[Federal Register Volume 67, Number 118 (Wednesday, June 19, 2002)]
[Rules and Regulations]
[Pages 41589-41619]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-15294]



 ========================================================================
 Rules and Regulations
                                                 Federal Register
 ________________________________________________________________________
 
 This section of the FEDERAL REGISTER contains regulatory documents 
 having general applicability and legal effect, most of which are keyed 
 to and codified in the Code of Federal Regulations, which is published 
 under 50 titles pursuant to 44 U.S.C. 1510.
 
 The Code of Federal Regulations is sold by the Superintendent of Documents. 
 Prices of new books are listed in the first FEDERAL REGISTER issue of each 
 week.
 
 ========================================================================
 

  Federal Register / Vol. 67, No. 118 / Wednesday, June 19, 2002 / 
Rules and Regulations  

[[Page 41589]]



DEPARTMENT OF AGRICULTURE

Food and Nutrition Service

7 CFR Parts 271, 272, 273, 275, and 277

RIN 0584-AC45


Food Stamp Program: Work Provisions of the Personal 
Responsibility and Work Opportunity Reconciliation Act of 1996 and Food 
Stamp Provisions of the Balanced Budget Act of 1997

AGENCY: Food and Nutrition Service, USDA.

ACTION: Final rule.

-----------------------------------------------------------------------

SUMMARY: On September 3, 1999, the Department published an interim rule 
(64 FR 48246) to implement, effective November 2, 1999, two food stamp 
provisions of the Balanced Budget Act of 1997 (the Balanced Budget 
Act). The two provisions amended the Food Stamp Act of 1977 (the Food 
Stamp Act) to enhance State flexibility in exempting portions of a 
State agency's caseload from the food stamp time limit and to increase 
significantly the funding available to create work opportunities for 
recipients who are subject to the time limit. Comments were solicited 
through November 2, 1999.
    On December 23, 1999, the Department published a proposed rule (64 
FR 72196) to amend Food Stamp Program (FSP) regulations to incorporate 
the work provisions of the Personal Responsibility and Work Opportunity 
Reconciliation Act of 1996 (PRWORA). This rule proposed making 
significant changes to current work rules, including requirements for 
the Food Stamp Employment and Training (E&T) Program and the optional 
workfare program, as well as simplifying disqualification requirements 
for failure to comply with work rules. Comments were solicited through 
February 22, 2000. This rule finalizes both of those rulemakings.

EFFECTIVE DATE: This final rule is effective August 19, 2002.

FOR FURTHER INFORMATION CONTACT: John Knaus, Chief, Program Design 
Branch, Program Development Division, Food Stamp Program, FNS, 3101 
Park Center Drive, Room 810, Alexandria, Virginia, (703) 305-2519.

SUPPLEMENTARY INFORMATION:   

Executive Order 12866

    This final rule was determined to be economically significant and 
was reviewed by the Office of Management and Budget (OMB) in 
conformance with 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 in 7 CFR part 3105, 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 final rule 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 that 
conflict with its provisions or that would otherwise impede its full 
implementation. This rule is not intended to have retroactive effect 
unless so specified in the ``Effective Date'' paragraph of this final 
rule. Prior to any judicial challenge to the provisions of this rule or 
the application of its provisions, all applicable administrative 
procedures must be exhausted.

Regulatory Flexibility Act

    This rule has been reviewed with regard to the requirements of the 
Regulatory Flexibility Act of 1980 (5 U.S.C. 601-612). Eric M. Bost, 
Under Secretary for Food, Nutrition, and Consumer Services, has 
certified that this rule will not have a significant economic impact on 
a substantial number of small entities. The changes will affect food 
stamp applicants and recipients who are subject to FSP work 
requirements. The rulemaking also affects State and local welfare 
agencies that administer the FSP, to the extent that they must 
implement the provisions described in this action.

Unfunded Mandate Analysis

    Title II of the Unfunded Mandate Reform Act of 1995 (UMRA), Pub. L. 
104-4, establishes requirements for Federal agencies to assess the 
effects of their regulatory actions on State, local, and tribal 
governments and the private sector. Under section 202 of UMRA, the 
Department generally must prepare a written statement, including a cost 
benefit analysis, for proposed and final rules with ``Federal 
mandates'' that may result in expenditures to State, local, or tribal 
governments, in the aggregate, or to the private sector, of $100 
million or more in any one year. When such a statement is needed for a 
rule, section 205 of UMRA generally requires the Department to identify 
and consider a reasonable number of regulatory alternatives and adopt 
the least costly, more cost-effective or least burdensome alternative 
that achieves the objectives of the rule.
    This rule contains no Federal mandates (under the regulatory 
provisions of Title II of the UMRA) that impose costs on State, local, 
or tribal governments or to the private sector of $100 million or more 
in any one year. Thus this rule is not subject to the requirements of 
section 202 and 205 of UMRA.

Executive Order 13132

Federalism Summary Impact Statement

    Executive Order 13132 requires Federal agencies to consider the 
impact of their regulatory actions on State and local governments. 
Where such actions have ``federalism implications,'' agencies are 
directed to provide a statement for inclusion in the preamble to the 
regulation describing the agency's considerations in terms of the three 
categories called for under section (6)(b)(2)(B) of Executive Order 
13132.

Prior Consultation With State Officials

    Prior to drafting the rule, we received input from State and local 
agencies at various times. Since the FSP is a State administered, 
Federally funded program, our regional offices have formal and informal 
discussions with State and local officials on an ongoing basis 
regarding program implementation and policy issues. This arrangement 
allows State and local agencies to

[[Page 41590]]

provide feedback that forms the basis for many discretionary decisions 
in this and other FSP rules. In addition, we presented our ideas and 
received feedback on program policy at various State, regional, 
national, and professional conferences. Lastly, the comments from State 
and local officials on both the interim Balanced Budget Act rule and 
the proposed PRWORA rule were carefully considered in drafting this 
final rule.

Nature of Concerns and the Need To Issue This Rule

    State agencies generally want greater flexibility in their 
implementation of FSP work requirements and in the operation of the E&T 
Program. State agencies have indicated that providing them this 
flexibility would greatly enhance their ability to more efficiently 
administer the FSP. They also want current rules streamlined to allow 
them to conform to the rules of other means tested Federal programs.

Extent To Which We Meet Those Concerns

    FNS has considered the impact on State and local agencies. This 
rule deals mainly with changes required by law and made effective in 
1996 and 1997. The effects on State agencies are moderate. While some 
of the changes result in modest increases in administrative 
requirements, the overall effect is to lessen the administrative burden 
by providing increased State agency flexibility in program operation 
and by allowing State agencies to streamline their program 
requirements. PRWORA and the Balanced Budget Act required most of the 
changes made in this rule and the changes were effective upon enactment 
of these statutes. FNS is not aware of any case where the discretionary 
provisions of the rule would preempt State law. In addition, we are 
willing to approve a waiver of any discretionary provision in this rule 
where: (1) A State agency can demonstrate that its own procedures would 
be more effective and efficient; (2) providing such a waiver would not 
result in a material impairment of any statutory or regulatory rights 
of participants or potential participants; and (3) it would otherwise 
be consistent with the waiver authority set out at 7 CFR 272.3(c).

Regulatory Impact Analysis

Costs/Benefits

    There are no new effects of implementing the work-related 
provisions of PRWORA on food stamp recipients. The Regulatory impact 
analysis associated with the proposed PRWORA rule, published December 
23, 1999 (64 FR 72201-72202), contains the expected impact of those 
provisions. State agencies have already implemented those changes and 
no further impact is expected following publication of this final rule. 
Other than the effects of eliminating the maximum slot reimbursement 
rates, there are no new effects of implementing the work-related 
provisions of the Balanced Budget Act. The Regulatory Impact Analysis 
associated with the interim final Balanced Budget Act rule, published 
September 3, 1999 (64 FR 48252-48254), contained the expected impact of 
the provisions, which State agencies have already implemented. The 
provision to eliminate the maximum slot reimbursement rate is expected 
to increase Food Stamp Program expenditures by a range of $25.3 million 
to $62.0 million, depending on State agency actions, over the period FY 
2002-FY 2012.

Need for Action--Food Stamp Provisions of the Balanced Budget Act of 
1997

    We believe that the regulatory effect of removing the maximum slot 
rates will have very little effect on State agencies' overall E&T 
spending patterns, which currently fall into four categories: (1) The 
12 alternative reimbursement State agencies currently not bound by 
reimbursement rates as long as they provide work slots to all ABAWDs 
willing to comply with the work requirements. Data from the FNS-583 
report indicate that if they had been subject to the rates, they would 
have overspent the maximum slot rates by some 47 percent in FY 2000. 
(2) Another 12 State agencies that reported spending over their maximum 
slot rates in FY 2000 and were reimbursed for 50 percent of the amount 
they overspent from Federal funds. The FY 2000 FNS-583 reports indicate 
that these State agencies overspent the maximum slot rates by 17 
percent that year. (3) Another seven State agencies spending at maximum 
slot rates. (4) The 22 State agencies that spent under the slot rates 
in FY 2000.
    We assume that both the alternative reimbursement State agencies 
and the State agencies that have spent under their slot rates will not 
change their spending patterns. Because alternative reimbursement State 
agencies' spending was not limited by the maximum slot rates, their 
spending is not expected to change with the elimination of those rates. 
Likewise, removing the slot rates will have no impact those State 
agencies spending under their maximum slot rates.
    Removing the slot rates could affect the remaining 19 State 
agencies that either spent over or exactly at their slot rates in a 
number of ways. The Federal government reimbursed State agencies that 
had already spent over their slot rates for 50 percent of the cost, 
which was some $1.4 million in 2000. If slot rates are removed, and 
these State agencies do not change their spending patterns, all of the 
cost would be covered by 100 percent Federal funds. The increase in 
costs to the Federal government could be an additional $1.5 million. If 
these State agencies were to increase their spending from 17 percent 
reported by States that overspent the maximum slot rates to the 47 
percent that the alternative reimbursement State agencies spent in 
2000, the additional Federal cost could be as much as $3.6 million.
    If slot rates are removed, we assume that State agencies that 
currently spend at 100 percent of their slot rates might increase their 
spending in one of two ways: either by the 17 percent level of the 
other State agencies that overspent, or by the 47 percent over the 
maximum slot rates that the alternative reimbursement State agencies 
spent. If they were to do the former, the additional Federal cost could 
be slightly over one-half million dollars; if they were to do the 
latter, that cost increases to $1.5 million.
    The total cost in FY 2003 ranges from $2.3 million if State 
agencies increase their spending to 117 percent of the maximum to $5.6 
million if they increase their spending to 147 percent of the maximum. 
Allowing for inflation, the 10-year cost ranges from $25.3 to $62 
million.

Need for Action--Work Provisions of the Personal Responsibility and 
Work Opportunity Reconciliation Act of 1996

    This action is needed to implement the work provisions of Pub. L. 
104-193, the Personal Responsibility and Work Opportunity 
Reconciliation Act of 1996 (PRWORA). These provisions: (1) Establish 
new disqualification penalties for noncompliance with FSP work 
requirements; (2) permit certain State agencies to lower the age at 
which a child exempts a parent or caretaker from food stamp work rules; 
(3) revise and streamline the E&T Program; (4) provide State agencies 
the option of using a household's food stamp benefits to subsidize a 
job for a household member participating in a work supplementation or 
support program; and (5) permit qualifying States to provide certain

[[Page 41591]]

households with cash in lieu of food stamps.

Benefits

    State agencies will benefit from the provisions of this rule 
because they streamline FSP work requirements, simplify the 
disqualification requirements for failure to comply with work rules, 
and provide greater flexibility for State agencies to operate their 
employment and training programs. Removing the maximum slot rates will 
benefit States by enhancing administrative simplification and 
increasing program access to greater numbers of recipients.
[GRAPHIC] [TIFF OMITTED] TR19JN02.000

Paperwork Reduction Act

    This final rule contains information collections which are subject 
to review by the Office of Management and Budget (OMB) under the 
Paperwork Reduction Act of 1995 (Pub. L. 104-13) (44 U.S.C. 3507).
    The reporting and recordkeeping burdens associated with the 15 
percent exemption and the increased funding for State E&T programs 
authorized by the Balanced Budget Act and addressed in this rule 
necessitated a revision to a previously approved information collection 
activity, the Employment and Training Program Report (FNS-583), 
approved under OMB No. 0584-0339. Because the Balanced Budget Act 
mandated implementation of the food stamp provisions addressed in this 
rule effective October 1, 1997, without regard to whether regulations 
were promulgated to implement them, FNS submitted an emergency request 
to OMB on February 17, 1998, to revise the information collection for 
the FNS-583 form to reflect the requirements of the statute. FNS 
estimated the total annual burden hours associated with the revised 
FNS-583 to be 195,363 hours--182,643 hours for the work registration 
process, 2,762 hours for the 15 percent ABAWD exemption, and 9,958 
hours for the E&T funding requirements. OMB approved the burden 
estimate for the revised form for six months, with an expiration date 
of August 31, 1998.
    On April 27, 1998, FNS issued a notice in the Federal Register (63 
FR 20567) describing in detail the revised collection of information 
and requesting comments. FNS received no comments from the general 
public or other public agencies about the information collection.
    On September 23, 1998, FNS received an extension of OMB's approval 
of the revised burden estimate for the FNS-583 through September 30, 
2001.
    On June 8, 2001, FNS issued a notice in the Federal Register (66 FR 
30877) inviting the general public and other public agencies to comment 
on the proposed extension of the information collection previously 
approved. FNS received one comment, which suggested that FNS provide 
State agencies the means to electronically submit their FNS-583 
reports, and that FNS create an online help system with detailed 
instructions for completing the form. No action was necessary because 
State agencies already have the ability to submit their FNS-583 reports 
electronically via the Food Stamp Program Integrated Information System 
(FSPIIS). Additionally, FSPIIS contains a through help system, recently 
revised, which provides detailed instructions for completing each area 
of the FNS-583.
    On September 12, 2001, FNS submitted to OMB a request to approve a 
revised total annual burden of 190,541 hours associated with the FNS-
583: (1) 84,657 hours for household members participating in the work 
registration process; (2) 42,328 hours maintaining data on work 
registration; (3) 708 hours tracking the numbers of ABAWDs exempted 
under the 15 percent exemption allowance; (4) 60,800 hours recording 
ABAWD E&T activities; and (5) 2,048 hours compiling and recording data 
on the FNS-583.
    On December 21, 2001, OMB approved an extension of OMB No. 0584-
0339 through December 31, 2004.
    Sections 272.2 and 273.7 contain information collection 
requirements. The Food and Nutrition Service submitted a copy of this 
section to OMB for its review.
    The regulations at 7 CFR 272.2 require that State agencies plan and 
budget program operations and establish objectives for each year. 
Section 273.7 contains requirements for the State

[[Page 41592]]

Employment and Training Plan, one of the required planning documents. 
In the interest of State flexibility, the PRWORA provisions addressed 
in this rule deleted State E&T planning requirements for describing the 
intensity of E&T services, conciliation procedures, and Statewide 
limits for dependent care reimbursements, while adding the requirement 
that State agencies provide a description of their mandatory 
disqualification procedures and periods for noncompliance with FSP work 
requirements.
    The respondents are 53 State agencies and they are required to 
respond once a year. It is estimated that the total annual reporting 
burden is 3,768 hours.
    The PRWORA provisions addressed in this rule deleted reporting 
burdens in the interest of State flexibility, while adding a new burden 
associated with each State agency's mandatory disqualification 
procedures. Thus, the overall reporting and recordkeeping burden for 
this proposed information collection is unchanged.
    PRWORA provided State agencies the option of implementing work 
supplementation or support programs. In these programs the cash value 
of public assistance benefits, plus food stamps, is provided to an 
employer as a wage subsidy to be used for hiring and employing public 
assistance recipients. This rule proposes to add the work 
supplementation or support plan, as required at Sec. 273.7(l)(1), to 
the planning requirements at 7 CFR 272.2.
    The potential respondents are any of the 53 State agencies that may 
opt to initiate a work supplementation or support program. The one-time 
burden associated with a State agency creating a plan for a work 
supplementation or support program is estimated to be 100 hours. 
However, since no State agency has opted to initiate a work 
supplementation or support program since the enactment of PRWORA, it is 
anticipated that this provision will not change the burden associated 
with this information collection.
    In the proposed rule dated December 23, 1999 (64FR72196) at page 
72209, FNS solicited comments from organizations and individuals on: 
(a) Whether the proposed collection of information is necessary for the 
proper performance of the functions of the agency, including whether 
the information will have practical utility; (b) the accuracy of the 
agency's estimate of the burden of the proposed collection of 
information including the validity of the methodology and the 
information to be collected; (c) ways to enhance the quality, 
usefulness, and clarity of the information to be collected; and (d) 
ways to minimize the burden of the collection of information on those 
who are to respond, including through the use of appropriate automated, 
electronic, mechanical, or other technological collection techniques or 
other forms of information technology. Comments were directed to the 
Office of Information and Regulatory Affairs, OMB, Room 10235, New 
Executive Office Building, Washington, DC 20503; Attention Desk Officer 
for the Food and Nutrition Service.
    The comment period closed February 22, 2000. OMB did not receive 
any comments concerning the proposed information collection 
requirement.
    The information collection requirements contained in this rule are 
currently approved under OMB control number 0584-0339. FNS is in the 
process of revising these requirements with the intent of reducing 
administrative burden and accommodating the elimination of the maximum 
slot reimbursement rate. FNS plans to request OMB approval of these 
revisions after soliciting public comment via a Federal Register 
notice.

Background

    In August 1996, President Clinton signed into law the Personal 
Responsibility and Work Opportunity Reconciliation Act of 1996, or 
PRWORA (Pub. L. 104-193). PRWORA--popularly known as ``welfare 
reform''--contained several FSP work-related provisions that strengthen 
work requirements, promote personal responsibility, streamline E&T 
requirements, and greatly increase State flexibility.
    Section 815 of PRWORA dealt with disqualification for noncompliance 
with FSP work requirements. It added to the list of ineligible 
individuals at section 6(d)(1) of the Food Stamp Act those who: (1) 
Refuse without good cause to provide sufficient information to allow a 
determination of their employment status or job availability; (2) 
voluntarily and without good cause quit their job (previously limited 
to heads of households); (3) voluntarily and without good cause reduce 
their work effort and, after the reduction, work less than 30 hours a 
week; and (4) fail to comply with the workfare rules in section 20 of 
the Food Stamp Act (7 U.S.C. 2029). Section 815 removed the requirement 
that the entire food stamp household be disqualified if the head of the 
household is disqualified. Instead, it provided States the option to 
disqualify the entire household if the head of the household is 
disqualified. Section 815 established new mandatory minimum 
disqualification periods for individuals who fail to comply with work 
requirements. It required the Secretary of Agriculture (the Secretary) 
to determine the meanings of good cause, voluntary quit, and reduction 
of work effort. It required States to determine: (1) The meaning of 
other terms related to FSP work requirements; (2) the procedures for 
determining compliance with work requirements; and (3) whether an 
individual is actually complying with work requirements. Lastly, 
Section 815 specified that States may not use meanings, procedures, or 
determinations that are less restrictive on food stamp recipients than 
comparable meanings, procedures, or determinations are on recipients of 
assistance under State programs funded under title IV-A of the Social 
Security Act (title IV-A) (42 U.S.C. 601 et seq).
    Section 817 of PRWORA streamlined E&T administrative requirements 
for States by: (1) Requiring E&T components to be delivered through a 
statewide workforce development system, if available; (2) expanding the 
existing State option to apply E&T requirements to applicants 
(previously limited to job search); (3) eliminating the requirement 
that job search components be comparable with those operated under 
title IV-A; (4) removing requirements for work experience components 
that mandated they serve a useful public service and that they use a 
participant's prior training, experience, and skills; (5) removing 
specific Federal rules as to States' authority to exempt categories of 
individuals and individuals from E&T requirements, as well as removing 
the requirement that such exemptions be evaluated no less often than at 
each certification or recertification of the affected food stamp case; 
(6) deleting outdated language concerning applications by States to 
provide priority service to volunteer E&T participants; (7) removing 
the requirement that States permit, to the greatest practicable extent, 
work registrants exempted from E&T, as well as E&T participants who 
comply with or are in the process of complying with program 
requirements, to participate in E&T, while maintaining the States' 
option to permit voluntary participation; (8) removing the requirement 
for conciliation procedures to resolve disputes involving participation 
in E&T (9) removing the requirement that States' limits for payments 
or reimbursements of dependent care expenses to E&T participants must 
be at least as high as the FSP dependent care deduction cap; (10) 
removing the requirements for E&T performance standards; (11) adding 
the

[[Page 41593]]

provision that the amount of funds States use to provide E&T services 
to participants receiving benefits under a State program funded under 
title IV-A cannot exceed the amount of funds, if any, States used in 
fiscal year (FY) 1995 to provide E&T services to participants who were 
receiving benefits under title IV-A; and (12) removing the Secretary's 
authority to withhold funds from States for failure to comply without 
good cause with E&T requirements.
    Three other PRWORA provisions added new language to the Food Stamp 
Act. Section 816 permitted certain States to lower the age at which a 
child exempts a parent/caretaker from food stamp work rules. Section 
849 provided States the option of using a household's food stamp 
benefits to subsidize a job for a household member participating in a 
work supplementation program. Section 852 permitted qualifying States 
to provide certain households with cash in lieu of food stamps.
    Additionally, PRWORA made significant changes to the workfare 
provisions at section 20 of the Food Stamp Act. It removed the States' 
ability to comply with section 20 by operating a workfare program under 
title IV-A. It removed the provision that permitted States to combine 
the value of a household's food stamp allotment with the value of 
assistance received by the household from a program under title IV-A in 
order to determine the number of monthly hours of participation 
required of those households in a title IV-A community work experience 
program. Lastly, it eliminated disqualification provisions specific to 
the optional workfare program and incorporated noncompliance with 
workfare into the disqualification provisions governing noncompliance 
with FSP work requirements.
    PRWORA also contained major changes in the requirements for Federal 
financial participation in the E&T program. Subsequently, the Balanced 
Budget Act further amended those requirements.
    On August 5, 1997, the President signed into law the Balanced 
Budget Act. The Balanced Budget Act included two provisions addressed 
in this final rule. The first provision provided State agencies the 
authority to exempt up to 15 percent of a State agency's caseload that 
is subject to the food stamp time limit at section 6(o)(2) of the Food 
Stamp Act of 1977. The second provision provided additional funding for 
administration of the E&T Program.
    The Department received a combined total of 234 comments from 
eleven commenters on the interim Balanced Budget Act rule and 24 
commenters on the proposed PRWORA rule. The Department is grateful to 
each commenter for taking the time and effort to respond.
    We carefully reviewed and considered each comment while preparing 
this final rule for publication. We have addressed significant comments 
received in response to the regulatory changes proposed in the interim 
and proposed rulemakings. We will not address comments that were not 
germane to the amendments to the Food Stamp Act contained in PRWORA and 
the Balanced Budget Act or to resulting changes to the Federal 
regulations contained in the proposed rule. A number of comments 
supported our proposed changes. However, we will not discuss those in 
great detail.
    Provisions of the interim and proposed rulemakings that received no 
comment are not addressed in this rule. Those provisions are adopted as 
final without change. For an explanation of those provisions, please 
refer to the interim and proposed rulemakings.

