This section of the FEDERAL REGISTER

contains notices to the public of the proposed

issuance of rules and regulations. The

purpose of these notices is to give interested

persons an opportunity to participate in the

rule making prior to the adoption of the final

rules.

Proposed Rules Federal Register

51274 

Vol. 76, No. 160 

Thursday, August 18, 2011 

DEPARTMENT OF AGRICULTURE 

Food and Nutrition Service 

7 CFR Parts 273 and 276 

RIN 0584–AD98 

Supplemental Nutrition Assistance 

Program: Major System Failures 

AGENCY: Food and Nutrition Service, 

USDA. 

ACTION: Proposed rule. 

SUMMARY: This rule proposes to amend 

Supplemental Nutrition Assistance 

Program (SNAP—formerly the Food 

Stamp Program) regulations to 

implement the Food, Conservation, and 

Energy Act of 2008, (‘‘FCEA’’). Section 

4133, The ‘‘Major System Failures’’ 

section of the FCEA, amends the Food 

and Nutrition Act of 2008 (‘‘the Act’’) to 

require the United States Department of 

Agriculture (USDA) to determine when 

a systemic State error is resulting in the 

overissuance of benefits to a substantial 

number of SNAP households and the 

actions the Department may take if such 

a determination were made. This rule 

proposes criteria for determining if a 

State experienced a systemic error that 

resulted in the overissuance of benefits 

to a substantial number of households 

and specifies the steps that the 

Department may take to collect data, 

instruct the State to terminate claims 

collection from the affected households, 

and issue a bill to the State for the value 

of the over-issuances. It also identifies 

the review and appeal process for any 

such billing. 

DATES: Comments must be received on 

or before October 17, 2011. 

ADDRESSES: The Food and Nutrition 

Service invites interested persons to 

submit comments on this proposed rule. 

Comments may be submitted by any of 

the following methods: 

• Federal eRulemaking Portal: 

Preferred method. Go to http:// 

www.regulations.gov; follow the online 

instructions for submitting comments 

on Docket FNS–2009–0025. 

• Fax: Submit comments by facsimile 

transmission to (703) 305–2486, 

attention: Lizbeth Silbermann. 

• Mail: Send comments to Lizbeth 

Silbermann, Director, Program 

Development Division, Food and 

Nutrition Service, 3101 Park Center 

Drive, Room 810, Alexandria, Virginia 

22302, (703) 305–2494. 

• Hand delivery or Courier: Deliver 

comments to Lizbeth Silbermann at the 

above address. All comments on this 

proposed rule will be included in the 

record and will be made available to the 

public. Please be advised that the 

substance of the comments and the 

identity of the individuals or entities 

submitting the comments will be subject 

to public disclosure. FNS will make the 

comments publicly available on the 

Internet via http://www.regulations.gov. 

FOR FURTHER INFORMATION CONTACT: For 

further information concerning this 

proposed rule, you may contact Moira 

Johnston, Program Development 

Division, Supplemental Nutrition 

Assistance Program, 3101 Park Center 

Drive, Room 800, Alexandria, Virginia 

22302 or via the Internet at 

moira.johnston@fns.usda.gov. 

SUPPLEMENTARY INFORMATION: Additional 

electronic filing information: You may 

download a copy of this rule from 

http://www.fns.usda.gov/SNAP. You 

may also comment via the Internet at 

the same address. Please include 

ATTENTION RIN 0548–AD98 in the 

subject line and your name and address 

in the message. If you do not receive a 

confirmation that we have received your 

comment please call 703–305–2515. 

Written Comments: Written comments 

on this rule should be specific, confined 

to issues pertinent to the rule, and 

should explain the reason for any 

change you recommend. Where 

possible, you should reference the 

specific section or paragraph of the rule 

you are addressing. We may not 

consider or include in the 

Administrative Record for the final 

rulemaking comments that we receive 

after the close of the comment period or 

comments delivered to an address other 

than that listed above. We will make 

available all comments for public 

inspection, including, name, address 

and other contact information of 

respondents. If you wish to request that 

we consider withholding your name, 

address, or other contact information 

from public review or from disclosure 

under the Freedom of Information Act, 

you must state this prominently at the 

beginning of your comment. We will 

honor requests for confidentiality on a 

case-by-case basis to the extent allowed 

by law. We will make available for 

public inspection in their entirety all 

submissions from organizations or 

businesses, and from individuals 

identifying themselves as 

representatives or officials of 

organizations or businesses. 

Executive Order 12866 

This rule has been determined to be 

not significant and was reviewed by the 

Office Management and Budget in 

conformance with Executive Order 

(E.O.) 12866. 

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). It has been certified 

that this rule will not have a significant 

economic impact on a substantial 

number of small entities. State agencies 

that administer SNAP will be affected to 

the extent they implement major 

changes in program operations. 

Unfunded Mandates Reform Act 

Title II of the Unfunded Mandates 

Reform Act of 1995 (UMRA), Public 

Law 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 the 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 the 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. 

This rule is, therefore, not subject to the 

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Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Proposed Rules 51275 

requirements of sections 202 and 205 of 

the UMRA. 

Executive Order 12372 

The SNAP 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 3015, Subpart 

V and related document published June 

24, 1983 (48 FR 29114 for SNP; 48 FR 

29115 for FSP), this Program is 

excluded from the scope of E.O. 12372, 

which requires intergovernmental 

consultation with State and local 

officials. 

Federalism Impact Statement 

E.O. 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 

regulations describing the agency’s 

considerations in terms of the three 

categories called for under section 

(6)(b)(2)(B) of E.O. 13132. FNS has 

considered the impact of this rule on 

State and local governments and has 

determined that this rule does not have 

Federalism implications. This rule does 

not impose substantial or direct 

compliance costs on State and local 

governments. Therefore, under Section 

6(b) of the E.O., a federalism summary 

impact statement is not required. 

