[Federal Register Volume 76, Number 160 (Thursday, August 18, 2011)]
[Proposed Rules]
[Pages 51274-51281]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2011-20786]


========================================================================
Proposed Rules
                                                Federal Register
________________________________________________________________________

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.

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

[[Page 51274]]



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:
    <bullet> Federal eRulemaking Portal: Preferred method. Go to http://www.regulations.gov; follow the online instructions for submitting 
comments on Docket FNS-2009-0025.
    <bullet> Fax: Submit comments by facsimile transmission to (703) 
305-2486, attention: Lizbeth Silbermann.
    <bullet> 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.
    <bullet> 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 
<a href="/cdn-cgi/l/email-protection#eb868482998ac581848385989f8485ab8d8598c59e988f8ac58c849d"><span class="__cf_email__" data-cfemail="204d4f4952410e4a4f484e53544f4e60464e530e555344410e474f56">[email protected]</span></a>.

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

[[Page 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 statutorily-mandated 
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 
Sec.  273.15; for State agencies--administrative procedures issued 
pursuant to 7 U.S.C. 2023 of the Act and regulations at Sec.  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 <a href="/cdn-cgi/l/email-protection" class="__cf_email__" data-cfemail="83ceeceaf1e2adc9ecebedf0f7ecedc3e5edf0adf6f0e7e2ade4ecf5">[email protected]</a>.
    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

[[Page 51276]]

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:
    <bullet> 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.
    <bullet> 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.

------------------------------------------------------------------------
                                                            Expiration
                    OMB Approval No.                           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]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                           Number of    Estimated annual                     Estimated       Estimated
            Regulation section                        Title                potential     report/ record    Total annual      hours per     total burden
                                                                          respondents         filed          responses       response          hours
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                               Reporting Burden Estimates
--------------------------------------------------------------------------------------------------------------------------------------------------------
272.19...................................  States' State agencies.....              53              .019               1            2040            2040
--------------------------------------------------------------------------------------------------------------------------------------------------------
    Subtotal--Reporting...............................................              53              .019               1            2040            2040
--------------------------------------------------------------------------------------------------------------------------------------------------------

[[Page 51277]]

 
                                                             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:

------------------------------------------------------------------------
                                            Acronym,  abbreviation,  or
                  Phrase                               symbol
------------------------------------------------------------------------
Code of Federal Regulations..............  CFR
Federal Register.........................  FR
Federal Fiscal Year......................  FY
Food and Nutrition Act of 2008...........  the Act
Food and Nutrition Service...............  FNS
Food, Conservation, and Energy Act of      FCEA
 2008.
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:
    <bullet> The Secretary will define what constitutes a major 
systemic error that affects a substantial number of households.
    <bullet> 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.
    <bullet> The Secretary will make a final determination after 
reviewing relevant information provided by a State agency.
    <bullet> 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.
    <bullet> The Secretary shall establish a claim against the State 
agency equal to the value of the overissuance caused by the systemic 
error.
    <bullet> 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.
    <bullet> 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.
    <bullet> 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.
    <bullet> 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.

[[Page 51278]]

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 measured annually based on an in-

[[Page 51279]]

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 Sec.  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 over-
issuances 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

[[Page 51280]]

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 Sec.  
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 Sec.  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 Sec.  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 Sec.  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 Sec.  273.19 to read as follows.


Sec.  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.

[[Page 51281]]

    (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 Sec.  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 Sec.  
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 Sec.  276.7, paragraph (a)(1) is revised to read as follows:


Sec.  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 
(Sec.  276.2), billings based on charges of negligence or fraud (Sec.  
276.3), billings based on over-issuances for systemic errors (Sec.  
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 (Sec.  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


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