Program Work Requirements

    Current regulations at 7 CFR 273.7 require that all physically and 
mentally fit food stamp recipients over the age of 15 and under the age 
of 60 who are not otherwise exempted be registered for work by the 
State agency at the time of application and once every 12 months 
thereafter. Work registrants are required to participate in an E&T 
program if assigned by the State agency, provide information regarding 
employment status and availability for work, report to an employer if 
referred, and accept a bona fide offer of suitable employment at a wage 
no less than the applicable State or Federal minimum wage, whichever is 
highest.
    Failure to meet these requirements without good cause results in a 
2-month disqualification. If the noncompliant individual is the head of 
the household, the entire household is disqualified for two months. 
Otherwise, only the individual is disqualified.
    Additionally, if the head of the household voluntarily quits a job 
of 20 or more hours a week, without good cause, 60 days or less prior 
to applying for food stamps, or at any time thereafter, the entire 
household is disqualified for 90 days.
    Eligibility may be reestablished by the household during a 
disqualification period if the head of the household becomes exempt 
from the work registration requirement, is no longer a member of the 
household, or complies with the requirement in question. Disqualified 
individuals may reestablish eligibility by becoming exempt from the 
work registration requirement or by complying with the requirement in 
question.
    Certain food stamp recipients are exempt from work registration 
requirements. Among these exempt individuals are those currently 
subject to and complying with a work registration requirement under 
title IV-A or the Federal-State unemployment compensation system. If 
these individuals fail to comply with any work requirement to which 
they are subject that is comparable to a FSP work requirement, they are 
subject to disqualification.
    In accordance with section 815 of PRWORA, which contains amendments 
to section 6(d)(1) of the Food Stamp Act, the rulemaking proposed 
several changes to current regulations. In this rule we are addressing 
only those proposed changes that received comment. Provisions of the 
proposed rulemaking that received no comment are adopted as final 
without change.

Work Registrant Requirements

    The current regulation at 7 CFR 273.7(a) contains the work 
registration requirement for nonexempt food stamp household members.
    Current regulations at 7 CFR 273.7(e) list the responsibilities and 
requirements for work registrants.
    Current regulations at 7 CFR 273.22 contain FSP workfare 
participation requirements for households. 7 CFR 273.22(f)(6) provides 
for penalties for failure to comply with workfare requirements.
    Section 815 of PRWORA aligned workfare penalties with other work 
penalties. It amended section 20 of the Food Stamp Act by removing 
workfare disqualification provisions, and further amended section 
6(d)(1) by including refusal without good cause to comply with section 
20 of the Food Stamp Act as a reason for disqualification.
    The Department proposed to amend 7 CFR 273.22(f) by removing 
paragraph (6), Failure to Comply, and to amend 7 CFR 273.7(e) by adding 
as a work registrant requirement participation in a workfare program if 
assigned.
    The Department further proposed to incorporate the work registrant 
requirements listed in 7 CFR 273.7(e) into 7 CFR 273.7(a), redesignate 
it 7 CFR 273.7(a)(1) and rename it work requirements.
    The Department also proposed to incorporate the participation 
requirements for strikers listed in 7 CFR 273.7(j); the requirements 
for registration of certain PA, GA, and refugee households listed in 7 
CFR 273.7(k); and the provisions for

[[Page 41594]]

applicants applying for SSI and food stamps under Sec. 273.2(k)(1)(i), 
listed in 7 CFR 273.7(l), into 7 CFR 273.7(a), and redesignate them 7 
CFR 273.7(a)(4), (a)(5), and (a)(6) respectively.
    Lastly, the Department proposed to make the following changes to 7 
CFR 273.7: (1) Redesignate the current provisions at 7 CFR 273.7(f), 
(g), (h), (i), (m), and (n) as 7 CFR 273.7(e), (f), (g), (h), (i), and 
(j) respectively; (2) delete the current provisions at 7 CFR 273.7(o) 
and (p) and add new provisions, designated 7 CFR 273.7(k) and (l); (3) 
redesignate the provisions for the optional workfare program at 273.22 
as 7 CFR 273.7(m); and (4) remove 7 CFR 273.22.
    Three commenters questioned the language in sections 
273.7(a)(1)(ii) and 273.7(a)(1)(iii) that requires each household 
member not exempt from Program work requirements to participate in an 
E&T program or in an optional workfare program if assigned by the State 
agency, to the extent required by the State agency. The commenters 
believe the language further empowers State agencies to create 
definitions related to work requirements.
    Section 815 of PRWORA added the phrase ``to the extent required by 
the State agency'' to the E&T participation requirement contained in 
section 6(d)(1)(A)(ii) of the Food Stamp Act. Its purpose is to 
emphasize State agency flexibility in setting participation 
requirements for E&T program components, within the limits specified in 
the Food Stamp Act. The Department has no discretion to remove this 
phrase from the E&T participation requirement. However, we agree that 
adding such language to the workfare program participation requirement 
at 273.7(a)(1)(iii) could result in a State agency inadvertently 
assigning food stamp household members to participate in workfare 
beyond the maximum legal limit of the number of hours resulting from 
dividing the value of the household's monthly food stamp allotment by 
the higher of the Federal or applicable State minimum wage. In this 
final rulemaking we are, therefore, removing the phrase ``to the extent 
required by the State agency'' from section 273.7(a)(1)(iii).
    No further comments germane to the proposed changes were received. 
With the change noted above, the Department is adopting in this final 
rulemaking the revisions as proposed.

Administrative Responsibilities

    Current regulations at 7 CFR 273.7(m) assign to State agencies the 
responsibility for determining the existence of good cause in instances 
when an individual fails or refuses to comply with FSP work 
requirements. 7 CFR 273.7(n) assigns to State agencies the 
responsibility for determining whether or not a voluntary quit 
occurred.
    Section 815 of PRWORA amended the Food Stamp Act by adding a new 
provision, section 6(d)(1)(D), Administration. Section 6(d)(1)(D) 
assigned to the Secretary responsibility for determining the meanings 
of ``good cause,'' ``voluntary quit,'' and ``reduction of work 
effort,'' and assigned to State agencies the responsibility for 
determining: (1) The meaning of all other terms relating to work 
requirements; (2) the procedures for determining whether an individual 
is in compliance with work requirements; and (3) whether an individual 
is actually in compliance with work requirements.
    However, section 6(d)(1)(D) prohibits State agencies from assigning 
a meaning, procedure, or determination that is less restrictive on food 
stamp recipients than a comparable meaning, procedure, or determination 
under a State program funded under title IV-A.
    The Department proposed to amend 7 CFR 273.7(a) by assigning to FNS 
the responsibility for determining the meaning of ``good cause,'' 
``voluntary quit,'' and ``reduction of work effort'' in regard to FSP 
work requirements. The Department further proposed to amend 7 CFR 
273.7(a) by assigning to the State agency responsibility for 
determining the meaning of all terms related to FSP work requirements; 
for establishing the procedures for determining whether an individual 
is in compliance with work requirements; and for determining whether an 
individual is in actual compliance with work requirements. The State 
agency may not use a meaning, procedure, or determination that is less 
restrictive on food stamp recipients than a comparable meaning, 
procedure, or determination is on recipients of a State program funded 
under title IV-A. The Department proposed to incorporate these 
provisions in new paragraphs, 7 CFR 273.7(a)(2) and 7 CFR 273.7(a)(3) 
respectively.
    Three commenters recommended that, for clarity, we cross-reference 
the subparagraphs of 273.7 that contain the good cause, voluntary quit, 
and reduction of work effort provisions. The Department has added the 
cross-references to the final rule. Otherwise, the Department is 
adopting in this final rulemaking the revisions as proposed.

Household Ineligibility

    Current regulations at 7 CFR 273.7(g)(1) require that an 
individual, other than the head of household, who fails or refuses 
without good cause to comply with FSP work requirements be disqualified 
from participation. However, if the head of household fails or refuses 
without good cause to comply, the entire household must be 
disqualified.
    Section 815 of PRWORA amended section 6(d)(1) of the Food Stamp Act 
by removing the requirement that the entire household be disqualified 
if the head of the household fails or refuses without good cause to 
comply. Instead, section 815 provided State agencies the option to 
disqualify the entire household if the head of household fails or 
refuses without good cause to comply with work requirements. It limited 
the length of such an optional household disqualification to the 
duration of the disqualification period applied to the individual or 
180 days, whichever is shorter.
    The Department proposed to amend redesignated 7 CFR 273.7(f) by 
eliminating the requirement in paragraph (1) that the entire household 
be disqualified if the head of the household fails to comply. The 
Department further proposed to add a new paragraph (4), Household 
Ineligibility, to provide that a State agency has the option to 
disqualify the entire household if the head of the household becomes 
ineligible to participate in the FSP for failure to comply with work 
requirements. If the State agency chooses this option, it may 
disqualify the household for the duration of ineligibility of the head 
of the household, or for 180 days, whichever is less.
    One commenter recommended that the State keep the current 
requirement that the entire household be disqualified if the head of 
household is disqualified. The State agency option to disqualify the 
entire household if the head of the household is disqualified is a 
statutorily mandated provision. The Department has no discretion to 
make such an action mandatory.
    Another commenter suggested that the final rule clarify that, when 
the entire household is disqualified when the head of household is 
disqualified, the household's disqualification must end if the head of 
the household becomes exempt from food stamp work requirements and his 
or her disqualification ends. The Department agrees that this 
clarification would be helpful. The final rule is amended to

[[Page 41595]]

include language to that effect at 273.7(f)(5)(iii)(C).
    No further comments on this proposed amendment were received. With 
the changes noted above, the Department is adopting in this final 
rulemaking the revisions as proposed.

Disqualification Periods

    Current regulations at 7 CFR 273.7(g)(1) establish a 2 month 
disqualification period to be imposed for failure or refusal without 
good cause to comply with FSP work requirements.
    Section 815 of PRWORA amended sections 6(d)(1)(a) and (b) of the 
Food Stamp Act to establish mandatory disqualification periods--based 
on the frequency of the violation--for individuals who fail to comply 
with FSP work requirements. For the first violation, the individual is 
disqualified until the later of the date the individual complies with 
FSP work requirements, 1 month, or, at State agency option, up to 3 
months. For the second violation, the individual is disqualified until 
the later of the date the individual complies with FSP work 
requirements, 2 months, or a period--determined by the State agency--
not to exceed 6 months. For the third or subsequent violation, the 
individual is disqualified until the later of the date the individual 
complies with FSP work requirements; 6 months; a date determined by the 
State agency; or, at the option of the State agency, permanently.
    The Department proposed to amend redesignated 7 CFR 273.7(f) by 
deleting reference to a 2 month disqualification period and by 
inserting a new paragraph, 7 CFR 273.7(f)(2), Disqualification Periods. 
The new paragraph (2) provides for minimum mandatory disqualification 
periods for individuals who fail or refuse without good cause to comply 
with work requirements. State agencies are free to elect which 
disqualification period they institute for each level of noncompliance. 
However, each State agency must apply its disqualification policy 
uniformly, statewide.
    We further proposed to add a new paragraph (d)(xiii) under 7 CFR 
272.2, Plan of operation. Paragraph (d)(xiii) contains the requirement 
for each State agency's disqualification policies.
    One commenter suggested that, because food stamp regulations 
require State agencies to retain program records for only 3 years, the 
final rule should permit State agencies to disregard events that took 
place more than 3 years previously when determining the length of the 
disqualification to be imposed under section 273.7(f)(2). We disagree. 
The Food Act makes it very clear that 3 years is a minimum period. 
Section 11(a) of the Food Stamp Act specifies that State agencies must 
keep ``such records as may be necessary to ascertain whether the 
program is being conducted in compliance with the provisions of this 
Act and the regulations issued pursuant to this Act. Such records shall 
be available for inspection and audit at any reasonable time and shall 
be preserved for such a period of time, not less than three years, as 
may be specified in the regulations issued pursuant to this Act.'' 
PRWORA requires State agencies to establish successively longer 
disqualification periods for each additional violation of FSP work 
requirements (up to the third violation). The Department has no 
authority to permit State agencies to disregard earlier violations when 
determining the disqualification period for a subsequent violation.
    With this change, the proposed redesignated 7 CFR 273.7(f) is 
adopted in the final rule.

Good Cause

    The current regulations at 7 CFR 273.7(m) assign to State agencies 
responsibility for determining good cause when an individual fails to 
comply with FSP work registration, E&T, and voluntary quit 
requirements. The regulations include as good cause circumstances 
beyond the individual's control. One example cited is the lack of 
adequate childcare for children ages 6 to 12.
    The current regulations at 7 CFR 273.7(n)(3) contain the good cause 
requirements specifically concerning voluntary quit, as well as the 
procedures for verifying questionable information concerning voluntary 
quit.
    Section 815 of PRWORA amended section 6(d)(1) of the Food Stamp Act 
by deleting language that included the lack of adequate child care for 
children between 6 and 12 as good cause for refusing to accept an offer 
of employment, and by assigning to the Secretary specific authority to 
define the meaning of good cause. We believe that Congress did not 
intend to eliminate lack of adequate child care as a valid good cause 
reason, thereby forcing parents to choose between the well-being of 
their children and the demands of FSP work requirements. Instead, by 
deleting this reference to a very specific, single instance of 
noncompliance, we believe Congress intended to eliminate any confusion 
about applying good cause criteria equitably across-the-board to all 
FSP work requirements. Therefore, lack of adequate childcare remains as 
a good cause reason for noncompliance.
    Although current good cause regulations remain basically unchanged, 
the Department proposed to take the opportunity to amend redesignated 7 
CFR 273.7(i) and redesignated 7 CFR 273.7(j) by combining the 
provisions under the specific heading ``Good Cause'' at redesignated 7 
CFR 273.7(i). We also proposed to add language to redesignated 7 CFR 
273.7(i) reminding State agencies that it is not possible for the 
Department to enumerate each individual circumstance that should or 
should not be considered good cause. State agencies must consider all 
facts and circumstances in each individual case concerning the 
determination of good cause.
    Three commenters recommended that Section 273.7(i)(3)(vii) be 
amended. This provision states that acceptance of a bona fide offer of 
employment of more than 20 hours a week (or employment paying at least 
the Federal minimum wage equivalent of 20 hours a week) that, because 
of circumstances beyond the individual's control, subsequently either 
does not materialize or results in employment of less than 20 hours a 
week (or earnings of less than the Federal minimum wage equivalent of 
20 hours a week) constitutes good cause for leaving employment. The 
commenters suggested that changing the number of hours to 30 a week 
would conform the good cause provision to the level of work effort 
necessary to exempt an individual from FSP work requirements and to the 
voluntary quit and reduction of work effort thresholds. The Department 
agrees. The final rule is amended accordingly.

Voluntary Quit

    Current regulations at 7 CFR 273.7(n) contain the procedures for 
disqualifying a household whose head voluntarily quits a job without 
good cause 60 days or less before applying for food stamps, or at any 
time thereafter. For purposes of establishing voluntary quit, a ``job'' 
is considered employment of 20 or more hours per week, or employment 
that provides weekly earnings at least equivalent to the Federal 
minimum wage multiplied by 20 hours. A Federal, State, or local 
government employee dismissed from employment because of participation 
in a strike is considered to have voluntarily quit without good cause.
    In the case of applicant households, if the State agency determines 
that a voluntary quit by the head of household was without good cause, 
the household's application for benefits will be denied and it will not 
be eligible for benefits for 90 days, starting with the date of the 
quit.

[[Page 41596]]

    In the case of participating households, if the State agency 
determines that a head of household voluntarily quit a job while 
participating in the FSP, or discovers that a quit occurred within 60 
days prior to application or between application and certification, the 
household will be disqualified from participation for 90 days, 
beginning with the first of the month after all normal adverse action 
procedures are completed.
    Following the end of a voluntary quit disqualification, a household 
may reapply and, if otherwise eligible, begin participation in the FSP. 
Eligibility may be reestablished during a disqualification period and 
the household may, if otherwise eligible, resume participation if the 
head of household secures new employment comparable to the job that was 
quit, or leaves the household. Eligibility may also be reestablished if 
the head of household becomes exempt from work registration. If the 
disqualified household splits, the disqualification follows the head of 
household. If that individual becomes head of a new household, that 
household must serve out the balance of the disqualification period.
    If a disqualified household applies for participation in the third 
month of its disqualification, it does not have to reapply in the next 
month. The State agency must use the same application to deny benefits 
in the remaining month of disqualification and to certify the household 
for any subsequent month(s) if it is otherwise eligible.
    Section 815 of PRWORA amended section 6(d)(1) of the Food Stamp Act 
by removing the requirement that only the head of household is subject 
to voluntary quit. As with all the other sanctionable actions listed in 
section 6(d)(1)(A), each individual household member was made subject 
to disqualification for a voluntary quit. The State agency was afforded 
the option of disqualifying the entire household if the quitter is the 
head of household.
    Section 6(d)(1) was further amended by eliminating the 90-day 
disqualification period for voluntary quit. Penalties for voluntary 
quit are based on the minimum mandatory disqualification provisions 
contained in PRWORA.
    Lastly, section 815 of PRWORA amended section 6(d)(1) by adding the 
provision that an individual who voluntarily and without good cause 
reduces work effort and, after the reduction, works less than 30 hours 
per week, must be disqualified.
    The Department proposed to retain the 60-day pre-application period 
for establishing voluntary quit and to apply the same standard when 
determining reduction of work effort for applicants. The voluntary quit 
and reduction in work effort provisions aim to deter individuals with 
reasonable income from intentionally ending or reducing that income to 
qualify for food stamps or to increase coupon allotments. We felt that 
60 days is a reasonable time span to use to gauge intent.
    One commenter suggested that the 60-day period for establishing 
voluntary quit or reduction in work effort is too long a time for 
caseworkers to obtain and evaluate as reliable verifications of 
potential good cause reasons for job quit or reduction in work effort.
    The Department agrees. Because of fluctuating work hours, personnel 
turnover, and other variables, the 60-day period may pose verification 
problems for State agencies. Reducing the period to 30 days will make 
it much easier for a caseworker to obtain reliable good cause 
information, without degrading the seriousness or the impact of good 
cause and reduction in work effort determinations. However, since some 
State agencies are committed to the 60-day ``look-back'' period for 
establishing voluntary quit and reduction of work effort, the 
Department believes it should afford each State agency the option to 
determine which period best suits its particular needs. The final rule 
is therefore amended to provide State agencies the option of 
establishing a period between 30 and 60 days for determining voluntary 
quit and reduction in work effort.
    We also proposed to increase the 20-hour/equivalent Federal minimum 
wage figure used in defining voluntary quit to 30 hours. Increasing the 
number of hours to 30 provides a logical connection between voluntary 
quit and the reduction of work effort threshold mandated by Congress. 
The 30-hour figure also conforms to the number of hours of work 
required to exempt an employed recipient from FSP work requirements. 
The Department welcomed comments on this issue. None were received.
    Congress clearly stated that any reduction in hours of employment 
to less than 30 hours a week without good cause must be penalized. We 
do not believe Congress intended that a minimum wage equivalent of 30 
hours be considered when establishing voluntary reduction in work 
hours. The Department proposed to make this clear in the rule. We also 
proposed to incorporate good cause for reduction of work effort into 
the good cause provision at redesignated 7 CFR 273.7(i). There were no 
germane comments concerning the reduction in work effort provision.
    One commenter questioned the current regulatory requirement that a 
claim be established in certain instances of voluntary quit or 
reduction in work effort. If a voluntary quit or reduction in work 
effort occurs in the last month of a certification period, or the State 
agency establishes voluntary quit or reduction in work effort in the 
last 30 days of the certification period, and the individual does not 
apply for food stamp benefits by the end of the certification period, 
the State agency must establish a claim for the benefits received by 
the individual for the number of months equal to the mandatory 
disqualification period. The commenter believes this requirement is 
confusing, places an undue claims burden on State agencies, and is 
inconsistent with penalties for noncompliance with all other FSP work 
requirements. We agree. We are taking this opportunity to revise the 
voluntary quit language by eliminating the requirement to establish 
claims in such situations. This final rule will clarify that the 
appropriate mandatory disqualification period is to be imposed after 
timely and adequate notice of adverse action is taken, regardless of 
whether the individual reapplies for food stamps.
    No further comments on the voluntary quit provision were received. 
With the revisions discussed above, this final rulemaking adopts these 
provisions.

