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contains regulatory documents having general

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Rules and Regulations Federal Register

6313

Vol. 70, No. 24

Monday, February 7, 2005

DEPARTMENT OF AGRICULTURE 

Food and Nutrition Service 

7 CFR Parts 272 and 275

RIN 0584–AD29

Food Stamp Program: High 

Performance Bonuses

AGENCY: Food and Nutrition Service, 

USDA.

ACTION: Final rule.

SUMMARY: This rule finalizes 

amendments to the Food Stamp 

Program (FSP) regulations that were 

proposed in a Notice of Proposed 

Rulemaking (NPRM), ‘‘Food Stamp 

Program High Performance Bonuses’’, 

published on December 17, 2003 in the 

Federal Register. The NPRM proposed 

regulations that would implement 

section 4120 of the Farm Security and 

Rural Investment Act of 2002 (FSRIA) 

which authorized the Food and 

Nutrition Service (FNS) to award 

bonuses to States that demonstrate high 

or improved performance in 

administering the FSP. The NPRM 

proposed performance measures for the 

high performance bonuses for fiscal year 

(FY) 2005 and beyond. It also proposed 

the data that would be used to measure 

the identified performance. This final 

rule summarizes and discusses the 

comments we received as well as 

adjusts the regulatory language when 

necessary in response to those 

comments.

DATES: This final rule is effective April 

8, 2005. The provisions of this final rule 

are required to be implemented no later 

than April 8, 2005.

FOR FURTHER INFORMATION CONTACT:

Moira Johnston, Senior Program 

Analyst, Program Design Branch, 

Program Development Division, Food 

Stamp Program, FNS, 3101 Park Center 

Drive, Room 812, Alexandria, Virginia, 

703–305–2515, or via the Internet at 

Moira.Johnston@fns.usda.gov.

SUPPLEMENTARY INFORMATION: 

I. Procedural Matters 

Executive Order 12866

This final rule was determined to be 

significant, although not economically 

significant, and was reviewed by the 

Office of Management and Budget 

(OMB) in conformance with Executive 

Order 12866. 

Executive Order 12372

The FSP is listed in the Catalog of 

Federal Domestic Assistance under No. 

10.551. For the reasons set forth in the 

final rule in 7 CFR part 3105, subpart V 

and related Notice (48 FR 29115, June 

24, 1983), the FSP is excluded from the 

scope of Executive Order 12372. This 

Executive Order requires 

intergovernmental consultation with 

State and local officials regarding 

Federal financial assistance and direct 

Federal development. The Food Stamp 

Program is excluded because it is an 

entitlement program and benefits are 

provided directly to individuals. 

Executive Order 12988

This final rule has been reviewed 

under Executive Order 12988, Civil 

Justice Reform. This final rule is 

intended to have preemptive effect with 

respect to any State or local laws, 

regulations, or policies that conflict 

with its provisions or that would 

otherwise impede its full 

implementation. This final rule is not 

intended to have retroactive effect 

unless so specified in the ‘‘Dates’’ 

paragraph of this rule. Prior to any 

judicial challenge to the provisions of 

this rule or the application of its 

provisions, all applicable administrative 

procedures must be exhausted. 

Regulatory Flexibility Act 

This rule has been reviewed with 

regard to the requirements of the 

Regulatory Flexibility Act of 1980 (5 

U.S.C. 601–612). Eric M. Bost, Under 

Secretary for Food, Nutrition, and 

Consumer Services, has certified that 

this rule will not have a significant 

economic impact on a substantial 

number of small entities. The changes 

will affect State and local agencies that 

administer the FSP, to the extent that 

they must implement the provisions 

described in this action. 

Unfunded Mandate Analysis

Title II of the Unfunded Mandate 

Reform Act of 1995 (UMRA), Pub. L. 

104–4, establishes requirements for 

Federal agencies to assess the effects of 

their regulatory actions on State, local, 

and tribal governments and the private 

sector. Under section 202 of UMRA, the 

Department generally must prepare a 

written statement, including a cost 

benefit analysis, for proposed and final 

rules with ‘‘Federal mandates’’ that may 

result in expenditures to State, local, or 

tribal governments, in the aggregate, or 

to the private sector, of $100 million or 

more in any one year. When such a 

statement is needed for a rule, section 

205 of UMRA generally requires the 

Department to identify and consider a 

reasonable number of regulatory 

alternatives and adopt the least costly, 

more cost-effective or least burdensome 

alternative that achieves the objectives 

of the rule. 

This rule contains no Federal 

mandates (under the regulatory 

provisions of Title II of the UMRA) that 

impose costs on State, local, or tribal 

governments or to the private sector of 

$100 million or more in any one year. 

Thus, this rule is not subject to the 

requirements of section 202 and 205 of 

UMRA. 

Regulatory Impact Analysis 

Need for Action 

This final rule is needed to implement 

the provisions of Section 4120 of the 

FSRIA that authorized FNS to establish 

performance measures relating to 

actions taken to correct errors, reduce 

rates of error, improve the eligibility 

determinations and other indicators of 

effective administration; measure States’ 

performance against these performance 

measures; and award performance 

bonus payments totaling $48 million for 

each fiscal year to State agencies that 

show high or improved performance 

relating to the performance measures. 

Benefits 

State agencies will benefit from the 

provisions of this rule because they 

have the potential to be awarded 

bonuses for high or improved 

performance in administering the FSP. 

Recipients will benefit from the 

provisions of this rule because, as the 

State agencies seek to improve their 

performance in determining eligibility, 

issuing benefits, and attracting and 

6314 Federal Register / Vol. 70, No. 24 / Monday, February 7, 2005 / Rules and Regulations 

retaining participants, their actions will 

positively affect applicants and 

participants. 

Costs 

The cost of implementing these 

provisions is $48 million each fiscal 

year, or $240 million over 5 years. 

Executive Order 13132

Federalism Summary Impact Statement 

Executive Order 13132 requires 

Federal agencies to consider the impact 

of their regulatory actions on State and 

local governments. Where such actions 

have ‘‘federalism implications,’’

agencies are directed to provide a 

statement for inclusion in the preamble 

to the regulation describing the agency’s 

considerations in terms of the three 

categories called for under section 

(6)(b)(2)(B) of Executive Order 13132. 

Prior Consultation With State Officials 

Prior to drafting the NPRM, FNS 

received input from State and local 

agencies. Since the FSP is a State 

administered, Federally funded 

program, our national headquarters staff 

and regional offices have formal and 

informal discussions with State and 

local officials on an ongoing basis 

regarding FSP implementation and 

policy issues. This arrangement allows 

State and local agencies to provide 

feedback that forms the basis for any 

discretionary decisions made in this and 

other FSP rules. In addition, FNS 

solicited ideas at various State, regional, 

national, and professional conferences. 

FNS also consulted with State 

government representatives and our 

partners in the anti-hunger arena 

through meetings with such entities as 

the National Conference of State 

Legislators (NCSL), the National 

Governors Association (NGA), and the 

American Public Human Services 

Association (APHSA). Finally, we 

solicited comments on these 

amendments through the rulemaking 

process. The comment period for the 

NPRM opened on December 17, 2003 

and closed on February 17, 2004. FNS 

received comments from 14 State or 

local agencies that administer the FSP, 

3 interest groups, one university and 

one individual. 

Nature of Concerns and the Need To 

Issue This Rule 

Results of the consultations that were 

held prior to the publication of the 

NPRM were discussed in the preamble 

of that rule and therefore will not be 

discussed here. The comments that FNS 

received in response to the NPRM are 

discussed at length later in this 

preamble.

Extent to Which We Met Those 

Concerns 

FNS considered comments on the 

NPRM prior to publishing this final 

rule. Our responses to these comments 

are discussed at length later in this 

preamble. 

Civil Rights Impact Analysis 

FNS has reviewed this final 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 food stamp 

households and individual participants, 

FNS has determined that there is no 

adverse effect on any of the protected 

classes. The rulemaking is directed at 

State agencies and not applicants or 

recipients. If there were a trickle down 

effect on applicants or recipients, it 

would more than likely be positive and 

affect all applicants and recipients as 

this rulemaking includes incentives for 

State agencies to improve the eligibility 

determination and certification systems. 

FNS has no discretion in 

implementing the law, which was 

effective upon enactment of the FSRIA 

on May 13, 2002. However, FNS does 

have discretion regarding the 

performance measures on which to base 

the awards. As discussed above, these 

performance measures are directed at 

State agencies. To the extent States act 

on these incentives, customer service 

and payment accuracy may improve. 

Therefore, FNS anticipates no adverse 

impact on any of the individuals eligible 

for food stamps and no disproportionate 

impact on any protected class. 