Prior Consultation With State Officials 

After the FCEA was enacted on June 

18, 2008, FNS held a series of 

conference calls with State agencies and 

FNS regional offices to explain the 

SNAP provisions included in the public 

law and to answer questions that State 

agencies had about implementing the 

changes to the program. On July 3, 2008, 

FNS issued an implementation 

memorandum that described each 

SNAP-related provision in the FCEA 

and provided basic information to assist 

State agencies in meeting statutorilymandated implementation timeframes. 

FNS responded to additional questions 

that State agencies submitted and 

posted the answers on the FNS Web 

site. Another forum for consultation 

with State officials on implementation 

of the FCEA provisions included 

various conferences hosted by FNS 

regional offices, State agency 

professional organizations, and program 

advocacy organizations. During these 

conferences, held in the latter part of 

2008 and early months of 2009, FNS 

officials responded to a range of 

questions posed by State agency 

officials related to implementation of 

FCEA provisions. 

Executive Order 12988 

This rule has been reviewed under 

E.O. 12988, ‘‘Civil Justice Reform.’’ This 

rule, when published final, is not 

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 the 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. In SNAP, the administrative 

procedures are as follows: For program 

benefit recipients—State administrative 

procedures issued pursuant to 7 U.S.C. 

2020(e)(10) of the Food and Nutrition 

Act of 2008 and regulations at § 273.15; 

for State agencies—administrative 

procedures issued pursuant to 7 U.S.C. 

2023 of the Act and regulations at 

§ 276.7 (for rules related to non-Quality 

Control liabilities) or 7 CFR part 283 (for 

rules related to Quality Control 

liabilities); or Program retailers and 

wholesalers—administrative procedures 

issued pursuant to 7 U.S.C. 2023 and 7 

CFR part 279. 

Civil Rights Impact Analysis 

FNS has reviewed this rule in 

accordance with the Department 

Regulation 4300–4, ‘‘Civil Rights Impact 

Analysis,’’ to identify and address any 

major civil rights impacts the rule might 

have on minorities, women, and persons 

with disabilities. After a careful review 

of the rule’s intent and provisions, and 

the characteristics of SNAP households 

and individual participants, FNS has 

determined that an important impact of 

this rule will be to help relieve the 

adverse effects of errors in program 

operations on recipients, including 

protected classes. All data available to 

FNS indicate that protected individuals 

have the same opportunity to participate 

in SNAP as non-protected individuals. 

FNS specifically prohibits State and 

local government agencies that 

administer the Program from engaging 

in actions that discriminate based on 

race, color, national origin, gender, age, 

disability, marital or family status. 

SNAP non-discrimination policy can be 

found at 7 CFR 272.6(a). Where State 

agencies have options, and they choose 

to implement a certain provision, they 

must implement it in such a way that it 

complies with 7 CFR 272.6. 

Executive Order 13175—Consultation 

and Coordination With Indian Tribal 

Governments 

E.O. 13175 requires Federal agencies 

to consult and coordinate with tribes on 

a government-to-government basis on 

policies that have tribal implications, 

including regulations, legislative 

comments or proposed legislation, and 

other policy statements or actions that 

have substantial direct effects on one or 

more Indian tribes, on the relationship 

between the Federal Government and 

Indian tribes, or on the distribution of 

power and responsibilities between the 

Federal Government and Indian tribes. 

We are unaware of any current Tribal 

laws that could be in conflict with the 

proposed rule. We request that 

commenters address any concerns in 

this regard in their responses. 

Paperwork Reduction Act 

The Paperwork Reduction Act of 1995 

(44 U.S.C. Chap. 35; see 5 CFR part 

1320) requires that the Office of 

Management and Budget (OMB) 

approve all collections of information 

by a Federal agency from the public 

before they can be implemented. 

Respondents are not required to respond 

to any collection of information unless 

it displays a current valid OMB control 

number. This proposed rule contains 

information collections that are subject 

to review and approval by OMB; 

therefore, FNS is submitting for public 

comment the changes in the information 

collection burden that would result 

from adoption of the proposals in the 

rule. Comments on this proposed rule 

must be received by October 17, 2011. 

Send comments to Office of 

Information and Regulatory Affairs, 

OMB, Attention: Desk Officer for FNS, 

Washington, DC 20503. Please also send 

a copy of your comments to Lizbeth 

Silbermann, Director Program 

Development Division, Food and 

Nutrition Service, U.S. Department of 

Agriculture, 3101 Park Center Drive, 

Alexandria, VA 22302. For further 

information, or for copies of the 

information collection package, please 

contact Moira Johnston at the above 

address or via the Internet at 

Moira.Johnston@fns.usda.gov. 

Comments are invited on: (a) Whether 

the proposed collection of information 

is necessary for the proper performance 

of the functions of the agency, including 

whether the information shall 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 assumptions used; (c) 

ways to enhance the quality, utility, and 

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51276 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Proposed Rules 

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 

use of appropriate automated, 

electronic, mechanical, or other 

technological collection techniques or 

other forms of information technology. 

All responses to this notice will be 

summarized and included in the request 

for OMB approval. All comments will 

also become a matter of public record. 

For further information, or for copies of 

the information collection requirements, 

please contact Moira Johnston at the 

address indicated above. 

Title: Major System Failures. 

OMB Number: 0584–New. 

Expiration Date: Not yet determined. 

Type of Request: New Collection. 

