Supplemental Nutrition Assistance Program: Quality Control Provisions of Title IV of Public Law 107-171, 33422-33444 [2010-13446]

Agencies

• DEPARTMENT OF AGRICULTURE
• Food and Nutrition Service

[Federal Register Volume 75, Number 112 (Friday, June 11, 2010)]
[Rules and Regulations]
[Pages 33422-33444]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2010-13446]



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Part III





Department of Agriculture





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 Food and Nutrition Service



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7 CFR Parts 271, 273, 275, and 277



Supplemental Nutrition Assistance Program: Quality Control Provisions 
of Title IV of Public Law 107-171; Final Rule

Federal Register / Vol. 75 , No. 112 / Friday, June 11, 2010 / Rules 
and Regulations

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DEPARTMENT OF AGRICULTURE

Food and Nutrition Service

7 CFR Parts 271, 273, 275, and 277

 [FNS-2009-0045]
RIN 0584-AD31


Supplemental Nutrition Assistance Program: Quality Control 
Provisions of Title IV of Public Law 107-171

AGENCY: Food and Nutrition Service, USDA.

ACTION: Final rule.

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SUMMARY: This rule finalizes provisions of an interim rule entitled 
``Food Stamp Program: Non-Discretionary Quality Control Provisions of 
Title IV of Public Law 107-171'' published on October 16, 2003, and a 
proposed rule entitled ``Food Stamp Program: Discretionary Quality 
Control Provisions of Title IV of Public Law 107-171'' published on 
September 23, 2005. The Food Stamp Program is now referred to as the 
Supplemental Nutrition Assistance Program (SNAP) pursuant to the Food 
and Nutrition Act of 2008 (Act). This final rule codifies the 
provisions concerning the Quality Control system in Sections 4118 and 
4119 of the Food Stamp Reauthorization Act (FSRA) of 2002. This rule 
finalizes the liability procedures and the deadlines for completing the 
quality control review process and announcement of error rates 
established in the interim rule. It eliminates enhanced administrative 
funding for low error rates, establishes new time frames for completing 
individual quality control reviews, establishes procedures for 
resolving liabilities following appeal decisions, revises the negative 
case review procedures, and provides procedures for households that 
separate while subject to the penalty for refusal to cooperate with a 
quality control review. This rule also adopts several policy changes 
and technical corrections included in the proposed rule. In addition, 
this rule affects State agencies' quality control review operations and 
alters the impact on State agencies of assessment and resolution of 
potential liabilities for excessive payment error rates and awarding of 
bonuses for superior performance. Households with cases sampled for 
quality control review of their cases would be minimally affected by 
this rule.

DATES: Effective Date: This rule is effective July 12, 2010. 
Implementation date: This rule shall be implemented as follows: The 
provisions in 7 CFR 271.2, 7 CFR 275.11(e)(2)(i), 7 CFR 
275.11(e)(2)(ii), 7 CFR 275.13(b), and 7 CFR 275.12(c)(1) concerning 
negative cases and 7 CFR 273.2(d)(2) concerning consequences to 
households that refuse to cooperate with quality control (QC) reviews 
must be implemented no later than October 1, 2011. State agencies may 
choose to implement these provisions earlier than October 1, 2011. A 
120-day hold harmless is provided for implementation of 7 CFR 
273.2(d)(2), concerning consequences to households who refuse to 
cooperate with a QC review. If a State agency implements the provision 
before October 1, 2011, the 120-day hold harmless period begins on the 
date of implementation. All other provisions must be implemented August 
10, 2010.

FOR FURTHER INFORMATION CONTACT: Margaret Werts Batko, Quality Control 
Branch, Program Accountability and Administration Division, Food and 
Nutrition Service, USDA, 3101 Park Center Drive, Alexandria, Virginia 
22302, (703) 305-2516. The e-mail address is 
margaret.batko@fns.usda.gov. Questions regarding this rulemaking should 
be addressed at the above address, by telephone at (703) 305-2516, or 
via the Internet at margaret.batko@fns.usda.gov.

SUPPLEMENTARY INFORMATION:

I. Additional Information on Electronic Access

Electronic Access

    You may view and download an electronic version of this final rule 
at https://www.fns.usda.gov/snap/. All comments, including names, street 
addresses, and other contact information of respondents, received in 
response to the interim and proposed rules are available for public 
inspection on the 8th floor, 3101 Park Center Drive, Alexandria, 
Virginia 22302 between 8:30 a.m. and 5 p.m. Eastern time, Monday 
through Friday, excluding Federal holidays.

II. Procedural Matters

Executive Order 12866

    This rule has been determined to be significant under E.O. 12866 
and has, therefore, been reviewed by the Office of Management and 
Budget.

Executive Order 12372

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

Regulatory Flexibility Act

    This rule has been reviewed with regard to the requirements of the 
Regulatory Flexibility Act (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 welfare agencies will be 
the most affected to the extent that they administer the Supplemental 
Nutrition Assistance Program.

Public Law 104-4

    Title II of the Unfunded Mandates Reform Act of 1995 (UMRA) 
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 Food and 
Nutrition Service (FNS) 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 FNS 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) for 
State, local, and tribal governments or the private sector of $100 
million or more in any one year. This rule is, therefore, not subject 
to the requirements of sections 202 and 205 of the UMRA.

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 regulations 
describing the agency's considerations in terms of the three categories 
called for under section (6)(b)(2)(B) of E.O. 13132. The Food and 
Nutrition Service has considered this rule's impact on State and local 
agencies and has determined that it does not have Federalism 
implications under E.O. 13132.