In general, all data available to FNS 

indicate that protected individuals have 

the same opportunity to participate in 

the FSP as non-protected individuals. 

FNS specifically prohibits the State and 

local government agencies that 

administer the FSP from engaging in 

actions that discriminate based on race, 

color, national origin, gender, age, 

disability, marital or family status (FSP 

nondiscrimination 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 the regulations at 7 CFR 

272.6. 

Paperwork Reduction Act 

The Paperwork Reduction Act of 1995 

(44 U.S.C. Chap. 35; see 5 CFR 1320) 

requires that the Office of Management 

and Budget (OMB) approve all 

collections of information by a Federal 

agency 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. There are no revisions to 

information collections identified in 

this rule. This rule contains information 

collections that have been previously 

approved by OMB. The burden for the 

Quality Control Negative Case Action 

Review Schedule (FNS–245) is 

approved under OMB #0584–0034. The 

Quality Control Review Schedule (FNS–

380–1) is approved under OMB #0584–

0299. The Integrated Quality Control 

Review Worksheet (FNS–380) is 

approved under OMB #0584–0074. The 

State Coupon Issuance and Participation 

Estimates (FNS–388) is approved under 

OMB #0584–0081. 

Government Paperwork Elimination Act 

(GPEA) 

FNS is committed to compliance with 

the GPEA, which requires Government 

agencies, in general, to provide the 

public the option of submitting 

information or transacting business 

electronically to the maximum extent 

possible. 

II. Discussion of Comments 

A. Background 

Section 16(a) of the Food Stamp Act 

of 1977 (the Act), 7 U.S.C. 2025(a), 

establishes the base administrative costsharing rate between the Federal 

Government and States at 50 percent. 

That is, pursuant to Section 16(a), FNS 

will typically reimburse half a State’s 

costs incurred in administering the FSP. 

The Act, prior to enactment of the 

FSRIA, provided that a State agency 

would receive enhanced funding if it 

had a payment error rate less than or 

equal to 5.9 percent and a negative case 

error rate less than the national 

weighted mean negative case error rate 

for the previous year. State agencies and 

advocate groups expressed concerns 

that this incentive was too narrowly 

focused on payment accuracy and 

should be modified to also reward 

States for efficient management of the 

FSP in other areas.

On May 13, 2002, the enactment of 

FSRIA re-designed the quality control 

(QC) system, replacing enhanced 

funding with bonuses for States with 

high or most improved performance in 

administering the FSP, while 

significantly reducing liabilities 

assessed against States with poor 

accuracy outcomes. 

On December 17, 2003, FNS 

published the NPRM titled ‘‘Food 

Stamp Program High Performance 

Federal Register / Vol. 70, No. 24 / Monday, February 7, 2005 / Rules and Regulations 6315

Bonuses’’ (68 FR 70193) which 

proposed to implement the FSRIA high 

performance bonus provisions. 

Elimination of enhanced funding and 

changes in the liability system will be 

dealt with in a separate rulemaking. 

Section 4120 of the FSRIA (Pub. L. 

107–171) amended Section 16 of the Act 

(7 U.S.C. 2025) to authorize FNS to: 

establish performance measures relating 

to actions taken to correct errors, reduce 

rates of error, improve eligibility 

determinations, and other indicators of 

effective administration; measure States’

performance against these performance 

measures; and award performance 

bonus payments totaling $48 million for 

each fiscal year to State agencies that 

show high or most improved 

performance relating to the performance 

measures. Section 16(d)(2) of the Act (7 

U.S.C. 2025 (d)(3)) provides that FNS 

must establish the performance 

measures through guidance for FY 2003 

and FY 2004 and by regulation for FY 

2005 and beyond. Section 16(d)(3) (7 

U.S.C. 2025(d)(3)) prohibits a State from 

being eligible for a performance bonus 

payment any fiscal year for which it has 

a liability amount established. Section 

16(d)(4) (7 U.S.C. 2025(d)(4)) provides 

that the amount of the bonus payment 

and whether or not to award such bonus 

payment is not subject to administrative 

or judicial review. Pursuant to Section 

16(d)(2)(B)(ii) of the amended Act (7 

U.S.C. 2025 (d)(2)(B)(ii)), FNS is to 

award the bonus payments in the fiscal 

year following the fiscal year of 

performance. 

B. General Rule 

1. Section 275.24

The NPRM proposed to establish a 

new section 7 CFR 275.24, High 

Performance Bonuses. Section 275.24 

(a)(1) through (a)(7) of the proposal set 

forth the general guidelines for the high 

performance bonuses. We received 

several comments on these provisions. 

FNS will address each provision and the 

comments received individually. 

2. Section 275.24(a)(1) 

In the NPRM, section 275.24(a)(1) 

proposed that FNS would award 

bonuses totaling $48 million for each 

fiscal year to State agencies that show 

high or most improved performance. 

Section 275.24(b) proposed to make 

awards to 30 States in 7 categories: the 

lowest and most improved combined 

payment error rates ($24 million); the 

lowest and most improved negative 

error rates ($6 million); the highest and 

most improved participant access rates 

(PAR) ($12 million); and the best 

application processing timeliness rate 

($6 million). It proposed that 50 percent, 

or $24 million, of the award money be 

allocated to payment accuracy based 

upon States’ error rates, the sole 

criterion used under the previous 

enhanced funding. 

One commenter generally disagreed 

with dividing the bonuses among a 

limited number of States. The 

commenter claimed that such a 

distribution was a disincentive because 

States could maintain a low error rate 

year after year and yet never qualify for 

a bonus. This commenter suggested that 

every State that strives to reach and 

maintain an acceptable performance 

level should receive a bonus. FNS does 

not believe that providing bonus funds 

to all States that attempt to maintain a 

certain level of error meets the intent of 

the legislation or that such an approach 

would be as effective as the proposed 

process. 

One commenter suggested FNS use a 

composite ranking to determine the best 

overall State and make awards based on 

that ranking. FNS held many 

discussions with various stakeholders 

prior to drafting the NPRM. It was clear 

from these meetings that several 

individual performance measures were 

preferable over a composite measure. 

Because many stakeholders specifically 

mentioned this in those discussions, 

and because FNS received no other 

comments to this affect on the NPRM, 

FNS has decided to retain the structure 

of providing the awards based on 

individual performance measures. 

Five commenters expressed 

dissatisfaction with the way FNS 

proposed to divide the money among 

the categories. Four of these 

commenters expressed concern that too 

much money had been allocated 

towards payment accuracy. One 

commenter argued that, while program 

integrity is important, there are other 

indicators of successful FSP 

administration that should be 

recognized and rewarded equally. This 

commenter recommended allocating 

more money towards rewarding States 

with high and improved PAR. Another 

commenter argued that the FSRIA 

intended to move away from a system 

that measured FSP performance solely 

via payment accuracy. This same 

commenter pointed out that while the 

FSRIA modified the quality control 

sanction system, the system remains in 

place and, due to the national average 

feature, a number of States would 

continue to be sanctioned every year. 

Therefore, this commenter found it 

inappropriate that FNS should 

emphasize payment accuracy in the 

high performance bonus system as well. 

This commenter recommended a more 

balanced division of the bonus money—

awarding the majority to customer 

service measures. A third commenter 

argued that the QC system already 

imposes severe fiscal penalties on States 

that do not perform within acceptable 

standards. In addition, States are given 

incentives to focus on program integrity 

by keeping a share of the recipient 

claims they collect. This commenter 

argued that the purpose of the high 

performance bonus system was to 

provide a balance to the system. This 

commenter recommended that the best 

way to do this would be to allocate 70 

percent of the $48 million to client 

service/access measures. A fourth 

commenter urged FNS to consider 

apportioning a larger share of the $48 

million towards the customer service 

measures thus buttressing an emphasis 

on improving access. 

One commenter suggested that FNS 

allocate even more towards payment 

accuracy—$30 million. This suggestion 

was not based on the importance of 

payment accuracy, but on the belief that 

less should be allocated for the PAR due 

to inaccurate data.

FNS maintains its conviction that 

allocating fifty percent of the total 

amount towards payment accuracy is 

appropriate. FNS is aware that the 

FSRIA intended to move away from 

awarding States solely on the merits of 

error rates. The last year of enhanced 

funding, FNS paid out more than $77 

million in bonuses based on States’

error rates. Therefore, allocating $24 

million in performance bonuses based 

on payment accuracy is a significant 

reduction in money awarded to States 

based on error rates. At the same time, 

FNS believes it is important to allocate 

this amount to payment accuracy as it 

continues to be one of the Agency’s 

highest priorities and of critical 

importance to Congress and the 

taxpayer. In addition, it is an 

established index that measures 

outcomes that are influenced by many 

aspects of FSP management, such as 

policies, training and customer service. 