Abstract: Section 4133 of the FCEA, 

Major System Failures, amended the Act 

to require the United States Department 

of Agriculture (USDA) to determine 

when a systemic State error is resulting 

in the overissuance of SNAP benefits to 

a substantial number of SNAP 

households and the actions the 

Department may take if such a 

determination were made. To make this 

determination, the Department may 

require that States with potential 

Systemic Error situations to collect 

specific data concerning the systemic 

error. Such data may be obtained from 

the State’s Information Management 

System or it may be necessary for the 

State to select and review a statistical 

(random) sample of cases and report the 

results to the Department. 

Respondents: The 53 state agencies 

that administer SNAP. 

Estimated Number of Annual 

Responses per Respondent: Based on 

experience from the past twenty years 

(1990–2010) and considering the need 

for replacement of legacy systems in 

many States, out of the 53 State 

Agencies FNS estimates that one state 

agency will experience one systemic 

error every other year. If this provision 

had been in effect (using the proposed 

definition for a systemic error and 

States’ history of overissuance in 

SNAP), there were two or three 

instances between 1990 and 2010 in 

which the Department may have 

required States to provide additional 

data following implementation of a new 

information management system. While 

there is no hard data that would 

indicate an increase in the frequency of 

such situations, the implementation of 

new systems with new technology may 

introduce additional risk. FNS’ estimate 

represents the highest number of 

systemic error situations that can be 

expected. 

Estimated Total Annual Responses: 

One required response every year. Based 

upon the above estimate of one systemic 

error situation every other year, an 

individual State might be expected to be 

required to provide additional data 

under the authority of 7 CFR 273.19 

about once every 53 years. 

Estimated Total Annual Reporting 

Burden on Respondents: Proposed 

Section 273.19 requires States to 

provide the data specified by FNS when 

a systemic error that affects a substantial 

number of households occurs. Such data 

is expected to either be available from 

a State’s Information Management 

System (IMS) or the State will be 

required to collect the information from 

reviewing a sample of its case files for 

the systemic error. As noted above it is 

expected that there would be one 

respondent once every year. The average 

number of staff days required per 

systemic error occurrence is expected to 

be 255 so the total annual burden would 

be 2040 hours. 

The above estimate is based upon the 

following assumptions and calculations: 

• IMS data—Production of a data file 

containing case level information and/or 

summary reports that would provide the 

necessary information concerning a 

systemic error should not require more 

than 80 hours given the growing 

sophistication of States’ systems. 

• Sample of cases—FNS believes that 

the number of sample cases required for 

Quality Control (QC) each year would 

be sufficient to measure the cost of a 

systemic error but would be needed for 

a 6-month period rather than annually. 

While this rule does not specify the 

number of cases a State will select for 

review, the maximum FNS would 

require based upon this rulemaking 

would be 500 over a 6-month period. 

Since the number required for a large 

State’s QC sample is about 1,000 cases 

annually, FNS and the State would have 

500 cases available from QC to measure 

a systemic error in a 6-month period 

and would need an additional 500 cases 

in a 6-month period to reach a sample 

size comparable to the QC sample. In 

the smaller States (14–16 States) the 

number would be between 300 and 400 

additional cases. The QC reporting 

burdens have already been approved by 

OMB as shown in the following chart. 

OMB Approval No. Expiration date 

OMB 0584–0303 .................. 12/31/2013 

OMB 0584–0034 .................. 12/31/2012 

OMB 0584–0074 .................. 4/30/2013 

OMB 0584–0299 .................. 3/31/2013 

It is estimated that it would take a 

State about 10 staff days to construct a 

sample frame, and select and assign the 

sample. An additional 20 staff days 

would be necessary to develop the 

review guidance and forms. Since desk 

reviews of case files together with some 

phone interviews with households and 

collateral contacts should provide 

sufficient information, each case review 

should require no more than one staff 

day to complete (for example, given an 

average of 450 case reviews, the average 

burden to complete the case reviews 

would be 450 staff days). Another 20 

staff days would be needed to compile 

and report the results of the sample 

including examination of the cases 

originally selected for QC review. Based 

upon the above, the average requirement 

would the 500 staff days when a sample 

of cases is required. 

Averaging the 80 hours (10 staff days) 

with the 500 staff days yields 255 days 

per systemic error if the frequency of 

using IMS data and reviews of case 

samples were equal (there is no 

information to suggest otherwise). 

ATTACHMENT A: MAJOR SYSTEM FAILURES

[Affected Public: State and Local Agencies (including Indian Tribal Organizations and U.S. Territories] 

Regulation 

section Title 

Number of 

potential 

respondents 

Estimated annual 

report/ 

record filed 

Total 

annual 

responses 

Estimated 

hours per 

response 

Estimated 

total burden 

hours 

Reporting Burden Estimates 

272.19 ............................... States’ State agencies ..... 53 .019 1 2040 2040 

Subtotal—Reporting .................................................. 53 .019 1 2040 2040 

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Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Proposed Rules 51277 

ATTACHMENT A: MAJOR SYSTEM FAILURES—Continued 

[Affected Public: State and Local Agencies (including Indian Tribal Organizations and U.S. Territories] 

Regulation 

section Title 

Number of 

potential 

respondents 

Estimated annual 

report/ 

record filed 

Total 

annual 

responses 

Estimated 

hours per 

response 

Estimated 

total burden 

hours 

Recordkeeping Burden Estimates 

0 0 0 0 0 

Grand Total ............................................................... 53 .019 1 2040 2040 

E-Government Act Compliance 

FNS is committed to complying with 

the E-Government Act of 2002 to 

promote the use of the Internet and 

other information technologies to 

provide increased opportunities for 

citizen access to Government 

information and services, and for other 

purposes. 

