be a date 
occurring after the publication date of the notice.

PART 275--PERFORMANCE REPORTING SYSTEM

    3. The authority citation for part 275 continues to read as 
follows:

    Authority: 7 U.S.C. 2011-2032.

    4. In Sec. 275.3:
    a. the last sentence of the introductory text of paragraph (c) is 
amended by removing the reference to ``275.23(e)(6)'' and adding in its 
place a reference to ``275.23(e)(8)'';
    b. paragraph (c)(1)(iii) is revised;
    c. paragraph (c)(4) is revised.
    The revisions read as follows:


Sec. 275.3   Federal monitoring.

* * * * *
    (c) Validation of State Agency Error Rates. * * *
    (1) Payment error rate. * * *
    (iii) Upon the request of a State agency, the appropriate FCS 
Regional Office will assist the State agency in completing active cases 
reported as not completed due to household refusal to cooperate.
* * * * *
    (4) Arbitration. (i) Whenever the State agency disagrees with the 
FCS regional office concerning individual QC case findings and the 
appropriateness of actions taken to dispose of an individual case, the 
State agency may request that the dispute be arbitrated on a case-by-
case basis by an FCS Arbitrator, subject to the following limitations.
    (A) The State agency may only request arbitration when the State 
agency's and FCS regional office's findings or disposition of an 
individual QC case disagree.
    (B) The arbitration review shall be limited to the point(s) within 
the Federal findings or disposition that the State agency disputes. 
However, if the arbitrator in the course of the review discovers a 
mathematical error in the computational sheet, the arbitration shall 
correct the error while calculating the allotment.
    (ii) The FCS Arbitrator(s) shall be an individual or individuals 
who are not directly involved in the validation effort.
    (iii) With the exception of the restrictions contained in paragraph 
(c)(4)(iii), for an arbitration request to be considered, it must be 
received by the appropriate FCS regional office within 20 calendar days 
of the date of receipt by the State agency of the regional office case 
findings. In the event the last day of this time period falls on a 
Saturday, Sunday, or Federal or State holiday, the period shall run to 
the end of the next work day. The State agency shall be restricted in 
its eligibility to request arbitration of an individual case if that 
case was not disposed of and the findings reported in accordance with 
the timeframes specified in Sec. 275.21(b)(2). For each day late that a 
case was disposed of and the findings reported, the State agency shall 
have one less day to request arbitration of the case.
    (iv) When the State agency requests arbitration, it shall submit 
all required documentation to the appropriate FCS regional office 
addressed to the attention of the FCS Arbitrator. The FCS regional 
office QC staff may submit an explanation of the Federal position 
regarding a case to the FCS Arbitrator.
    (A) A complete request is one that contains all information 
necessary for the arbitrator to render an accurate, timely decision.
    (B) If the State agency's request is not complete the arbitrator 
shall make a decision based solely on the available documents.
    (v) The FCS Arbitrator shall have 20 calendar days from the date of 
receipt of a State agency's request for arbitration to review the case 
and make a decision.
* * * * *


Sec. 275.11  [Amended]

    5. In Sec. 275.11:
    a. the third sentence of paragraph (g) is amended by removing the 
reference to ``275.25(e)(6)'' and adding in its place a reference to 
``275.23(e)(8)'';
    b. the fourth sentence of paragraph (g) is amended by removing the 
reference to ``275.25(c)'' and adding in its place a reference to 
``275.23(c)''.
    6. In Sec. 275.12:
    a. the introductory text of paragraph (d)(2)(vii) is revised;
    b. paragraph (d)(2)(vii)(A) is revised;

[[Page 29659]]

    c. paragraph (d)(2)(vii)(D) is revised.
    The revisions read as follows:


Sec. 275.12  Review of active cases.

