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Food and Nutrition Service, USDA § 274.1 determine under regular food stamp 274.11 Issuance and inventory record reten- rules the eligibility and benefits of any tion, and forms security. household that it has found ineligible 274.12 Electronic Benefit Transfer issuance for TANF assistance because of time system approval standards. limits, more restrictive resource stand- AUTHORITY: 7 U.S.C. 2011–2036. ards, or other rules that do not apply SOURCE: 54 FR 7004, Feb. 15, 1989, unless to food stamps. otherwise noted. (d) Standards for shelter costs. Legisla- tion governing the SFSP requires that EDITORIAL NOTE: OMB control numbers re- lating to this part 274 are contained in § 271.8. State plans must address the needs of households with high shelter costs rel- § 274.1 State agency issuance responsi- ative to their income. If a State choos- bility. es to standardize shelter costs under the SFSP, it must, therefore, use mul- (a) Basic issuance requirements. State tiple standards that take into consider- agencies shall establish issuance and ation households with high shelter accountability systems which ensure costs versus those with low shelter that only certified eligible households costs. A State is prohibited from using receive benefits; that coupons are ac- a single standard based on average cepted, stored, and protected after de- shelter costs for all households partici- livery to receiving points within the pating in an SFSP. State; that Program benefits are time- (e) Opportunity for public comment. ly distributed in the correct amounts; States must provide an opportunity for and that coupon issuance and reconcili- public input on proposed SFSP plans ation activities are properly conducted (with special attention to changes in and accurately reported to FNS. benefit amounts that are necessary in (b) Contracting or delegating issuance order to ensure that the overall pro- responsibilities. State agencies may as- posal not increase Federal costs) sign to others such as banks, savings through a public comment period, pub- and loan associations, the Postal Serv- lic hearings, or meetings with groups ice, community action and migrant representing participants' interests. service agencies, and other commercial Final approval will be given after the businesses, the responsibility for the State informs the Department about issuance and storage of food coupons. the comments received from the pub- State agencies may permit contractors lic. After the public comment period, to subcontract assigned issuance re- the State agency must inform the De- sponsibilities. partment about the comments received (1) Any assignment of issuance func- from the public and submit its final tions shall clearly delineate the re- SFSP plan for Departmental approval. sponsibilities of both parties. The State agency remains responsible, re- [Amdt. 388, 65 FR 70211, Nov. 21, 2000] gardless of any agreements to the con- trary, for ensuring that assigned duties PART 274—ISSUANCE AND USE OF are carried out in accordance with COUPONS these regulations. In addition, the State agency is strictly liable to FNS Sec. for all losses of coupons, even if those 274.1 State agency issuance responsibility. losses are the result of the performance 274.2 Providing benefits to participants. of issuance, security, or accountability 274.3 Issuance systems. duties by another party. 274.4 Reconciliation and reporting. (2) All issuance contracts shall follow 274.5 [Reserved] procurement standards set forth in 274.6 Replacement issuances to households. part 277. 274.7 Coupon management. (3) The State agency shall not assign 274.8 Responsibilities of coupon issuers, and the issuance of coupons to any retail bulk storage and claims collection points. food firm unless the State agency pro- 274.9 Closeout of a coupon issuer. vides evidence that such an arrange- ment is needed to maintain or increase erowe on DSK5CLS3C1PROD with CFR 274.10 Use of identification cards and re- demption of coupons by eligible house- the efficient and effective operation of holds. the Program, as described below. 875 VerDate Nov<24>2008 13:53 Jan 27, 2010 Jkt 220015 PO 00000 Frm 00885 Fmt 8010 Sfmt 8010 Y:\SGML\220015.XXX 220015 § 274.1 7 CFR Ch. II (1–1–10 Edition) (i) Coupons may be issued inside or natives will not compromise the secu- within a retail food store, if the rity of the ID system. issuance is performed by a bank, credit (c) State monitoring of coupon issuers. union or other financial organization The State agency's accountability sys- independent of the retail food store. tem shall include procedures for moni- (ii) Coupons may be issued on-site by toring coupon issuers to assure that a retail food store under the following the day-to-day operations of all coupon conditions: issuers comply with these regulations, (A) The State agency adequately doc- to identify and correct deficiencies, uments that unless the retail