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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 that the rule might have on 
minorities, women, and persons with disabilities. After a careful 
review of the rule's intent and provisions, FNS has determined that 
this rule has no intended impact on any of the protected classes. These 
changes primarily affect the quality control (QC) review system and not 
individual recipients' eligibility for or participation in the 
Supplemental Nutrition Assistance Program. The only provision that has 
any direct impact on recipients is the conforming change made in 7 CFR 
273.2(d)(2). This section provides that a recipient who refuses to 
cooperate with a QC review of his or her case will be terminated from 
further participation in the Program; that if the household reapplies 
during the annual review period, it cannot be determined eligible until 
it cooperates with the QC review; and if it reapplies following the end 
of the QC review period, the household is required to provide full 
verification of its eligibility factors before it can be certified. The 
purpose of the requirement is to encourage household cooperation with 
the QC review of its case. This rule contains a conforming amendment to 
extend the time frame of the penalty consistent with the revised time 
frame for completing the QC review process established in Section 4119 
of the Food Stamp Reauthorization Act of 2002 and addressed in this 
rule at Sec.  275.23. Significant protection exists within the 
regulations to ensure that a household is terminated solely for 
refusal, and not inability, to cooperate. A household so terminated 
also has the right to request a fair hearing. Further, the household 
has the ability to reverse its termination by cooperating with the QC 
review during the QC review period. There were 56,954 active case 
households subject to a QC review, and 2,101 households who refused to 
cooperate with a QC review during Fiscal Year 2002, the last year 
information on non-cooperating households was collected. Information on 
protected classes is not available for these households.
    An additional change is also being made to 7 CFR 273.2(d)(2) that 
requires a State agency to convey the disqualification penalty for 
refusing to cooperate with a QC reviewer with the non-cooperating 
household member if the household breaks up and if the State agency can 
identify the non-cooperating individual. This change ameliorates the 
penalty on cooperating household members. It is not intended to have a 
disproportionate impact on any of the protected classes.
    All data available to FNS indicate that protected individuals have 
the same opportunity to participate in the SNAP as non-protected 
individuals. The QC system is a systematic method of measuring the 
validity of the SNAP caseload. A statistically valid sample of active 
and negative cases is reviewed to determine the extent to which 
households are receiving the allotments to which they are entitled, and 
to determine which decisions to deny, suspend, or terminate cases are 
correct. Protected classes should appear in any given sample to the 
extent that they are represented in the overall SNAP population. There 
is no way to determine the percentage of each of the protected classes 
terminated for refusal to cooperate with a QC review as that data is 
not collected.
    FNS specifically prohibits the State and local government agencies 
that administer the Program from engaging in actions that discriminate 
against any applicant or participant in any aspect of program 
administration, including, but not limited to, the certification of 
households, the issuance of coupons, the conduct of fair hearings, or 
the conduct of any other program service for reasons of age, race, 
color, sex, handicap, religious creed, national origin, or political 
beliefs (SNAP nondiscrimination policy can be found at 7 CFR 272.6). 
Discrimination in any aspect of program administration is prohibited by 
these regulations, the Food and Nutrition Act of 2008, the Age 
Discrimination Act of 1975 (Pub. L. 94-135), the Rehabilitation Act of 
1973 (Pub. L. 93-112, section 504), and title VI of the Civil Rights 
Act of 1964 (42 U.S.C. 2000d). Enforcement action may be brought under 
any applicable Federal law. Title VI complaints shall be processed in 
accordance with 7 CFR Part 15.

Paperwork Reduction Act

    This rule contains reporting or recordkeeping requirements that 
have been approved by the Office of Management and Budget (OMB) under 
several separate information collections under the Paperwork Reduction 
Act of 1995. The collections are:
    0584-0034, Negative Quality Control Review Schedule; Status of 
Sample Selection and Completion, Form FNS-245 and FNS-248 (expiration 
date November 30, 2009): This rule does not affect the negative review 
schedule, Form FNS-245. In the most recent approval of OMB Number 0584-
0034, the form FNS-247 (Statistical Summary of Sample Distribution) was 
eliminated. FNS has stopped requesting that this form be completed and 
the information be submitted. This rule removes the requirement to 
submit the report that is still found in the regulation. Eliminating 
from the regulations the requirement to complete the form does not 
affect the burden as the burden was already adjusted in the burden 
approval process when the actual use of the form was discontinued. We 
proposed to eliminate the Form FNS-248. Over time, we have discontinued 
requiring that the form itself be submitted. However, some of 
information on that form is still required. State agencies provide the 
information on the interval and the number of cases selected each month 
by phone or e-mail. With the elimination of the Form FNS 248, the 
regulations will permit that this information be submitted in another 
format. The burden difference from eliminating most of the data 
collection found on the form has already been accounted for through the 
burden approval process. Accordingly, elimination of this form will not 
increase or decrease the approved burden for OMB Number 0584-0034. We 
received no comments on this proposal; we are adopting it as proposed.
    0584-0074 (Form FNS-380, Worksheet for Supplemental Nutrition 
Assistance Program Quality Control Reviews) (expiration date February 
28, 2010) ; 0584-0299 (Form FNS-380-1, Quality Control Review 
Schedule)(expiration January 31, 2010); and 0584-0303 (Food Stamp 
Program Regulations, Part 275--Quality Control)(expiration date 
November 30, 2010) (Note the name of 0584-0303 will be changed to 
Supplemental Nutrition Assistance Program Regulations, Part 275--
Quality Control when it is next renewed or a change justification is 
done.): This rule does not affect these information collections. This 
rule does not change the requirements for development and submittal of 
the States' sampling plans. This rule does not change the requirements 
for submitting cases for arbitration nor will it impact the number of 
cases anticipated to be submitted. This rule does include the 
provisions for good cause; however, those provisions are unchanged 
except for redesignation. Therefore, this rule will not impact the 
burden currently approved for good cause either.
    OMB Number 0584-0010, Performance Reporting System, Management 
Evaluation, Data Analysis and Corrective Action (expiration date April 
30, 2010): Corrective action

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planning is included under this information collection package. 
Regulations prior to passage of the Food Stamp Reauthorization Act of 
2002 required corrective action planning when a State agency failed to 
reach the yearly target, when a State agency was not entitled to 
enhanced funding, and when its negative case error rate exceeded one 
percent. In an interim rule entitled ``Food Stamp Program: Non-
Discretionary Quality Control Provisions of Title IV of Public Law 107-
171'' published on October 16, 2003, at 68 FR 59519, the regulations 
were changed to reflect the provision in Section 4118 of the Food Stamp 
Reauthorization Act of 2002 that requires corrective action planning 
whenever a State agency's payment error rate equals or exceeds six 
percent. This requirement replaced the requirement for corrective 
action planning whenever a State agency failed to reach the yearly 
target. This rule finalizes this requirement to conduct corrective 
action whenever a State's payment error rate equals or exceeds six 
percent.
    In the regulations as modified by the interim rule, State agencies 
continued to be required to do corrective action whenever they were not 
entitled to enhanced funding or when the negative case error rate 
exceeded one percent. A State agency was entitled to enhanced funding 
when its payment error rate was less than or equal to 5.90 percent and 
its negative case error rate was less than the national weighted mean 
negative case error rate for the prior fiscal year. This rule 
eliminates the requirement that State agencies conduct corrective 
action planning whenever a State agency is not entitled to enhanced 
funding because enhanced funding has been eliminated by Section 4118 of 
the Food Stamp Reauthorization Act of 2002. Elimination of this 
requirement will not have a significant impact on States' requirements 
to do corrective action planning because of the requirement in the 
regulation to do corrective action planning whenever the State's error 
rate exceeds six percent. The change from 5.9 percent to six is 
minimal. In Fiscal Year 2002, the last year enhanced funding was 
provided to States, there was no State whose error rate was below six 
percent that did not get enhanced funding. This rule finalizes the 
proposal to require that State agencies do corrective action planning 
whenever a State's negative case error rate exceeds one percent. 
Therefore, there is essentially no impact from removing the requirement 
to do corrective action planning whenever a State agency is not 
entitled to enhanced funding.