Background 

Section 4133 of the FCEA amends 

Section 13 of the Act to provide the 

Secretary with the authority to define 

and determine when a State has 

overissued SNAP benefits to a 

substantial number of households in a 

fiscal year as a result of a major systemic 

error. If the Secretary made such a 

determination, the State agency could 

be prohibited from collecting these 

overissuances from some or all of the 

affected households and a claim would 

be established against the State for the 

value of the overissuances caused by the 

systemic error. States are required to 

provide the Secretary with information 

on which to base such a determination. 

The State has the right to appeal such 

a claim under the provisions of Section 

14 of the Act. With many State’s 

automated systems aging and the 

growing potential for replacement of 

those systems over the next several 

years, this provision provides a 

protection to households from claims 

collections if errors in the new system 

designs or their implementation result 

in systemic over-issuances to a 

substantial number of households. 

What acronyms or abbreviations are 

used in this supplementary discussion 

of the proposed provisions? 

In the discussion of the proposed 

provisions in this rule, we use the 

following acronyms or abbreviations to 

stand in for certain words or phrases: 

Phrase 

Acronym, 

abbreviation, 

or symbol 

Code of Federal Regulations CFR 

Federal Register .................. FR 

Federal Fiscal Year ............... FY 

Phrase 

Acronym, 

abbreviation, 

or symbol 

Food and Nutrition Act of 

2008.

the Act 

Food and Nutrition Service ... FNS 

Food, Conservation, and Energy Act of 2008.FCEA 

Quality Control ...................... QC 

U.S. Department of Agriculture.the Department 

What does the Food and Nutrition Act 

of 2008 say about State liability for 

major systemic errors? 

The legislative language includes the 

following: 

• The Secretary will define what 

constitutes a major systemic error that 

affects a substantial number of 

households. 

• State agencies shall provide all 

information requested by the Secretary 

concerning the issuance of benefits to 

households by the State agency in the 

applicable fiscal year. 

• The Secretary will make a final 

determination after reviewing relevant 

information provided by a State agency. 

• The final determination will 

include whether the State agency 

overissued benefits to a substantial 

number of households as a result of a 

systemic error and the amount of the 

overissuance in the applicable fiscal 

year. 

• The Secretary shall establish a 

claim against the State agency equal to 

the value of the overissuance caused by 

the systemic error. 

• Administrative and judicial review, 

as provided in Section 14 of the Act, 

shall apply to the final determinations 

by the Secretary once the claim is 

established. 

• The State agency shall, as soon as 

practical, remit to the Secretary the 

dollar amount specified in the claim if 

the determination of the Secretary is not 

appealed. 

• When the determination of the 

Secretary is appealed, and after 

completion of the administrative or 

judicial review there is a finding of 

liability on the part of the State, it shall 

remit to the Secretary the dollar amount 

of the liability found in the 

administrative or judicial review. The 

payment shall be made by the State to 

the Secretary as soon as practical. 

• The Secretary may reduce any 

amount due to the State agency under 

any other provision of the Act by the 

amount due if a State agency fails to 

make a payment within a reasonable 

period of time determined by the 

Secretary. 

The FCEA language does not 

specifically define what constitutes a 

substantial number of households being 

overissued benefits or a major systemic 

error. The language is not specific to 

‘‘systems failures,’’ and could be 

interpreted to include errors resulting 

from a variety of causes. Given the other 

authorities the Act provides to deal with 

error situations, the Department believes 

the intent of this provision is to focus 

on errors associated with automated 

eligibility systems and the effects of 

their implementation. 

What is a major systemic error? 

States have experienced technological 

and operational failures in the past 

when major systems were implemented 

before they were fully tested and staff 

fully trained in their use. The 

Department is proposing that a major 

systemic error be defined as an error 

resulting from a State’s implementation 

of a new SNAP automated eligibility 

(data processing) system, 

reprogramming of an existing system, or 

adding new programming to an older 

system. While the legislative language 

does not limit the term systemic to 

‘‘systems’’ errors, given the other 

authorities and remedies in the Act, the 

Department believes this is the most 

reasonable interpretation of this new 

authority (there is no practical utility 

relative to this proposed rulemaking in 

defining what might constitute a 

‘‘minor’’ systemic error). The second 

criterion for use of the subject authority 

is that the systemic error affects a 

substantial number of households as 

discussed below. 

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51278 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Proposed Rules 

What constitutes a ‘‘substantial’’ 

number of households? 

The Department is particularly 

interested in comments on this aspect of 

the proposal. Clearly, defining 

‘‘substantial’’ in the context of this rule 

is problematic. The Department 

considered using a specific number of 

households, but with the vast 

differences in States’ caseload sizes, a 

single number could not be equitable 

between States. The better alternative is 

use of a percentage of States’ caseloads 

that experience overissuances to define 

substantial. Since the national average 

case error rate has been around seven 

percent for several years and this 

number represents all of the errors made 

in the certification of households, it is 

reasonable to view this rate as 

‘‘substantial.’’ Therefore, the 

Department proposes that when an 

average of 8 percent or more of a State’s 

caseload receives overissuances due to a 

systemic error over a 6-month period, 

this would be considered a substantial 

number of households. The reason for 

specifying a minimum of 6 months is 

that if a systemic error that affected 8 

percent of the caseload lasted less than 

6 months, it could affect less than 4 

percent of the State’s case load on an 

annual basis. 

Will States have the opportunity to take 

corrective action regarding the systemic 

error and avoid suspension of claims 

collection and the resulting liability? 