FNS believes allocating more than $24 

million towards payment accuracy 

would be excessive, as the other 

measurements are also significant. 

Therefore, FNS is retaining this 

provision to allocate $24 million 

towards payment accuracy. 

3. Section 275.24(a)(2) 

Section 275.24(a)(2) proposed 

awarding the bonuses no later than 

September 30th of the fiscal year 

following the performance measurement 

year. FNS received no comments on this 

specific provision. However, FNS did 

receive comments on how it relates to 

6316 Federal Register / Vol. 70, No. 24 / Monday, February 7, 2005 / Rules and Regulations 

awarding the bonus for the best and 

most improved PAR. These comments 

will be discussed later in the preamble. 

This provision is statutorily mandated 

(7 U.S.C. 2025(d)(2)(B)(ii)) and, 

therefore, we are adopting the proposed 

regulatory modification as final with no 

changes. 

4. Section 275.24(a)(3) 

Section 275.24(a)(3) proposed that a 

State agency would not be eligible for a 

bonus payment in any fiscal year for 

which it has a liability amount 

established. FNS received three 

comments opposing this provision. One 

commenter argued that this provision 

penalizes States that have made the 

greatest strides in addressing problem 

areas. This commenter suggested that, if 

a State against which a liability has been 

established wins an award, FNS should 

use the award to offset any liabilities. 

This commenter stressed that this 

would not only recognize improvement 

but serve as an incentive as well. 

Another commenter argued that awards 

for improvement should not be tied to 

a liability payment because 

improvement should be rewarded 

regardless of the national standard for 

payment accuracy. This commenter 

urged FNS to consider a legislative 

change. This commenter believes high 

achievement in customer service should 

be rewarded regardless of a State’s 

payment accuracy rate. One commenter 

plans to seek a legislative change which 

would allow FNS to award bonuses to 

States even if they have been assessed 

a liability. 

At this point in time, FNS is unable 

to modify this provision due to the 

statutory mandate of 7 U.S.C. 

2025(d)(3). Therefore, FNS is adopting 

this provision as final with no changes. 

FNS received one comment 

suggesting we modify the regulatory 

language to clarify that the only kind of 

liability that may render a State 

ineligible for a bonus is a penalty for an 

excessive QC payment error rate in the 

same year for which enhanced funding 

might otherwise be awarded. This 

commenter suggested that we articulate 

that this does not include leftover QC 

penalties due to a failed reinvestment 

plan or penalties for other deficiencies 

in FSP operations. This same 

commenter noted that the proposed rule 

does not clearly state that if a State is 

disqualified from receiving a bonus 

payment due to a QC penalty, the State 

with the next best performance will win 

the performance bonus just as if the 

disqualified State were a poor 

performer. 

FNS agrees with this commenter and, 

therefore, is modifying the regulatory 

language at § 275.24(a)(3) to provide that 

a State agency is not eligible for a bonus 

payment in any fiscal year for which it 

has a liability amount established as a 

result of an excessive payment error rate 

in the same year. If a State is 

disqualified from receiving a bonus 

payment and the State is not tied for a 

bonus, the State with the next best 

performance will be awarded a bonus 

payment. 

5. Section 275.24(a)(4) 

Section 275.24(a)(4) proposed that the 

determination whether, and in what 

amount, to award a performance bonus 

payment is not subject to administrative 

or judicial review. FNS received no 

comments on this provision. This 

provision is statutorily mandated by 7 

U.S.C. 2025(d)(4) and, therefore, FNS is 

adopting it as final. 

6. Section 275.24(a)(5)

Section 275.24(a)(5) proposed that 

FNS divide the award money among the 

States in each category in proportion to 

the size of their caseloads (the average 

number of households per month for the 

fiscal year for which performance is 

measured). FNS received four comments 

on this provision, each arguing that this 

method is unfair to small States with 

small caseloads. Each of these 

commenters suggested that FNS 

establish a base amount for each award 

and then divide the remainder 

according to caseload size. This method, 

they argue, would provide more of an 

incentive for smaller States. Suggestions 

for the amount of the base award 

differed among commenters, from 

$150,000 in general to $1 million 

specifically in the payment accuracy 

category. 

FNS recognizes that the proposed 

system is somewhat biased against 

smaller States, especially if a State with 

a small caseload wins in the same 

category as a State with a large caseload. 

Therefore, FNS is modifying the 

regulatory language at § 275.24(a)(5) to 

provide that FNS will award a base 

amount of $100,000 to each State agency 

that is an identified winner in each 

category. FNS will divide the remaining 

award money among the States in each 

category in proportion to the size of 

their caseloads. 

7. Section 275.24(a)(6) 

Section 275.24(a)(6) proposed that a 

State cannot be awarded two bonuses in 

the same category (payment accuracy, 

negative error rate, or participant access 

rate). If a State is determined to be the 

best and the most improved in a 

category, it would only be awarded a 

bonus for being the most improved. This 

allows the ‘‘next best’’ State to receive 

an award as being among the best States. 

FNS received three comments on this 

provision. One commenter agreed with 

awarding a State only one award, but 

suggested that it be for the best and not 

for the most improved. This commenter 

reasoned that the State with the best 

performance should get the award for 

being the best, regardless of the degree 

of improvement. One commenter agreed 

with the proposal to recognize the State 

in the most improved category thus 

allowing the State with the next best 

performance to receive an award. This 

commenter reasoned that this method 

allows more States exhibiting 

outstanding performance to receive 

awards. This commenter also stated that 

recognizing and rewarding 

improvement is important, but it is 

more appropriate to give award money 

to States qualifying as the best. The 

third commenter suggested that FNS 

first calculate the monetary amount of 

the award for each bonus and then 

award the State in the category in which 

it would receive the higher bonus. 

FNS is committed to awarding both 

high and improved performance in 

administering the FSP. FNS believes it 

is important to emphasize high 

performance. Therefore, FNS has 

decided to award a State that is a double 

winner (best and most improved) the 

award for being the best while at the 

same time acknowledging that the State 

also achieved in the most improved 

category. FNS will then award a bonus 

to the next State in the best category. 

FNS is not adopting the commenter’s 

suggestion concerning awarding the 

State the highest monetary amount. FNS 

believes that the amount of the bonus 

award is secondary to the recognition a 

State receives. 

8. Section 275.25(a)(7) 

Section 275.24(a)(7) proposed that, 

where there is a tie to the fourth decimal 

point, FNS will add the additional 

State(s) into the category and the money 

will be divided among all the States. 

FNS received no comments on this 

provision and is adopting it as final 

with no changes. 

9. Innovation 

In the preamble of the NPRM, FNS 

specifically solicited comments on 

whether or not to include ‘‘innovation’’

as a measure of high performance and, 

if so, what criteria could be used to rank 

innovative projects. We received two 

comments suggesting we create a 

category for innovation. One commenter 

indicated that to be valid, results of a 

project need to be measurable 

(quantifiable) and repeatable among 

Federal Register / Vol. 70, No. 24 / Monday, February 7, 2005 / Rules and Regulations 6317

other states; need to affect something 

important to the FSP; and need to be 

something an individual State can 

effect. One commenter strongly 

supported the idea of allocating money 

to reward State innovation, even if that 

pot of money is relatively small. This 

commenter recommended requiring 

States to apply for the award. This way, 

FNS would be able to collect 

information on innovative practices that 

it could then share with all the States. 

This commenter suggested that in the 

application the States answer the 

following questions: What problem did 

the State attempt to solve? Did the State 

work in partnership with other state 

agencies or non-profit groups to identify 

and resolve the problem? What 

quantifiable results are available to 

support the States’ success? Is the idea 

exportable to other States? 

FNS appreciates the comments 

concerning creating a performance 

bonus category for innovation. However, 

FNS received only two comments 

supporting this idea and has concluded 

that a determination of innovation 

would be too subjective. At the same 

time, FNS values the idea of collecting 

and sharing innovative ideas. Therefore, 

FNS is examining how best to do this 

outside of the performance bonus arena. 

10. Additional Comments 

FNS received two comments 

suggesting it include a performance 

measurement for Food Stamp 

Employment and Training (FSET) 

participation rate and most employed. 

One of the commenters put forth this 

suggestion because FSET is a major 

component of the FSP. The other 

indicated that this category would be an 

outcome measure that supports the goal 

of increasing family self-sufficiency 

rather than just an administrative 

process. 