* * * * *
    (d) Variance identification. * * *
    (2) Variance excluded from error analysis. * * *
    (vii) Subject to the limitations provided in paragraphs 
(d)(2)(vii)(A) through (d)(2)(vii)(F) of this section any variance 
resulting from application of a new Program regulation or implementing 
memorandum (if one is sent to advise State agencies of a change in 
Federal law, in lieu of regulations during the first 120 days from the 
required implementation date.
    (A) When a regulation allows a State agency an option to implement 
prior to the required implementation date, the date on which the State 
agency chooses to implement may, at the option of the State, be 
considered to be the required implementation date for purposes of this 
provision. The exclusion period would be adjusted to begin with this 
date and end on the 120th day that follows. States choosing to 
implement prior to the required implementation date must notify the 
appropriate FCS Regional Office, in writing, prior to implementation 
that they wish the 120 day variance exclusion to commence with actual 
implementation. Absent such notification, the exclusionary period will 
commence with the required implementation date.
* * * * *
    (D) Regardless of when the State agency actually implemented the 
regulation, the variance exclusion period shall end on the 120th day 
following the required implementation date, including the required 
implementation date defined in paragraph (d)(2)(vii)(A) of this 
section.
* * * * *
    7. In Sec. 275.23:
    a. the last sentence of paragraph (d)(1)(iii) is amended by 
removing the reference to ``(e)(6)(iii)'' and adding in its place a 
reference to ``(e)(8)(iii)'';
    b. paragraph (e)(1) is amended by removing the reference to 
``paragraph (e)(6)'' and adding in its place a reference to ``paragraph 
(e)(8)'';
    c. the heading of paragraph (e)(4) is amended by removing the words 
``Fiscal Year 1986 and Beyond'' and adding the words ``Fiscal Years 
1986 through Fiscal Year 1991'' in their place;
    d. the first sentence of paragraph (e)(4)(i) is amended by removing 
the words ``For Fiscal Year 1986 and subsequent years'' and adding the 
words ``For Fiscal Year 1986 through Fiscal year 1991'' in their place;
    e. paragraphs (e)(5), (e)(6), (e)(7), (e)(8), (e)(9), and (e)(10) 
are redesignated as paragraphs (e)(6), (e)(7), (e)(8), (e)(9), (e)(10), 
and (e)(11), respectively and a new paragraph (e)(5) is added;
    f. newly redesignated paragraph (e)(7) is revised;
    g. the first sentence of newly redesignated paragraph (e)(8)(i)(D) 
is amended by removing the reference to ``paragraph (e)(7)(iii)'' and 
adding in its place a reference to ``paragraph (e)(8)(iii)'';
    h. the last sentence of newly redesignated paragraph (e)(8)(ii) is 
amended by removing the words ``procedure of Sec. 276.7'' and adding 
the words ``procedures of Part 283'' in their place;
    i. the first sentence of newly redesignated paragraph 
(e)(8)(iii)(A) is amended by removing the reference to ``paragraph 
(e)(7)(i)(C)'' and adding in its place a reference to ``paragraph 
(e)(8)(i)(C)'';
    j. the first sentence of newly redesignated paragraph 
(e)(8)(iii)(B) is amended by removing the reference to ``paragraph 
(e)(7)(i)(C)'' and adding in its place a reference to ``paragraph 
(e)(8)(i)(C)'';
    k. the first three sentences in newly redesignated paragraph (e)(9) 
are revised;
    l. in newly redesignated paragraph (e)(10)(i) the first sentence is 
amended by removing the reference to ``275.23(e)(4)'' and adding in its 
place a reference to ``275.23(e)(5)''. The second sentence is amended 
by removing the reference to ``Sec. 276.7'' and adding in its place a 
reference to ``part 283''. The fourth sentence is amended by removing 
the words ``2 years'' and adding the words ``one year'' in their place.
    m. the last sentence of newly redesignated paragraph (e)(11)(iii) 
is amended by removing the reference to ``(e)(10)(vi)'' and adding in 
its place a reference to ``(e)(11)(vi)''.
    The revisions and additions read as follows:


Sec. 275.23  Determination of State agency program performance.

* * * * *
    (e) State agencies' liabilities for payment error rates. * * *
    (5) State agencies' liabilities for payment error-Fiscal Year 1992 
and beyond. 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 and subsequent years, FCS shall announce a 
national performance measure within 30 days following the completion of 
the 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 rates 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.
* * * * *
    (7) 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 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

[[Page 29660]]

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 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 FCS 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 29661]]

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)(7)(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)(5)(i) of this 
section, exceeds the national performance measure determined in 
accordance with paragraph (e)(5)(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 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)(7)(i)(A) through (e)(7)(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

[[Page 29662]]

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.);
    (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)(7)(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)(7)(i)(A) through (e)(7)(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)(7) 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 $283.20 of this chapter.
* * * * *
    (9) FCS Timeframes. FCS shall determine, and announce the national 
average payment error rate for fiscal year within 30 days following the 
completion of the case review process and all arbitrations of State 
agency-Federal difference cases for that fiscal year, and at the same 
time FCS shall notify all State agencies of their individual payment 
error rates and payment error rate liabilities, if any. The case review 
process and the arbitration of all difference cases shall be completed 
not later than 180 days after the end of fiscal year. FCS shall 
initiate collection action on each claim for such liabilities before 
the end of the fiscal year following the end of the fiscal year 
reporting period in which the claim arose unless an administrative 
appeal relating to the claim is pending.
* * * * *
    Dated: May 20, 1997.
Mary Ann Keeffe,
Acting Under Secretary for Food, Nutrition, and Consumer Services.
[FR Doc. 97-13946 Filed 5-30-97; 8:45 am]
BILLING CODE 3410-30-M