E-Government Act Compliance

    The Food and Nutrition Service 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.

Executive Order 12988

    This rule has been reviewed under Executive Order 12988, Civil 
Justice Reform. This rule is intended to have preemptive effect with 
respect to any State or local laws, regulations, or policies that 
conflict with its provisions or that would otherwise impede its full 
implementation. This rule is not intended to have retroactive effect 
unless so specified in the ``Effective Date'' paragraph of the final 
rule. Prior to any judicial challenge to the provisions of this rule or 
to the application of its provisions, all applicable administrative 
procedures must be exhausted. In the Supplemental Nutrition Assistance 
Program the administrative procedures are as follows: (1) For Program 
benefit recipients--State administrative procedures issued pursuant to 
7 U.S.C. 2020(e)(10) and 7 CFR 273.15; (2) for State agencies--
administrative procedures issued pursuant to 7 U.S.C. 2023 set out at 7 
CFR 276.7 (for rules related to non-quality control (QC) liabilities) 
or Part 283 (for rules related to QC liabilities); (3) for retailers 
and wholesalers--administrative procedures issued pursuant to 7 U.S.C. 
2023 set out at 7 CFR Part 279.

Need for Action

    This action is needed to implement certain provisions of Sections 
4118 and 4119 of Title IV, the Food Stamp Reauthorization Act of 2002, 
Public Law 107-171, which was enacted on May 13, 2002. This rule 
finalizes provisions of the interim rule ``Food Stamp Program: Non-
Discretionary Quality Control Provisions of Title IV of Public Law 107-
171'' published on October 16, 2003, and a proposed rule entitled 
``Food Stamp Program: Discretionary Quality Control Provisions of Title 
IV of Public Law 107-171'' on September 23, 2005.
    The interim rule revised the liability procedures and established 
new deadlines for completing the quality control (QC) review process 
and announcement of payment error rates. This final rule would amend 
the Supplemental Nutrition Assistance Program regulations concerning 
the QC system to eliminate enhanced funding, to address the impact of 
appeals decisions on the resolution of QC liabilities for high payment 
error rates, to revise the time frames for completing individual case 
reviews and the time frames for penalties for households that refuse to 
cooperate with a QC review, to revise the negative review procedures, 
and to make a number of technical policy changes and corrections. This 
analysis addresses the liability procedures, elimination of enhanced 
funding, the impact of appeals decisions on the resolution of QC 
liabilities for high payment error rates, the revised time frames for 
completing individual case reviews and the entire review process and 
announcement of the error rates, the time frames for penalties for 
households that refuse to cooperate with a QC review, negative review 
procedures, and corrective action planning.
Cost Impact
    Since this action does not directly impact benefit levels or 
eligibility, we do not anticipate any impact on SNAP benefit costs. The 
provision extending the time frames for verification of households 
reapplying for benefits is not expected to have a measurable impact on 
benefit costs. Fewer States will be identified as having any potential 
liability, and most such liabilities will be significantly lower than 
those under the previous system.
    Elimination of enhanced funding will result in a savings of 
administrative matching funds. In 2002, the Agency paid $77.3 million 
in enhanced funding incentives to 13 States. Over the five years 
between 1998 and 2002, the Agency paid $250 million in enhanced 
funding, for an annual average of $50 million during this period.
    If State payment error rates had remained at their 1998-2002 
levels, the annual savings to the Supplemental Nutrition Assistance 
Program would have been $50 million and the five-year savings would 
have been $250 million. These savings would have been offset by the 
establishment of high performance bonuses (addressed in the final rule 
``Food Stamp Program: High Performance Bonuses'' published February 7, 
2005, at 70 FR 6313).
    However, between 2002 and 2008, payment error rates fell from 8.26 
percent to 5.01 percent. The number of States that would have qualified 
for enhanced funding would have risen to 28 by 2008 and the amount of 
incentive funding received by these States would have totaled nearly 
$188 million. The amount of incentive funding for the five

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years from 2003-2007 would have totaled $720 million, of which only 
$240 million would have been offset by the new performance bonus, 
yielding a net savings of $480 million.
    See Table below.
Benefit Impact
    Elimination of enhanced funding based on payment accuracy did not 
have a benefit impact on State administrating agencies or on program 
operations if considered in isolation. However, when this provision was 
combined with the new performance bonus system in another rulemaking 
that proposes to change performance criteria from a narrow focus on 
payment accuracy to a broader measure that incorporates client service 
criteria in addition to payment accuracy, the new performance bonus 
system was expected to encourage States to assess and improve overall 
performance.

    Cost Impact of Certain Quality Control Provisions of the Food Stamp Reauthorization Act of 2002 (Federal
                                                    Outlays)
                                            [In millions of dollars]
----------------------------------------------------------------------------------------------------------------
                                        2003         2004         2005         2006         2007        5-Year
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Elimination of Enhanced funding...         -$95        -$133        -$158        -$160        -$174        -$720
High Performance Bonus............           48           48           48           48           48          240
                                   -----------------------------------------------------------------------------
    Net Savings...................          -47          -85         -110         -112         -126         -480
----------------------------------------------------------------------------------------------------------------

    The provisions affecting the time frames for completing individual 
case reviews, negative reviews, procedures for appeals for the 
resolution of QC liabilities, and the procedures for treating 
households that refuse to cooperate with QC reviews are not expected to 
have any measurable impact on program costs.

III. Background

    On May 13, 2002, the President signed Public Law 107-171, the Farm 
Security and Rural Investment Act of 2002. Title IV of Public Law 107-
171, the Food Stamp Reauthorization Act of 2002 (FSRA), significantly 
revised the sanction, liability, and enhanced funding provisions of the 
QC system. An interim rule entitled ``Food Stamp Program: Non-
Discretionary Quality Control Provisions of Title IV of Public Law 107-
171'' was published October 16, 2003, at 68 FR 59519 that addressed 
certain provisions of Sections 4118 and 4119. A final rule entitled 
``Food Stamp Program: High Performance Bonuses'' was published February 
7, 2005, at 70 FR 6313 that implemented Section 4120 of the FSRA. A 
proposed rulemaking, published September 23, 2005, at 70 FR 55776 
addressed the remaining provisions of Sections 4118 and 4119 of the 
FSRA, negative case review procedures, and several discretionary policy 
changes, and numerous technical corrections. This rule finalizes both 
the interim and the proposed rules.