Caretaker Exemption

    Current regulations at 7 CFR 273.7(b)(iv), pursuant to section 
6(d)(2)(B) of the Food Stamp Act, exempt from FSP work requirements a 
parent or other household member who is responsible for the care of a 
dependent child under six. Prior to the enactment of PRWORA, eight 
State agencies had submitted requests to waive this regulation to 
require caretakers of children less than six years old to participate 
in their proposed welfare reform demonstration projects. The purpose of 
these waivers was to conform FSP and title IV-A work requirements in 
order to provide the State agencies maximum flexibility in the 
operation of their demonstrations. The Department believed that the 
States' requests violated section 17(b) of the Food Stamp Act, which 
prohibited the approval of a waiver that would lower or further 
restrict the benefit levels of food stamp recipients. The Department 
concluded that the approval of these waivers would subject food stamp

[[Page 41597]]

recipients to work requirements and possible sanctions that they would 
not be subject to under regular program rules. Therefore, the waivers 
were denied.
    Section 816 of PRWORA amended section 6(d)(2) of the Food Stamp Act 
by adding an option to allow State agencies that previously requested a 
waiver to lower the age of the qualifying dependent child to less than 
six. Under this option, State agencies that had requested such a 
waiver, but were denied before August 1, 1996, could lower the age of a 
qualifying dependent child to between one and six years. This option 
could be exercised for a period of not more than three years.
    The Department proposed to amend 7 CFR 273.7(b)(iv) to include a 
provision offering this option to the State agencies of Alabama, 
Kansas, Maryland, Michigan, North Dakota, Virginia, Wisconsin, and 
Wyoming. According to FNS records, these were the State agencies that 
were denied the exemption waivers before August 1, 1996. The Department 
proposed to allow these State agencies, upon submission of written 
notification to the Department, to lower the age of a dependent child 
that qualifies a parent or other household member for an exemption to 
between one and six, for a maximum of 3 years. The State agencies of 
Alabama, North Dakota, and Virginia never implemented the option. The 
remaining eligible State agencies implemented the option on the 
following dates: Kansas--March 3, 1997; Maryland--November 11, 1996; 
Michigan--November 1, 1996; Wisconsin--January 1, 1997; and Wyoming--
January 1, 1997.
    Commenters pointed out that, like all other PRWORA provisions for 
which a specific effective date was not specified, the caretaker option 
should have been made effective upon enactment of the law on August 22, 
1996. Therefore, they believe the 3 years have passed and the provision 
is obsolete. They recommend that it be omitted from the final rule.
    The Department agrees that the effective date for the caretaker 
option should have been established as August 22, 1996. Therefore, the 
3-year implementation period has expired and the provision is obsolete. 
In this final rulemaking, the Department is deleting the proposed 
caretaker exemption at 273.7(b)(iv)(B), and is redesignating 
273.7(b)(iv)(A) as 273.7(b)(iv).

Employment and Training Program

    Section 817 of PRWORA amended section 6(d)(4) of the Food Stamp 
Act. Section 6(d)(4) contains provisions for the E&T Program. In the 
December 23, 1999, PRWORA rulemaking the Department proposed several 
changes to current E&T regulations. In this rule we are addressing only 
those proposed changes that received comment. Provisions of the 
proposed rulemaking that received no comment are adopted as final 
without change.

Job Search and Job Search Training

    Current regulations at 7 CFR 273.7(f)(1)(i) authorize a State 
agency to offer a job search component comparable to that required of a 
program under title IV-A. Aside from the initial applicant job search 
period, discussed above, the work registrant can be required to conduct 
a job search of up to eight weeks (or an equivalent period) in any 
consecutive 12-month period. The first such 12-month period begins at 
any time following the close of the initial period.
    Section 817 of PRWORA amended section 6(d)(4)(B) of the Food Stamp 
Act by deleting the title IV-A comparability requirement for job 
search.
    The Department proposed to amend redesignated 7 CFR 273.7(e)(1)(i) 
by deleting the requirement that a State agency's E&T job search 
component must be comparable to its title IV-A job search component.
    In keeping with the State agency flexibility offered under PRWORA, 
the Department further proposed to amend redesignated 7 CFR 
273.7(e)(1)(i) by removing the annual 8-week job search limitation. 
Each State agency will be free to conform its E&T job search to that of 
its title IV-A work program, or to establish job search requirements 
that, in the State agency's estimation, will provide participants a 
reasonable opportunity to find suitable employment. However, the 
Department agrees with one commenter who believes that if a reasonable 
period of job search does not result in employment, placing the 
individual in a training or education component to improve job skills 
will likely be more productive. The final rule includes a statement to 
that effect.
    Lastly, the Department proposed to amend redesignated 7 CFR 
273.7(e)(1)(i) by adding that, in accordance with section 6(o)(1)(A) of 
the Food Stamp Act and 7 CFR 273.24 of the regulations, a job search 
program operated as a component of a State's E&T program does not meet 
the definition of work program relating to the participation 
requirements necessary to maintain eligibility for able-bodied adults 
without dependents (ABAWDs) subject to the 3-month food stamp time 
limit. The Department proposed to add this same notice at redesignated 
7 CFR 273.7(e)(1)(ii), which describes job search training programs. 
These additions also specify that the prohibitions against E&T job 
search and job search training do not apply to such programs operated 
under title I of the Workforce Investment Act of 1998 (29 U.S.C. 2801 
et seq.) (the WIA), or under section 236 of the Trade Act of 1974 (19 
U.S.C. 2296) (the Trade Act). Further, we proposed to amend 
redesignated 7 CFR 273.7(e)(1) to add that job search or job search 
training activities, when offered as part of other E&T program 
components, are acceptable as long as those activities comprise less 
than half the required time spent in the other components.
    Section 273.7(e)(1)(ii) explains that a reasonable job search 
training and support activity includes job skills assessments, job 
finding clubs, training in techniques for employability, job placement 
services, or other direct training or support activities, including 
educational programs determined by the State agency to expand the job 
search abilities or employability of those subject to the program. A 
commenter urged the Department to provide a basis for evaluating 
whether or not a local district's job search requirements are, in fact, 
reasonable under the circumstances, and whether or not they are 
designed to effectively assist individuals in obtaining employment. 
They believe the final rule should clarify that when a local district's 
program requirements are unreasonable, individuals may not be 
disqualified because they do not participate. The Department disagrees. 
The State agency is in the best position to evaluate reasonableness for 
its clientele and local labor markets. Each State agency must be 
permitted to establish what it believes is a reasonable and effective 
program for its circumstances. However, in cases where the Department 
determines that a State agency's requirements are unreasonable, it 
will, in accordance with the authority granted it under section 6(d) of 
the Food Stamp Act, require the State agency to amend its practices.
    No other comments were received concerning the proposed amendments. 
The Department is adopting in this final rulemaking the revisions as 
proposed.

Workfare

    Current regulations at 7 CFR 273.7(f)(1)(iii) authorize assignment 
to workfare components operated in accordance with section 20 of the 
Food Stamp Act and 7 CFR 273.22.
    As part of a workfare program, the Food Stamp Act permits operating 
agencies to establish a job search period

[[Page 41598]]

of up to 30 days following certification prior to making a workfare 
assignment. During this period, the participant is expected to look for 
a job. The job search period may only be conducted at certification, 
not at recertification. This job search activity is part of the 
workfare assignment and not a job search ``program.'' Therefore, 
participants are to be considered as participating in and complying 
with the requirements of workfare, thereby satisfying the ABAWD work 
requirement.
    The Department proposed to amend redesignated 7 CFR 
273.7(e)(1)(iii) to include a statement that makes it clear that the 
job search period authorized by State agencies for workfare components 
is not a job search ``program'' and that participants are considered to 
be participating in and complying with the requirements of workfare.
    A commenter recommended that the reference to certification in this 
section, as the permissible starting point for the 30-day job search 
phase of workfare, be removed in order to authorize assignment of 
applicants to workfare job search. Section 20(e) of the Food Stamp Act 
allows the operating agency to permit a job search period, prior to 
making workfare assignments, following a determination of eligibility. 
The language of the Food Stamp Act is very specific as to the time 
frame in which workfare job search is permitted. The Department has no 
discretion to make the recommended change. However, as discussed above, 
under section 6(d)(4)(B) of the Food Stamp Act, the State agency may 
impose a job search requirement on a program applicant at the time of 
application, for a period adequate to meet program goals.
    No other comments were received concerning the proposed amendments. 
The Department is adopting in this final rulemaking the revisions as 
proposed.

Federal Financial Participation

    Section 817 of PRWORA amended section 6(d)(4) of the Food Stamp Act 
by adding a provision that limits the amount of money State agencies 
may spend to provide E&T program services to food stamp recipients who 
also receive benefits under a State program funded under title IV-A. 
The limit is the amount of Federal E&T funds the State agency spent on 
E&T services for the same category of recipients in FY 1995. The 
Department proposed, therefore, to add, at 7 CFR 273.7(d)(1)(i)(F), the 
provision that, notwithstanding any other provision of the paragraph, 
the amount of E&T funds, including participant and dependent care 
reimbursements, a State agency uses to serve participants who are 
receiving benefits under a State program funded under title IV-A may 
not exceed the amount of funds the State agency used in FY 1995 to 
serve participants who were receiving benefits under a State program 
funded under title IV-A.
    Based on information provided by each State agency, the Department 
established claimed Federal E&T expenditures on this category of 
recipients in FY 1995 for the State agencies of Colorado ($318,613), 
Utah ($10,200), Vermont ($1,484,913), and Wisconsin ($10,999,773). 
These State agencies may spend a like amount each fiscal year to serve 
food stamp recipients who also receive title IV-A assistance, if they 
choose. Other State agencies are prohibited from expending any Federal 
E&T funds on title IV-A recipients.
    Two commenters recommended that the final rule clearly identify the 
group to which the funding prohibition applies (title IV-A cash 
recipients or title IV-A supportive services recipients). This final 
rulemaking makes clear that the funding prohibition applies to 
individuals receiving cash assistance under title IV-A of the Social 
Security Act. The Department is amending the language at 7 CFR 
273.7(d)(1)(i)(F) in this final rule to change the word ``benefit'' to 
``cash assistance.''

Funding for Food Stamp Employment and Training Programs

    Prior to enactment of the Balanced Budget Act, FSP regulations at 
section 273.7(d) required FNS to allocate an annual 100 percent 
Federally funded E&T grant to State agencies based on the number of 
work registrants in each State compared to the number of work 
registrants nationwide. The grant requires no State match. Each State 
agency must receive at least $50,000 in 100 percent Federal funds. 
State agencies are required to use their E&T grants to fund the 
administrative costs of planning, implementing and operating E&T 
programs. FNS pays 50 percent of all other administrative costs above 
those covered by the 100 percent Federal grant that State agencies 
incur in operating their E&T programs.
    Section 1002 of the Balanced Budget Act authorized an additional 
$599 million over five years in 100 percent Federal funding for the 
operation of the E&T programs. The Agricultural Research, Extension, 
and Education Reform Act of 1998 (Pub. L. 105-185) reduced authorized 
levels by $100 million in FY 1998 and $45 million in FY 1999. 
Additionally, the Agriculture, Rural Development, Food and Drug 
Administration, and Related Agencies Appropriations Act of 2001, signed 
into law on October 28, 2000, reduced the authorized level for FY 2001 
by $25 million. The purpose of the additional E&T funding is to enable 
State agencies to create additional education, training, and workfare 
opportunities that permit ABAWDs subject to the 3-month time limit to 
remain eligible. By providing State agencies with the resources to 
create more opportunities, the additional Balanced Budget Act funding 
will help insure that it is only those individuals who deliberately 
choose not to satisfy the program's work requirements who lose their 
eligibility and not those who are willing to work but cannot find 
opportunities to do so.
    In the September 3, 1999, interim rulemaking, the Department 
amended Food Stamp Program regulations at Sec. 273.7 to implement the 
requirements of the Balanced Budget Act. In this final rule we are 
addressing only those amendments that received comment. Provisions of 
the interim rulemaking that received no comment are adopted as final 
without change.

Allocation of E&T Grants

    Prior to the enactment of the Balanced Budget Act, the regulation 
at 7 CFR 273.7(d)(1)(i)(A) required that nonperformance based 100 
percent Federal E&T funding be allocated among State agencies based on 
the number of work registrants in each State relative to the total 
number of work registrants nationwide. To target Federal E&T funding 
toward serving ABAWDs subject to the 3-month time limit, the Balanced 
Budget Act amended section 16(h)(1) of the Food Stamp Act to require 
that, in FY 1999 through FY 2002, E&T funding be allocated to State 
agencies based on (1) changes in each State's food stamp caseload; and 
(2) each State's portion of food stamp recipients who are not eligible 
for an exception to the time limit under section 6(o)(3) of the Food 
Stamp Act and who do not reside in an area of the State granted a 
waiver of the ABAWD work requirement under section 6(o)(4) of the Food 
Stamp Act, or who do reside in an area of the State granted a waiver of 
the ABAWD work requirement under section 6(o)(4) of the Food Stamp Act 
if the State agency provides E&T services in the area to food stamp 
recipients who are subject to the work requirement. The interim 
rulemaking amended the regulations at 7 CFR 273.7(d)(1)(i)(C) to 
describe the new procedures for allocating 100 percent Federal E&T 
funding.
    Prior to the Balanced Budget Act, the regulation at 7 CFR 
273.7(d)(1)(i)(A)

[[Page 41599]]

required that FNS, using work registrant data from the most recent 
fiscal year, allocate nonperformance based 100 percent Federal E&T 
funding on the basis of work registrants in each State as a percentage 
of work registrants nationwide. Section 1002 of the Balanced Budget Act 
amended section 16(h) of the Food Stamp Act to require that, for 
purposes of determining each State agency's allocation of 100 percent 
Federal E&T funds in a fiscal year, FNS estimate the portion of food 
stamp recipients residing in each State who are not eligible for an 
exception under section 6(o)(3) of the Food Stamp Act using the 1996 
Quality Control survey data. The interim rulemaking amended the 
regulation at 7 CFR 273.7(d)(1)(i)(D) to incorporate this requirement.
    Prior to enactment of the Balanced Budget Act, the regulation at 7 
CFR 273.7(d)(1)(i)(B) required that each State agency receive a minimum 
of $50,000 in 100 percent Federal E&T funding each fiscal year. The 
Balanced Budget Act left this requirement unchanged. However, the 
interim rulemaking amended the regulation at 7 CFR 273.7(d)(1)(i)(E) to 
revise the manner in which the minimum allocation is to be calculated.
    Prior to enactment of the Balanced Budget Act, the regulation at 7 
CFR 273.7(d)(1)(i)(D) authorized FNS, with the concurrence of the State 
agencies involved, to adjust the level of E&T grants during a fiscal 
year to move funds unlikely to be used by State agencies and reallocate 
them to State agencies that could use the funds more productively. The 
Balanced Budget Act contains the same authority, but it amended section 
16(h)(1)(C) of the Food Stamp Act to authorize FNS to reallocate 
unexpended funds in the fiscal year in which they were allocated or in 
the subsequent fiscal year. The interim rule amended the regulation at 
7 CFR 273.7(d)(1)(i)(F) to incorporate this authorization.
    One commenter suggested that waivers exempting ABAWDs from the work 
requirement should be approved or denied before the allocation of 
funding for the E&T program. The Department does not agree with this 
suggestion. We act promptly on all ABAWD waivers. They are generally 
approved within 60 days of being submitted, and they are extended for 
no more than 1 year. The waiver cycle began after passage of PRWORA in 
August 1996. From the date on which the State agency submitted its 
request, the waiver would expire in approximately 1 year and 60 days. 
The waiver process is not associated with the E&T allocation. State 
agencies can monitor the employment situation in their States and if 
they think it is warranted, they can ask for waivers outside of their 
existing cycle. However, FNS will ensure that all waivers granted in a 
reasonable time before the E&T allocations are computed will be 
considered in the computation.

Use of Funds

    The Balanced Budget Act amended section 16(h) of the Food Stamp Act 
to require that not less than 80 percent of a State agency's 100 
percent Federal E&T allocation each fiscal year--both the base and 
additional Balanced Budget Act allocations--be used during the fiscal 
year to serve food stamp recipients not eligible for an exception under 
section 6(o)(3) of the Food Stamp Act who are placed in and comply with 
a program described in subparagraph (B) or (C) of section 6(o)(2) of 
the Food Stamp Act. The interim rule added a new section, designated 7 
CFR 273.7(d)(1)(ii) to the regulations. The new section, titled ``Use 
of Funds,'' contains the requirements for State agency use of 100 
percent Federal E&T funding established by the Balanced Budget Act.
    Section 7 CFR 273.7(d)(1)(ii) requires that not less than 80 
percent of the 100 percent Federal funds a State agency receives in a 
fiscal year be used to serve ABAWDs subject to the 3-month time limit 
who are placed in and comply with a qualifying work program for at 
least 20 hours a week or a workfare program as described in 7 CFR 
273.7(m) or a comparable program. ``Work program'' is defined as an 
education or training activity operated under title I of the WIA (which 
replaces the Job Training Partnership Act (JTPA) effective July 1, 
2000); section 236 of the Trade Act; or an E&T program operated or 
supervised by a State or a political subdivision of a State that meets 
standards approved by the Governor of the State, including the Food 
Stamp E&T Program, other than a job search or job search training 
program.
    Section 7 CFR 273.7(d)(1)(ii) provides that the remaining 20 
percent of a State agency's 100 percent Federal E&T grant may be used 
to provide work activities for food stamp recipients who meet one of 
the criteria for exception in section 6(o)(3) of the Food Stamp Act, or 
on work activities that do not qualify either as work or workfare 
programs, such as job search or job search training programs for any 
food stamp recipient.
    Section 7 CFR 273.7(d)(1)(ii) also provides that, if a State agency 
spends more than 20 percent of the 100 percent Federal E&T funds it 
receives in a fiscal year to provide work activities for food stamp 
recipients who are eligible for an exception under section 6(o)(3) of 
the Food Stamp Act, or on activities that do not qualify either as work 
or workfare programs under sections 6(o)(2)(B) and (C) of the Food 
Stamp Act, the allowable costs incurred that are in excess of the 20 
percent threshold will be reimbursed at the normal administrative 50-50 
match rate.
    Several commenters maintained that the final regulation should make 
clear that, under some circumstances, job search or job search training 
can be qualifying activities for ABAWDs. The Department agrees. 
Language has been added to 7 CFR 273.7(d)(1)(ii) in this final 
rulemaking to clarify that: (1) Job search and job search training 
programs operated under title I of the WIA or under section 236 of the 
Trade Act do meet the definition of work program; (2) job search or job 
search training activities, when offered as part of other E&T program 
components, are acceptable as long as those activities comprise less 
than half the required time spent in the other components; and (3) a 
job search period of up to 30 days following initial certification 
prior to making a workfare assignment is part of the workfare 
assignment, and not a job search ``program.''
    One commenter pointed out that section 7(j) of the Food Stamp Act 
authorizes State agencies to offer State purchase programs to provide 
benefits for legal immigrants denied eligibility under sections 402 or 
403 of PRWORA and ABAWDs who are no longer eligible to participate in 
the FSP because their 3-month time limit was reached. The commenter 
believes that the regulations should make clear that States may use 100 
percent Federal E&T funds to fund work activities for legal immigrants 
receiving food stamps through such a State purchase program. The 
Department disagrees. State purchase program participants receive food 
stamp benefits that are paid for with State money and are not 
considered Federal food stamp recipients. As provided in section 
7(j)(6) of the Food Stamp Act, administrative and other costs incurred 
in issuing a benefit under the State purchase program are not eligible 
for Federal funding.
    Except for the addition of the clarification noted above, the 
Department is publishing this provision in the final rulemaking as it 
was issued in the interim rule.

Component Costs

    The Department is taking the opportunity in this final rule to 
eliminate the reimbursement rate structure currently in effect. The 
rate structure, which represented the

[[Page 41600]]

maximum amount that FNS would reimburse State agencies for the costs of 
creating qualifying opportunities for ABAWDs to remain eligible, was 
initiated in the interim rule.
    Section 1002 of the Balanced Budget Act amended section 16(h)(1) of 
the Food Stamp Act to require FNS to monitor State agency expenditures 
of 100 percent Federal E&T funding, including the costs of individual 
components of State E&T programs. The Balanced Budget Act also provided 
FNS the discretion to set reimbursable costs for individual components 
of State E&T programs, making sure that the amount spent or planned to 
be spent on the components reflect the reasonable cost of efficiently 
and economically providing components appropriate to recipients' 
employment and training needs.
    The interim rulemaking amended food stamp regulations to add a new 
section that contained requirements regarding E&T components costs. The 
new section was designated section 273.7(d)(1)(iv) and titled 
``Component Costs.''
    FNS determined that setting reimbursement rates for E&T activities 
was necessary to promote the intent of the increased E&T funding, which 
was to create a sufficient number of work opportunities, or ``slots,'' 
so that as many ABAWDs that wished to work could be given the 
opportunity to do so before losing eligibility for the program. FNS 
believed that use of the reimbursement rates would help ensure that the 
maximum number of slots was created with the available funds, thus 
potentially keeping as many ABAWDs as possible eligible for the 
program.
    The reimbursement rates--$30 for an offered work slot and $175 for 
a filled work slot--represented FNS's estimate of the reasonable cost 
of efficiently and economically providing work slots. The rates applied 
to all 100 percent Federal E&T funds that a State spent to provide 
qualifying activities that met the work requirement for ABAWDs, 
including those who reside in areas of a State granted a waiver under 
section 6(o)(4) of the Food Stamp Act and those granted an exemption 
from the requirement under section 6(o)(6) of the Food Stamp Act.
    To provide State agencies greater flexibility to meet the intent of 
the increased funding provided under the Balanced Budget Act, FNS 
offered State agencies the opportunity to test an alternative to the 
reimbursement rates. Under the alternative, a participating State 
agency was permitted to spend its 100 percent Federal E&T allocation 
without regard to the slot rates if the State agency guaranteed to 
offer a qualifying education, training, or workfare opportunity to 
every ABAWD applicant and recipient who exhausted the 3-month food 
stamp time limit, who did not reside in an area of the State in which 
the ABAWD work requirement was waived, and who was not exempt from the 
ABAWD work requirement under each State agency's 15 percent exemption 
allowance in accordance with section 6(o)(6) of the Food Stamp Act. By 
fiscal year 2001 13 State agencies were operating under the 
alternative.
    Numerous commenters stated their belief that the reimbursement 
rates established by FNS are too low and actually discourage--rather 
than encourage--State agencies from spending 100 percent Federal E&T 
money. They stated that the reimbursement rates make it impossible to 
effectively operate an E&T program. Unless the State can provide up 
front funding, no public or private non-profit agency can operate a 
program with the restricting $175 cost per participating client.
    Now that FNS has had the opportunity for further consideration of 
this issue, we believe that the reimbursement rate structure has 
constrains State agencies' ability to serve ABAWDs effectively in State 
E&T programs and should be eliminated. This will allow State agencies 
to fully utilize the funds available to them to create opportunities 
for ABAWDs that meet PRWORA work requirements or that go beyond the 
requirements in PRWORA but help ABAWDs become and stay employed. Such 
opportunities could include expanded vocational training activities 
that are more expensive than normal, and post secondary education in 
subject areas directly related to employment. Because the law requires 
that 80 percent of all E&T funds either be earmarked for ABAWDs or 
returned to FNS for reallocation, the intent of the Act--efficiently 
and economically providing ABAWDs the opportunity to remain eligible-
would continue to be met, and adequate funding would remain available 
for use by State agencies.
    However, FNS will closely monitor State agency spending of 100 
percent Federal E&T funds. We will pay particular attention to State 
agency estimates of component costs, as detailed in State E&T plans. We 
will compare those estimates with prior expenditures, keeping in mind 
variations among State agencies and the characteristics of the 
individuals to be served, as well as the components offered. In 
addition, we will utilize expenditure and program data reported by 
State agencies to track component costs throughout the fiscal year. In 
this manner, FNS will ensure that planned and actual expenditures 
continue to reflect reasonable costs of providing services.
    The Department is amending in this final rulemaking the language of 
7 CFR 273.7(d)(1)(iv) as published in the September 3, 1999 interim 
rule to eliminate the requirement for a reimbursement rate structure.