In drafting the policy for FY 2003 and 

FY 2004 and in drafting the NPRM, FNS 

did consider including a category for 

FSET. While FNS recognizes that this 

activity is important, it is not critical to 

the administrative performance of the 

FSP as outlined in the FSRIA. 

Furthermore, FNS does not have access 

to data that would be necessary for such 

a measure. Therefore, FNS is not 

adopting this suggestion.

C. Payment Accuracy 

1. Section 275.24(b)(1) 

Section 275.24(b)(1) proposed to 

divide $24 million (50 percent of the 

total amount) among the 10 States with 

the lowest and the most improved 

combined payment error rate (the error 

rate). Section 275.24(b)(1)(i) proposed 

awarding bonuses to the 7 States with 

the lowest combined payment error 

rates based on the validated quality 

control payment error rates for the 

performance measurement year. One 

commenter suggested that FNS award 

bonuses in the area of payment accuracy 

to the ten best and the ten most 

improved States. This commenter 

argued that such a method would 

provide a greater incentive to States and 

would represent FNS’ highest priority 

and the State’s ability to manage the 

FSP. One commenter argued that 

rewarding improvement is more 

important than rewarding the best and, 

therefore, FNS should award 12 States 

in this category: six States that are the 

best and six States that are the most 

improved. 

FNS appreciates these comments. 

However, FNS believes that awarding 20 

States in the area of payment accuracy 

would result in bonus amounts that 

would be so small they would reduce 

States’ incentive. Furthermore, FNS 

believes that the proposed provision 

strikes a good balance by recognizing 

three States that improved the most 

while still providing the greater number 

of bonuses for the best performers. FNS 

will adopt this provision as final with 

no changes. 

2. Section 275.24(b)(1)(ii) 

Section 275.24(b)(1)(ii) proposed 

awarding the 3 States with the largest 

percentage point decrease in the 

combined payment error rates based on 

the comparison of the validated quality 

control payment error rates for the 

performance measurement year and the 

previous fiscal year. FNS received four 

comments on this provision. 

Two commenters suggested that 

States only get awards if States’ error 

rates are at or below the national 

average payment error rate. The FSRIA 

provided no restrictions on awarding 

States for improvement, while it did 

provide for a restriction for awarding 

States with established liabilities. FNS 

views these awards as an incentive for 

improvement, especially for States with 

already high error rates. If FNS only 

awarded States that were at or below the 

national average, what incentive then 

would these bonuses serve for those 

States that have high error rates? Also, 

if States had significantly higher error 

rates than the national average, they 

very well may be in sanction mode and 

would be statutorily prohibited from 

receiving a bonus. Finally, FNS 

contends that States that are already at 

or below the national average can 

compete for an award in the ‘‘best’’

category. Therefore, while FNS 

appreciates the comments on this 

subject, FNS is not adopting the 

commenters’ suggestion. 

One commenter supported basing the 

award for most improved on percentage 

point decrease (absolute improvement). 

Another commenter disagreed with this 

suggestion. This commenter argued that 

it is much harder for a State with an 

already low error rate to improve by 

several percentage points and, therefore, 

States with a solid performance record 

and significant percentage improvement 

would not be rewarded. In addition, this 

commenter argued that the State with a 

lower error rate is costing the FSP less 

money. This commenter suggested that 

FNS measure percentage improvement 

(relative improvement) so all States 

have an opportunity to realize a 

performance bonus not just those that 

have high dollar errors. 

FNS stands by the proposal to use 

percentage point improvement (absolute 

improvement) as the best means of 

measuring improvement. To illustrate, 

we will repeat the example given in the 

proposed rulemaking at 68 FR 70197: if 

State A has a 10 percent error rate in FY 

2004 and a 6 percent error rate in FY 

2005, it has shown an absolute 

improvement rate of 4 percent (the 

difference between 10 and 6) and a 

relative improvement rate of 40 percent 

(the percentage reduction from 10) If 

State B has a 6 percent error rate in FY 

2004 and a 3 percent error rate in FY 

2005, it has had an absolute 

improvement rate of 3 and a relative 

improvement rate of 50 percent. States 

that improve by more percentage points 

have more of an impact on the national 

FSP and on their own caseload than 

States that make a relative 

improvement. And, as discussed above, 

States that have already low error rates 

can compete for and very well may win 

in the ‘‘best’’ category. Therefore, we are 

adopting this provision as final with no 

changes. 

D. Negative Error Rate 

1. Section 275.24(b)(2) 

Section 275.24(b)(2) proposed to 

divide $6 million among the 4 States 

with the lowest negative error rates and 

the 2 States with the most improved 

negative error rates. The negative error 

rate measures the correctness of the 

State agency’s action to deny an 

application, or suspend or terminate the 

benefits of a participating household. It 

also measures whether a State correctly 

determined a household’s eligibility in 

terms of the State’s compliance with 

Federal procedural requirements.

One commenter recommended that 

the definition of a negative error be 

revised to exclude procedural issues 

6318 Federal Register / Vol. 70, No. 24 / Monday, February 7, 2005 / Rules and Regulations 

when the household is not eligible 

anyway, e.g. denying the case on the 

29th day instead of the 30th. Negative 

cases are defined in 7 CFR 271.2 and the 

review procedures for negative cases are 

specified in 7 CFR 275.12 and the FNS 

Handbook 310, the Food Stamp Program 

Quality Control Review Handbook. 

Those procedures are based on 

certification policy. Revisions to quality 

control review policy are outside of the 

scope of this rulemaking. Therefore, 

FNS will not adopt the commenter’s 

suggestion, but will consider the idea in 

future rulemaking. 

2. Section 275.24(b)(2)(i) 

Section 275.24(b)(2)(i) proposed to 

award bonuses to the 4 States with the 

lowest negative error rates based on 

validated quality control negative error 

rates for the performance year. One 

commenter supported this measure. One 

commenter questioned how FNS would 

validate the negative error rate from year 

to year to determine the most improved. 

This commenter pointed out that in the 

past the State’s negative error rates have 

not been validated unless the State was 

below the national average for active 

reviews. This commenter questioned if 

the negative error rates would be 

validated for all States whether or not 

they have met the active error rate or 

would only the State’s error rate be 

used. If the State’s rate will be used, this 

commenter expressed concern that the 

results would be questionable if not 

validated. For several years, FNS has 

been validating all State agencies’

negative case error rates because of 

concerns about the quality of the data 

and fair and equitable treatment of 

applicants. Although this comment is 

outside the scope of this rulemaking, 

FNS recognizes the merit of the 

comment and intends to continue to 

validate all State agencies’’ negative 

case error rates. 

3. Section 275.24(b)(2)(ii) 

Section 275.24(b)(2)(ii) proposed to 

award bonuses to the 2 States with the 

largest percentage point decrease in 

their negative error rates based on the 

comparison or the performance 

measurements year’s validated quality 

control negative error rates with those of 

the previous fiscal year. One commenter 

supported the idea of awarding States 

for improvement in the negative error 

rate but suggested it be a smaller 

amount of money than for the best. One 

commenter supported using percentage 

points versus percentage improved. One 

commenter opposed this method. This 

commenter suggested that awarding 

funds for improvement may result in 

States that have worked diligently to 

reach a low error rate losing to States 

that have had continuously high error 

rates. Again, as discussed above, FNS 

believes that States that improve by 

more percentage points have more of an 

impact on the national FSP and on their 

own caseload than States that make 

percentage improvement. Additionally, 

States that have already low error rates 

can compete for and very well may win 

in the ‘‘best’’ category. Therefore, we are 

adopting this provision as final with no 

changes. 

4. Threshold 

In the preamble of the NPRM, FNS 

specifically solicited comments on 

whether States must attain a certain 

threshold to be rewarded for an 

improved negative error rate. For 

example, should a State be rewarded if 

it improves its negative error rate from 

20 percent to 15 percent, even though 

its negative error rate is still very high? 

One commenter suggested setting 

separate thresholds for groups of States 

created within each bonus category. 

These groups could be based on 

caseload, metropolitan area, and 

expenditure level. Alternatively, this 

commenter suggested setting no 

threshold because it could exclude 

those States whose improvement had 

the largest possible impact on the 

caseload, in terms of the number of 

cases positively affected. In addition, 

using a threshold for the most improved 

negative error rate would be 

incongruous since no such thresholds 

are used for the other most improved 

categories. One commenter supported 

awarding States for most improved even 

if their negative error rate was above the 

national average. At the same time, this 

commenter suggested that in lieu of the 

bonus money, we award these States 

special recognition. 