A. Enhanced Funding

    The current regulations at 7 CFR 275.1(b) provide that the 
Department shall pay a State agency enhanced administrative funding if 
its payment error rate is less than or equal to 5.90 percent and the 
negative case error rate is less than the national weighted mean 
negative case error rate for the prior fiscal year. Section 4118 of 
FSRA removed the provision in the Food Stamp Act of 1977 (now the Food 
and Nutrition Act of 2008) for giving enhanced funding to State 
agencies with low payment and negative case error rates, effective 
fiscal year (FY) 2003, effectively ending enhanced payments. Section 
4120 of the FSRA replaced these enhanced funding provisions with high 
performance bonuses. Regulations addressing high performance bonuses 
have been published separately (proposed rule published December 17, 
2003, at 68 FR 70193; final rule published February 7, 2005, at 70 FR 
6313). Section 275.23(d) establishes procedures for providing enhanced 
funding. In accordance with the elimination of enhanced funding, these 
sections are no longer necessary. We proposed to eliminate paragraphs 
(b)(1) and (b)(2) of 7 CFR 275.1, to change paragraph (a) of 7 CFR 
275.1 into a general introductory paragraph, and to remove 7 CFR 
275.23(d). We received two comments on the proposed elimination of 
enhanced funding. Both commenters supported the proposal. Accordingly, 
we are adopting as proposed the revisions to 7 CFR 275.1, eliminating 
paragraphs (b)(1) and (2), changing paragraph (a) into a general 
introductory paragraph, and removing 7 CFR 275.23(d).
    Section 275.3(c) requires that FNS validate the negative case error 
rate when a State agency's payment error rate for an annual review 
period appears to entitle it to an increased share of Federal 
administrative funding and its reported negative case error rate for 
that period is less than two percentage points above the national 
weighted mean negative case error rate for the prior fiscal year. That 
section also provides that FNS may review any negative case for other 
reasons. Validation of the negative case error rate is no longer 
necessary for purposes of establishing eligibility for enhanced 
funding. However, we proposed in 7 CFR 275.3(c) to require that all 
States' negative error rates be validated by FNS. First, we believe 
that fair and equitable treatment needs to be ensured when it comes to 
denying households benefits. Second, the negative error rate is one of 
the measurements of high performance. We believe that it is necessary 
to ensure the accuracy of those error rates if awards will be driven by 
these rates. We received two comments supporting this proposal. We are 
adopting the provision mandating FNS validation of all States' negative 
error rates in 7 CFR 275.3(c).
    In addition, we are adopting as proposed the technical changes 
throughout Part 275 that remove references to enhanced funding. These 
deletions are not discussed in this preamble.
    Part 277, Payments of Certain Administrative Costs of State 
Agencies, establishes the rules for paying State agency administrative 
costs for operating the SNAP. In 7 CFR 277.4, paragraphs (b)(1), 
(b)(4), (b)(5), and (b)(6) describe the procedures for increasing State 
administrative funding when State agency QC error rates meet certain 
standards. Each paragraph provides the authority for different fiscal 
year periods beginning with Fiscal Year 1980. Sections 277.4(b)(1)(i), 
(b)(4), (b)(5), and (b)(6) cover fiscal year periods beginning October 
1, 1980, through September 30, 1988. Section 277.4(b)(1)(ii) provides 
the authority for the period beginning October 1988 and forward. The 
authority in the Food Stamp Act (now the Food and Nutrition Act of 
2008) for 7 CFR 277.4(b)(1)(i) was

[[Page 33426]]

removed by the Hunger Prevention Act of 1988 (Public Law 100-435). The 
authority for 7 CFR 277.4(b)(4), (b)(5), and (b)(6) was removed by the 
Omnibus Budget Reconciliation Act of 1982 (Public Law 97-253). Section 
4118 of the FSRA eliminated enhanced funding based on QC error rates 
for fiscal years beginning October 2002 and beyond, thus making 7 CFR 
277.4(b)(1)(ii) obsolete for FY 2003 and beyond. All enhanced funding 
for Fiscal Years 1980 through 2002 paid under any of these authorities 
has already been made. Therefore, these paragraphs are no longer 
necessary. No comments were received on these proposed changes. 
Accordingly, we are removing 7 CFR 277.4(b)(1), (b)(4), (b)(5), and 
(b)(6). Sections 277.4(b)(2), (b)(3), (b)(7), and (b)(8) are 
redesignated as 7 CFR 277.4(b)(1), (b)(2), (b)(3), and (b)(4), 
respectively. In addition, we are also revising the references in 
redesignated 7 CFR 277.4(b)(3) to reflect these changes.

B. Disposition of Cases Where the Household Refuses To Cooperate

    Section 275.12(g) establishes procedures for disposition of active 
QC cases. Section 275.12(g)(1)(ii) provides procedures for handling 
cases when the household refuses to cooperate in the review. Under 
these procedures, the State agency is required to notify the household 
of the penalties for refusing to cooperate with the review. In 7 CFR 
275.12(g)(1)(ii), regulations currently provide that a reviewer may 
attempt to complete the case if this notice has been sent. This policy 
was revised by FNS memorandum on September 1, 1998, in ``Change 1 to 
the September 1997 version of FNS Handbook 310,'' to require the State 
agency reviewer to attempt to complete the review. The change was 
effective October 1, 1998. The revised policy has been retained in 
subsequent revisions of FNS Handbook 310. The Department requires such 
completion because incomplete reviews introduce bias into the system. 
Consistent with this change in policy, we proposed to revise 7 CFR 
275.12(g)(1)(ii) to say that the reviewer must attempt to complete the 
case. As provided for in the FNS Handbook 310, the reviewer will 
attempt to determine all of the necessary information to the point 
where either ineligibility or the appropriate benefit allotment is 
determined, verified, and documented. We received six comments 
addressing this proposed revision, all supporting the revision to the 
regulations. This policy has been in effect since October 1998 and 
benefits State agencies. Accordingly, we are adopting as proposed the 
revision to 7 CFR 275.12(g)(1)(ii) that requires QC reviewers to 
attempt to complete cases where a household refuses to cooperate.