Work Supplementation Program

    Section 849 of PRWORA amended section 16(b) of the Food Stamp Act 
(7 U.S.C. 2025(b)) to give State agencies the option to implement work 
supplementation (or support) programs. In these programs the cash value 
of public assistance benefits, plus FSP benefits, is provided to an 
employer as a wage subsidy to be used for hiring and employing public 
assistance recipients. The goal of work supplementation is to promote 
self-sufficiency by providing public assistance recipients with work 
experience to help them move into non-subsidized jobs.
    The Department proposed to add, at 7 CFR 273.7, a new paragraph 
(l), containing requirements for the work supplementation or support 
program.
    We further proposed to add a new paragraph (d)(xiv) under 7 CFR 
272.2, Plan of operation, that contains the requirement for a planning 
document from each State agency that operates a work supplementation 
program.
    The Department also solicited comments in the following areas that 
were not mandated by PRWORA but are necessary to comply with other laws 
or for accounting and reporting purposes.
     States must ensure that work supplemented or supported 
employees are treated the same as other non-subsidized employees and 
that all subsidized positions comply with the Fair Labor Standards Act.
     States must outline State agency, employer and recipient 
obligations and responsibilities in the proposed work supplementation 
program. They must also describe procedures for providing wage 
subsidies to participating employers and for monitoring the use of the 
funds.
     At the same time the plan is submitted for approval, the 
State must also submit an operating budget for the proposed program. 
Additionally, before the plan is approved, the State must agree to 
comply with certain reporting and monitoring requirements. State 
agencies operating work supplementation and support programs are 
required to comply with all FNS

[[Page 41601]]

reporting requirements, including reporting the amount of benefits 
contributed to all employers as a wage subsidy on the FNS 388. State 
Issuance and Participation Estimates; FNS-388A, Participation and 
Issuance Project Area; FNS-46. Issuance Reconciliation Report; and SF-
269, Addendum Financial Status Report. State agencies are also required 
to report administrative costs associated with work supplementation 
programs on the FNS-366A, Budget Projection and SF-269, Financial 
Status Report. Special codes for work supplementation programs will be 
assigned for reporting purposes.
     The proposed rule asked States to include in their plan 
amendments whether food stamp allotments and public assistance grants 
will be frozen at the time a recipient begins a subsidized job. The 
Department was particularly interested in public comments on the 
desirability of a Federal standard for issuing supplemental allotments 
when earnings unexpectedly fall and, secondly, whether there should be 
a time limit on freezing benefit levels (i.e., not counting any 
unsubsidized wages from the employer).
     Once the work supplementation program plan is approved, 
the State agency must incorporate it into the State Plan of Operation 
and include its operating budget in the State agency budget. After 
approval, the Department will pay the cash value of a recipient's food 
stamp benefits to the State agency so they may be paid directly to an 
employer as a wage subsidy. The State agency will also be reimbursed 
for administrative costs related to the operation of the work 
supplementation program as provided by Section 16 of the Food Stamp 
Act.
     For Quality Control purposes, cases in which a household 
member is participating in a work supplementation program will be coded 
as not subject to review.
    Section 273.7(l)(i)(H) provides that wages paid under a wage 
supplementation or support program must meet the requirements of the 
Fair Labor Standards Act. One commenter pointed out that a wide range 
of other employment laws beyond the Fair Labor Standards Act will also 
apply. The Department agrees and has amended this provision to indicate 
that wages paid under a wage supplementation or support program must 
meet the requirements of the Fair Labor Standards Act and other 
applicable employment laws.
    No other germane comments concerning the proposed work 
supplementation or support program provision were received. Aside from 
the clarification noted above, the Department is adopting in this final 
rulemaking the revisions as proposed.

Workfare

    Since 1982 the Department has afforded State agencies and political 
subdivisions the option to establish a workfare program. In workfare, 
nonexempt food stamp household members are required to accept public 
service job offers and work in return for the household's food stamp 
allotment. The number of hours of work required of a household member 
is calculated by dividing the household's monthly benefit by the higher 
of the applicable Federal or State minimum wage.
    Under current rules, household members subject to the work 
registration requirements of 7 CFR 273.7(a) may also be subject to 
workfare. Additionally, recipients of benefits under title IV-A may be 
subject to workfare if they are currently involved less than 20 hours a 
week in title IV-A work activities and are not otherwise exempt. 
Applicants for, or recipients of, unemployment compensation may also be 
subject to workfare.
    Workfare is a household responsibility. Legislative history 
(Conference Report No. 97-290 on the Agriculture and Food Act of 1981, 
December 10, 1981, page 226) established Congressional intent that the 
household's workfare responsibility be shared by all nonexempt members: 
``Upon a household member's failure to comply with workfare 
requirements, the household would be ineligible for food stamps * * *, 
unless someone in the household satisfies all outstanding workfare 
obligations. * * *'' Failure of a household to comply with workfare 
requirements without good cause results in the disqualification of the 
entire household until the workfare obligation is met, or for two 
months, whichever is less.
    The workfare provisions of section 20 (7 U.S.C. Sec. 2029) of the 
Food Stamp Act entitle a political subdivision operating a workfare 
program to share in the benefit reductions that occur when a workfare 
participant begins employment while engaged in workfare for the first 
time, or within 30 days of ending the first participation in workfare. 
This provision is available only for workfare programs operated under 
section 20.
    Workfare may also be offered as a component of a State agency's E&T 
program. However, workfare savings are not available for E&T workfare 
components.
    State agencies and political subdivisions may also operate workfare 
programs in which participation by food stamp recipients is voluntary. 
In a voluntary program, disqualification for failure to comply does not 
apply. The number of hours of work will be negotiated between the 
volunteer household and the agency operating the workfare program.
    Section 815 of PRWORA amended section 20 of the Food Stamp Act to: 
(1) eliminate the requirement for conformance with workfare programs 
under title IV-A; (2) eliminate the provision for combining the food 
stamp and title IV-A assistance grants to determine the number of hours 
a title IV-A food stamp household can be required to participate in a 
community work experience program established under section 409 of the 
Social Security Act; and (3) conform disqualification penalties for 
failure to comply with workfare requirements with those under section 
6(d)(1) of the Food Stamp Act. Thus, while still a household 
responsibility, State agencies have the option of disqualifying the 
individual or, if the individual is a head of household, the entire 
household.
    The Department proposed to amend 7 CFR 273.22 to incorporate PRWORA 
changes as well as making other technical corrections.
    Lastly, in keeping with the Department's ongoing regulation 
streamlining and reform initiative, and to create a more logical union 
of food stamp work requirements and the optional workfare program, we 
proposed to move the amended 7 CFR 273.22 to 7 CFR 273.7, Work 
provisions, and to designate it paragraph (m), Optional workfare 
program.
    One commenter asked for a clarification of the language in 
273.7(m)(2)(i): Do the rules under section (m) apply to workfare 
programs operated as a component of a State agency's E&T program and 
those operated independently, or only those operated independently? A 
food stamp workfare program may be operated as a component of a State 
agency's E&T program. However, certain rules governing optional 
workfare programs operated under section 20 of the Food Stamp Act do 
not apply. For instance, the sharing of workfare savings authorized 
under section 20(g) of the Food Stamp Act are not available for E&T 
workfare components. Likewise, State agencies may not use any portion 
of their annual 100 percent Federal E&T grants to fund the 
administration of optional workfare programs under section 20 of the 
Food Stamp Act. They can, however, use their grants to fund the 
operation of workfare components in their E&T programs.

[[Page 41602]]

    To ensure clarity in the final rulemaking, the Department is 
redesignating section 273.7(e)(1)(iii) as 273.7(e)(1)(iii)(A) and 
adding a new subparagraph, 273.7(e)(1)(iii)(B), to read: ``The sharing 
of workfare savings authorized under section 20(g) of the Food Stamp 
Act and detailed at paragraph (m)(7)(iv) of this section are not 
available for E&T workfare components.''
    Further, the Department is adding the following statement to the 
end of 273.7(m)(7)(i): ``State agencies must not use any portion of 
their annual 100 percent Federal E&T allocations to fund the 
administration of optional workfare programs under section 20 of the 
Food Stamp Act and this subparagraph (m).''

15 Percent Exemption

Background

    Section 1001 of the Balanced Budget Act amended section 6(o) of the 
Food Stamp Act to allow State agencies to provide an exemption from the 
3-month ABAWD food stamp time limit to cover up to 15 percent of their 
ABAWDs who would otherwise be ineligible because of the limit. These 
``covered individuals,'' as defined in section 6(o)(6)(ii) of the Food 
Stamp Act, are food stamp recipients, or applicants denied food stamps 
because they have exhausted their 3 months of eligibility, who: (1) Are 
not eligible for an exception to the ABAWD work requirement; (2) are 
not covered by a waiver of the ABAWD work requirement; (3) are not 
already complying with the ABAWD work requirement; (4) are not 
receiving food stamps during their 3 months of eligibility authorized 
under the time limit; or (5) are not receiving food stamps during a 
subsequent period after reestablishing eligibility by complying with 
the requirements of section 6(o)(5) of the Food Stamp Act.
    Section 1001 of the Balanced Budget Act authorizes the Secretary to 
estimate the number of covered individuals in a State based on FY 1996 
Quality Control data and other factors appropriate due to the timing 
and the limitations of the data. The Secretary is also authorized to: 
(1) Adjust the number of exemptions each fiscal year to reflect changes 
in the State's caseload and changes in the proportion of the State's 
food stamp caseload covered by the ABAWD-related waivers; (2) adjust 
the number of exemptions estimated for a State during a fiscal year if 
the number of food stamp recipients in the State varies from the 
State's caseload by more than 10 percent; (3) adjust the number of 
exemptions assigned for a current fiscal year based on the actual 
number of exemptions granted by the State agency in the preceding 
fiscal year; and (4) require whatever State agency reports determined 
necessary to ensure compliance with the 15 percent exemption 
provisions. The Department has no discretion in implementing this 
provision.
    Because of the many requirements of PRWORA and the Balanced Budget 
Act that apply only to ABAWDs and the 3-month time limit, the 
Department created, in the interim rule, a new regulatory section, 
section 273.24, in which it incorporated the Balanced Budget Act 
provisions regarding the 15 percent exemptions.

Determining How To Use the Exemptions

    In the interim rule the Department did not prescribe how State 
agencies must use the exemption authority. State agencies have maximum 
flexibility to apply the exemptions as they deem appropriate. However, 
in the preamble to the interim rule, the Department did remind State 
agencies that, along with the flexibility they are afforded in terms of 
determining the exemption criteria, they have the responsibility for 
developing exemption policies that comport with their number of 
exemptions.

Covered Individuals

    In the interim rule, the Department clarified that it is up to the 
State agency to decide whether or not to require an ABAWD to exhaust 
the 3-month time limit (either the initial 3 months or the subsequent 3 
months) in order to qualify for an exemption under this provision. For 
example, if a State agency has a sufficient number of 15 percent 
exemptions available, it may choose to exempt all ABAWDs residing in an 
area not already waived under 6(o)(4) regardless of whether they have 
exhausted their first or second 3 months. Conversely, a State agency 
may determine that the best way to manage its finite number of 15 
percent exemptions is to require individuals to exhaust their 3 months 
of eligibility before being exempted under this provision.

Determining the Number of Exemptions

    The interim rule provided that a State agency may exempt up to 15 
percent of their covered individuals. The number of exemptions allotted 
each State will reflect changes in the State's caseload and the 
proportion of ABAWDs covered by waivers granted under paragraph 6(o)(4) 
of the Food Stamp Act.
    The interim rule further provided that FNS will adjust the 
estimated number of covered individuals estimated for a State during a 
fiscal year if the number of actual food stamp recipients in the State 
varies by more than 10 percent, as determined by the FNS.
    Lastly, the interim rule authorized FNS to adjust the number of 
exemptions allocated to a State agency for a fiscal year based on the 
difference between the average monthly number of exemptions in effect 
in the State for the preceding fiscal year and the average monthly 
number of exemptions estimated for the State agency for the preceding 
fiscal year. If more exemptions are used than authorized in a fiscal 
year, the State's allocation for the next year will be reduced. If the 
State agency does not use all of its exemptions by the end of the 
fiscal year, FNS will increase by the remaining balance the estimated 
number of exemptions allocated to the State agency for the subsequent 
fiscal year.

Reporting

    The interim rule required State agencies to track and report the 
number of cases exempt under the 15 percent criteria used each month to 
their respective FNS regional offices on a quarterly basis.
    All commenters agreed with allowing maximum flexibility in using 
the exemption.
    One commenter stated that in calculating the number of people 
living in areas where there is no ABAWD waiver due to insufficient jobs 
or high unemployment, the Department should take special care to avoid 
overestimating the number of people in waived parts of counties that 
contain only some waived communities. They believe the Department 
should develop and release a clear, reliable methodology for 
calculating the fraction of a county's recipients that are covered by 
an ABAWD waiver.
    The Department is currently exploring ways to improve the estimates 
of the proportions of an area that have received waivers. For example, 
we have been working to modify the QC file to enable it to both 
identify cases in the file that should be classified as ABAWDs, and to 
determine whether those cases either live in a waived area, or are 
subject to other exemptions. The effort is ongoing, and we will 
continue to welcome technical contributions in this area.
    One commenter suggested that the Department should make technical 
assistance available to help States identify simple, easily 
administered options for using the exemptions, such

[[Page 41603]]

as extending the number of months of benefits a household may receive 
within a 36-month period, reducing the number of months (from 36) 
required for a household's ``clock'' to recharge, or exempting readily 
identifiable demographic groups (such as those over age 40 or 45). The 
Department has provided guidance to the State agencies regarding use of 
exemptions in the form of policy memoranda. At the same time, regional 
offices are working very closely with State agencies to identify the 
best way to use the exemptions and to share information on what other 
State agencies are doing.
    Another commenter suggested that the Department should allow States 
to rely upon estimates of the effects of its 15 percent exemption 
policy as an alternative to counting the actual number of exemptions 
provided each month. The Department will not make a change to this 
provision. Because of the statutory 15 percent limit on exemptions the 
Department must require an accurate accounting of how many exemptions 
State agencies use. Likewise, States agencies need to accurately record 
the numbers of individuals exempt under this provision in order to 
comply with the statute.
    Publication of an associated final rulemaking added to and revised 
Sec. 273.24. Additionally, corrections have made to the language of the 
original interim rule. Thus, the Department is taking this opportunity 
to publish the 15 percent ABAWD exemption provision in its final form.

List of Subjects

7 CFR 271

    Administrative practice and procedures, Food stamps, Grant 
programs-social programs.

7 CFR 272

    Administrative practice and procedures, Food stamps, Grant 
programs-social programs.

7 CFR 273

    Administrative practice and procedures, Food stamps, Grant 
programs-social programs, Penalties, Reporting and recordkeeping.

7 CFR 275

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

7 CFR 277

    Administrative practice and procedures, Food stamps, Fraud, Grant 
Programs, Social Programs, Penalties.

    Accordingly, 7 CFR parts 271, 272, 273, 275, and 277 are amended as 
follows:
    1. The authority citation for parts 271, 272, 273, 275, and 277 
continues to read as follows:

    Authority: 7 U.S.C. 2011-2036

PART 271--GENERAL INFORMATION AND DEFINITIONS

    2. In Sec. 271.2:
    a. The definition of ``Base of eligibles'' is removed.
    b. The definition of ``Exempted'' is amended by removing the 
reference to ``Sec. 273.7(f)'' and adding in its place a reference to 
``Sec. 273.7(e).''
    c. The definition of ``Placed in an employment and training (E&T) 
program'' is revised.
    The revision reads as follows:


Sec. 271.2  Definitions.

* * * * *
    Placed in an employment and training (E&T) program means a State 
agency may count a person as ``placed'' in an E&T program when the 
individual commences a component.
* * * * *

    3. In Sec. 271.8, amend the table of OMB assigned control numbers 
by:
    a. Removing the entry for ``273.7(a), (d), (f)'' and adding in its 
place an entry for ``273.7(a), (d), (e).''
    b. Removing the entry for ``273.7(g)'' and adding in its place an 
entry for ``273.7(f).''
    c. Adding a new entry ``273.7(m)'' after the newly amended entry 
for ``273.7(f).''
    d. Removing the entry for ``273.22(b), (c), (d), (e), (f), (g).''
    The addition reads as follows:


Sec. 271.8  Information collection/recordkeeping--OMB assigned control 
numbers.

------------------------------------------------------------------------
                                                             Current OMB
      7 CFR section where requirements are described         control no.
------------------------------------------------------------------------
 
         *        *        *        *        *        *        *
273.7(m)..................................................    0584-0285
 
         *        *        *        *        *        *        *
------------------------------------------------------------------------

PART 272--REQUIREMENTS FOR PARTICIPATING STATE AGENCIES

    4. In Sec. 272.1, add paragraph (g)(166) to read as follows:


Sec. 272.1  General terms and conditions.

* * * * *
    (g) * * *
    (166) Amendment No. 393. The provisions of Amendment No. 393, 
regarding the Work Provisions of the Personal Responsibility and Work 
Opportunity Reconciliation Act of 1996 are effective August 19, 2002.
    5. In Sec. 272.2:
    a. Paragraph (d)(1)(v) is amended by removing the reference to 
``Sec. 273.7(c)(4) and (5)'' and adding in its place a reference to 
``Sec. 273.7(c)(6).''
    b. New paragraphs (d)(1)(xiv) and (d)(1)(xv) are added.
    c. Paragraph (e)(9) is amended by removing the reference to 
``Sec. 273.7(c)(5)'' and adding in its place a reference to 
``Sec. 273.7(c)(7).''
    The additions read as follows:


Sec. 272.2  Plan of operation.

* * * * *
    (d) * * *
    (1) * * *
    (xiv) The State agency's disqualification plan, in accordance with 
Sec. 273.7(f)(3) of this chapter.
    (xv) If the State agency chooses to implement the provisions for a 
work supplementation or support program, the work supplementation or 
support program plan, in accordance with Sec. 273.7(l)(1) of this 
chapter.
* * * * *

PART 273--CERTIFICATION OF ELIGIBLE HOUSEHOLDS

    6. In Sec. 273.1:
    a. Paragraph (b)(7)(iv) is removed and paragraphs (b)(7)(v), 
(b)(7)(vi), (b)(7)(vii), (b)(7)(viii), (b)(7)(ix), (b)(7)(x), 
(b)(7)(xi), and (b)(7)(xii) are redesignated as (b)(7)(iv), (b)(7)(v), 
(b)(7)(vi), (b)(7)(vii), (b)(7)(viii), (b)(7)(ix), (b)(7)(x) and 
(b)(7)(xi) respectively.
    b. The first sentence of paragraph (d)(2) is revised.
    The revision reads as follows:


Sec. 273.1  Household concept.

* * * * *
    (d) * * *
    (2) For purposes of failure to comply with the work requirements of 
Sec. 273.7, the head of household shall be the principal wage earner 
unless the household has selected an adult parent of children as 
specified in paragraph (d)(1) of this section. * * *
* * * * *


Sec. 273.5  [AMENDED]

    7. In Sec. 273.5, paragraph (b)(ll)(iv) is amended by removing two 
references to ``Sec. 273.7(f)(1)'' and adding in their places a 
reference to ``Sec. 273.7(e)(1).''

    8. Sec. 273.7 is revised to read as follows:

[[Page 41604]]

Sec. 273.7  Work provisions.