States are required to take corrective 

action immediately when they are 

become aware of a potential systemic 

error and, if the action were effective, 

could prevent the error affecting 8 

percent of its households over the 6- 

month period, thus avoiding liability 

under these provisions. However, once 

the systemic error has affected 8 percent 

of the caseload over the 6-month period, 

the Act does not provide for any 

consideration of a State’s corrective 

action efforts. Even if a major systemic 

error was determined to exist, timely 

corrective action could reduce the 

State’s exposure to additional months of 

liability. 

Will FNS take the amount of the 

individual overissuances into account in 

determining the percentage of 

households affected by the systemic 

error? 

The Department is proposing that the 

amount of the error be at least $21 per 

month for a case to be included in the 

calculation of a ‘‘substantial’’ number of 

households. The primary purpose of 

this proposed provision is to relieve 

households from payment of claims 

resulting from systemic errors. Since 

States have the option of establishing 

claims of less than $125 against those 

households that are no longer on the 

Program, households overissued less 

than $21 per month over a 6-month 

period would not reach $125 and may 

not be required to pay a claim even in 

the absence of this provision. Therefore, 

including cases with monthly loses of 

less than $21 in the count of households 

would not contribute to the purpose of 

this provision. 

What authorities does USDA currently 

have when errors are made in a State’s 

administration of SNAP? 

This proposal does not represent a 

significant departure from the 

Department’s policy in dealing with 

State error and compliance issues. FNS 

has long focused on working in 

partnership with States to prevent errors 

or develop strong corrective action 

measures through technical assistance 

and identifying promising State 

practices. While most States already test 

new automated eligibility systems 

extensively, this provision should help 

encourage all States to implement new 

systems using sound testing. The Act 

has four other primary authorities for 

billing States for the loss of Federal 

funds and non-compliance with Federal 

law and regulations. Each is based on a 

different set of concepts, but there is 

potential for overlap, depending on the 

nature of the error or compliance issue. 

None of these other authorities allow for 

prohibition of claims collection against 

households for overissuances. 

Suspension/Disallowance of 

Administrative Funding 

Section 11(g) of the Act, 7 CFR 276.4, 

specifies that if FNS determines that a 

State agency’s administration of the 

Program is inefficient or ineffective, 

FNS may warn the State agency that a 

suspension and/or disallowance of 

administrative funds is being 

considered. After a State agency 

receives a warning, FNS may either 

suspend or disallow administrative 

funds if the problem is not corrected. 

Since this authority deals with 

administrative funds and the systemic 

error authority deals with overissued 

benefits, there can be no direct overlap 

between the claim amounts. In addition, 

while FNS could use the two authorities 

sequentially or simultaneously in 

dealing with a severe compliance issue, 

the suspension/disallowance authority 

is generally viewed as more appropriate 

to issues of non-compliance that affect 

program access or application 

processing. 

Negligence 

Section 11(h) of the Act, 7 CFR 276.3 

specifies that FNS may determine that a 

State agency has been negligent in the 

certification of applicant households if 

a State agency disregards SNAP 

requirements or implements procedures 

that deviate from the Act, the 

regulations, or the FNS-approved State 

Plan of Operation without first 

obtaining FNS approval, and the result 

is a loss of Federal funds. In computing 

amounts of losses of Federal funds due 

to negligence, FNS may use actual, 

documented amounts or amounts which 

have been determined through the use 

of statistically valid projections. When a 

statistically valid projection is used, the 

methodology will include a 95 percent, 

one-sided confidence level. 

If FNS makes a determination that 

there has been negligence or fraud on 

the part of a State agency in the 

certification of households for 

participation in the Program, FNS is 

authorized to bill the State agency for an 

amount equal to the amount of benefits 

issued as a result of the negligence or 

fraud. 

While there are some structural 

similarities in terms of benefit loss and 

claim calculation, the systemic error 

authority does not require the State to 

‘‘disregard’’ or ‘‘deviate from’’ a policy. 

There is potential for overlap in the use 

of the two authorities and to the extent 

that a State actually pays the Federal 

government for either a negligence 

billing or a systemic error billing under 

this authority, the second collection 

amount would be reduced. 

Direct Liability 

In accordance with Section 7(e) of the 

Act, 7 CFR 276.1(a)(2), FNS holds State 

agencies strictly liable for all losses that 

occur during issuance. This authority 

can only be used in cases of issuance 

errors. Since errors that fall outside of 

QC data are difficult to identify without 

review of States’ issuance and 

certification files, FNS has employed 

data mining as necessary to determine if 

losses are occurring in the process of 

issuing benefits. It is possible that the 

systemic error in a States’ operation 

could be in the issuance process so 

there is potential for overlap in the use 

of the two authorities and to the extent 

that a State actually pays the Federal 

government for both a strict liability 

billing and for a systemic error billing 

under this authority, the second 

collection amount would be reduced. 

QC Sanctions 

States’ payment error rates are 

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depth review of a sample of cases 

receiving SNAP benefits each month of 

the year. The review determines the 

amount of benefits cases should have 

been issued based on correct policy and 

verified household information relative 

to the amount that they were issued. 

The differences in the two amounts 

(over a threshold) constitute the error 

dollars that are divided by the total 

amount issued to the sample cases to 

calculate States’ payment error rates. 

Because the sample is random and 

State-wide, these error rates represent 

the States’ actual error rates. For a 

complete description of the QC process 

see Section 16(c) of the Act, 7 CFR 

275.12, and QC Handbook 310 (may be 

found on the FNS Web site at http:// 

www.fns.usda.gov/snap/qc/ 

default.htm). Section 16(c)(1) of the Act 

specifies the process for determining 

when a State’s payment error rate is 

excessive and State funds are subject to 

a liability. See § 275.23 for a complete 

description of the QC sanction 

provisions. 