C. Negative Case Reviews

    The Department proposed significant changes to the negative review 
procedures. In order to fully understand the changes made in this 
rulemaking to the procedures for reviewing negative cases, readers are 
referred to the proposed rule located at 70 FR 55776. The proposed rule 
has a detailed description of the existing requirements and the 
proposed changes.
    First, the Department proposed that the negative universe be 
selected based only on ``action,'' eliminating the option to use 
``effective date.'' Second, the Department proposed to delete the 
requirement that there be a break in participation in order for a 
negative action to be subject to review. Finally, the Department 
proposed to limit the use of the expanded review process.
    We received 22 comments on one or more aspects of the proposals to 
revise the negative review procedures. Most commenters opposed all the 
proposed changes; a few supported all the changes; some addressed only 
one or two of the proposed changes; and some commenters supported one 
or more of the proposals while opposing one or more of them. The 
opposing commenters also believed that these proposed changes reflected 
a change from ``outcome'' based reviews to ``procedural'' reviews.
    Specific comments will be addressed during the discussion of each 
proposed change to the negative review procedures.
    Currently, the regulations allow either ``action'' or ``effective 
date'' as the selection criteria for the sampling universe. Use of the 
two different selection criteria, ``action'' and ``effective date,'' 
has resulted in differences in the sampling universes among the States 
and inconsistent reviews. These sampling differences are of statistical 
concern in calculating both the States' and the national negative error 
rate. Because multiple actions can occur within a sampling period, 
States using ``effective date'' have had to decide which of the several 
actions to review. This decision process introduces bias into the 
system. Focusing on the ``action'' means that each negative action has 
an equal opportunity to be sampled and reviewed. We proposed to revise 
7 CFR 275.11(e)(2)(i) and (e)(2)(ii) accordingly. Sixteen commenters 
addressed the proposal to eliminate ``effective date'' for constructing 
the sample. Ten commenters opposed the proposal; 4 commenters supported 
the proposal; and two commenters supported the proposal but said they 
used ``effective date''. We have not categorized these last two 
commenters as either supporting or opposing the proposals because we 
believe that, based on how they worded their comments, that these 
commenters misunderstood the proposal. However, it is possible that 
they supported the proposal even though these States would be required 
to change their methods of sample selection.
    Commenters did not address the statistical issues that resulted in 
the decision to propose requiring the use of ``action date'' and 
eliminate the use of ``effective date.'' States did, however, discuss 
how this has been the process for many years and has apparently worked. 
It has worked largely because the Department was unaware that not all 
actions were being included in the universe. The problem only came to 
our attention when we began universal validation of negatives. The 
increased attention to negatives has resulted in an awareness of many 
of the problem addressed. State agencies started asking many questions 
about how to review negatives, questions that were not raised before 
validation was universal. The Department became aware of problems 
surrounding sample construction in two major ways. First, statistical 
reviews revealed that not all negative actions were being captured in 
some States that were relying on ``effective date'' to capture 
terminations. Further, the Department has been receiving questions 
about what action should be reviewed when multiple actions occurred 
during a sample month and the reviewer has not been able to determine 
what action was sampled.
    Commenters were concerned that the proposed change would 
necessitate major computer changes to change the sample selection 
process. Such computer changes are costly and time-consuming, according 
to the commenters. While we understand the commenters' concerns about 
computer changes that will be required, we believe that it is necessary 
that the sampling universe include all possible negative actions. 
Therefore, the best way to obtain all possible negative actions and to 
eliminate possible bias in the selection process is to select based on 
``action'' rather than ``effective date.'' Accordingly, we are adopting 
as proposed the changes to 7 CFR 275.11(e)(2)(i) and (e)(2)(ii).
    We have revised the definition of a ``Negative case'' in 7 CFR 
271.2 to say that a ``Negative case means any action to deny, suspend, 
or terminate a case''. One commenter believed the proposed

[[Page 33427]]