    (a) Work requirements. (1) As a condition of eligibility for food 
stamps, each household member not exempt under paragraph (b)(1) of this 
section must comply with the following Food Stamp Program work 
requirements:
    (i) Register for work or be registered by the State agency at the 
time of application and every 12 months after initial registration. The 
member required to register need not complete the registration form.
    (ii) Participate in a Food Stamp Employment and Training (E&T) 
program if assigned by the State agency, to the extent required by the 
State agency;
    (iii) Participate in a workfare program if assigned by the State 
agency;
    (iv) Provide the State agency or its designee with sufficient 
information regarding employment status or availability for work;
    (v) Report to an employer to whom referred by the State agency or 
its designee if the potential employment meets the suitability 
requirements described in paragraph (h) of this section;
    (vi) Accept a bona fide offer of suitable employment, as defined in 
paragraph (h) of this section, at a site or plant not subject to a 
strike or lockout, at a wage equal to the higher of the Federal or 
State minimum wage or 80 percent of the wage that would have governed 
had the minimum hourly rate under section 6(a)(1) of the Fair Labor 
Standards Act been applicable to the offer of employment.
    (vii) Do not voluntarily and without good cause quit a job of 30 or 
more hours a week or reduce work effort to less than 30 hours a week, 
in accordance with paragraph (j) of this section.
    (2) The Food and Nutrition Service (FNS) has defined the meaning of 
``good cause,'' and ``voluntary quit,'' and ``reduction of work 
effort'' as used in paragraph (a)(1)(vii) of this section. See 
paragraph (i) of this section for a discussion of good cause; see 
paragraph (j) of this section for a discussion of voluntary quit and 
reduction of work effort.
    (3) Each State agency will determine the meaning of any other terms 
used in paragraph (a)(1) of this section; the procedures for 
establishing compliance with Food Stamp Program work requirements; and 
whether an individual is complying with Food Stamp Program work 
requirements. A State agency must not use a meaning, procedure, or 
determination that is less restrictive on food stamp recipients than is 
a comparable meaning, procedure, or determination under the State 
agency's program funded under title IV-A of the Social Security Act.
    (4) Strikers whose households are eligible under the criteria in 
Sec. 273.1(e) are subject to Food Stamp Program work requirements 
unless they are exempt under paragraph (b)(1) of this section at the 
time of application.
    (5) State agencies may request approval from FNS to substitute 
State or local procedures for work registration for PA households not 
subject to the work requirements under title IV of the Social Security 
Act or for GA households. However, the failure of a household member to 
comply with State or local work requirements that exceed the 
requirements listed in this section must not be considered grounds for 
disqualification. Work requirements imposed on refugees participating 
in refugee resettlement programs may also be substituted, with FNS 
approval.
    (6) Household members who are applying for SSI and for food stamps 
under Sec. 273.2(k)(1)(i) will have Food Stamp Program work 
requirements waived until they are determined eligible for SSI and 
become exempt from Food Stamp Program work requirements, or until they 
are determined ineligible for SSI, at which time their exemptions from 
Food Stamp Program work requirements will be reevaluated.
    (b) Exemptions from work requirements. (1) The following persons 
are exempt from Food Stamp Program work requirements:
    (i) A person younger than 16 years of age or a person 60 years of 
age or older. A person age 16 or 17 who is not the head of a household 
or who is attending school, or is enrolled in an employment training 
program, on at least a half-time basis, is also exempt. If the person 
turns 16 (or 18 under the preceding sentence) during a certification 
period, the State agency must register the person as part of the next 
scheduled recertification process, unless the person qualifies for 
another exemption.
    (ii) A person physically or mentally unfit for employment. For the 
purposes of this paragraph (b), a State agency will define physical and 
mental fitness; establish procedures for verifying; and will verify 
claimed physical or mental unfitness when necessary. However, the State 
agency must not use a definition, procedure for verification, or 
verification that is less restrictive on food stamp recipients than a 
comparable meaning, procedure, or determination under the State 
agency's program funded under title IV-A of the Social Security Act.
    (iii) A person subject to and complying with any work requirement 
under title IV of the Social Security Act. If the exemption claimed is 
questionable, the State agency is responsible for verifying the 
exemption.
    (iv) A parent or other household member responsible for the care of 
a dependent child under 6 or an incapacitated person. If the child has 
his or her 6th birthday during a certification period, the State agency 
must work register the individual responsible for the care of the child 
as part of the next scheduled recertification process, unless the 
individual qualifies for another exemption.
    (v) A person receiving unemployment compensation. A person who has 
applied for, but is not yet receiving, unemployment compensation is 
also exempt if that person is complying with work requirements that are 
part of the Federal-State unemployment compensation application 
process. If the exemption claimed is questionable, the State agency is 
responsible for verifying the exemption with the appropriate office of 
the State employment services agency.
    (vi) A regular participant in a drug addiction or alcoholic 
treatment and rehabilitation program.
    (vii) An employed or self-employed person working a minimum of 30 
hours weekly or earning weekly wages at least equal to the Federal 
minimum wage multiplied by 30 hours. This includes migrant and seasonal 
farm workers under contract or similar agreement with an employer or 
crew chief to begin employment within 30 days (although this will not 
prevent individuals from seeking additional services from the State 
employment services agency). For work registration purposes, a person 
residing in areas of Alaska designated in Sec. 274.10(a)(4)(iv) of this 
chapter, who subsistence hunts and/or fishes a minimum of 30 hours 
weekly (averaged over the certification period) is considered exempt as 
self-employed. An employed or self-employed person who voluntarily and 
without good cause reduces his or her work effort and, after the 
reduction, is working less than 30 hours per week, is ineligible to 
participate in the Food Stamp Program under paragraph (j) of this 
section.
    (viii) A student enrolled at least half-time in any recognized 
school, training program, or institution of higher education. Students 
enrolled at least half-time in an institution of higher education must 
meet the student eligibility requirements listed in Sec. 273.5. A 
student will remain exempt during normal periods of class attendance, 
vacation, and recess. If the student

[[Page 41605]]

graduates, enrolls less than half-time, is suspended or expelled, drops 
out, or does not intend to register for the next normal school term 
(excluding summer), the State agency must work register the individual, 
unless the individual qualifies for another exemption.
    (2)(i) Persons losing exemption status due to any changes in 
circumstances that are subject to the reporting requirements of 
Sec. 273.12 must register for employment when the change is reported. 
If the State agency does not use a work registration form, it must 
annotate the change to the member's exemption status. If a work 
registration form is used, the State agency is responsible for 
providing the participant with a work registration form when the change 
is reported. Participants are responsible for returning the completed 
form to the State agency within 10 calendar days from the date the form 
was handed to the household member reporting the change in person, or 
the date the State agency mailed the form. If the participant fails to 
return the completed form, the State agency must issue a notice of 
adverse action stating that the participant is being terminated and 
why, but that the termination can be avoided by returning the form.
    (ii) Those persons who lose their exemption due to a change in 
circumstances that is not subject to the reporting requirements of 
Sec. 273.12 must register for employment at their household's next 
recertification.
    (c) State agency responsibilities. (1) The State agency must 
register for work each household member not exempted by the provisions 
of paragraph (b)(1) of this section. As part of the work registration 
process, the State agency must explain to the individual the pertinent 
work requirements, the rights and responsibilities of work-registered 
household members, and the consequences of failure to comply. The State 
agency must provide a written statement of the above to each individual 
in the household who is registered for work. A notice must also be 
provided when a previously exempt individual or new household member 
becomes subject to a work requirement, and at recertification. The 
State agency must permit the applicant to complete a record or form for 
each household member required to register for employment in accordance 
with paragraph (a)(1)(i) of this section. Household members are 
considered to have registered when an identifiable work registration 
form is submitted to the State agency or when the registration is 
otherwise annotated or recorded by the State agency.
    (2) The State agency is responsible for screening each work 
registrant to determine whether or not it is appropriate, based on the 
State agency's criteria, to refer the individual to an E&T program, and 
if appropriate, referring the individual to an E&T program component. 
Upon entry into each component, the State agency must inform the 
participant, either orally or in writing, of the requirements of the 
component, what will constitute noncompliance and the sanctions for 
noncompliance. The State agency may, with FNS approval, use intake and 
sanction systems that are compatible with its title IV-A work program. 
Such systems must be proposed and explained in the State agency's E&T 
State Plan.
    (3) The State agency must issue a notice of adverse action to an 
individual, or to a household if appropriate, within 10 days after 
learning of the individual's noncompliance with Food Stamp Program work 
requirements. The notice of adverse action must meet the timeliness and 
adequacy requirements of Sec. 273.13. If the individual complies before 
the end of the advance notice period, the State agency will cancel the 
adverse action. If the State agency offers a conciliation process as 
part of its E&T program, it must issue the notice of adverse action no 
later than the end of the conciliation period.
    (4) The State agency must design and operate an E&T program that 
may consist of one or more or a combination of employment and/or 
training components as described in paragraph (e)(1) of this section. 
The State agency must ensure that it is notified by the agency or 
agencies operating its E&T components within 10 days if an E&T 
mandatory participant fails to comply with E&T requirements.
    (5) Each component of the State agency's E&T program must be 
delivered through its statewide workforce development system, unless 
the component is not available locally through such a system.
    (6) In accordance with Sec. 272.2(d) and Sec. 272.2(e) of this 
chapter, the State agency must prepare and submit an E&T Plan to its 
appropriate FNS Regional Office. The E&T Plan must be available for 
public inspection at the State agency headquarters. In its E&T Plan, 
the State agency will detail the following:
    (i) The nature of the E&T components the State agency plans to 
offer and the reasons for such components, including cost information. 
The methodology for State agency reimbursement for education components 
must be specifically addressed;
    (ii) An operating budget for the Federal fiscal year with an 
estimate of the cost of operation for one full year. Any State agency 
that requests 50 percent Federal reimbursement for State agency E&T 
administrative costs, other than for participant reimbursements, must 
include in its plan, or amendments to its plan, an itemized list of all 
activities and costs for which those Federal funds will be claimed, 
including the costs for case management and casework to facilitate the 
transition from economic dependency to self-sufficiency through work. 
Costs in excess of the Federal grant will be allowed only with the 
prior approval of FNS and must be adequately documented to assure that 
they are necessary, reasonable and properly allocated. If the State 
agency intends to spend the additional E&T grant allocation for which 
it is eligible in a fiscal year in accordance with paragraph 
(d)(1)(i)(B) of this section, it must declare its intention to maintain 
its level of expenditures for E&T and workfare at a level not less than 
the level of such expenditures in FY 1996;
    (iii) The categories and types of individuals the State agency 
intends to exempt from E&T participation, the estimated percentage of 
work registrants the State agency plans to exempt, and the frequency 
with which the State agency plans to reevaluate the validity of its 
exemptions;
    (iv) The characteristics of the population the State agency intends 
to place in E&T
    (v) The estimated number of volunteers the State agency expects to 
place in E&T
    (vi) The geographic areas covered and not covered by the E&T Plan 
and why, and the type and location of services to be offered;
    (vii) The method the State agency uses to count all work 
registrants the first month of each fiscal year;
    (viii) The method the State agency uses to report work registrant 
information on the quarterly Form FNS-583;
    (ix) The method the State agency uses to prevent work registrants 
from being counted twice within a Federal fiscal year. If the State 
agency universally work registers all food stamp applicants, this 
method must specify how the State agency excludes those exempt from 
work registration under paragraph (b)(1) of this section. If the State 
agency work registers nonexempt participants whenever a new application 
is submitted, this method must also specify how the State agency 
excludes those participants who may have already been registered within 
the past

[[Page 41606]]

12 months as specified under paragraph (a)(1)(i) of this section;
    (x) The organizational relationship between the units responsible 
for certification and the units operating the E&T components, including 
units of the statewide workforce development system, if available. FNS 
is specifically concerned that the lines of communication be efficient 
and that noncompliance be reported to the certification unit within 10 
working days after the noncompliance occurs;
    (xi) The relationship between the State agency and other 
organizations it plans to coordinate with for the provision of 
services, including organizations in the statewide workforce 
development system, if available. Copies of contracts must be available 
for inspection;
    (xii) The availability, if appropriate, of E&T programs for Indians 
living on reservations;
    (xiii) If a conciliation process is planned, the procedures that 
will be used when an individual fails to comply with an E&T program 
requirement. Include the length of the conciliation period; and
    (xiv) The payment rates for child care established in accordance 
with the Child Care and Development Block Grant provisions of 45 CFR 
98.43, and based on local market rate surveys.
    (7) The State agency will submit its E&T Plan biennially, at least 
45 days before the start of the Federal fiscal year. The State agency 
must submit plan revisions to the appropriate FNS regional office for 
approval if it plans to alter the nature or location of its components 
or the number or characteristics of persons served. The proposed 
changes must be submitted for approval at least 30 days prior to 
planned implementation.
    (8) The State agency will submit quarterly reports to FNS no later 
than 45 days after the end of each Federal fiscal quarter containing 
monthly figures for:
    (i) Participants newly work registered;
    (ii) Work registrants exempted by the State agency from 
participation in E&T
    (iii) Participants who volunteer for and commence participation in 
an approved E&T component;
    (iv) E&T mandatory participants who commence an approved E&T 
component, including Food Stamp Program applicants if the State agency 
chooses to operate a component for applicants;
    (v) Able-bodied adults without dependents (ABAWDs) subject to the 
3-month food stamp time limit imposed in accordance with Sec. 273.24(b) 
who are exempt under the State agency's 15 percent exemption allowance 
under Sec. 273.24(g);
    (vi) Filled and offered slots created in E&T workfare components or 
comparable programs that serve ABAWDs subject to the 3-month food stamp 
time limit. This information must be broken out to show the number of 
slots created in areas of the State that have received a waiver of the 
time limit in accordance with Sec. 273.24(f) and in non-waived areas;
    (vii) Filled and offered slots created in education and training 
components or comparable programs that serve ABAWDs subject to the 3-
month food stamp time limit. This information must be broken out to 
show the number of slots created in areas of the State that have 
received a waiver of the time limit in accordance with Sec. 273.24(f) 
and in non-waived areas;
    (viii) The amount of 100 percent Federal E&T funds spent to create 
workfare slots that serve ABAWDs subject to the 3-month time limit; and
    (ix) The amount of 100 percent Federal E&T funds spent to create 
education and training slots that serve ABAWDs subject to the 3-month 
time limit.
    (9) The State agency will submit annually, on its first quarterly 
report:
    (i) The number of work registered persons in the State during the 
period October 1 through October 31 of the new fiscal year, including 
persons work registered during October; and
    (ii) The number of these work registered persons the State agency 
subsequently exempted from participation in E&T.
    (10) The State agency will submit annually, on its final quarterly 
report, a list of E&T components it offered during the fiscal year and 
the number of mandatory and volunteer participants placed in each E&T 
component.
    (11) Additional information may be required of the State agency, on 
an as needed basis, regarding the type of components offered and the 
characteristics of persons served, depending on the contents of its E&T 
Plan.
    (12) The State agency must ensure, to the maximum extent 
practicable, that E&T programs are provided for Indians living on 
reservations.
    (13) If a benefit overissuance is discovered for a month or months 
in which a mandatory E&T participant has already fulfilled a work 
component requirement, the State agency must follow the procedure 
specified in paragraph (m)(6)(v) of this section for a workfare 
overissuance.
    (14) If a State agency fails to efficiently and effectively 
administer its E&T program, the provisions of Sec. 276.1(a)(4) of this 
chapter will apply.
    (d) Federal financial participation. (1) Employment and training 
grants. (i) Allocation of grants. Each State agency will receive an E&T 
program grant for each fiscal year to operate an E&T program. The grant 
requires no State matching. The grant will consist of a base amount and 
a additional amount that will be available only to those affected State 
agencies that elect to meet their maintenance of effort requirements as 
described in paragraph (d)(1)(iii) of this section.
    (A) In determining each State agency's base 100 percent Federal E&T 
grant amount, FNS will apply the percentage determined in accordance 
with paragraph (d)(1)(i)(C) of this section to the total amount of the 
100 percent Federal E&T grant provided under section 16(h)(1)(A) of the 
Food Stamp Act for each fiscal year.
    (B) In determining each State agency's additional 100 percent 
Federal E&T grant amount, FNS will apply the percentage determined in 
accordance with paragraph (d)(1)(i)(C) of this section to the total 
amount of 100 percent Federal E&T grant provided under section 
16(h)(1)(A) of the Food Stamp Act for each fiscal year.
    (C) Except as otherwise provided in paragraph (d)(1)(i)(F) of this 
section, Federal funding for E&T grants, including both the base and 
additional amounts, will be allocated based on the number of ABAWDs in 
each State not eligible for an exemption under Sec. 273.24(c), who 
either do not reside in an area subject to a waiver granted in 
accordance with Sec. 273.24(f) or who do reside in an area subject to a 
waiver in which the State agency provides E&T services to ABAWDs, as a 
percentage of such recipients nationwide. FNS will ensure that all 
waivers granted in accordance with Sec. 273.24(f) in a reasonable time 
before the E&T allocations are determined will be considered in the 
determination.
    (D) FNS will determine each State's percentage of ABAWDs using FY 
1996 Quality Control survey data adjusted for changes in each State's 
caseload.
    (E) No State agency will receive less than $50,000 in 100 percent 
Federal E&T funds. To ensure this, FNS will reduce, if necessary, the 
grant of each State agency allocated more than $50,000. The reduction 
will be proportionate to the number of ABAWDs in the State who are not 
eligible for an exemption under Sec. 273.24(c), and who do not reside 
in an area subject to a waiver under Sec. 273.24(f) or who do reside in 
an area subject to a waiver in which the State

[[Page 41607]]

agency provides E&T services to ABAWDs as compared to the total number 
of such recipients in all the State agencies receiving more than 
$50,000. FNS will distribute the funds from the reduction to State 
agencies initially allocated less than $50,000 so they receive the 
$50,000 minimum.
    (F) If a State agency will not expend all of the funds allocated to 
it for a fiscal year under paragraph (d)(1)(i)(C) of this section, FNS 
will reallocate the unexpended funds to other State agencies during the 
fiscal year or the subsequent fiscal year as it considers appropriate 
and equitable.
    (ii) Use of Funds. (A) Not less than 80 percent of the funds a 
State agency receives in a fiscal year under paragraph (d)(1)(i) of 
this section must be used to serve ABAWDs who are placed in and comply 
with the requirements of a workfare component in an E&T program 
described in paragraph (e)(1)(iii) of this section or a comparable 
program, or to serve ABAWDs participating in qualifying education and 
training activities for 20 hours or more per week. Qualifying 
activities are those provided as part of a program operated under the 
Workforce Investment Act of 1998 (29 U.S.C. 2801 et seq.)(WIA), a 
program under section 236 of the Trade Act of 1974 (19 U.S.C. 2296), or 
an E&T program operated or supervised by the State agency or a 
political subdivision that meets standards approved by the Governor of 
the State, including programs described in paragraphs (e)(1)(iv), 
(e)(1)(v), (e)(1)(vi) and (e)(1)(vii) of this section. Job search and 
job search training programs as described in paragraphs (e)(1)(i) and 
(e)(1)(ii) of this section do not meet the definition of qualifying 
activities. However, job search and or job search training programs, 
when operated under title I of the WIA or under section 236 of the 
Trade Act, do meet the definition of qualifying activities. Further, 
job search or job search training activities, when offered as part of 
other E&T program components, are acceptable as long as those 
activities comprise less than half the required time spent in the other 
components. Lastly, a State agency may establish a job search period of 
up to 30 days following initial certification prior to making a 
workfare assignment. This job search activity is part of the workfare 
assignment, and not a job search ``program.'' Participants are 
considered to be participating in and complying with the requirements 
of workfare, thereby meeting the work requirement for ABAWDs.
    (B) Funds a State agency receives in a fiscal year under paragraph 
(d)(1)(i) of this section that are used to serve ABAWDs who either 
reside in an area of a State granted a waiver under Sec. 273.24(f) or 
who have been granted an exemption under Sec. 273.24(g) and that are 
expended on qualifying ABAWD activities as described in paragraph 
(d)(1)(ii)(A) of this section count toward a State agency's 80 percent 
expenditure.
    (C) Not more than 20 percent of the funds a State agency receives 
in a fiscal year under paragraph (d)(1)(i) of this section may be used 
to serve individuals eligible for an exemption under Sec. 273.24(c) 
(non-ABAWDs) or on activities that do not meet the definition of 
qualifying activities as described in paragraph (d)(1)(ii)(A) of this 
section. E&T funds expended in accordance with this paragraph 
(d)(1)(ii)(C) may be spent independent of whether or not the State 
agency expends any Federal funds that meet the requirements of 
paragraph (d)(1)(ii)(A) of this section.
    (D) If at the end of a fiscal year, FNS determines that a State 
agency has spent more than 20 percent of the Federal E&T funds it 
received for that fiscal year under paragraph (d)(1)(i) of this section 
to serve non-ABAWDs or on activities that do not meet the definition of 
qualifying activities as described in paragraph (d)(1)(ii)(A) of this 
section, it will reimburse States for allowable costs incurred in 
excess of the 20 percent threshold at the normal administrative 50/50 
match rate.
    (E) A State agency must use E&T program grants to fund the 
administrative costs of planning, implementing and operating its food 
stamp E&T program in accordance with its approved State E&T plan. E&T 
grants must not be used for the process of determining whether an 
individual must be work registered, the work registration process, or 
any further screening performed during the certification process, nor 
for sanction activity that takes place after the operator of an E&T 
component reports noncompliance without good cause. For purposes of 
this paragraph (d), the certification process is considered ended when 
an individual is referred to an E&T component for assessment or 
participation. E&T grants may also not be used to subsidize the wages 
of participants, or to reimburse participants under paragraph (d)(3) of 
this section.
    (F) A State agency's receipt of its 100 percent Federal E&T grant 
is contingent on FNS's approval of the State agency's E&T plan. If an 
adequate plan is not submitted, FNS may reallocate a State agency's 
grant among other State agencies with approved plans. Non-receipt of an 
E&T grant does not release a State agency from its responsibility under 
paragraph (c)(4) of this section to operate an E&T program.
    (G) Federal funds made available to a State agency to operate an 
educational component under paragraph (e)(1)(vi) of this section must 
not be used to supplant nonfederal funds for existing educational 
services and activities that promote the purposes of this component. 
Education expenses are approvable to the extent that E&T component 
costs exceed the normal cost of services provided to persons not 
participating in an E&T program.
    (H) In accordance with section 6(d)(4)(K) of the Food Stamp Act, 
and notwithstanding any other provision of this paragraph (d), the 
amount of Federal E&T funds, including participant and dependent care 
reimbursements, a State agency uses to serve participants who are 
receiving cash assistance under a State program funded under title IV-A 
of the Social Security Act must not exceed the amount of Federal E&T 
funds the State agency used in FY 1995 to serve participants who were 
receiving cash assistance under a State program funded under title IV-A 
of the Social Security Act.
    (1) Based on information provided by each State agency, FNS 
established claimed Federal E&T expenditures on this category of 
recipients in fiscal year 1995 for the State agencies of Colorado 
($318,613), Utah ($10,200), Vermont ($1,484,913), and Wisconsin 
($10,999,773). These State agencies may spend up to a like amount each 
fiscal year to serve food stamp recipients who also receive title IV 
assistance.
    (2) All other State agencies are prohibited from expending any 
Federal E&T funds on title IV cash assistance recipients.
    (iii) Maintenance of Effort. (A) To be eligible for a grant derived 
from the additional level of E&T funding described in paragraph 
(d)(1)(i)(B) of this section, a State agency must maintain State 
expenditures on E&T programs and optional workfare (if applicable) at a 
level not less than the level of its expenditures in FY 1996. A State 
agency need not expend all of its required maintenance of effort funds 
before it begins spending its additional E&T grant. In accordance with 
paragraph (c)(6)(ii) of this section, a State agency that intends to 
spend the additional allocation for which it is eligible in a fiscal 
year must declare in its State E&T plan for that fiscal year its 
intention to maintain its expenditures for E&T and optional workfare 
(if applicable) at a level not less than the level of such expenditures 
in FY 1996.