Three commenters opposed awarding 

States for most improved when their 

negative error rates were above the 

national average. One commenter 

argued that it would not be fair to award 

a State for improvement when its 

negative error rate was still very high. A 

second commenter argued that since the 

entire purpose of the bonuses is to 

reward States for correct administration 

of the FSP, a State that is incorrectly 

denying or terminating more cases than 

the national average should not receive 

a financial award. A third argued that 

States that win awards for improvement 

in their negative error rate should be 

held to some basic level of performance. 

This commenter suggested that States 

should not be awarded for most 

improved if they are more than 30 

percent above the national average for 

negative error rates. According to this 

commenter this approach is consistent 

with the statutory provision that 

disqualifies States from receiving a 

bonus payment if they are subject to a 

QC penalty in that fiscal year.

FNS views these bonuses as 

incentives for States to improve. 

However, FNS also recognizes that if a 

State has an excessively high negative 

error rate even after improvement, then 

it should not be rewarded. While the 

FSRIA did not provide for a restriction, 

FNS agrees with the comments. 

Therefore, FNS has decided to take a 

moderate position on this issue and 

provide that States that are more than 50 

percent above the national average 

negative error rate may not receive a 

bonus in this category regardless of 

improvement. 

E. Program Access Index 

1. Section 275.24(b)(3) 

Section 275.24(b)(3)(i) and (b)(3)(ii) 

proposed to divide $12 million among 

the 4 States with the highest and the 4 

States with the most improved 

participant access rate (PAR). Section 

275.24(b)(3)(iii) proposed to use a 

variety of data sources to calculate the 

PAR. FNS proposed that the 

denominator be composed of annual 

State counts of persons below 125 

percent of poverty from the Census 

Bureau’s March Supplement to the 

Current Population Survey (CPS). These 

counts are based on annual income 

received in the previous calendar year. 

For the numerator, or the number of 

food stamp participants, FNS proposed 

to use administrative counts of 

participants by State over the same 

calendar year as for the Census Bureau’s 

persons below 125 percent of poverty, 

averaging 12 months of data. In 

addition, FNS proposed to make 

adjustments for two special situations. 

First, because persons receiving 

Supplemental Security Income (SSI) are 

ineligible for food stamps in California, 

FNS proposed to reduce the number of 

persons below 125 percent of poverty in 

California by the percentage of such 

persons who received SSI in the 

previous year. Second, because some 

individuals residing on reservations 

may choose to receive food assistance 

from either the FSP or the Food 

Distribution Program on Indian 

Reservations (FDPIR) but not both 

simultaneously, FNS proposed to add 

the number of FDPIR participants to the 

number of food stamp participants, 

using administrative data averaged over 

a calendar year. 

Federal Register / Vol. 70, No. 24 / Monday, February 7, 2005 / Rules and Regulations 6319

2. Name Change 

It has come to FNS’ attention that 

there is a lot of confusion between the 

PAR and the official Participation Rate. 

FNS believes that part of the confusion 

is due to the similar names. In an 

attempt to distinguish this performance 

bonus measure from the official 

participation rate, FNS is changing the 

term Participant Access Rate (PAR) to 

the Program Access Index (PAI). 

Normally, ‘‘rate’’ is used to measure 

how often something occurs (food stamp 

participation) among all the times it 

could occur (food stamp eligibles). By 

changing this to an ‘‘index’’ FNS 

believes it will be clearer that it is 

relating a pair of numbers that are 

similar but do not have the same 

properties of a rate. Not all food stamp 

participants have low-income as defined 

in the denominator of the index, nor are 

all persons in the denominator eligible 

to participate. 

3. Poverty Threshold 

Section 275.24(b)(3)(iii) proposed to 

use 125 percent of poverty in 

calculating the PAI. This threshold 

differs from what FNS used for fiscal 

years 2003 and 2004 (100 percent of 

poverty). However, our analysis showed 

that using 125 percent of poverty better 

correlates to the official FSP 

participation rates. The official FSP 

participation rate uses 130 percent of 

income in the denominator. FNS looked 

at using 130 percent of poverty in the 

PAI but found that the data is not 

readily available from the Census 

Bureau and it would require time and 

additional expense to obtain the 

tabulations. In addition, FNS analyses 

found that using 130 percent in the PAI 

denominator versus 125 percent made 

no impact in the correlation to the 

official participation rates. As a result, 

FNS decided for efficiency and validity 

that using 125 percent of poverty in the 

PAI denominator was acceptable. FNS 

proposed in the preamble that, if the 

Agency could receive the estimate of 

individuals with income below 130 

percent of poverty from the Census 

Bureau within a reasonable timeframe 

and the data better correlates to the 

official statistics, FNS would use 

numbers of people below 130 percent 

rather than 125 percent of poverty.

FNS received several comments on 

this proposal. Two commenters 

supported using 130 percent of poverty, 

stating it is more accurate. One 

commenter suggested we request a retabulation of data from Census. Two 

commenters, while not opposed to using 

125 percent or 130 percent, proposed 

making adjustments for immigrants and 

individuals who live on reservations. 

Finally, one commenter suggested FNS 

not foreclose the possibility of Census 

providing data on the number of 

individuals with income below 130 

percent of the poverty line in a timely 

fashion. This commenter suggested FNS 

craft the regulatory language so that FNS 

reserves the right to substitute the 

number of people below 130 percent for 

the number below 125 percent of 

poverty if the data is available in a 

timely manner. Comments related to 

ineligible aliens and undocumented 

immigrants will be discussed later in 

the preamble. FNS analyses show that a 

denominator using persons with income 

below 125 percent of poverty with 

certain adjustments produces a rate that 

best correlates to the official State 

participation rates. However, FNS does 

not want to preclude using 130 percent 

of poverty if that information should 

become available in time to calculate 

the PAI. FNS agrees that the final 

regulation should allow certain 

flexibility in improving the PAI 

calculation because of new and better 

data. Therefore, FNS is amending the 

proposed language to provide that FNS 

reserves the right to use the number of 

people below 130 percent of poverty 

should the data be available in a timely 

manner. Any such substitution would 

apply to all States. 

One commenter expressed concern 

that the Census Bureau poverty counts 

appeared to be inaccurate for FY 2002 

because, in one particular State 

identified by the commenter, the 

poverty count increased more than the 

State population, and because 

unemployment did not increase by as 

much in that State during that time 

period. FNS contends that in addition to 

population growth, there are several 

other factors that can affect the poverty 

count. Poverty can increase faster than 

unemployment if wage rates are not 

increasing or more workers are 

employed only part-time. The Census 

Bureau and FNS recognize the problems 

small entities have with uncertainty in 

the poverty estimates. However, FNS 

knows of no specific problem in that 

particular State and, moreover, knows of 

no other more reliable data source. 

Lacking better information or data, FNS 

will continue to use Census Bureau data 

on the count of people in poverty in 

each State. 

4. American Community Survey versus 

the Current Population Survey 

In the preamble to the proposed rule, 

FNS stated that since the American 

Community Survey (ACS) has a larger 

sample and is released earlier than the 

CPS, FNS was considering using data 

from that survey to calculate the PAI. 

However, since the survey was 

relatively new, FNS was going to 

examine the data over time to determine 

how well the PAI using ACS poverty 

counts correlated to the official FSP 

participation rate. If this data were more 

consistent, FNS would use it instead of 

the CPS. 

FNS received several comments on 

this proposal. One commenter agreed 

that FNS should evaluate data from the 

ACS because of its larger sample size. 

One commenter suggested that FNS use 

whichever data source best correlates 

with the full Census. One commenter 

argued that neither data source was 

appropriate because they are both based 

on samples that do not accurately reflect 

the true extent of poverty, particularly 

in small jurisdictions subject to small 

sample sizes. One commenter urged 

FNS to use the ACS because it is a yearby-year supplement to the Decennial 

Census and is, therefore, more up-todate, and because of its larger sample 

size. 

FNS agrees that the national survey 

based on a sample is problematic for 

smaller jurisdictions. However, FNS 

knows of no other more reliable source 

of data available in a timely manner that 

could be used to calculate a measure of 

participation access that is comparable 

across all States and time. The CPS is 

made up of a scientifically selected 

sample designed to represent the 

civilian non-institutional population. 

While it does not pull a sample from 

every county in the country, it does 

statistically represent State populations. 

As it is planned, the ACS will have a 

much larger sample size than the CPS 

when fully implemented. FNS does not 

want to preclude using the ACS, 

especially if, when it becomes 

nationally representative, it proves to be 

a better source of data for calculating the 

PAI. Therefore, this final regulation 

provides that FNS will use the CPS, but 

reserves the right to use new and better 

data should it become available. 