The key differences between the QC 

sanction and this authority is that the 

QC error rate is an index made up of 

errors with many different causes 

(potentially including certain systemic 

errors), QC liability amounts are not 

dollar-for-dollar relative to the overissuances measured, and QC liability 

amounts are not necessarily repaid to 

the Federal government. To the extent 

that a State is billed by the Federal 

government for both a QC based liability 

and for a systemic error under this 

authority, the second collection amount 

would be reduced. 

Could the Department invoke more than 

one of these authorities for the same 

error or compliance issue? 

Yes. In certain situations the 

Department could use the systemic error 

authority and another authority to 

address different aspects of an issue in 

a State. However, any collections based 

on the same overissuance or direct 

liability loss would be offset in the 

second collection amount. 

What is the relationship of this rule to 

the ‘‘FCEA Testing Requirements Rule?’’ 

Section 16(g) of the Act requires 

States designing new automated 

eligibility systems to thoroughly test 

and pilot such systems prior to full 

implementation. Through the advanced 

planning document process (7 CFR 

277.18), FNS strives to work closely 

with States in their planning, and later, 

in their implementation of new systems. 

While it is not unusual for such 

potential errors to be present in the 

early stages of new software 

development and application, it is the 

purpose of the testing and piloting 

process to identify and correct such 

errors. A cautious and measured roll-out 

of new systems within a State also 

allows for identification and correction 

of any errors before they can affect the 

entire caseload. If a State complies with 

the required testing and piloting 

provisions of the Act and resulting 

regulations, deals effectively with issues 

identified in this process prior to rolling 

the new system out, and implements 

effectively in terms of case conversion 

and worker training, the potential for a 

systemic error that affects a substantial 

number of households is minimal. 

However unlikely, it is possible that 

a State could experience a systemic 

error situation even if all precautions 

have been taken. While FNS would be 

reluctant to use the systemic error 

authority in this situation, the intent of 

the subject provision of the FCEA is to 

relieve the burden of reduced benefits 

by prohibiting claims collection for 

systemic overissuances to households. 

While the FCEA does give the 

Department discretion regarding the 

prohibition of collecting claims against 

households when a major systemic error 

occurs, it does not allow discretion 

regarding a State’s liability for such an 

error; even when the State has been 

prudent in its planning and 

implementation. While such a situation 

would preclude a negligence billing, the 

Department would prohibit individual 

household claims collection and 

establish a liability against the State 

under this proposal. 

Could the Department prohibit claims 

collection, but not bill the State for a 

systemic error? 

No, the FCEA is clear that the 

determination that a systemic error has 

occurred will result in a claim against 

the State for the amount of the systemic 

error. This rule links the determination 

to prohibit claims collection for 

resulting overissuances to the mandate 

to bill the State. However, the 

Department has general discretionary 

authority under Section 13 of the Act to 

waive part or all of a claim against a 

State. If a State has adhered to the 

planning, testing, and piloting 

requirements of the Act and regulations, 

FNS would strongly consider 

recommending reduction or elimination 

of any claim against the State for a 

systemic error. 

Will this authority only be used relative 

to computer programming problems that 

result in systemic errors? 

No, the implementation of a new 

system or significant system changes 

may also require worker training, case 

conversion, sufficient server capacity, 

proper equipment and changes to the 

States’ business processes in the local 

offices. If systemic errors arose from 

factors related to implementation, the 

Department could prohibit claims 

collection for the error and pursue a 

claim against the State. 

How will the Department become aware 

of system problems that may result in 

the use of the systemic error authority? 

The Department monitors States’ 

implementation of new systems and 

their impact on program performance 

through on-site reviews and standard 

reports such as QC and participation 

reports. In addition, recipients, advocate 

groups and the media can provide 

indications of problems that FNS 

follows up on with inquires to the State, 

requests for additional data, and/or 

additional reviews of States operations. 

FNS can go further by using data mining 

techniques on States’ data or analyzing 

QC data for error patterns that may have 

a systemic cause. Therefore, except in 

the most extreme circumstances, the 

process of identifying a systemic error 

would typically require a series of steps, 

within each of which FNS would be 

seeking to work with the State to correct 

the problem. If, upon State-wide 

implementation of a system, the 

systemic error was pervasive and 

readily identified, the process for using 

this authority to prohibit claims 

collection could be more immediate. 

What data will States be required to 

provide to FNS? 

FNS’ data needs will be determined 

by the nature and timing of the systemic 

error. While the FCEA and this proposal 

requires States to provide all 

information requested by the 

Department, FNS will negotiate with the 

State on the data request to ensure that 

only the information needed to make a 

determination and calculate the proper 

amount of a claim would be required 

from the State. For example, FNS could 

use the authority of the FCEA to require 

States to conduct additional reviews of 

a sample of cases (similar to a QC 

review) to determine the extent of a 

potential systemic error, but would 

negotiate with the State on the extent of 

the review process, the timing of 

reviews and the size of the sample. 

States could also be required to provide 

data from their automated eligibility 

system. FNS will base its determination 

on whether there has been a systemic 

error that affected a substantial number 

of households on the data it gathers 

from the State. FNS would base its 

determination on the point estimate of 

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the sample data when sample data is 

used. 

How will the Department notify States of 

the potential for prohibiting claims 

collection? 

FNS will be in communication with 

any State that may be subject to this 

authority, but will notify the State that 

the State will have 10 days from the 

date of notification to stop claims 

collection against households affected 

by the systemic error. 

How long will States have to provide 

required information to FNS? 

Unless otherwise specified by FNS, 

States shall provide required 

information to FNS within 3 months of 

being notified of the data requirements. 

How long will States have to implement 

the prohibition of recipient claims 

collection for overissuances based upon 

systemic errors? 

States will have 10 business days after 

notification from FNS to stop claims 

collection against households affected 

by the systemic error. 