definition was not consistent with the proposal to sample based on 
action taken. We disagree with that commenter. The current definition 
in 7 CFR 271.2 is not consistent with the proposed change; however, the 
new definition is. We are adopting the revised definition in 7 CFR 
271.2 as proposed.
    One commenter requested additional time for implementation if the 
proposal were to be adopted. We have considered this suggestion and 
have decided to make the modifications to the negative review 
procedures effective beginning with the first day of FY 2012, October 
1, 2011.
    Section 275.11(f)(2)(vi) currently provides that a negative action 
would only be subject to review if there was a break in participation. 
The Department proposed to eliminate the requirement in 
275.11(f)(2)(vi) that there be a break in participation for a negative 
action to be subject to review because limiting the focus only to the 
``action'' eliminates a need for determining whether there was a break 
in participation. A conforming change was also proposed to be made to 
the definition ``Negative case'' in 7 CFR 271.2. Twelve commenters 
opposed this proposal; three commenters supported the proposal. As 
stated in the preamble to the proposed rule, this proposed change to 
eliminate the ``break in participation'' is consistent with the change 
in focus to review each individual action taken. We are adopting the 
change to 7 CFR 275.11(f)(2)(iv) as proposed.
    Finally, the Department proposed to limit the expanded review in 7 
CFR 275.13(b). The expanded review allows the QC reviewer to look 
beyond the reason given for action taken by the eligibility worker (EW) 
to deny, terminate, or suspend a household. Under current procedures as 
provided for in 7 CFR 275.13(b) and expanded in FNS Handbook 310, the 
QC reviewer may examine the case file for additional reasons to support 
the denial, suspension, or termination. Section 275.13(b) permits 
contacting the household or a collateral contact to clarify whether a 
reason exists that supports a denial, suspension, or termination. The 
FNS Handbook 310 also permits a field investigation. During the 
validation process, it has become apparent that the expanded review has 
become an opportunity to search for information to eliminate an invalid 
negative decision, making the decision correct, rather than determining 
the validity of the action the EW took. The Department considers this 
an inappropriate use of the review process that needs to be curtailed. 
Limiting the expanded review is also consistent with a review of 
``action.''
    Under the review procedures as proposed, the QC review would be 
focused solely on the action taken, not on other possible negative 
actions that could have been taken. Under this proposal, an action 
could only be determined ``valid'' if the case record supported the 
negative action under review, as it was presented to the household. If 
documentation is missing in the case file to support and verify the 
reason for the specific denial action, the Department proposed to 
continue to allow the QC reviewer to contact the household or a 
collateral contact to verify the validity of the specific negative 
action.
    The Department received 20 comments on this proposal. Eighteen 
commenters opposed the proposal; two supported it. The commenters 
opposing the change felt that this change, especially in combination 
with the other two changes, emphasized procedure rather than outcome. 
These commenters believed that the purpose of the negative review 
should be to determine if a household was ineligible for benefits, 
regardless of what a household may have been told about its 
eligibility. One commenter even stated that its notices to households 
were not always as accurate as one might wish them to be. Ten 
commenters suggested that if the expanded review be limited, it be 
limited to other information in the case file that would support an 
alternative reason for a negative action, but prohibit contact with the 
household or a collateral contact. State agencies pointed out that 
while wrong reasons may be coded for a specific negative action, the 
correct reason may be in the case file. The commenters felt that such 
coding errors were procedural rather than outcome based.
    During the period following the publication of the proposed rule, 
the Department revised the FNS 310 Handbook to conform the procedures 
in the Handbook to the regulations. By doing so, the Department 
eliminated the most far-reaching forms of the expanded review in use by 
some States, i.e., field investigations. The FNS 310 Handbook now 
requires the State agency to review the case record to determine if 
there is another reason in the case record that makes the negative 
action valid and allows the reviewer to contact the household or a 
collateral contact to verify information in the case record.
    The Department has considered the commenters' concerns about the 
expanded review. However, the Department has decided the limitations on 
the scope of the expanded review are appropriate and consistent with 
reviews based on ``action.'' Further, the Department believes that 
households are impacted by the reasons they are given for their case 
closures and denials. Section 273.13(a)(2) requires that the notice of 
adverse action clearly explain the proposed action, the reason for the 
proposed action, and the household's right to appeal. We do not believe 
that it is purely procedural when a household is given an incorrect 
reason for the negative action. We do not believe that it is purely 
procedural when the State agency fails to follow certification policy 
and provide households with the rights to which they are entitled, such 
as (but not limited to) Notices of Missed Interview (NOMIs), expedited 
service, or properly-timed denials. Therefore, we believe that it is in 
the best interests of program integrity and service to households to 
adopt the procedure as proposed. Further, with the change to ``action'' 
only reviews, we do not believe it necessary or appropriate to seek 
reasons other than the stated one given for the negative action. 
Accordingly, the Department is adopting as proposed the limiting of the 
expanded review in 7 CFR 275.13(b), with minor wording changes of 
``correct'' to ``valid'' and ``incorrect'' to ``invalid''. The State 
agency will continue to be allowed to contact the household or a 
collateral contact to verify the validity of the specific negative 
action. A conforming change is also being made to 7 CFR 275.13(c)(1).
    In summary, the Department has adopted the provisions revising the 
negative case review process because we believe that to do so is 
necessary to correct the statistical issues surrounding sampling, that 
the changes will result in consistent interpretations among the States, 
and represents a better balance between accuracy and customer service.
    One commenter requested a 120-day hold harmless period if the 
Department adopted the proposed changes. We have considered this 
request but have determined that it is not appropriate. Section 
16(c)(3) of the Act and Section 275.12(d)(2)(vii) of the regulations 
(as modified by this rule) provide for exclusion of errors resulting in 
the application of new regulations. However, a change in review 
procedures does not result in an error; the QC system is a measurement 
system and review procedures are the mechanism of that measurement. The 
errors that are measured are errors in the certification process. 
Changes to the review procedures do not change the certification 
requirements. The Department has not been able to

[[Page 33428]]

determine what the commenter expected to be excluded.
    We would like to address at this point the need for States to be 
consistent, thorough, and accurate in the construction of the sample 
universe. All actions to deny, terminate, or suspend households need to 
be included in the universe. While we believe that using the notices of 
adverse action would be the simplest way to capture the terminations, 
it may not be the only way. Further, the failure to send a notice is 
not in and of itself a reason for an action to be not subject to 
review. For example, if for some reason, the State's computer fails to 
issue notices of adverse action to a category of households being 
terminated from the Program those terminations would still be subject 
to review. The State agency would be responsible for ensuring that that 
group of negative actions is subject to sampling. Also, if the computer 
sends notices of adverse action even if the ``action'' is solely the 
expiration of the certification period, it should be noted that expired 
certification periods are not negative actions and such cases should be 
excluded from the sample. Another category of concern is administrative 
closures that do not result in adverse action notices to households, 
such as a case closure and transfer to another number because the 
worker incorrectly opened the case under the wrong number. The 
Department does not consider such administrative closures to be 
negative actions as defined by this rule.

D. Corrective Action Planning

    Section 4118 of the FSRA requires a State agency to do corrective 
action planning whenever its payment error rate is six percent or 
greater. In the interim rule published October 16, 2003 at 68 FR 59519, 
7 CFR 275.16(b)(1) was revised to require corrective action planning 
whenever a State agency's error rate equals or exceeds six percent. 
Current regulations provide that corrective action planning shall also 
be done by a State agency when the State agency is not entitled to 
enhanced funding (7 CFR 275.16(b)(2)) or when the State agency's 
negative case error rate exceeds one percent (7 CFR 275.16(b)(3)). We 
proposed to remove 7 CFR 275.16(b)(2) as no longer necessary because 
enhanced funding has been eliminated. We also proposed to continue to 
require State agencies to conduct corrective action planning whenever 
the negative case error rate exceeds one percent (7 CFR 275.16(b)(3)), 
(redesignated as 7 CFR 275.16(b)(2) to reflect the deletion of 7 CFR 
275.16(b)(2)). We proposed retaining the requirement to do corrective 
action planning when the negative error rate exceeds one percent to 
ensure that households are not being inappropriately denied or 
terminated. Further, this proposal is consistent with the High 
Performance Bonuses final rule that provides criteria for rewarding 
States with very low negative case error rates.
    Finally, we proposed to redesignate 7 CFR 275.16(b)(4), (b)(5), and 
(b)(6) as 7 CFR 275.16(b)(3), (b)(4), and (b)(5), respectively, to 
reflect the removal of 7 CFR 275.16(b)(2) and redesignation of 7 CFR 
275.16(b)(3) as 7 CFR 275.16(b)(2). In practical terms, this change 
will have little impact on the number of State agencies required to do 
corrective action planning. In FY 2002, the last year of enhanced 
funding, no State that had a payment error rate of less than six 
percent failed to qualify for enhanced funding. We received 4 comments 
concerning corrective action plans for negative reviews. Two commenters 
supported the proposal. Two commenters were concerned about the impact 
of the proposed changes to the negative review process on the negative 
error rate and were opposed to the provision as written if the changes 
to the negative review process were adopted. As discussed above, the 
Department has adopted the changes to the negative review process. We 
have considered the comments; however, we are adopting as final the 
change made in the interim rule to 7 CFR 275.16(b)(1) and the deletion 
of 7 CFR 275.16(b)(2) and the change in the proposed rule to 7 CFR 
275.16(b)(3) (redesignated as 7 CFR 275.16(b)(2)). We believe the 1-
percent threshold is appropriate even though some States' error rates 
may rise.
    Section 275.13 requires State agencies to review suspended cases as 
part of the negative case sample. Suspended cases were added to the 
negative universe in a final rule published July 16, 1999, at 64 FR 
38287. That rule did not add suspended cases to those deficiencies 
requiring corrective action at 7 CFR 275.16(b)(6) (redesignated in this 
rule as 7 CFR 275.16(b)(5)). To correct this oversight, we proposed to 
revise redesignated 7 CFR 275.16(b)(5) to include deficiencies which 
result in improper suspensions. One commenter addressed and supported 
this proposal. We are adopting as proposed the requirement to address 
deficiencies in the handling of suspended cases through the corrective 
action planning process.