[[Page 41608]]

    (B) State funds that a State agency expends in order to meet its 
maintenance of effort requirement are not subject to the use of funds 
requirements of paragraph (d)(1)(ii) of this section.
    (C) Participant reimbursements paid with State funds do not count 
toward a State agency's maintenance of effort requirement, except in 
the case of optional workfare programs in which reimbursements to 
participants for work-related expenses are part of the State agency's 
administrative expenses in accordance with section 20(g)(1) of the Food 
Stamp Act.
    (iv) Component Costs. FNS will monitor State agencies' expenditures 
of 100 percent Federal E&T funds, including the costs of individual 
components of State agencies' programs, to ensure that planned and 
actual spending reflects the reasonable cost of efficiently and 
economically providing E&T services.
    (2) Additional administrative costs. Fifty percent of all other 
administrative costs incurred by State agencies in operating E&T 
programs, above the costs referenced in paragraph (d)(1) of this 
section, will be funded by the Federal government.
    (3) Participant reimbursements. The State agency must provide 
payments to participants in its E&T program, including applicants and 
volunteers, for expenses that are reasonably necessary and directly 
related to participation in the E&T program. These payments may be 
provided as a reimbursement for expenses incurred or in advance as 
payment for anticipated expenses in the coming month. The State agency 
must inform each E&T participant that allowable expenses up to the 
amounts specified in paragraphs (d)(3)(i) and (d)(3)(ii) of this 
section will be reimbursed by the State agency upon presentation of 
appropriate documentation. Reimbursable costs may include, but are not 
limited to, dependent care costs, transportation, and other work, 
training or education related expenses such as uniforms, personal 
safety items or other necessary equipment, and books or training 
manuals. These costs must not include the cost of meals away from home. 
If applicable, any allowable costs incurred by a noncompliant E&T 
participant after the expiration of the noncompliant participant's 
minimum mandatory disqualification period, as established by the State 
agency, that are reasonably necessary and directly related to 
reestablishing eligibility, as defined by the State agency, are 
reimbursable under paragraphs (d)(3)(i) and (d)(3)(ii) of this section. 
The State agency may reimburse participants for expenses beyond the 
amounts specified in paragraphs (d)(3)(i) and (d)(3)(ii) of this 
section; however, only costs that are up to but not in excess of those 
amounts are subject to Federal cost sharing. Reimbursement must not be 
provided from E&T grants allocated under paragraph (d)(1)(i) of this 
section. Any expense covered by a reimbursement under this section is 
not deductible under Sec. 273.10(d)(1)(i).
    (i) The State agency will reimburse the cost of dependent care it 
determines to be necessary for the participation of a household member 
in the E&T program up to the actual cost of dependent care, or the 
applicable payment rate for child care, whichever is lowest. The 
payment rates for child care are established in accordance with the 
Child Care and Development Block Grant provisions of 45 CFR 98.43, and 
are based on local market rate surveys. The State agency will provide a 
dependent care reimbursement to an E&T participant for all dependents 
requiring care unless otherwise prohibited by this section. The State 
agency will not provide a reimbursement for a dependent age 13 or older 
unless the dependent is physically and/or mentally incapable of caring 
for himself or herself or is under court supervision. The State agency 
must provide a reimbursement for all dependents who are physically and/
or mentally incapable of caring for themselves or who are under court 
supervision, regardless of age, if dependent care is necessary for the 
participation of a household member in the E&T program. The State 
agency will obtain verification of the physical and/or mental 
incapacity for dependents age 13 or older if the physical and/or mental 
incapacity is questionable. Also, the State agency will verify a court-
imposed requirement for the supervision of a dependent age 13 or older 
if the need for dependent care is questionable. If more than one 
household member is required to participate in an E&T program, the 
State agency will reimburse the actual cost of dependent care or the 
applicable payment rate for child care, whichever is lowest, for each 
dependent in the household, regardless of the number of household 
members participating in the E&T program. An individual who is the 
caretaker relative of a dependent in a family receiving cash assistance 
under title IV-A of the Social Security Act in a local area where an 
employment, training, or education program under title IV-A is in 
operation is not eligible for such reimbursement. An E&T participant is 
not entitled to the dependent care reimbursement if a member of the E&T 
participant's food stamp household provides the dependent care 
services. The State agency must verify the participant's need for 
dependent care and the cost of the dependent care prior to the issuance 
of the reimbursement. The verification must include the name and 
address of the dependent care provider, the cost and the hours of 
service (e.g., five hours per day, five days per week for two weeks). A 
participant may not be reimbursed for dependent care services beyond 
that which is required for participation in the E&T program. In lieu of 
providing reimbursements for dependent care expenses, a State agency 
may arrange for dependent care through providers by the use of purchase 
of service contracts, by providing vouchers to the household or by 
other means. A State agency may require that dependent care provided or 
arranged by the State agency meet all applicable standards of State and 
local law, including requirements designed to ensure basic health and 
safety protections (e.g., fire safety). An E&T participant may refuse 
available appropriate dependent care as provided or arranged by the 
State agency, if the participant can arrange other dependent care or 
can show that such refusal will not prevent or interfere with 
participation in the E&T program as required by the State agency. A 
State agency may claim 50 percent of actual costs for dependent care 
services provided or arranged for by the State agency up to the actual 
cost of dependent care, the applicable payment rate for child care, or 
the Statewide limit, whichever is lowest.
    (ii) The State agency will reimburse the actual costs of 
transportation and other costs (excluding dependent care costs) it 
determines to be necessary and directly related to participation in the 
E&T program up the maximum level of reimbursement established by the 
State agency. Such costs are the actual costs of participation unless 
the State agency has a method approved in its E&T Plan for providing 
allowances to participants to reflect approximate costs of 
participation. If a State agency has an approved method to provide 
allowances rather than reimbursements, it must provide participants an 
opportunity to claim actual expenses up to the maximum level of 
reimbursements established by the State agency. Only costs up to $25 
per participant per month are subject to Federal cost sharing.
    (iii) No participant cost that has been reimbursed under a workfare 
program under paragraph (m)(7)(i) of this section,

[[Page 41609]]

title IV of the Social Security Act or other work program will be 
reimbursed under this section.
    (iv) Any portion of dependent care costs that are reimbursed under 
this section may not be claimed as an expense and used in calculating 
the dependent care deduction under Sec. 273.9(d)(4) for determining 
benefits.
    (v) The State agency must inform all mandatory E&T participants 
that they may be exempted from E&T participation if their monthly 
expenses that are reasonably necessary and directly related to 
participation in the E&T program exceed the allowable reimbursement 
amount. Persons for whom allowable monthly expenses in an E&T component 
exceed the amounts specified under paragraphs (d)(3)(i) and (d)(3)(ii) 
of this section are not required to participate in that component. 
These individuals will be placed, if possible, in another suitable 
component in which the individual's monthly E&T expenses would not 
exceed the allowable reimbursable amount paid by the State agency. If a 
suitable component is not available, these individuals will be exempt 
from E&T participation until a suitable component is available or the 
individual's circumstances change and his/her monthly expenses do not 
exceed the allowable reimbursable amount paid by the State agency. 
Dependent care expenses incurred that are otherwise allowable but not 
reimbursed because they exceed the reimbursable amount specified under 
paragraph (d)(3)(i) of this section will be considered in determining a 
dependent care deduction under Sec. 273.9(d)(4).
    (4) Workfare cost sharing. Enhanced cost-sharing due to placement 
of workfare participants in paid employment is available only for 
workfare programs funded under paragraph (m)(7)(iv) of this section at 
the 50 percent reimbursement level and reported as such.
    (5) Funding mechanism. E&T program funding will be disbursed 
through States' Letters of Credit in accordance with Sec. 277.5 of this 
chapter. The State agency must ensure that records are maintained that 
support the financial claims being made to FNS.
    (6) Fiscal recordkeeping and reporting requirements. Total E&T 
expenditures are reported on the Financial Status Report (SF-269) in 
the column containing ``other'' expenses. E&T expenditures are also 
separately identified in an attachment to the SF-269 to show, as 
provided in instructions, total State and Federal E&T expenditures; 
expenditures funded with the unmatched Federal grants; State and 
Federal expenditures for participant reimbursements; State and Federal 
expenditures for E&T costs at the 50 percent reimbursement level; and 
State and Federal expenditures for optional workfare program costs, 
operated under section 20 of the Food Stamp Act and paragraph (m)(7) of 
this section. Claims for enhanced funding for placements of 
participants in employment after their initial participation in the 
optional workfare program will be submitted in accordance with 
paragraph (m)(7)(iv) of this section.
    (e) Employment and training programs. Work registrants not 
otherwise exempted by the State agency are subject to the E&T program 
participation requirements imposed by the State agency. Such 
individuals are referred to in this section as E&T mandatory 
participants. Requirements may vary among participants. Failure to 
comply without good cause with the requirements imposed by the State 
agency will result in disqualification as specified in paragraph (f)(2) 
of this section.
    (1) Components. To be considered acceptable by FNS, any component 
offered by a State agency must entail a certain level of effort by the 
participants. The level of effort should be comparable to spending 
approximately 12 hours a month for two months making job contacts (less 
in workfare or work experience components if the household's benefit 
divided by the minimum wage is less than this amount). However, FNS may 
approve components that do not meet this guideline if it determines 
that such components will advance program goals. An initial screening 
by an eligibility worker to determine whom to place in an E&T program 
does not constitute a component. The State agency may require Food 
Stamp Program applicants to participate in any component it offers in 
its E&T program at the time of application. The State agency must not 
impose requirements that would delay the determination of an 
individual's eligibility for benefits or in issuing benefits to any 
household that is otherwise eligible. In accordance with section 
6(o)(1)(A) of the Food Stamp Act and Sec. 273.24, job search and job 
search training, when offered as components of an E&T program, are not 
qualifying activities relating to the participation requirements 
necessary to maintain food stamp eligibility for ABAWDs. However, job 
search or job search training activities, when offered as part of other 
E&T program components, are acceptable as long as those activities 
comprise less than half the total required time spent in the 
components. An E&T program offered by a State agency must include one 
or more of the following components:
    (i) A job search program. The State agency may require an 
individual to participate in job search from the time an application is 
filed for an initial period established by the State agency. Following 
this initial period (which may extend beyond the date when eligibility 
is determined) the State agency may require an additional job search 
period in any period of 12 consecutive months. The first such period of 
12 consecutive months will begin at any time following the close of the 
initial period. The State agency may establish a job search period 
that, in its estimation, will provide participants a reasonable 
opportunity to find suitable employment. The State agency should not, 
however, establish a continuous, year-round job search requirement. If 
a reasonable period of job search does not result in employment, 
placing the individual in a training or education component to improve 
job skills will likely be more productive. In accordance with section 
6(o)(1)(A) of the Food Stamp Act and Sec. 273.24, a job search program 
is not a qualifying activity relating to the participation requirements 
necessary to maintain food stamp eligibility for ABAWDs. However, such 
a program, when operated under title I of the WIA, or under section 236 
of the Trade Act, is considered a qualifying activity relating to the 
participation requirements necessary to maintain food stamp eligibility 
for ABAWDs.
    (ii) A job search training program that includes reasonable job 
search training and support activities. Such a program may consist of 
job skills assessments, job finding clubs, training in techniques for 
employability, job placement services, or other direct training or 
support activities, including educational programs determined by the 
State agency to expand the job search abilities or employability of 
those subject to the program. Job search training activities are 
approvable if they directly enhance the employability of the 
participants. A direct link between the job search training activities 
and job-readiness must be established for a component to be approved. 
In accordance with section 6(o)(1) of the Food Stamp Act and 
Sec. 273.24, a job search program is not a qualifying activity relating 
to the participation requirements necessary to maintain food stamp 
eligibility for ABAWDs. However, such a program, when operated under 
title I of the WIA or under section 236 of the Trade Act, is considered 
a qualifying activity relating to the participation

[[Page 41610]]

requirements necessary to maintain food stamp eligibility for ABAWDs.
    (iii) A workfare program as described in paragraph (m) of this 
section.
    (A) The participation requirements of section 20(b) of the Food 
Stamp Act and paragraphs (m)(5)(i)(A) and (m)(5)(i)(B) of this section 
for individuals exempt from Food Stamp Program work requirements under 
paragraphs (b)(1)(iii) and (b)(1)(v) of this section, are not 
applicable to E&T workfare components.
    (B) In accordance with section 20(e) of the Food Stamp Act and 
paragraph (m)(6)(ii) of this section, the State agency may establish a 
job search period of up to 30 days following certification prior to 
making a workfare assignment. This job search activity is part of the 
workfare assignment, and not a job search ``program.'' Participants are 
considered to be participating in and complying with the requirements 
of workfare, thereby meeting the participation requirement for ABAWDs.
    (C) The sharing of workfare savings authorized under section 20(g) 
of the Food Stamp Act and paragraph (m)(7)(iv) of this section are not 
available for E&T workfare components.
    (iv) A program designed to improve the employability of household 
members through actual work experience or training, or both, and to 
enable individuals employed or trained under such programs to move 
promptly into regular public or private employment. Such an employment 
or training experience must:
    (A) Not provide any work that has the effect of replacing the 
employment of an individual not participating in the employment or 
training experience program; and
    (B) Provide the same benefits and working conditions that are 
provided at the job site to employees performing comparable work for 
comparable hours.
    (v) A project, program or experiment such as a supported work 
program, or a WIA or State or local program aimed at accomplishing the 
purpose of the E&T program.
    (vi) Educational programs or activities to improve basic skills or 
otherwise improve employability including educational programs 
determined by the State agency to expand the job search abilities or 
employability of those subject to the program. Allowable educational 
activities may include, but are not limited to, high school or 
equivalent educational programs, remedial education programs to achieve 
a basic literacy level, and instructional programs in English as a 
second language. Only educational components that directly enhance the 
employability of the participants are allowable. A direct link between 
the education and job-readiness must be established for a component to 
be approved.
    (vii) A program designed to improve the self-sufficiency of 
recipients through self-employment. Included are programs that provide 
instruction for self-employment ventures.
    (2) Exemptions. Each State agency may, at its discretion, exempt 
individual work registrants and categories of work registrants from E&T 
participation. Each State agency must periodically reevaluate its 
individual and categorical exemptions to determine whether they remain 
valid. Each State agency will establish the frequency of its periodic 
evaluation.
    (3) Time spent in an employment and training program. (i) Each 
State agency will determine the length of time a participant spends in 
any E&T component it offers. The State agency may also determine the 
number of successive components in which a participant may be placed.
    (ii) The time spent by the members of a household collectively each 
month in an E&T work program (including, but not limited to, those 
carried out under paragraphs (e)(1)(iii) and (e)(1)(iv) of this 
section) combined with any hours worked that month in a workfare 
program under paragraph (m) of this section must not exceed the number 
of hours equal to the household's allotment for that month divided by 
the higher of the applicable Federal or State minimum wage. The total 
hours of participation in an E&T component for any household member 
individually in any month, together with any hours worked in a workfare 
program under paragraph (m) of this section and any hours worked for 
compensation (in cash or in kind), must not exceed 120.
    (4) Voluntary participation. (i) A State agency may operate program 
components in which individuals elect to participate.
    (ii) A State agency must not disqualify voluntary participants in 
an E&T component for failure to comply with E&T requirements.
    (iii) The hours of participation or work of a volunteer may not 
exceed the hours required of E&T mandatory participants, as specified 
in paragraph (e)(3) of this section.
    (f) Failure to comply (1) Ineligibility for failure to comply. A 
nonexempt individual who refuses or fails without good cause, as 
defined in paragraphs (i)(2) and (i)(3) of this section, to comply with 
the Food Stamp Program work requirements listed under paragraph (a)(1) 
of this section is ineligible to participate in the Food Stamp Program, 
and will be considered an ineligible household member, pursuant to 
Sec. 273.1(b)(7).
    (i) As soon as the State agency learns of the individual's 
noncompliance it must determine whether good cause for the 
noncompliance exists, as discussed in paragraph (i) of this section. 
Within 10 days of establishing that the noncompliance was without good 
cause, the State agency must provide the individual with a notice of 
adverse action, as specified in Sec. 273.13. If the State agency offers 
a conciliation process as part of its E&T program, it must issue the 
notice of adverse action no later than the end of the conciliation 
period.
    (ii) The notice of adverse action must contain the particular act 
of noncompliance committed and the proposed period of disqualification. 
The notice must also specify that the individual may, if appropriate, 
reapply at the end of the disqualification period. Information must be 
included on or with the notice describing the action that can be taken 
to avoid the disqualification before the disqualification period 
begins. The disqualification period must begin with the first month 
following the expiration of the 10-day adverse notice period, unless a 
fair hearing is requested.
    (iii) An E&T disqualification may be imposed after the end of a 
certification period. Thus, a notice of adverse action must be sent 
whenever the State agency becomes aware of an individual's 
noncompliance with Food Stamp Program work requirements, even if the 
disqualification begins after the certification period expires and the 
household has not been recertified.
    (2) Disqualification periods. The following disqualification 
periods will be imposed:
    (i) For the first occurrence of noncompliance, the individual will 
be disqualified until the later of:
    (A) The date the individual complies, as determined by the State 
agency;
    (B) One month; or
    (C) Up to three months, at State agency option.
    (ii) For the second occurrence, until the later of:
    (A) The date the individual complies, as determined by the State 
agency;
    (B) Three months; or
    (C) Up to six months, at State agency option.
    (iii) For the third or subsequent occurrence, until the later of:
    (A) The date the individual complies, as determined by the State 
agency;
    (B) Six months;
    (C) A date determined by the State agency; or

[[Page 41611]]

    (D) At the option of the State agency, permanently.
    (3) Record retention. In accordance with Sec. 272.1(f) of this 
chapter, State agencies are required to retain records concerning the 
frequency of noncompliance with FSP work requirements and the resulting 
disqualification actions imposed. These records must be available for 
inspection and audit at any reasonable time to ensure conformance with 
the minimum mandatory disqualification periods instituted.
    (4) Disqualification plan. In accordance with 
Sec. 272.2(d)(1)(xiii) of this chapter, each State agency must prepare 
and submit a plan detailing its disqualification policies. The plan 
must include the length of disqualification to be enforced for each 
occurrence of noncompliance, how compliance is determined by the State 
agency, and the State agency's household disqualification policy.
    (5) Household ineligibility. (i) If the individual who becomes 
ineligible to participate under paragraph (f)(1) of this section is the 
head of a household, the State agency, at its option, may disqualify 
the entire household from Food Stamp Program participation.
    (ii) The State agency may disqualify the household for a period 
that does not exceed the lesser of:
    (A) The duration of the ineligibility of the noncompliant 
individual under paragraph (f)(2) of this section; or
    (B) 180 days.
    (iii) A household disqualified under this provision may reestablish 
eligibility if:
    (A) The head of the household leaves the household;
    (B) A new and eligible person joins the household as the head of 
the household, as defined in Sec. 273.1(d)(2); or
    (C) The head of the household becomes exempt from work requirements 
during the disqualification period.
    (iv) If the head of the household joins another household as its 
head, that household will be disqualified from participating in the 
Food Stamp Program for the remaining period of ineligibility.
    (6) Fair hearings. Each individual or household has the right to 
request a fair hearing, in accordance with Sec. 273.15, to appeal a 
denial, reduction, or termination of benefits due to a determination of 
nonexempt status, or a State agency determination of failure to comply 
with Food Stamp Program work requirements. Individuals or households 
may appeal State agency actions such as exemption status, the type of 
requirement imposed, or State agency refusal to make a finding of good 
cause if the individual or household believes that a finding of failure 
to comply has resulted from improper decisions on these matters. The 
State agency or its designee operating the relevant component must 
receive sufficient advance notice to either permit the attendance of a 
representative or ensure that a representative will be available for 
questioning over the phone during the hearing. A representative of the 
appropriate agency must be available through one of these means. A 
household must be allowed to examine its E&T component casefile at a 
reasonable time before the date of the fair hearing, except for 
confidential information (that may include test results) that the 
agency determines should be protected from release. Confidential 
information not released to a household may not be used by either party 
at the hearing. The results of the fair hearing are binding on the 
State agency.
    (7) Failure to comply with a work requirement under title IV of the 
Social Security Act, or an unemployment compensation work requirement. 
An individual exempt from Food Stamp Program work requirements by 
paragraphs (b)(1)(iii) or (b)(1)(v) of this section because he or she 
is subject to work requirements under title IV-A or unemployment 
compensation who fails to comply with a title IV-A or unemployment 
compensation work requirement will be treated as though he or she 
failed to comply with the Food Stamp Program work requirement.
    (i) When a food stamp household reports the loss or denial of title 
IV-A or unemployment compensation benefits, or if the State agency 
otherwise learns of a loss or denial, the State agency must determine 
whether the loss or denial resulted when a household member refused or 
failed without good cause to comply with a title IV-A or unemployment 
compensation work requirement.
    (ii) If the State agency determines that the loss or denial of 
benefits resulted from an individual's refusal or failure without good 
cause to comply with a title IV or unemployment compensation 
requirement, the individual (or household if applicable under paragraph 
(f)(5) of this section) must be disqualified in accordance with the 
applicable provisions of this paragraph (f). However, if the 
noncomplying individual meets one of the work registration exemptions 
provided in paragraph (b)(1) of this section (other than the exemptions 
provided in paragraphs (b)(1)(iii) and (b)(1)(v) of this section) the 
individual (or household if applicable under paragraph (f)(5) of this 
section) will not be disqualified.
    (iii) If the State agency determination of noncompliance with a 
title IV-A or unemployment compensation work requirement leads to a 
denial or termination of the individual's or household's food stamp 
benefits, the individual or household has a right to appeal the 
decision in accordance with the provisions of paragraph (f)(6) of this 
section.
    (iv) In cases where the individual is disqualified from the title 
IV-A program for refusal or failure to comply with a title IV-A work 
requirement, but the individual meets one of the work registration 
exemptions provided in paragraph (b)(1) of this section, other than the 
exemptions provided in paragraphs (b)(1)(iii) and (b)(1)(v) of this 
section, the State agency may, at its option, apply the identical title 
IV-A disqualification on the individual under the Food Stamp Program. 
The State agency must impose such optional disqualifications in 
accordance with section 6(i) of the Food Stamp Act and with the 
provisions of Sec. 273.11(1).
    (g) Ending disqualification. Except in cases of permanent 
disqualification, at the end of the applicable mandatory 
disqualification period for noncompliance with Food Stamp Program work 
requirements, participation may resume if the disqualified individual 
applies again and is determined by the State agency to be in compliance 
with work requirements. A disqualified individual may be permitted to 
resume participation during the disqualification period (if otherwise 
eligible) by becoming exempt from work requirements.
    (h) Suitable employment. (1) Employment will be considered suitable 
unless:
    (i) The wage offered is less than the highest of the applicable 
Federal minimum wage, the applicable State minimum wage, or eighty 
percent (80%) of the Federal minimum wage if neither the Federal nor 
State minimum wage is applicable.
    (ii) The employment offered is on a piece-rate basis and the 
average hourly yield the employee can reasonably be expected to earn is 
less than the applicable hourly wages specified under paragraph 
(h)(1)(i) of this section.
    (iii) The household member, as a condition of employment or 
continuing employment, is required to join, resign from, or refrain 
from joining any legitimate labor organization.
    (iv) The work offered is at a site subject to a strike or lockout 
at the time