Will States be required to return any 

claims resulting from the systemic error 

that are collected prior to the FNS 

notification prohibiting their collection? 

Yes, claims resulting from the 

systemic error that are collected must be 

restored to households’ Electronic 

Benefit Transfer (EBT) accounts. 

When this authority is invoked, will 

claims be prohibited for all households? 

No, claims establishment and 

collection would only be prohibited for 

the claims resulting from the systemic 

error(s) identified by FNS. States would 

be expected to continue to pursue 

claims against households that are 

overissued benefits in accordance with 

the Act, except those affected by the 

systemic error. 

How long will recipient claims 

collection be prohibited under this 

provision? 

Once FNS notifies a State that claims 

collection is to be prohibited for a 

systemic error, all claims in process and 

any claims that could be pursued for 

that error would be prohibited until the 

systemic error is determined by FNS to 

have been substantially corrected. For 

example, a State implements a major 

system change on March 1, and on 

August 1, FNS notifies the State to 

prohibit claims collection due to a 

systemic error in the certification 

process arising from that system change. 

The State takes corrective action to 

address the problem on October 1 and 

the State is notified on December 1 that 

FNS has determined that the systemic 

error has been eliminated. All claims 

against cases arising from systemic 

errors made between March 1st and 

December 1st would be prohibited, 

including benefits issued to such cases 

after December 1st until they are 

recertified. However, no claims 

resulting from an error occurring after 

December 1st could have claim 

collection prohibited. 

What information will States be 

required to report on the prohibited 

claims collection? 

While the State will be required to 

document the cases where 

overissuances are caused by the 

systemic error and claims are not being 

pursued, no additional reporting will be 

required. 

How will FNS determine the claim 

amount against a State following 

prohibition of recipient claims 

collection? 

FNS will use information from its 

standard reports together with the data 

it obtains from the State under the 

authority of this provision of the FCEA. 

QC data alone may be used or it may be 

used in conjunction with an additional 

sample of cases. Data mining techniques 

may be employed when QC data cannot 

provide the necessary information on 

the error. When FNS uses sample data, 

it will apply a 95 percent one-sided 

confidence level to determine the 

amount of a claim. The example of how 

this calculation will be made is 

provided in § 273.19(c)(5) as: the sample 

estimate of the major systemic error is 

8 percent over a 6 month period, but 

based on a 95 percent confidence 

interval of 2 percentage points, the rate 

used would be 6 percent. Therefore the 

claim would be 6 percent of value of the 

State’s total issuance over the 6 months. 

What are the appeal procedures for 

claims against states? 

The administrative appeal process for 

claims asserted under this authority is 

specified in § 276.7 and permits States 

to request an administrative review 

within 10 days of the date of delivery 

of the notice of claim. This proposed 

rule adds reference to billings based 

upon systemic errors into § 276.7(a)(1). 

Can a State appeal the Department’s 

decision to prohibit claims collection 

against households affected by a 

systemic error? 

FNS’ decision on prohibiting 

collection of recipient claims resulting 

from systemic error cannot be appealed. 

Only the related, but separate, claim 

against the State can be appealed. 

If a State disagrees with the ruling of the 

SNAP appeals board, can it seek 

judicial review? 

As specified in § 276.7(j), ‘‘State 

agencies aggrieved by the final 

determination may obtain judicial 

review and trial de novo by filing a 

complaint against the United States 

within 30 days after the date of delivery 

of the final determination, requesting 

the court to set aside the final 

determination.’’ 

If the State does not appeal the billing 

or there is a remaining liability amount 

after the administrative and or judicial 

review process, what are the next steps 

in the process? 

As soon as practicable, the State 

would remit the claim amount as 

specified in the FNS billing. If a State 

agency fails to make a payment within 

a reasonable period of time, FNS would 

reduce the administrative funding due 

to the State agency by the amount of the 

claim. 

List of Subjects 

7 CFR Part 273 

Administrative practice and 

procedure, Aliens, Claims, Employment, 

Grant programs—social programs, 

Income taxes, Reporting and 

recordkeeping requirements, Students, 

Supplemental Security Income. 

7 CFR Part 276 

State agency liabilities, Negligence or 

fraud, Suspension/disallowance of 

administrative funds, Injunctive relief, 

Good cause, Administrative review 

process. 

Accordingly, 7 CFR parts 273 and 276 

are proposed to be amended as follows: 

PART 273—CERTIFICATION OF 

ELIGIBLE HOUSEHOLDS 

1. The authority citation for part 273 

and continues to read as follows: 

Authority: 7 U.S.C. 2011–2036. 

2. Add § 273.19 to read as follows. 

§ 273.19 Recipient claims resulting from 

major systemic errors. 

(a) Major systemic errors. (1) Major 

systemic errors are overissuance errors 

that effect eight percent or more of a 

State’s caseload over a 6 month period 

that result from the State’s 

implementation of a new SNAP 

automated eligibility (data processing) 

system, reprogramming of an existing 

system, or adding new programming to 

an existing system. 

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(2) The causes of major systemic 

errors may include, but are not limited 

to: Incorrect computer programming, 

ineffective worker training, problems in 

case conversion, insufficient server 

capacity, improper equipment, and 

ineffective States’ business processes in 

the local offices related to the systems 

change. 