5. Determining the Number of 

Participants 

Section 275.24(b)(3)(iii) proposed 

using State participation data, averaged 

over 12 months, to determine the 

number of participants. One commenter 

opposed using an average because it 

flattens out the actual increase in 

participation, especially for States that 

are actively conducting outreach 

activities throughout the year. This 

commenter suggested using the end 

results for the last month of the year 

(December). However, using 

participation in a single month like 

December is an advantage only when 

6320 Federal Register / Vol. 70, No. 24 / Monday, February 7, 2005 / Rules and Regulations 

caseloads are rising. When caseloads are 

decreasing, this would actually 

disadvantage some States. 

Using an average smoothes out this 

effect. FNS chose average participation 

in the calendar year because the income 

data from the CPS, which is the basis for 

the count of persons with income below 

125 percent of poverty, is available 

solely for a calendar year. 

The Census Bureau does not collect 

monthly income in a large enough 

national survey to provide accurate 

monthly counts of persons with 

incomes below 125 percent of poverty 

by State. FNS is not adopting the 

commenter’s suggestion and instead 

will continue to use an average 12 

months of data based on a calendar year.

6. Making Adjustments 

Section 275.24(b)(3)(iii) proposed 

that, to calculate the PAI, FNS would 

make adjustments for the SSI 

population in California and the FDPIR 

participants in States with reservations. 

FNS received several comments 

concerning the proposed adjustments. 

Several commenters proposed that, to 

improve the accuracy of the PAI, FNS 

should make adjustments for all those 

who are ineligible (such as immigrants 

or individuals who are not meeting the 

work requirements), or take into 

consideration other State specific 

situations that affect participation in the 

FSP such as the economy or urban 

versus rural populations. In addition, 

these commenters pointed out that FNS 

proposed to adjust differently for SSI 

recipients in California and individuals 

that received FDPIR. These commenters 

argued that since both populations are 

ineligible for the FSP they should be 

treated similarly. Several commenters 

suggested alternative ways to calculate 

the PAI, or that FNS seek a legislative 

change that would allow it to award 

these bonuses later so it can use the 

official participation rate. 

FNS has decided not to change the 

method used to calculate the PAI or to 

adjust for such factors as ineligible 

individuals not addressed in the 

proposed rule (immigrants or 

individuals who are not meeting the 

work requirements), the economy, or 

rural versus urban populations with one 

exception. State-reported participation 

includes people provided benefits under 

special disaster conditions. FNS will 

subtract from the number of participants 

the state-reported number of people 

who received food stamp disaster 

assistance to better reflect on-going 

administration of the regular FSP. 

Disaster assistance is approved in 

limited circumstances and operates 

under special rules that differ from 

those of the regular FSP. FNS will 

subtract only those disaster assistance 

recipients who are new to the FSP—not 

existing participants who are issued 

replacement benefits. These individuals 

were not participating in the FSP under 

normal operations before the disaster. 

To the extent they apply and continue 

to participate under normal program 

rules in the following months, they are 

included in the count of participants. 

FNS agrees with the comment that 

some adjustment should be made for 

FDPIR participants and SSI recipients in 

California, and that the adjustment 

approach should be consistent for both. 

Consistency could be achieved by 

either: (1) Adding the count of FDPIR 

and California SSI recipients to the 

numerator of the PAI, or (2) subtracting 

the count of low-income FDPIR and 

California SSI recipients from the 

denominator. Because the number of 

participants in FDPIR and California SSI 

recipients offers no information on the 

effectiveness of State food stamp agency 

operations, FNS believes it is preferable 

to exclude FDPIR and California SSI 

participants from the denominator of 

the PAI. 

FNS will make this adjustment by 

using prior-year information from the 

CPS to estimate the number of 

California SSI recipients with income 

below 125 percent of poverty. Data 

limitations prevent a similar estimate of 

the number of FDPIR participants with 

income below the 125 percent of 

poverty. Therefore, FNS will subtract 

the average monthly number of FDPIR 

participants from the number of persons 

with income below 125 percent of 

poverty in each State. Although some 

FDPIR participants with incomes above 

125 percent of poverty may qualify for 

benefits, FNS believes that the number 

will be relatively small. 

We received one comment on the data 

used to remove SSI recipients in 

California from the denominator. This 

commenter suggested that since FNS is 

using Census data to determine the 

number of eligibles in the State, FNS 

should use Census figures to back out 

the SSI recipients from the 

denominator. In fact, the methodology 

proposed in the NPRM used Census 

data from the CPS to remove from the 

denominator the SSI recipients with 

incomes below 125 percent of poverty 

in California.

7. Additional Comments 

One commenter urged FNS to clarify 

in the regulations how the PAI is 

calculated in order to ‘‘ensure full 

transparency’’ regarding distribution of 

funds and to make it more difficult for 

future Administrations to tinker with 

the formula without going through the 

public comment process. FNS agrees 

with this commenter that the 

regulations should be as complete as 

possible and believes that the 

regulations as written in this final rule 

are complete. 

This same commenter suggested that 

FNS specify that the PAI is the share of 

eligible individuals in food stamp 

households who participate in the FSP. 

FNS would like to reiterate in the 

preamble that the PAI is the ratio of 

participants to persons with incomes 

below 125 percent of poverty, not 

eligible individuals. The official State 

participation rate is the ratio of 

participants to eligibles. FNS agrees and 

regrets that there is a lot of confusion 

over these two rates. Therefore, as 

discussed above, this measure will now 

be referred to as the Program Access 

Index. 

F. Application Processing Timeliness 

1. Section 275.24(b)(4) 

Section 275.24(b)(4) proposed to 

divide $6 million among the 6 States 

with the highest percentage of timelyprocessed applications. One commenter 

supported the proposal to measure 

application-processing timeliness 

because it is an essential component of 

customer service. 

2. Section 275.24(b)(4)(i) 

Section 275.24(b)(4)(i) proposed 

collecting data on applicationprocessing timeliness through the QC 

system. FNS initiated collection of data 

as part of the QC reviews beginning 

with FY 2003 cases. Instructions for 

collecting this information are found in 

the FNS 310 Handbook, The Food 

Stamp Program Quality Control Review 

Handbook. In the preamble to the 

proposed rule, FNS specifically sought 

comment on this data collection 

instrument and its ability to collect the 

sought after information. FNS received 

two comments regarding the data 

collection instrument. One commenter 

suggested we use different QC codes for 

the data collection instrument: 1. 

Timely; 2. Not timely—agency caused; 

3. Not timely—client caused; 4. 

Application filed outside of fiscal year; 

and, 5. Unable to determine timeliness 

of application processing. FNS 

appreciates the merit of this comment. 

However, FNS has determined that 

there is no reason to change the codes 

since client-versus agency-caused 

delays is not relevant with regard to this 

measure. 

One commenter opposed using QC 

data for this measurement saying it 

would result in inconsistent reporting. 

Federal Register / Vol. 70, No. 24 / Monday, February 7, 2005 / Rules and Regulations 6321

This commenter cautioned that since 

the QC data collection instrument is 

new, States would be unfamiliar with it, 

and would, therefore, have many 

questions and may not report the data 

in the same way. This commenter 

suggested FNS modify the Program 

Activity Statement (FNS–366) to capture 

the data since States already have this 

procedure in place. This commenter felt 

that specific revisions to the FNS–366 

form would result in more consistency 

since it is common to all States. FNS 

seriously considered using the FNS–366 

form, but wanted to have a mechanism 

for validating these numbers. QC 

provides that mechanism. Therefore, 

FNS will verify the QC application 

processing data for any State that is in 

contention for a bonus. 

3. Section 275.24(b)(4)(ii) 

Section 275.24(b)(4)(ii) proposed that 

a timely processed application is one 

that provides an eligible applicant the 

‘‘opportunity to participate,’’ as defined 

in 7 CFR 274.2, within thirty days for 

normal processing or 7 days for 

expedited processing. New applications 

that are processed outside of this 

standard would be untimely for this 

measure, except for applications that are 

properly pended in accordance with 7 

CFR 273.2(h)(1)(i)(C). Properly pended 

applications would not be counted for 

(as timely) nor against (as untimely) 

States’ timeliness rate—they will be 

excluded from this particular 

calculation altogether. 

One commenter argued that the 

measure as proposed does not fully 

capture the issue of timeliness and its 

importance in the delivery of food 

assistance. This commenter pointed out 

that this measure treats States with 

average processing times of 15 days the 

same as States with average processing 

times of 25 days and, thus, treating 

these States the same does not 

accurately reflect their performance 

with respect to timeliness. This 

commenter suggested we incorporate 

average processing time into the 

measure to provide States with an 

incentive to do better than simply 

meeting the statutory deadlines. FNS 

contends that average processing time 

can mask the effect of those States that 

process the bulk of their applications 

outside of the 30 days, but their average 

processing time is better than those 

States that consistently process their 

application within the 30 day standard. 