E. Time Frames for Announcing the National Performance Measure and for 
Completing QC Reviews and Resolving State/Federal Differences

    The interim rule published October 16, 2003 at 68 FR 59519 revised 
the regulations at 7 CFR 275.23(e)(7) to establish the following time 
frames for completing QC reviews and resolving State/Federal 
differences and for announcing the national performance measure. The 
deadline for completing QC reviews and resolving State/Federal 
differences is May 31 of the following year. The deadline for 
announcing the national performance measure is June 30 following the 
end of the fiscal year review period. These time frames are mandated by 
the Act, and we did not receive any comments addressing these new time 
frames for completing the review process. Accordingly, we are adopting 
these time frames established in the interim rule.
    These new time frames provide approximately two additional months 
to complete the case review and arbitration process and to develop and 
announce the national performance measure. We proposed to use this 
additional time in the following way: (1) Provide State agencies at 
least 100 days from the end of the sample month to complete and 
transmit to FNS 90 percent of all cases and that State agencies shall 
have at least 113 days from the end of the sample month to complete and 
transmit to FNS 100 percent of all cases selected for the sample month; 
(2) provide State agencies at least 123 days from the end of the annual 
review period to complete or otherwise account for all cases selected 
for review during the annual review period and to report to FNS the 
results of all the reviews; (3) provide State agencies until January 21 
after the end of the review year to complete and dispose of all cases; 
and (4) stipulate that FNS may grant additional time as warranted upon 
request by a State agency for cause shown beyond these dates to 
complete and dispose of all cases. We also proposed to revise 7 CFR 
275.21(b)(4) by replacing ``95'' with ``113''; to revise 7 CFR 
275.21(c) by replacing ``105'' with ``123''; and to add a sentence to 
each of these paragraphs stating that if FNS extends the time frames in 
7 CFR 275.21(b)(2), that the time frames in these paragraphs will be 
extended accordingly. We also proposed to continue to allow States 20 
days to request arbitration of individual cases; however, we also 
requested comments about whether this time was considered adequate.
    On January 22, 2003, we waived the deadlines for State agencies to 
complete

[[Page 33429]]

processing cases in 7 CFR 273.21(b) for FY 2003 and provided States 
with 113 days to complete each sample month's cases. This waiver was 
extended on March 4, 2004 for Fiscal Years 2005 and 2006. The waiver 
was again extended on September 12, 2006, for FY 2007 and FY 2008. In 
providing comments on this proposal, we requested comments about 
whether this amount of additional time was useful and/or sufficient. In 
addition to the extended time frames for completion of individual 
cases, that waiver provides State agencies an additional 10 days at the 
end of the review period, i.e., January 22 through January 31, to 
perform checks on the individual data transmitted by State agencies (c-
trails). In the proposed rulemaking, we did not allow this additional 
10 days at the end of the review year for checking the c-trails. We did 
not propose allowing the additional 10 days at the end of the review 
year because we felt that States had already received a significant 
additional amount of time to perform and complete all work related to 
the individual case reviews. Delaying completion of the State work 
until January 31 delays the completion of the Federal re-review process 
which in turn impacts FNS's ability to timely and accurately prepare 
the payment error rates. However, we were interested in receiving 
comments on this issue.
    We received 16 comments addressing the individual case time frames, 
the 10-day period at the end of the review year to check the c-trails, 
and the time period to request arbitration. Concerns were also raised 
about the failure of FNS to establish individual case review times for 
the Federal validation process and delayed arbitration responses. Six 
commenters supported the individual case time frames as proposed; six 
commenters recommended additional time, up to as much as 125 days. 
Also, six commenters recommended that we eliminate the interim tracking 
and establish only a final deadline. We have considered the comments 
and will eliminate the interim tracking and establish only a final date 
for completion of each month's sample; provide the States 115 days to 
complete each month's sample; and allow 10 days at the end of the 
review year to check the c-trails. We also revised 7 CFR 275.21(b)(4) 
by replacing the two-tiered time frame completion schedule with 115 
days; revised 7 CFR 275.21(c) by replacing ``105'' with ``125''; and 
adopted the proposed addition to each of these paragraphs stating that 
if FNS extends the time frames in 7 CFR 275.21(b)(2), that the time 
frames in these paragraphs will be extended accordingly.
    Although we did not provide the States with 125 days to complete 
individual reviews each month as some State agencies recommended, we 
did provide the State agencies with 2 days more than proposed to 
complete individual reviews, i.e., 115 days instead of 113 days. As 
discussed in the preamble to the proposed rule, when the time to 
complete reviews and issue error rates was cut back by the Mickey 
Leland Childhood Hunger Relief Act, Public Law 103-66, FNS absorbed the 
entire reduction. When the FSRA replaced the 60 days lost under Public 
Law 103-66, FNS provided the States with a significant amount of that 
replaced time. We believe that FNS needs the remaining time to complete 
the individual case reviews. In addition to replacing some of the lost 
time, FNS's work load has increased with the advent of 100 percent 
validation of negative cases.
    Currently, there is one level of arbitration. Quality control 
arbitration is the resolution of disagreements between the FNS regional 
office and the State agency concerning individual QC case findings and 
the appropriateness of actions taken to dispose of an individual case. 
The time frames for conducting arbitration are in 7 CFR 275.3(c)(4). 
Under these rules, a State agency is required to submit its request for 
arbitration within 20 calendar days of the date of receipt by the State 
agency of the regional office case findings. The FNS arbitrator has 20 
calendar days from receipt of the State agency request to review and 
make a decision on the case. Prior to Public Law 103-66, States had 28 
days to request arbitration. As discussed above, originally FNS 
absorbed the total cut in review time and States lost 8 days to request 
arbitration. Although we considered the amount of time allowed for 
requesting arbitration to be adequate, we specifically requested 
comments, however, about whether affected parties and the public agree 
that the time frames are adequate. We received 7 comments addressing 
the time frames for requesting arbitration. Five commenters supported 
additional time to request arbitration; two commenters supported the 
existing 20 days. One commenter suggested that the arbitration process 
be changed to include a State person. This proposal was outside the 
scope of the proposed rule and has not been addressed.
    Two commenters wanted both more time to do reviews and more time to 
request arbitration. Three other commenters wanted additional time to 
request arbitration. In the proposed rule, States were given part of 
the restored time, and in this rule have been given two more days to 
perform their reviews, time which has come out of the Department's time 
to complete the Federal re-reviews, conduct arbitration, and calculate 
and release the error rates. As we indicated in the proposed rule, if 
we provided more time to request arbitration, time to conduct reviews 
by the States may have had to be reduced. States did not address this 
point; further, States were more concerned about the amount of time 
available for them to conduct individual reviews than about the time 
frames to request arbitration. In response to that concern, we provided 
them more time to conduct individual reviews. That time was taken from 
time for Federal re-reviews to be conducted.
    Three States commented that 20 days was not a sufficient amount of 
time to request arbitration when multiple cases are received at the 
same time. We believe that 20 days is an adequate amount of time for a 
State agency to prepare its case for arbitration. This time period is 
intended primarily for the State agency to prepare its letter 
addressing what issue or issues it is appealing, assemble the case 
file, and transmit the request. This time period is not intended for 
State agencies to conduct additional review activities. Overall, there 
are very few arbitration cases in any one review year. In FY 2000 there 
were a total of 75 cases nationwide; in FY 2001 there were 37; in FY 
2002, there were 43 cases; in FY 2004, there were 24 cases; in FY 2005, 
there were 38 cases; in FY 2006, there were 27 cases; in FY 2007, there 
were 47 cases, and in FY 2008, there were 55 cases. The commenters did 
not provide a compelling case stating why this work cannot be completed 
in the 20 days provided for that purpose. The arbitration time frames 
as currently established appear to be adequate from our perspective. 
Accordingly, we have decided to make no change to the time frames to 
request arbitration.
    Under the time frames as provided in the January 23, 2003; March 4, 
2004; and September 12, 2006 memoranda from FNS headquarters to FNS 
regional offices, FNS regional offices were given until March 31 to 
complete their subsample review process in order for all arbitration to 
be completed timely and to provide some additional time to ensure the 
accuracy of the error rates, liabilities, and adjustments to the 
liabilities. Although we did not request comments on the establishment 
of Federal review time frames, we received three comments suggesting 
the