(b) State reporting. (1) When the Food 

and Nutrition Service (FNS) determines 

that major systemic errors may have 

occurred in a State, the State shall 

provide the information that FNS 

identifies as necessary to make its 

determination that a systemic error has, 

or has not, occurred. Based on the data 

FNS gathers from the State, FNS will 

determine whether there has been a 

systemic error that affected a substantial 

number of households. FNS’ data needs 

will be determined by the nature and 

timing of the systemic error, but will 

generally cover at least a 6 month time 

period. FNS will only request the 

information necessary to make its 

determination and calculate the proper 

amount of any potential claim against 

the State. FNS may require States to 

conduct additional reviews of cases 

randomly sampled from the State’s 

caseload to determine the extent of a 

potential systemic error. When sample 

data is used, FNS will base its 

determination on the point estimate of 

the sample data and negotiate with the 

State on the size of the sample. FNS 

may also require a State to provide data 

from its automated eligibility (data 

processing) system. 

(2) Unless otherwise specified by 

FNS, States shall report to FNS within 

3 months of being notified of the data 

requirements. 

(c) FNS determination. (1) FNS shall 

base its determination of whether a 

major systemic error exists on the data 

it requires to be provided by the State 

and any data from Federal review 

sources including the USDA Office of 

Inspector General, the General 

Accounting Office, and FNS reviews. 

FNS may also validate data provided by 

a State. 

(2) FNS will notify a State of its 

determination and, when a major 

systemic error is determined to exist, 

inform the State of the specifics of the 

error(s) and prohibit claims collection 

from the affected cases. FNS will 

establish and inform the State on the 

time period for which overissuances to 

the subject cases are not subject to 

recipient claims collection. 

(3) When FNS determines that a major 

systemic error exists, FNS shall 

determine the amount of the 

overissuance caused by the major 

systemic error. FNS will calculate the 

claim amount based on the best 

information available and may require 

the State to provide information from its 

information management system or 

review a sample of cases. 

(4) Error amounts below $20 in a 

given month shall not be included in 

the determination of a systemic error. 

(5) When a sample is used, the claim 

shall be based on the lower boundary of 

a 95 percent confidence interval. 

Example of calculation based on 

information from a sample: The sample 

estimate of the major systemic error is 

8 percent over a 6 month period, but 

based on a 95 percent confidence 

interval of 2 percentage points, the rate 

used would be 6 percent. Therefore the 

claim would be 6 percent of value of the 

State’s total issuance over the 6 months. 

(6) If any funds resulting from the 

systemic error caused overissuances are 

collected based on the negligence or 

quality control provisions of 7 CFR parts 

276 and 275, the claim calculated under 

paragraph (c)(3) of this section would be 

reduced by the amount collected. 

(d) Action on recipient claims 

collection. (1) When FNS determines 

that a major systemic error has occurred, 

the State will be notified that claims 

resulting from the systemic error 

overissuances shall not be collected. 

FNS will specify the beginning date of 

the major systemic error the time period 

in which the errors occurred. 

(2) States shall have 10 days from the 

date of notification by FNS to stop 

collection of the claims resulting from 

the systemic error. 

(3) Once FNS determines that the 

systemic error has been corrected to the 

extent that it no longer affects a 

substantial number of households, the 

State will be notified of the ending date 

for prohibition on collection of claims 

for overissuances resulting from the 

major systemic error and that claims 

shall again be collected for all 

overissuances. 

(4) If claims are collected from 

households based on overissuances 

caused the major systemic error, the 

State shall return the claim amount 

collected to these households by 

restoring benefits to households EBT 

account. 

(e) Collection of liabilities and 

appeals. FNS shall initiate collection 

action unless an administrative appeal 

relating to the liability is pending. 

Appeals include administrative appeals 

in accordance with the procedures 

specified in § 276.7 and judicial 

appeals. While the amount of a State’s 

liability may be recovered through 

offsets to their letter of credit as 

identified in § 277.16(c) of this chapter, 

FNS shall also have the option of billing 

a State directly or using other claims 

collection mechanisms authorized 

under the Federal Claims Collection 

Act, depending upon the amount of the 

State’s liability. 

PART 276—STATE AGENCY 

LIABILITIES AND FEDERAL 

SANCTIONS 

3. The authority citation for part 276 

continues to read as follows: 

Authority: 7 U.S.C. 2011–2036. 

4. In § 276.7, paragraph (a)(1) is 

revised to read as follows: 

§ 276.7 Administrative review process. 

(a) * * * 

(1) Whenever FNS asserts a claim 

against a State agency, the State agency 

may appeal the claim by requesting an 

administrative review. FNS claims that 

may be appealed are billings resulting 

from financial losses involved in the 

acceptance, storage, and issuance of 

coupons (§ 276.2), billings based on 

charges of negligence or fraud (§ 276.3), 

billings based on over-issuances for 

systemic errors (§ 276.3) and 

disallowances of Federal funds for State 

agency failures to comply with the Food 

and Nutrition Act, regulations, or the 

FNS-approved State Plan of Operations 

(§ 276.4). 

* * * * * 

Dated: August 8, 2011. 

Audrey Rowe, 

Administrator, Food, Nutrition, and 

Consumer Services. 

[FR Doc. 2011–20786 Filed 8–17–11; 8:45 am] 

BILLING CODE 3410–30–P 

DEPARTMENT OF ENERGY 

10 CFR Part 431 

[Docket No. EERE–2010–BT–NOA–0028] 

RIN 1904–AC24 

Energy Conservation Program for 

Consumer Products and Certain 

Commercial and Industrial Equipment: 

Statement of Policy for Adopting FullFuel-Cycle Analyses Into Energy 

Conservation Standards Program 

AGENCY: Office of Energy Efficiency and 

Renewable Energy, Department of 

Energy. 

ACTION: Statement of Policy. 

SUMMARY: In its effort to adopt several 

National Academy of Sciences (the 

Academy) recommendations, the U.S. 

Department of Energy (DOE) intends to 

modify the methods it uses to estimate 

the likely impacts of energy 

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