For example State X processes 100 

applications, 20 in 31 days and the rest 

in 10 days, for an average of 14.1 days. 

State Y processes 90 applications in 20 

days and 10 in 40 days, for and average 

of 22 days. FNS believes it is important 

that as many applicants as possible be 

served in a timely manner. Therefore, 

while FNS sees merit in using 

averaging, FNS believes that the 

timeliness rate as proposed is a more 

accurate measure and is adopting it in 

this final rule.

4. Client-Caused Delays 

In the preamble of the NPRM, FNS 

specifically sought comment on whether 

to exclude all client-caused delays from 

this measure and, if so, how to work 

that into the existing reporting and QC 

framework. Two commenters opposed 

the proposal to measure timeliness 

against the statutory standard of 30 days 

from the date of application. These 

commenters suggested that we measure 

timeliness in accordance with the 

regulations at 7 CFR 273.2(h)(2)(i), 

which provide procedures for when the 

30-day standard is not met (such as 

State and client-caused delays). 

Otherwise, a State following these 

regulatory procedures would be 

penalized for purposes of awarding the 

performance bonus even though all 

timeliness standards may have been 

complied with under Federal 

regulations. Excluding client-caused 

delays would also have a big impact on 

States with large immigrant populations 

and multiple languages as client-caused 

delays are considerably higher in such 

States than those without such 

populations. As discussed in the 

preamble to the NPRM, FNS recognizes 

that the statutory time frame differs 

from the latitude afforded by the 

regulations. However, FNS believes that 

excellent customer service should be 

measured by whether or not the 

statutory time frame of 30-day 

processing is met as opposed to 

compliance with the regulations that 

allows for up to 60-day processing in 

some cases. Furthermore, FNS believes 

all States are faced with challenges of 

serving applicants with one barrier or 

another (e.g., language and culture). 

Measuring application-processing 

timeliness against a 30-day standard, 

therefore, rewards States that take the 

extra steps to overcome these 

challenges. 

Four commenters suggested excluding 

all client-caused delays from the 

measurement, not just those clientcaused delays due to lack of 

verification. While FNS appreciates the 

merit of these comments, FNS believes 

that a State has the ability and the 

responsibility to influence clients’

performance throughout the application 

process, such as helping to obtain 

verification, or accurately and 

adequately explaining the processing 

time frames and deadline dates. Again, 

this measure will reward States that go 

above and beyond to provide excellent 

customer service by providing needy 

individuals benefits in a timely fashion. 

Two commenters agreed with the 

exception that applications that are 

properly pended because the applicant 

failed to provide verification should not 

count in the measure of overdue 

applications. 

One commenter stated that States 

should not be held to a time frame of an 

application date for another program 

(such as TANF) when the client did not 

request food stamp benefits until a later 

date, perhaps during the interview for 

the other program. In this instance, the 

commenter suggested that the date of 

the interview should be the date the 

client requested food stamps. Existing 

FSP policy is that if an individual 

applies for another program but does 

not apply for the FSP until sometime 

later in the application process for the 

other program, then the date of 

application is the date that the 

individual applies for the FSP and not 

the other program. 

5. Expedited Time Frames 

Three commenters pointed out that 

the proposed rule does not address 

expedited time frames. One of these 

commenters questioned whether the 

policy regarding 30-day processing, 

which makes an exception for cases the 

State agency has pending due to 

incomplete verification, applied to 

expedited service cases. This 

commenter suggested that this policy be 

extended to all situations in which the 

client fails to comply with requirements 

necessary for agencies to meet the 7-day 

timeframe. FNS contends that the 

exception regarding failure to provide 

verification should not apply in cases 

that are entitled to expedited service. 

Verification requirements for expedited 

service cases are greatly reduced. The 

only information the State agency is 

required to verify in such cases is the 

identity of the head of the household. 

The State agency is not required to 

verify this information with paper 

documents, but may do so through a 

collateral contact. State agencies are 

encouraged to verify all other 

information prior to certification; 

however, they are permitted to postpone 

verification in the interest of providing 

food stamp benefits to destitute 

individuals. Therefore, since the 

probability of client-caused delays in 

expedited service cases due to failure to 

provide verification is minimal, FNS is 

not adopting the commenters 

suggestion.

Two commenters recommended that 

in cases of late determination for 

6322 Federal Register / Vol. 70, No. 24 / Monday, February 7, 2005 / Rules and Regulations 

expedited service, the 7-day time period 

be calculated from the date the agency 

discovers a household is entitled to 

expedited service and not the date of 

application. FNS believes that it is 

important to note that States are 

required to pre-screen applications to 

determine whether or not the applicant 

is entitled to expedited service. While 

all States face the challenge of 

accurately determining this need, those 

that do an excellent job in this endeavor 

or take the extra step to determine if a 

client is in dire need of nutritional 

assistance should be rewarded 

appropriately. 

6. Section 275.24(b)(4) 

Proposed § 275.24(b)(4) defined a 

timely-processed application as one that 

provides an eligible applicant the 

‘‘opportunity to participate,’’ as defined 

in 7 CFR 274.2, within 30 days or 7 days 

for expedited processing. One 

commenter recommended that the 

‘‘opportunity to participate’’ in the 

Electronic Benefit Transfer (EBT) 

environment be described. FNS 

recognizes that the ‘‘opportunity to 

participate,’’ as defined in 7 CFR 274.2, 

addresses systems that provide benefits 

in the form of food stamps or 

authorization documents as opposed 

EBT. However, revising that definition 

is outside of the scope of this 

rulemaking. Nevertheless, FNS has 

provided guidance delineating this term 

further, particularly in the EBT 

environment. Existing FSP policy 

regarding this performance measure is 

that the ‘‘opportunity to participate’’

consists of providing households with 

authorization documents (ATP cards), 

coupons, or EBT cards and having 

issuance facilities open and available for 

households to obtain their benefits. 

State agencies must mail or have EBT 

cards available for pick-up (and post 

benefits to the EBT account and provide 

all the training and PIN numbers) in 

time to assure that the recipient can 

access his benefits before the 30-day 

standard or 7-day standard expires. 

Furthermore, in an EBT system, the 

client has the opportunity to participate: 

• 24 hours after the client is notified 

by phone or in person to come into the 

office to pick up his card (assuming 

benefits are posted to the account, and 

the client has his PIN number or will be 

provided his PIN number when he 

comes in to get his card); or, 

• Three days after he has been 

notified by mail to come in and pick up 

his card (assuming benefits are posted to 

his account, and the client has his PIN 

number or will be provided his PIN 

number when he comes in to get his 

card). 

7. Approvals 

In the preamble of the NPRM, FNS 

proposed that only approvals be 

included in the determination of 

timeliness since this measure is focused 

on meeting the 30-day and 7-day 

standards for providing eligible 

households the opportunity to 

participate. FNS received five comments 

on this proposal. Two commenters 

supported excluding denials from this 

measurement because an early denial is 

not an indicator of strong performance. 

Three commenters supported including 

denials in this measurement because it 

is important to advise households of 

denials as well as certification and it 

requires as much time. While FNS 

believes it is important to notify a client 

about denial of benefits in a timely 

fashion, FNS agrees that an early denial 

is not good if the applicant has not been 

provided sufficient time to provide the 

required documentation. FNS is not 

aware of problems with late denials, but 

also does not collect information on the 

timeliness of denials at this time. FNS 

will investigate the timeliness of denials 

with States and determine whether 

further data analysis and regular 

collection of data might be warranted. 

However, denials will not be included 

in this measure. 

8. Section 275.24(b)(4)(iii) 

Section 275.24(b)(4)(iii) proposed that 

QC reviewers evaluate for timeliness 

only new applications in the State QC 

active sample that were filed on or after 

the beginning of the fiscal year because 

they were filed within the performance 

measurement year for which the 

bonuses are awarded. Two commenters 

opposed this provision. One commenter 

expressed concern that the sample pool 

would be too small to yield valid 

program data. This commenter 

suggested that the sample be expanded 

to all active cases sampled during the 

fiscal year. One commenter pointed out 

that this method excludes clients who 

apply in August and September whose 

eligibility is not determined until 

October or later. This might bias 

timeliness determinations for states that 

experience increases in applications in 

the late summer. FNS has been 

monitoring the sample size based on the 

proposed policy and contends that it is 

large enough to be statistically valid. In 

addition, FNS believes that it is 

important to measure a State agency’s 

performance within a fiscal year and, 

therefore, will retain the provision as 

proposed.