[[Page 41612]]

of the offer unless the strike has been enjoined under section 208 of 
the Labor-Management Relations Act (29 U.S.C. 78) (commonly known as 
the Taft-Hartley Act), or unless an injunction has been issued under 
section 10 of the Railway Labor Act (45 U.S.C. 160).
    (v) It fails to meet additional suitability criteria established by 
State agencies.
    (2) In addition, employment will be considered suitable unless the 
household member involved can demonstrate or the State agency otherwise 
becomes aware that:
    (i) The degree of risk to health and safety is unreasonable.
    (ii) The member is physically or mentally unfit to perform the 
employment, as documented by medical evidence or by reliable 
information from other sources.
    (iii) The employment offered within the first 30 days of 
registration is not in the member's major field of experience.
    (iv) The distance from the member's home to the place of employment 
is unreasonable considering the expected wage and the time and cost of 
commuting. Employment will not be considered suitable if daily 
commuting time exceeds 2 hours per day, not including the transporting 
of a child to and from a child care facility. Nor will employment be 
considered suitable if the distance to the place of employment 
prohibits walking and neither public nor private transportation is 
available to transport the member to the jobsite.
    (v) The working hours or nature of the employment interferes with 
the member's religious observances, convictions, or beliefs.
    (i) Good Cause. (1) The State agency is responsible for determining 
good cause when a food stamp recipient fails or refuses to comply with 
Food Stamp Program work requirements. Since it is not possible for the 
Department to enumerate each individual situation that should or should 
not be considered good cause, the State agency must take into account 
the facts and circumstances, including information submitted by the 
employer and by the household member involved, in determining whether 
or not good cause exists.
    (2) Good cause includes circumstances beyond the member's control, 
such as, but not limited to, illness, illness of another household 
member requiring the presence of the member, a household emergency, the 
unavailability of transportation, or the lack of adequate child care 
for children who have reached age six but are under age 12.
    (3) Good cause for leaving employment includes the good cause 
provisions found in paragraph (i)(2) of this section, and resigning 
from a job that is unsuitable, as specified in paragraphs (h)(1) and 
(h)(2) of this section. Good cause for leaving employment also 
includes:
    (i) Discrimination by an employer based on age, race, sex, color, 
handicap, religious beliefs, national origin or political beliefs;
    (ii) Work demands or conditions that render continued employment 
unreasonable, such as working without being paid on schedule;
    (iii) Acceptance of employment by the individual, or enrollment by 
the individual in any recognized school, training program or 
institution of higher education on at least a half time basis, that 
requires the individual to leave employment;
    (iv) Acceptance by any other household member of employment or 
enrollment at least half-time in any recognized school, training 
program or institution of higher education in another county or similar 
political subdivision that requires the household to move and thereby 
requires the individual to leave employment;
    (v) Resignations by persons under the age of 60 which are 
recognized by the employer as retirement;
    (vi) Employment that becomes unsuitable, as specified in paragraphs 
(h)(1) and (h)(2) of this section, after the acceptance of such 
employment;
    (vii) Acceptance of a bona fide offer of employment of more than 30 
hours a week or in which the weekly earnings are equivalent to the 
Federal minimum wage multiplied by 30 hours that, because of 
circumstances beyond the individual's control, subsequently either does 
not materialize or results in employment of less than 30 hours a week 
or weekly earnings of less than the Federal minimum wage multiplied by 
30 hours; and
    (viii) Leaving a job in connection with patterns of employment in 
which workers frequently move from one employer to another such as 
migrant farm labor or construction work. There may be some 
circumstances where households will apply for food stamp benefits 
between jobs particularly in cases where work may not yet be available 
at the new job site. Even though employment at the new site has not 
actually begun, the quitting of the previous employment must be 
considered as with good cause if it is part of the pattern of that type 
of employment.
    (4) Verification. To the extent that the information given by the 
household is questionable, as defined in Sec. 273.2(f)(2), State 
agencies must request verification of the household's statements. The 
primary responsibility for providing verification, as provided in 
Sec. 273.2(f)(5), rests with the household.
    (j) Voluntary quit and reduction of work effort. (1) Period for 
establishing voluntary quit and reduction of work effort. For the 
purpose of establishing that a voluntary quit without good cause or 
reduction in work effort without good cause occurred prior to applying 
for food stamps, a State agency may, at its option, choose a period 
between 30 and 60 days before application in which to determine 
voluntary quit or reduction in work effort.
    (2) Individual ineligibility. An individual is ineligible to 
participate in the Food Stamp Program if, in a period established by 
the State agency between 30 and 60 day before applying for food stamp 
benefits or at any time thereafter, the individual:
    (i) Voluntarily and without good cause quits a job of 30 hours a 
week or more; or
    (ii) Reduces his or her work effort voluntarily and without good 
cause and, after the reduction, is working less than 30 hours per week.
    (3) Determining whether a voluntary quit or reduction of work 
effort occurred and application processing. (i) When a household files 
an application for participation, or when a participating household 
reports the loss of a source of income or a reduction in household 
earnings, the State agency must determine whether any household member 
voluntarily quit his or her job or reduced his or her work effort. 
Benefits must not be delayed beyond the normal processing times 
specified in Sec. 273.2 pending the outcome of this determination.
    (ii) The voluntary quit provision applies if the employment 
involved 30 hours or more per week or provided weekly earnings at least 
equivalent to the Federal minimum wage multiplied by 30 hours; the quit 
occurred within a period established by the State agency between 30 to 
60 days prior to the date of application or anytime thereafter; and the 
quit was without good cause. Changes in employment status that result 
from terminating a self-employment enterprise or resigning from a job 
at the demand of the employer will not be considered a voluntary quit 
for purposes of this paragraph (j). An employee of the Federal 
Government, or of a State or local government who participates in a 
strike against such government, and is dismissed from his or her job 
because of participation in the strike, will be

[[Page 41613]]

considered to have voluntarily quit his or her job without good cause. 
If an individual quits a job, secures new employment at comparable 
wages or hours and is then laid off or, through no fault of his own, 
loses the new job, the individual must not be disqualified for the 
earlier quit.
    (iii) The reduction of work effort provision applies if, before the 
reduction, the individual was employed 30 hours or more per week; the 
reduction occurred within a period established by the State agency 
between 30 and 60 days prior to the date of application or anytime 
thereafter; and the reduction was voluntary and without good cause. The 
minimum wage equivalency does not apply when determining a reduction in 
work effort.
    (iv) In the case of an applicant household, the State agency must 
determine if any household member subject to Food Stamp Program work 
requirements voluntarily quit his or her job or reduced his or her work 
effort within a period established by the State agency between 30 and 
60 days prior to date of application. If the State agency learns that a 
household has lost a source of income or experienced a reduction in 
income after the date of application but before the household is 
certified, the State agency must determine whether a voluntary quit or 
reduction in work effort occurred.
    (v) Upon determining that an individual voluntarily quit employment 
or reduced work effort, the State agency must determine if the 
voluntary quit or reduction of work effort was with good cause as 
defined in paragraph (i) of this section.
    (vi) In the case of an individual who is a member of an applicant 
household, if the voluntary quit or reduction in work effort was 
without good cause, the individual will be determined ineligible to 
participate and will be disqualified according to the State agency's 
established minimum mandatory sanction schedule. The ineligible 
individual must be considered an ineligible household member, pursuant 
to Sec. 273.1(b)(7). The disqualification is effective upon the 
determination of eligibility for the remaining household members. If 
the individual who becomes ineligible is the head of the household, as 
defined in Sec. 273.1(d)(2), the State agency may choose to disqualify 
the entire household, in accordance with paragraph (f)(5) of this 
section. If the State agency chooses to disqualify the household, the 
State agency must provide the applicant household with a notice of 
denial in accordance with Sec. 273.2(g)(3). The notice must inform the 
household of the proposed period of disqualification; its right to 
reapply at the end of the disqualification period; and of its right to 
a fair hearing. The household's disqualification is effective upon the 
issuance of the notice of denial.
    (vii) In the case of an individual who is a member of a 
participating household, if the State agency determines that the 
individual voluntarily quit his or her job or reduced his or her work 
effort without good cause while participating in the program or 
discovers that the individual voluntarily quit his or her job or 
reduced his or her work effort without good cause during a period 
established by the State agency between 30 and 60 days prior to the 
date of application for benefits or between application and 
certification, the State agency must provide the individual with a 
notice of adverse action as specified in Sec. 273.13 within 10 days 
after the determination of a quit or reduction in work effort. The 
notification must contain the particular act of noncompliance 
committed, the proposed period of ineligibility, the actions that may 
be taken to avoid the disqualification, and it must specify that the 
individual, if otherwise eligible, may resume participation at the end 
of the disqualification period if the State agency determines the 
individual to be in compliance with Program work requirements. The 
individual will be disqualified according to the State agency's 
established minimum mandatory sanction schedule. The ineligible 
individual must be considered an ineligible household member, pursuant 
to Sec. 273.1(b)(7). The disqualification period will begin the first 
month following the expiration of the 10-day adverse notice period, 
unless the individual requests a fair hearing. If a voluntary quit or 
reduction in work effort occurs in the last month of a certification 
period, or is determined in the last 30 days of the certification 
period, the individual must be denied recertification for a period 
equal to the appropriate mandatory disqualification period, beginning 
with the day after the last certification period ends and continuing 
for the length of the disqualification, regardless of whether the 
individual reapplies for food stamps. Each individual has a right to a 
fair hearing to appeal a denial or termination of benefits due to a 
determination that the individual voluntarily quit his or her job or 
reduced his or her work effort without good cause. If the participating 
individual's benefits are continued pending a fair hearing and the 
State agency determination is upheld, the disqualification period must 
begin the first of the month after the hearing decision is rendered.
    (viii) If the individual who voluntarily quit his or her job, or 
who reduced his or her work effort without good cause is the head of a 
household, as defined in Sec. 273.1(d), the State agency, at its 
option, may disqualify the entire household from Food Stamp Program 
participation in accordance with paragraph (f)(5) of this section.
    (4) Ending a voluntary quit or a reduction in work 
disqualification. Except in cases of permanent disqualification, 
following the end of the mandatory disqualification period for 
voluntarily quitting a job or reducing work effort without good cause, 
an individual may begin participation in the program if he or she 
reapplies and is determined eligible by the State agency. Eligibility 
may be reestablished during a disqualification and the individual, if 
otherwise eligible, may be permitted to resume participation if the 
individual becomes exempt from Program work requirements under 
paragraph (b)(1) of this section.
    (5) Application in the final month of disqualification. Except in 
cases of permanent disqualification, if an application for 
participation in the Program is filed in the final month of the 
mandatory disqualification period, the State agency must, in accordance 
with Sec. 273.10(a)(3), use the same application for the denial of 
benefits in the remaining month of disqualification and certification 
for any subsequent month(s) if all other eligibility criteria are met.
    (k) Employment initiatives program. (1) General. In accordance with 
section 17(d)(1)(B) of the Food Stamp Act, qualified State agencies may 
elect to operate an employment initiatives program, in which an 
eligible household can receive the cash equivalent of its food stamp 
coupon allotment.
    (2) State agency qualification. A State agency qualifies to operate 
an employment initiatives program if, during the summer of 1993, at 
least half of its food stamp households also received cash benefits 
from a State program funded under title IV-A of the Social Security 
Act.
    (3) Qualified State agencies. The State agencies of Alaska, 
California, Connecticut, the District of Columbia, Massachusetts, 
Michigan, Minnesota, New Jersey, West Virginia, and Wisconsin meet the 
qualification. These 10 State agencies may operate an employment 
initiatives program.
    (4) Eligible households. A food stamp household in one of the 10 
qualified State agencies may receive cash benefits

[[Page 41614]]

in lieu of a food stamp coupon allotment if it meets the following 
requirements:
    (i) The food stamp household elects to participate in an employment 
initiatives program;
    (ii) An adult member of the household:
    (A) Has worked in unsubsidized employment for the last 90 days, 
earning a minimum of $350 per month;
    (B) Is receiving cash benefits under a State program funded under 
title IV-A of the Social Security Act; or
    (C) Was receiving cash benefits under the State program but, while 
participating in the employment initiatives program, became ineligible 
because of earnings and continues to earn at least $350 a month from 
unsubsidized employment.
    (5) Program Provisions. (i) Cash benefits provided in an employment 
initiatives program will be considered an allotment, as defined at 
Sec. 271.2 of this chapter.
    (ii) An eligible household receiving cash benefits in an employment 
initiatives program will not receive any other food stamp benefit 
during the period for which cash assistance is provided.
    (iii) A qualified State agency operating an employment initiatives 
program must increase the cash benefit to participating households to 
compensate for any State or local sales tax on food purchases, unless 
FNS determines that an increase is unnecessary because of the limited 
nature of items subject to the State or local sales tax.
    (iv) Any increase in cash assistance to account for a State or 
local sales tax on food purchases must be paid by the State agency.
    (6) Evaluation. After two years of operating an employment 
initiatives program, a State agency must evaluate the impact of 
providing cash assistance in lieu of a food stamp coupon allotment to 
participating households. The State agency must provide FNS with a 
written report of its evaluation findings. The State agency, with the 
concurrence of FNS, will determine the content of the evaluation.
    (l) Work supplementation program. In accordance with section 16(b) 
of the Food Stamp Act, States may operate work supplementation (or 
support) programs that allow the cash value of food stamp benefits and 
public assistance, such as cash assistance authorized under title IV-A 
of the Social Security Act or cash assistance under a program 
established by a State, to be provided to employers as a wage subsidy 
to be used for hiring and employing public assistance recipients. The 
goal of these programs is to promote self-sufficiency by providing 
public assistance recipients with work experience to help them move 
into unsubsidized jobs. In accordance with Sec. 272.2(d)(1)(xiv) of 
this chapter, State agencies that wish to exercise their option to 
implement work supplementation programs must submit to FNS for approval 
a plan that complies with the provisions of this paragraph (l). Work 
supplementation programs may not be implemented without prior approval 
from FNS.
    (1) Plan. (i) Assurances. The plan must contain the following 
assurances:
    (A) The individual participating in a work supplementation program 
must not be employed by the employer at the time the individual enters 
the program;
    (B) The wage subsidy received under the work supplementation 
program must be excluded from household income and resources during the 
term the individual is participating in work supplementation;
    (C) The household must not receive a separate food stamp allotment 
while participating in the work supplementation program;
    (D) An individual participating in a work supplementation program 
is excused from meeting any other work requirements;
    (E) The work supplementation program must not displace any persons 
currently employed who are not supplemented or supported;
    (F) The wage subsidy must not be considered income or resources 
under any Federal, State or local laws, including but not limited to, 
laws relating to taxation, welfare, or public assistance programs, and 
the household's food stamp allotment must not be decreased due to 
taxation or any other reason because of its use as a wage subsidy;
    (G) The earned income deduction does not apply to the subsidized 
portion of wages received in a work supplementation program; and
    (H) All work supplemented or supported employees must receive the 
same benefits (sick and personal leave, health coverage, workmen's 
compensation, etc.) as similarly situated coworkers who are not 
participating in work supplementation and wages paid under a wage 
supplementation or support program must meet the requirements of the 
Fair Labor Standards Act and other applicable employment laws.
    (ii) Description. The plan must also describe:
    (A) The procedures the State agency will use to ensure that the 
cash value of food stamp benefits for participating households are not 
subject to State or local sales taxes on food purchases. The costs of 
increasing household food stamp allotments to compensate for such sales 
taxes must be paid from State funds;
    (B) State agency, employer and recipient obligations and 
responsibilities;
    (C) The procedures the State agency will use to provide wage 
subsidies to employers and to ensure accountability;
    (D) How public assistance recipients in the proposed work 
supplementation program will, within a specified period of time, be 
moved from supplemented or supported employment to employment that is 
not supplemented or supported;
    (E) Whether the food stamp allotment and public assistance grant 
will be frozen at the time a recipient begins a subsidized job; and
    (F) The procedures the State agency will use to ensure that work 
supplementation program participants do not incur any Federal, State, 
or local tax liabilities on the cash value of their food stamp 
benefits.
    (2) Budget. In addition to the plan described in paragraph (l)(1) 
of this section, an operating budget for the proposed work 
supplementation program must be submitted to FNS.
    (3) Approval. FNS will review the initial plan and any subsequent 
amendments. Upon approval by FNS, the State agency must incorporate the 
approved work supplementation program plan or subsequent amendment into 
its State Plan of Operation and its operating budget must be included 
in the State agency budget. No plan or amendment may be implemented 
without approval from FNS.
    (4) Reporting. State agencies operating work supplementation and 
support programs are required to comply with all FNS reporting 
requirements, including reporting the amount of benefits contributed to 
employers as a wage subsidy on the FNS-388, State Issuance and 
Participation Estimates; FNS-388A, Participation and Issuance by 
Project Area; FNS-46, Issuance Reconciliation Report; and SF-269, 
Addendum Financial Status Report. State agencies are also required to 
report administrative costs associated with work supplementation 
programs on the FNS-366A, Budget Projection and SF-269, Financial 
Status Report. Special codes for work supplementation programs will be 
assigned for reporting purposes.
    (5) Funding. FNS will pay the cash value of a participating 
household's food stamp benefits to a State agency

[[Page 41615]]

with an approved work supplementation program to pay to an employer as 
a wage subsidy, and will also reimburse the State agency for related 
administrative costs, in accordance with Section 16 of the Food Stamp 
Act.
    (6) Quality control. Cases in which a household member is 
participating in a work supplementation program will be coded as not 
subject to review.
    (m) Optional workfare program. (1) General. This paragraph (m) 
contains the rules to be followed in operating a food stamp workfare 
program. In workfare, nonexempt food stamp recipients may be required 
to perform work in a public service capacity as a condition of 
eligibility to receive the coupon allotment to which their household is 
normally entitled. The primary goal of workfare is to improve 
employability and enable individuals to move into regular employment.
    (2) Program administration. (i) A food stamp workfare program may 
be operated as a component of a State agency's E&T program, or it may 
be operated independently. If the workfare program is part of an E&T 
program it must be included as a component in the State agency's E&T 
plan in accordance with the requirements of paragraph (c)(4) of this 
section. If it is operated independent of the E&T program, the State 
agency must submit a workfare plan to FNS for its approval. For the 
purpose of this paragraph (m), a political subdivision is any local 
government, including, but not limited to, any county, city, town or 
parish. A State agency may implement a workfare program statewide or in 
only some areas of the State. The areas of operation must be identified 
in the State agency's workfare or E&T plan.
    (ii) Political subdivisions are encouraged, but not required, to 
submit their plans to FNS through their respective State agencies. At a 
minimum, however, plans must be submitted to the State agencies 
concurrent with their submission to FNS. Workfare plans and subsequent 
amendments must not be implemented prior to their approval by FNS.
    (iii) When a State agency chooses to sponsor a workfare program by 
submitting a plan to FNS, it must incorporate the approved plan into 
its State Plan of Operations. When a political subdivision chooses to 
sponsor a workfare program by submitting a plan to FNS, the State 
agency is responsible as a facilitator in the administration of the 
program by disbursing Federal funding and meeting the requirements 
identified in paragraph (m)(4) of this section. When it is notified 
that FNS has approved a workfare plan submitted by a political 
subdivision in its State, the State agency must append that political 
subdivision's workfare plan to its own State Plan of Operations.
    (iv) The operating agency is the administrative organization 
identified in the workfare plan as being responsible for establishing 
job sites, assigning eligible recipients to the job sites, and meeting 
the requirements of this paragraph (m). The operating agency may be any 
public or private, nonprofit organization. The State agency or 
political subdivision that submitted the workfare plan is responsible 
for monitoring the operating agency's compliance with the requirements 
of this paragraph (m) or of the workfare plan. The Department may 
suspend or terminate some or all workfare program funding, or withdraw 
approval of the workfare program from the State agency or political 
subdivision that submitted the workfare plan upon finding that that 
State agency or political subdivision, or their respective operating 
agencies, have failed to comply with the requirements of this paragraph 
(m) or of the workfare plan.
    (v) State agencies or other political subdivisions must describe in 
detail in the plan how the political subdivision, working with the 
State agency and any other cooperating agencies that may be involved in 
the program, will fulfill the provisions of this paragraph (m). The 
plan will be a one-time submittal, with amendments submitted as needed 
to cover any changes in the workfare program as they occur.
    (vi) State agencies or political subdivisions submitting a workfare 
plan must submit with the plan an operating budget covering the period 
from the initiation of the workfare program's implementation schedule 
to the close of the Federal fiscal year. In addition, an estimate of 
the cost for one full year of operation must be submitted together with 
the workfare plan. For subsequent fiscal years, the workfare program 
budget must be included in the State agency's budget.
    (vii) If workfare plans are submitted by more than one political 
subdivision, each representing the same population (such as a city 
within a county), the Department will determine which political 
subdivision will have its plan approved. Under no circumstances will a 
food stamp recipient be subject to more than one food stamp workfare 
program. If a political subdivision chooses to operate a workfare 
program and represents a population which is already, at least in part, 
subject to a food stamp workfare program administered by another 
political subdivision, it must establish in its workfare plan how food 
stamp recipients will not be subject to more than one food stamp 
workfare program.
    (3) Operating agency responsibilities. (i) General. The operating 
agency, as designated by the State agency or other political 
subdivision that submits a plan, is responsible for establishing and 
monitoring job sites, interviewing and assessing eligible recipients, 
assigning eligible recipients to appropriate job sites, monitoring 
participant compliance, making initial determinations of good cause for 
household noncompliance, and otherwise meeting the requirements of this 
paragraph (m).
    (ii) Establishment of job sites. Workfare job slots may only be 
located in public or private nonprofit agencies. Contractual agreements 
must be established between the operating agency and organizations 
providing jobs that include, but are not limited to, designation of the 
slots available and designation of responsibility for provision of 
benefits, if any are required, to the workfare participant.
    (iii) Notifying State agency of noncompliance. The operating agency 
must notify the State agency of noncompliance by an individual with a 
workfare obligation when it determines that the individual did not have 
good cause for the noncompliance. This notification must occur within 
five days of such a determination so that the State agency can make a 
final determination as provided in paragraph (m)(4)(iv) of this 
section.
    (iv) Notifications. (A) State agencies must establish and use 
notices to notify the operating agency of workfare-eligible households. 
The notice must include the case name, case number, names of workfare-
eligible household members, address of the household, certification 
period, and indication of any part-time work. If the State agency is 
calculating the hours of obligation, it must also include this in the 
notice. If the operating agency is computing the hours to be worked, 
include the monthly allotment amount.
    (B) Operating agencies must establish and use notices to notify the 
workfare participant of where and when the participant is to report, to 
whom the participant is to report, a brief description of duties for 
the particular placement, and the number of hours to be worked.
    (C) Operating agencies must establish and use notices to notify the 
State agency of failure by a household to meet its workfare obligation.
    (v) Recordkeeping requirements. (A) Files that record activity by 
workfare