[[Page 33430]]

establishment of time frames for completion of Federal reviews. Those 
comments were outside the scope of the proposed rule. While we 
understand the concerns expressed by the commenters about delays in 
receiving Federal re-review results, we believe that this is an issue 
that can be addressed on a case-by-case basis.
    Section 275.21(c) provides that State agencies report the monthly 
progress of sample selection and completion on the Form FNS-248, Status 
of Sample Selection and Completion or other format specified by FNS. 
Prior to publication of the proposed rule (published on September 23, 
2005, at 70 FR 55776), in response to a notice published at 68 FR 10437 
on March 5, 2003, the Department received two comments suggesting 
elimination of the form. Federal statisticians use the information on 
the FNS-248 to track the status of case completions and identify when 
timely generation of an error rate is jeopardized. Most of the 
information on the FNS-248 is available elsewhere. Further, the form 
itself is not necessary for State agencies to provide the necessary 
information, and the regulation currently provides that States may 
submit this information other than on the form. Therefore, we proposed 
to revise 7 CFR 275.21(c) to eliminate the form. State agencies will 
still be required to submit the information on a monthly basis as 
directed by the appropriate regional office. We received no comments 
concerning this proposal; we are adopting it as proposed.
    Section 275.21(d) requires State agencies to submit an FNS-247, 
Statistical Summary of Sample Distribution, annually. Although the 
requirement is still in the regulations, FNS no longer requires State 
agencies to submit this form. Accordingly, we proposed to remove 7 CFR 
275.21(d). We received no comments concerning this proposal; we are 
adopting it as proposed.

F. Consequences to Households Who Refuse To Cooperate With QC Reviews

    Section 273.2(d)(2) provides procedures for handling the cases of 
SNAP participants who refuse to cooperate with a QC review of their 
case. Currently, a household is determined ineligible if it refuses to 
cooperate with a QC review. Questions have arisen about what happens 
when one or more household members leave a household subject to this 
penalty. Because the regulations do not provide an answer to the 
question, it has been left to State agencies to determine which 
household members continue to be subject to the penalty. We proposed to 
amend this provision to provide that the ineligibility penalty will 
follow the household member(s) who refused to cooperate. We received 13 
comments addressing this proposal. Nine commenters opposed the 
provision; 4 commenters supported; one commenter pointed out that a 
tracking mechanism would have to be developed. Commenters opposed to 
the proposal believed that it would be difficult to accomplish and were 
concerned about the need for a tracking mechanism to be developed that 
would involve computer expenses. We recognize these concerns; however, 
we do not believe households should be prohibited from participating in 
the program if the person who refused to cooperate with the QC review 
no longer resides with the remaining household members. Therefore, we 
are adopting as proposed the requirement that the ineligibility penalty 
follow the household member(s) who refused to cooperate. If the State 
agency is unable to identify a particular household member as the 
refusing person, the State agency may continue to decide what member(s) 
to disqualify. We recognize that it will take States time to adapt 
their computer systems to track the refusing individual. Accordingly we 
are giving the States an extended time to implement the provision, 
until October 1, 2011. States may opt to implement this provision 
earlier. A 120-day hold harmless provision applies to implementation of 
this change.
    In this rule, we also proposed to make a conforming change to 7 CFR 
273.2(d)(2). Current procedures in 7 CFR 273.2(d)(2) require that a 
household be terminated for refusal to cooperate with a State or 
Federal QC reviewer. If a household terminated for refusal to cooperate 
with a State QC reviewer reapplies within 95 days of the end of the 
annual review period, the household cannot be determined eligible until 
it cooperates with the State QC reviewer. If the household terminated 
for refusal to cooperate with a State QC reviewer reapplies more than 
95 days after the end of the review period, the household is required 
to provide verification of all eligibility factors before it can be 
certified. If a household terminated for refusal to cooperate with a 
Federal QC reviewer rea