List of Subjects 

7 CFR Part 272

Civil rights, Claims, Food stamps, 

Grant programs, Reporting and 

recordkeeping requirements, 

Unemployment compensation, Wages. 

7 CFR Part 275

Administration, Management 

evaluation reviews, Quality control 

reviews, Data analysis and evaluation, 

Corrective action, Responsibilities for 

reporting on program performance, 

Program performance.

■ Accordingly, 7 CFR Parts 272 and 275 

are amended as follows:

■ 1. The authority citation for Parts 272 

and 275 continues to read as follows:

Authority: 7 U.S.C. 2011–2036.

PART 272—REQUIREMENTS FOR 

PARTICIPATING STATE AGENCIES

■ 2. In § 272.1, add paragraph (g)(170) to 

read as follows:

§ 272.1 General terms and conditions. 

(g) * * *

(170) Amendment No. 396. The 

provisions of amendment number 396 

are effective April 8, 2005.

PART 275—PERFORMANCE 

REPORTING SYSTEM

■ 3. A new § 275.24 is added to read as 

follows:

§ 275.24 High performance bonuses. 

(a) General rule. (1) FNS will award 

bonuses totaling $48 million for each 

fiscal year to State agencies that show 

high or improved performance in 

accordance with the performance 

measures under paragraph (b) of this 

section. 

(2) FNS will award the bonuses no 

later than September 30th of the fiscal 

year following the performance 

measurement year. 

(3) A State agency is not eligible for 

a bonus payment in any fiscal year for 

which it has a liability amount 

established as a result of an excessive 

payment error rate in the same year. If 

a State is disqualified from receiving a 

bonus payment under this paragraph 

(a)(3), and the State is not tied for a 

bonus, the State with the next best 

performance will be awarded a bonus 

payment. 

(4) The determination whether, and in 

what amount, to award a performance 

bonus payment is not subject to 

administrative or judicial review. 

(5) In determining the amount of the 

award, FNS will first award a base 

amount of $100,000 to each State agency 

that is an identified winner in each 

Federal Register / Vol. 70, No. 24 / Monday, February 7, 2005 / Rules and Regulations 6323

category. Subsequently, FNS will divide 

the remaining money among the States 

in each category (see paragraph (b) of 

this section) in proportion to the size of 

their caseloads (the average number of 

households per month for the fiscal year 

for which performance is measured). 

(6) A State cannot be awarded two 

bonuses in the same category; the 

relevant categories are payment 

accuracy (which is outlined in 

paragraph (b)(1) of this section), 

negative error rate (which is outlined in 

paragraph (b)(2) of this section), or 

program access index (which is outlined 

in paragraph (b)(3) of this section). If a 

State is determined to be among the best 

and the most improved in a category, it 

will be awarded a bonus only for being 

the best. The next State in the best 

category will be awarded a bonus as 

being among the best States. 

(7) Where there is a tie to the fourth 

decimal point for the categories outlined 

in paragraphs (b)(1) through (b)(4) of 

this section, FNS will add the additional 

State(s) into the category and the money 

will be divided among all the States in 

accordance with paragraph (a)(5) of this 

section. 

(b) Performance measures. FNS will 

measure performance by and base 

awards on the following categories of 

performance measures: 

(1) Payment accuracy. FNS will 

divide $24 million among the 10 States 

with the lowest and the most improved 

combined payment error rates as 

specified in paragraphs (b)(1)(i) and 

(b)(1)(ii) of this section. 

(i) Excellence in payment accuracy.

FNS will provide bonuses to the 7 States 

with the lowest combined payment 

error rates based on the validated 

quality control payment error rates for 

the performance measurement year as 

determined in accordance with this 

part. 

(ii) Most improved in payment 

accuracy. FNS will provide bonuses to 

the 3 States with the largest percentage 

point decrease in their combined 

payment error rates based on the 

comparison of the validated quality 

control payment error rates for the 

performance measurement year and the 

previous fiscal year, as determined in 

accordance with this part.

(2) Negative error rate. FNS will 

divide $6 million among the 6 States 

with the lowest and the most improved 

negative error rates as specified in 

paragraphs (b)(2)(i) and (b)(2)(ii) of this 

section. 

(i) Lowest negative error rate. FNS 

will provide bonuses to the 4 States 

with the lowest negative error rates 

based on the validated quality control 

negative error rates for the performance 

year as determined in accordance with 

this part. 

(ii) Most improved negative error rate.

FNS will provide bonuses to the 2 States 

with the largest percentage point 

decrease in their negative error rates, 

based on the comparison of the 

performance measurement year’s 

validated quality control negative error 

rates with those of the previous fiscal 

year, as determined in accordance with 

this part. A State agency is not eligible 

for a bonus under this criterion if the 

State’s negative error rate for the fiscal 

year is more than 50 percent above the 

national average. 

(3) Program access index (PAI). FNS 

will divide $12 million among the 8 

States with the highest and the most 

improved level of participation as 

specified in paragraphs (b)(3)(i) through 

(b)(3)(iii) of this section. The PAI is the 

ratio of participants to persons with 

incomes below 125 percent of poverty, 

as calculated in accordance with 

paragraph (b)(3)(iii) of this section (the 

PAI was formerly known as the 

participant access rate (PAR)). 

(i) High program access index. FNS 

will provide bonuses to the 4 States 

with the highest PAI as determined in 

accordance with paragraph (b)(3)(iii) of 

this section. 

(ii) Most improved program access 

index. FNS will provide bonuses to the 

4 States with the most improved PAI as 

determined in accordance with 

paragraph (b)(3)(iii) of this section. 

(iii) Data. For the number of 

participants (numerator), FNS will use 

the administrative annual counts of 

participants minus new participants 

certified under special disaster program 

rules by State averaged over the 

calendar year. For the number of people 

below 125 percent of poverty 

(denominator), FNS will use the Census 

Bureau’s March Supplement to the 

Current Population Survey’s (CPS) 

count of people below 125 percent of 

poverty for the same calendar year. FNS 

will reduce the count in each State 

where a Food Distribution Program on 

Indian Reservations (FDPIR) program is 

operated by the administrative counts of 

the number of individuals who 

participate in this program averaged 

over the calendar year. FNS will reduce 

the count in California by the Census 

Bureau’s percentage of people below 

125% of poverty in California who 

received Supplemental Security Income 

in the previous year. FNS reserves the 

right to use data from the American 

Community Survey (ACS) in lieu of the 

CPS, and to use the count of people 

below 130 percent of poverty, should 

these data become available in a timely 

fashion and prove more accurate. Such 

a substitution would apply to all States. 

(4) Application processing timeliness.

FNS will divide $6 million among the 

6 States with the highest percentage of 

timely processed applications. 

(i) Data. FNS will use quality control 

data to determine each State’s rate of 

application processing timeliness. 

(ii) Timely processed applications. A 

timely processed application is one that 

provides an eligible applicant the 

‘‘opportunity to participate’’ as defined 

in § 274.2 of this chapter, within thirty 

days for normal processing or 7 days for 

expedited processing. New applications 

that are processed outside of this 

standard are untimely for this measure, 

except for applications that are properly 

pended in accordance with § 273.2(h)(2) 

of this chapter because verification is 

incomplete and the State agency has 

taken all the actions described in 

§ 273.2(h)(1)(i)(C) of this chapter. Such 

applications will not be included in this 

measure. Applications that are denied 

will not be included in this measure. 

(iii) Evaluation of applications. Only 

applications that were filed on or after 

the beginning of the performance 

measurement (fiscal) year will be 

evaluated under this measure.

Dated: January 31, 2005. 

Eric M. Bost, 

Under Secretary, Food, Nutrition and 

Consumer Services.

[FR Doc. 05–2260 Filed 2–4–05; 8:45 am] 

BILLING CODE 3410–30–P

DEPARTMENT OF AGRICULTURE

Agricultural Marketing Service 

7 CFR Part 932 

[Docket No. FV04–932–2 FR] 

Olives Grown in California; 

Redistricting and Reapportionment of 

Producer Membership on the 

California Olive Committee

AGENCY: Agricultural Marketing Service, 

USDA.

ACTION: Final rule.

SUMMARY: This rule redefines the 

producer districts and reapportions each 

district’s membership on the California 

Olive Committee (committee). The 

Federal marketing order for California 

olives (order) regulates the handling of 

canned ripe olives grown in California 

and is administered locally by the 

committee. This rule reduces the 

number of producer districts in the 

production area from four to two and 

reapportions the committee 

representation from each district to