[[Page 41616]]

participants must be maintained. At a minimum, these records must 
contain job sites, hours assigned, and hours completed.
    (B) Program records must be maintained, for audit and review 
purposes, for a period of 3 years from the month of origin of each 
record. Fiscal records and accountable documents must be retained for 3 
years from the date of fiscal or administrative closure of the workfare 
program. Fiscal closure, as used in this paragraph (m), means that 
workfare program obligations for or against the Federal government have 
been liquidated. Administrative closure, as used in this paragraph (m), 
means that the operating agency or Federal government has determined 
and documented that no further action to liquidate the workfare program 
obligation is appropriate. Fiscal records and accountable records must 
be kept in a manner that will permit verification of direct monthly 
reimbursements to recipients, in accordance with paragraph (m)(7)(iii) 
of this section.
    (vi) Reporting requirements. The operating agency is responsible 
for providing information needed by the State agency to fulfill the 
reporting requirements contained in paragraph (m)(4)(v) of this 
section.
    (vii) Disclosure. The provisions of Sec. 272.1(c) of this chapter 
restricting the use and disclosure of information obtained from food 
stamp households is applicable to the administration of the workfare 
program.
    (4) State agency responsibilities. (i) If a political subdivision 
chooses to operate a workfare program, the State agency must cooperate 
with the political subdivision in developing a plan.
    (ii) The State agency must determine at certification or 
recertification which household members are eligible for the workfare 
program and inform the household representative of the nature of the 
program and of the penalties for noncompliance. If the State agency is 
not the operating agency, each member of a household who is subject to 
workfare under paragraph (m)(5)(i) of this section must be referred to 
the organization which is the operating agency. The information 
identified in paragraph (m)(3)(iv)(A) of this section must be forwarded 
to the operating agency within 5 days after the date of household 
certification. Computation of hours to be worked may be delegated to 
the operating agency.
    (iii) The State agency must inform the household and the operating 
agency of the effect of any changes in a household's circumstances on 
the household's workfare obligation. This includes changes in benefit 
levels or workfare eligibility.
    (iv) Upon notification by the operating agency that a participant 
has failed to comply with the workfare requirement without good cause, 
the State agency must make a final determination as to whether or not 
the failure occurred and whether there was good cause for the failure. 
If the State agency determines that the participant did not have good 
cause for noncompliance, a sanction must be processed as provided in 
paragraphs (f)(1)(i) and (f)(1)(ii) of this section. The State agency 
must immediately inform the operating agency of the months during which 
the sanction will apply.
    (v) The State agency must submit quarterly reports to FNS within 45 
days of the end of each quarter identifying for that quarter for that 
State:
    (A) The number of households with workfare-eligible recipients 
referred to the operating agency. A household will be counted each time 
it is referred to the operating agency;
    (B) The number of households assigned to jobs each month by the 
operating agency;
    (C) The number of individuals assigned to jobs each month by the 
operating agency;
    (D) The total number of hours worked by participants; and
    (E) The number of individuals against which sanctions were applied. 
An individual being sanctioned over two quarters should only be 
reported as sanctioned for the earlier quarter.
    (vi) The State agency may, at its option, assume responsibility for 
monitoring all workfare programs in its State to assure that there is 
compliance with this section and with the plan submitted and approved 
by FNS. Should the State agency assume this responsibility, it would 
act as agent for FNS, which is ultimately responsible for ensuring such 
compliance. Should the State agency determine that noncompliance 
exists, it may withhold funding until compliance is achieved or FNS 
directs otherwise.
    (5) Household responsibilities. (i) Participation requirement. 
Participation in workfare, if assigned by the State agency, is a Food 
Stamp Program work requirement for all nonexempt household members, as 
provided in paragraph (a) of this section. In addition:
    (A) Those recipients exempt from Food Stamp Program work 
requirements because they are subject to and complying with any work 
requirement under title IV of the Social Security Act are subject to 
workfare if they are currently involved less than 20 hours a week in 
title IV work activities. Those recipients involved 20 hours a week or 
more may be subject to workfare at the option of the political 
subdivision; and
    (B) Those recipients exempt from Food Stamp Program work 
requirements because they have applied for or are receiving 
unemployment compensation are subject to workfare.
    (ii) Household obligation. The maximum total number of hours of 
work required of a household each month is determined by dividing the 
household's coupon allotment by the Federal or State minimum wage, 
whichever is higher. Fractions of hours of obligation may be rounded 
down. The household's hours of obligation for any given month may not 
be carried over into another month.
    (6) Other program requirements. (i) Conditions of employment. (A) A 
participant may be required to work a maximum of 30 hours per week. 
This maximum must take into account hours worked in any other 
compensated capacity (including hours of participation in a title IV 
work program) by the participant on a regular or predictable part-time 
basis. With the participant's consent, the hours to be worked may be 
scheduled in such a manner that more than 30 hours are worked in one 
week, as long as the total for that month does not exceed the weekly 
average of 30 hours.
    (B) No participant will be required to work more than eight hours 
on any given day without his or her consent.
    (C) No participant will be required to accept an offer of workfare 
employment if it fails to meet the criteria established in paragraphs 
(h)(1)(iii), (h)(1)(iv), (h)(2)(i), (h)(2)(ii), (h)(2)(iv), and 
(h)(2)(v) of this section.
    (D) If the workfare participant is unable to report for job 
scheduling, to appear for scheduled workfare employment, or to complete 
the entire workfare obligation due to compliance with Unemployment 
Insurance requirements; other Food Stamp Program work requirements 
established in paragraph (a)(1) of this section; or the job search 
requirements established in paragraph (e)(1)(i) of this section, that 
inability must not be considered a refusal to accept workfare 
employment. If the workfare participant informs the operating agency of 
the time conflict, the operating agency must, if possible, reschedule 
the missed activity. If the rescheduling cannot be completed before the 
end of the month, that must not be considered as cause for 
disqualification.
    (E) The operating agency must assure that all persons employed in 
workfare jobs receive job-related benefits at the

[[Page 41617]]

same levels and to the same extent as similar non-workfare employees. 
These are benefits related to the actual work being performed, such as 
workers' compensation, and not to the employment by a particular 
agency, such as health benefits. Of those benefits required to be 
offered, any elective benefit that requires a cash contribution by the 
participant will be optional at the discretion of the participant.
    (F) The operating agency must assure that all workfare participants 
experience the same working conditions that are provided to non-
workfare employees similarly employed.
    (G) The provisions of section 2(a)(3) of the Service Contract Act 
of 1965 (Public Law 89-286), relating to health and safety conditions, 
apply to the workfare program.
    (H) Operating agencies must not place a workfare participant in a 
work position that has the effect of replacing or preventing the 
employment of an individual not participating in the workfare program. 
Vacancies due to hiring freezes, terminations, or lay-offs must not be 
filled by workfare participants unless it can be demonstrated that the 
vacancies are a result of insufficient funds to sustain former staff 
levels.
    (I) Workfare jobs must not, in any way, infringe upon the 
promotional opportunities that would otherwise be available to regular 
employees.
    (J) Workfare jobs must not be related in any way to political or 
partisan activities.
    (K) The cost of workers' compensation or comparable protection 
provided to workfare participants by the State agency, political 
subdivision, or operating agency is a matchable cost under paragraph 
(m)(7) of this section. However, whether or not this coverage is 
provided, in no case is the Federal government the employer in these 
workfare programs (unless a Federal agency is the job site). The 
Department does not assume liability for any injury to or death of a 
workfare participant while on the job.
    (L) The nondiscrimination requirement provided in Sec. 272.6(a) of 
this chapter applies to all agencies involved in the workfare program.
    (ii) Job search period. The operating agency may establish a job 
search period of up to 30 days following certification prior to making 
a workfare assignment during which the potential participant is 
expected to look for a job. This period may only be established at 
household certification, not at recertification. The potential 
participant would not be subject to any job search requirements beyond 
those required under this section during this time.
    (iii) Participant reimbursement. The operating agency must 
reimburse participants for transportation and other costs that are 
reasonably necessary and directly related to participation in the 
program. These other costs may include the cost of child care, or the 
cost of personal safety items or equipment required for performance of 
work if these items are also purchased by regular employees. These 
other costs may not include the cost of meals away from home. No 
participant cost reimbursed under a workfare program operated under 
Title IV of the Social Security Act or any other workfare program may 
be reimbursed under the food stamp workfare program. Only reimbursement 
of participant costs up to but not in excess of $25 per month for any 
participant will be subject to Federal cost sharing as provided in 
paragraph (m)(7) of this section. Reimbursed child care costs may not 
be claimed as expenses and used in calculating the child care deduction 
for determining household benefits. In accordance with paragraph 
(m)(4)(i) of this section, a State agency may decide what its 
reimbursement policy shall be.
    (iv) Failure to comply. When a workfare participant is determined 
by the State agency to have failed or refused without good cause to 
comply with the requirements of this paragraph (m), the provisions of 
paragraph (f) of this section will apply.
    (v) Benefit overissuances. If a benefit overissuance is discovered 
for a month or months in which a participant has already performed a 
workfare or work component requirement, the State agency must apply the 
claim recovery procedures as follows:
    (A) If the person who performed the work is still subject to a work 
obligation, the State must determine how may extra hours were worked 
because of the improper benefit. The participant should be credited 
those extra hours toward future work obligations; and
    (B) If a workfare or work component requirement does not continue, 
the State agency must determine whether the overissuance was the result 
of an intentional program violation, an inadvertent household error, or 
a State agency error. For an intentional program violation a claim 
should be established for the entire amount of the overissuance. If the 
overissuance was caused by an inadvertent household error or State 
agency error, the State agency must determine whether the number of 
hours worked in workfare are more than the number which could have been 
assigned had the proper benefit level been used in calculating the 
number of hours to work. A claim must be established for the amount of 
the overissuance not ``worked off,''' if any. If the hours worked equal 
the amount of hours calculated by dividing the overissuance by the 
minimum wage, no claim will be established. No credit for future work 
requirements will be given.
    (7) Federal financial participation--(i) Administrative costs. 
Fifty percent of all administrative costs incurred by State agencies or 
political subdivisions in operating a workfare program will be funded 
by the Federal government. Such costs include those related to 
recipient participation in workfare, up to $25 per month for any 
participant, as indicated in paragraph (m)(6)(iii) of this section. 
Such costs do not include the costs of equipment, capital expenditures, 
tools or materials used in connection with the work performed by 
workfare participants, the costs of supervising workfare participants, 
the costs of reimbursing participants for meals away from home, or 
reimbursed expenses in excess of $25 per month for any participant. 
State agencies must not use any portion of their annual 100 percent 
Federal E&T allocations to fund the administration of optional workfare 
programs under section 20 of the Food Stamp Act and this paragraph (m).
    (ii) Funding mechanism. The State agencies have responsibility for 
disbursing Federal funds used for the workfare program through the 
State agencies' Letters of Credit. The State agency must also assure 
that records are being maintained which support the financial claims 
being made to FNS. This will be for all programs, regardless of who 
submits the plan. Mechanisms for funding local political subdivisions 
which have submitted plans must be established by the State agencies.
    (iii) Fiscal recordkeeping and reporting requirements. Workfare-
related costs must be identified by the State agency on the Financial 
Status Report (Form SF-269) as a separate column. All financial 
records, supporting documents, statistical records, negotiated 
contracts, and all other records pertinent to workfare program funds 
must be maintained in accordance with Sec. 277.12 of this chapter.
    (iv) Sharing workfare savings--(A) Entitlement. A political 
subdivision is entitled to share in the benefit reductions that occur 
when a workfare participant begins employment while participating in 
workfare for the first time, or within thirty days of ending the first 
participation in workfare.

[[Page 41618]]

    (1) To begin employment means to appear at the place of employment 
and to begin working.
    (2) First participation in workfare means performing work for the 
first time in a particular workfare program. The only break in 
participation that does not end the first participation will be due to 
the participant's taking a job which does not affect the household's 
allotment by an entire month's wages and which is followed by a return 
to workfare.
    (B) Calculating the benefit reductions. The political subdivision 
will calculate benefit reductions from each workfare participant's 
employment as follows.
    (1) Unless the political subdivision knows otherwise, it will 
presume that the benefit reduction equals the difference between the 
last allotment issued before the participant began the new employment 
and the first allotment that reflects a full month's wages, earned 
income deduction, and dependent care deduction attributable to the new 
job.
    (2) If the political subdivision knows of other changes besides the 
new job that affect the household's allotment after the new job began, 
the political subdivision will obtain the first allotment affected by 
an entire month's wages from the new job. The political subdivision 
will then recalculate the allotment to account for the wages, earned 
income deduction, and dependent care deduction attributable to the new 
job. In recalculating the allotment the political subdivision will also 
replace any benefits from a State program funded under title IV-A of 
the Social Security Act received after the new job with benefits 
received in the last month before the new job began. The difference 
between the first allotment that accounts for the new job and the 
recalculated allotment will be the benefit reduction.
    (3) The political subdivision's share of the benefit reduction is 
three times this difference, divided by two.
    (4) If, during these procedures, an error is discovered in the last 
allotment issued before the new employment began, that allotment must 
be corrected before the savings are calculated.
    (C) Accounting. The reimbursement from workfare will be reported 
and paid as follows:
    (1) The political subdivision will report its enhanced 
reimbursement to the State agency in accordance with paragraph 
(m)(7)(iii) of this section.
    (2) The Food and Nutrition Service will reimburse the political 
subdivision in accordance with paragraph (m)(7)(ii) of this section.
    (3) The political subdivision will, upon request, make available 
for review sufficient documentation to justify the amount of the 
enhanced reimbursement.
    (4) The Food and Nutrition Service will reimburse only the 
political subdivision's reimbursed administrative costs in the fiscal 
year in which the workfare participant began new employment and which 
are acceptable according to paragraph (m)(7)(i) of this section.
    (8) Voluntary workfare program. State agencies and political 
subdivisions may operate workfare programs whereby participation by 
food stamp recipients is voluntary. In such a program, the penalties 
for failure to comply, as provided in paragraph (f) of this section, 
will not apply for noncompliance. The amount of hours to be worked will 
be negotiated between the household and the operating agency, though 
not to exceed the limits provided under paragraph (m)(5)(ii) of this 
section. In addition, all protections provided under paragraph 
(m)(6)(i) of this section shall continue to apply. Those State agencies 
and political subdivisions choosing to operate such a program shall 
indicate in their workfare plan how their staffing will adapt to 
anticipated and unanticipated levels of participation. The Department 
will not approve plans which do not show that the benefits of the 
workfare program, in terms of hours worked by participants and reduced 
food stamp allotments due to successful job attainment, are expected to 
exceed the costs of such a program. In addition, if the Department 
finds that an approved voluntary program does not meet this criterion, 
the Department reserves the right to withdraw approval.
    (9) Comparable workfare programs. In accordance with section 
6(o)(2)(C) of the Food Stamp Act, State agencies and political 
subdivisions may establish programs comparable to workfare under this 
paragraph (m) for the purpose of providing ABAWDs subject to the time 
limits specified at Sec. 273.24 a means of fulfilling the work 
requirements in order to remain eligible for food stamps. While 
comparable to workfare in that they require the participant to work for 
his or her household's food stamp allotment, these programs may or may 
not conform to other workfare requirements. State agencies or political 
subdivisions desiring to operate a comparable workfare program must 
meet the following conditions:
    (i) The maximum number of hours worked weekly in a comparable 
workfare activity, combined with any other hours worked during the week 
by a participant for compensation (in cash or in kind) in any other 
capacity, must not exceed 30;
    (ii) Participants must not receive a fourth month of food stamp 
benefits (the first month for which they would not be eligible under 
the time limit) without having secured a workfare position or without 
having met their workfare obligation. Participation must be verified 
timely to prevent issuance of a month's benefits for which the required 
work obligation is not met;
    (iii) The State agency or political subdivision must maintain 
records to support the issuance of benefits to comparable workfare 
participants beyond the third month of eligibility; and
    (iv) The State agency or political subdivision must provide a 
description of its program, including a methodology for ensuring 
compliance with (m)(9)(ii) of this section. The description should be 
submitted to the appropriate Regional office, with copies forwarded to 
the Food Stamp Program National office.


Sec. 273.9  [AMENDED]

    9. In Sec. 273.9:
    a. Paragraph (c)(5)(i)(A) is amended by removing the reference to 
``Sec. 273.7(d)(1)(ii)'' and adding in its place a reference to 
``Sec. 273.7(d)(3)''.
    b. Paragraph (c)(5)(i)(F) is amended by removing the reference to 
``Sec. 273.7(d)(1)(ii)'' and adding in its place a reference to 
``Sec. 273.7(d)(3)''.
    c. Paragraph (c)(14) is amended by removing the references to 
``Sec. 273.7(d)(1)(ii)'' and ``Sec. 273.7(d)(1)(ii)(A)'' and adding in 
their place reference to ``Sec. 273.7(d)(3)'' and 
``Sec. 273.7(d)(3)(i)'' respectively.
    d. Paragraph (d)(4) is amended by removing the reference to 
``Sec. 273.7(f)'' and adding in its place a reference to 
``Sec. 273.7(e)''.


Sec. 273.22  [Removed and Reserved]

    10. Remove and reserve Sec. 273.22.

    11. In Sec. 273.24:
    a. Paragraphs (a)(5) and (a)(6) are removed.
    b. Paragraph (b)(8) is removed.
    c. Paragraph (c) heading and introductory text are revised.
    d. Paragraphs (g), (h), (i), and (j) are revised.
    The revisions read as follows:


Sec. 273.24  Time limit for able-bodied adults.

* * * * *
    (c) Exceptions. The time limit does not apply to an individual if 
he or she is: * * *
* * * * *
    (g) 15 percent exemptions. (1) For the purpose of establishing the 
15 percent exemption for each State agency, the following terms are 
defined:

[[Page 41619]]

    (i) Caseload means the average monthly number of individuals 
receiving food stamps during the 12-month period ending the preceding 
June 30.
    (ii) Covered individual means a food stamp recipient, or an 
applicant denied eligibility for benefits solely because he or she 
received food stamps during the 3 months of eligibility provided under 
paragraph (b) of this section, who:
    (A) Is not exempt from the time limit under paragraph (c) of this 
section;
    (B) Does not reside in an area covered by a waiver granted under 
paragraph (f) of this section;
    (C) Is not fulfilling the work requirements as defined in paragraph 
(a)(1) of this section; and
    (D) Is not receiving food stamp benefits under paragraph (e) of 
this section.
    (2) Subject to paragraphs (h) and (i) of this section, a State 
agency may provide an exemption from the 3-month time limit of 
paragraph (b) of this section for covered individuals. Exemptions do 
not count towards a State agency's allocation if they are provided to 
an individual who is otherwise exempt from the time limit during that 
month.
    (3) For each fiscal year, a State agency may provide a number of 
exemptions such that the average monthly number of exemptions in effect 
during the fiscal year does not exceed 15 percent of the number of 
covered individuals in the State, as estimated by FNS, based on FY 1996 
quality control data and other factors FNS deems appropriate, and 
adjusted by FNS to reflect changes in:
    (i) The State agency's caseload; and
    (ii) FNS's estimate of changes in the proportion of food stamp 
recipients covered by waivers granted under paragraph (f) of this 
section.
    (4) State agencies must not discriminate against any covered 
individual for reasons of age, race, color, sex, disability, religious 
creed, national origin, or political beliefs. Such discrimination is 
prohibited by this part, the Food Stamp Act, the Age Discrimination Act 
of 1975 (Public Law 94-135), the Rehabilitation Act of 1973 (Public Law 
93-112, section 504), and title VI of the Civil Rights Act of 1964 (42 
U.S.C. 2000d). Enforcement action may be brought under any applicable 
Federal law. Title VI complaints will be processed in accord with 7 CFR 
part 15.
    (h) Adjustments. FNS will make adjustments as follows:
    (1) Caseload adjustments. FNS will adjust the number of exemptions 
estimated for a State agency under paragraph (g)(2) of this section 
during a fiscal year if the number of food stamp recipients in the 
State varies from the State's caseload by more than 10 percent, as 
estimated by FNS.
    (2) Exemption adjustments. During each fiscal year, FNS will adjust 
the number of exemptions allocated to a State agency based on the 
number of exemptions in effect in the State for the preceding fiscal 
year.
    (i) If the State agency does not use all of its exemptions by the 
end of the fiscal year, FNS will increase the estimated number of 
exemptions allocated to the State agency for the subsequent fiscal year 
by the remaining balance.
    (ii) If the State agency exceeds its exemptions by the end of the 
fiscal year, FNS will reduce the estimated number of exemptions 
allocated to the State agency for the subsequent fiscal year by the 
corresponding number.
    (i) Reporting requirement. The State agency will track the number 
of exemptions used each month and report this number to the regional 
office on a quarterly basis as an addendum to the quarterly Employment 
and Training Report (Form FNS-583) required by Sec. 273.7(c)(8).
    (j) Other Program rules. Nothing in this section will make an 
individual eligible for food stamp benefits if the individual is not 
otherwise eligible for benefits under the other provisions of this part 
and the Food Stamp Act.

PART 275--PERFORMANCE REPORTING SYSTEM

    12. In Sec. 275.12, paragraph (d)(1) is amended by removing the 
reference to ``Sec. 273.7(g)'' and adding in its place a reference to 
``Sec. 273.7(f).''

PART 277--PAYMENTS OF CERTAIN ADMINISTRATIVE COSTS OF STATE 
AGENCIES

    13. In Sec. 277.4, paragraph (b)(8) is amended by removing the 
reference to ``Sec. 273.7(f)'' and adding in its place a reference to 
``Sec. 273.7(d).''

    Dated: June 7, 2002.
Eric M. Bost,
Under Secretary, Food, Nutrition and Consumer Services.
[FR Doc. 02-15294 Filed 6-18-02; 8:45 am]
BILLING CODE 3410-30-P