food and to report violations of the Act or store is permitted to issue coupons on- regulations to FNS. site there will be a hardship, not just (1) The State agency shall conduct an an inconvenience, to recipients. The onsite review of each coupon issuer and State agency shall contract directly bulk storage point at least once every with the retail food firm and shall pro- three years. All offices or units of a vide oversight to such entity; or coupon issuer are subject to this review (B) In the absence of the hardship requirement. The State agency shall documentation, a retail food firm itself base each review on the specific activi- may perform issuance as a subcon- ties performed by each coupon issuer or tractor to a bank, credit union or other bulk storage point. A physical inven- independent financial organization, tory of coupons shall be taken at each with strict oversight by the financial location and that count compared with organization. perpetual inventory records and the (4) The State agency may contract monthly reports of the coupon issuer with the U.S. Postal Service for the or bulk storage point. This review may issuance of benefits. The Department be conducted at branch sites as well as and the Postal Service have signed an the main offices of each issuer and bulk agreement which governs benefit storage point that operates in more issuance by the Postal Service. A State than one office. Except in unusual cir- agency's contract with the Postal cumstances, the Postal Inspection Service does not exempt the State Service will conduct onsite reviews of agency from the requirement that it Postal Service issuance operations. comply with these regulations. How- ever, State agencies may negotiate (2) This review requirement may be contracts with the Postal Service on fulfilled in part or in total by the per- all terms and conditions as long as formance reporting review system, part such provisions do not conflict with 275. The State agency may delegate these regulations. this review responsibility to another (5) In project areas or parts of project unit of the State government or con- areas where FNS has required a Photo- tract with an outside firm with exper- graphic identification (Photo ID) sys- tise in auditing and accounting. State tem to be used, the State agency shall agencies may use the results of reviews include in any contract or agreement of coupon issuers by independent audit with an issuing agent a provision es- or accounting firms as long as the food tablishing the agent's liability to the coupon issuance operations of the cou- State agency for the face value of cou- pon issuer are included in the review. pons issued in any authorization docu- (d) Changes. The State agency shall ment transaction where the authoriza- inform FNS whenever a project area, tion document is found to have been issuance point, reconciliation point, re- stolen or otherwise not received by the placement point, bulk storage report- household certified as eligible, if the ing point or coupon shipment receiving cashier has not fulfilled the require- point is created, relocated, or termi- ments contained in § 274.10. This same nated. The State agency shall report provision shall apply to issuance con- the change at least 30 days prior to the tracts in project areas or parts of effective date of the change. Initial no- project areas where FNS has granted a tification may be made by telephone waiver or waivers of any provision(s) of but the State agency shall confirm the erowe on DSK5CLS3C1PROD with CFR the Photo ID requirements based on a information in writing as soon as pos- determination that State agency alter- sible. 876 VerDate Nov<24>2008 13:53 Jan 27, 2010 Jkt 220015 PO 00000 Frm 00886 Fmt 8010 Sfmt 8010 Y:\SGML\220015.XXX 220015 Food and Nutrition Service, USDA § 274.2 (e) Advance planning documentation. make benefits available to the house- State agencies must comply with the hold not later than the fifth calendar procurement requirements of part 277 day following the date of application. for the acquisition, design, develop- Whatever system a State agency uses ment, or installation of automated to ensure meeting this delivery stand- data processing (ADP) equipment. With ard shall be designed to allow a reason- certain exceptions detailed in part 277, able opportunity for redemption of State agencies must receive prior ap- ATPs no later than the fifth calendar proval for the design and acquisition of day following the date of application. ADP systems through submission of (c) Combined allotments. For those advance planning documents (APD's). households which are to receive a com- bined allotment, the State agency shall § 274.2 Providing benefits to partici- provide the benefits for both months as pants. an aggregate (combined) allotment, or (a) General. Each State agency is re- as two separate allotments, with the sponsible for the timely and accurate same validity period, made available at issuance of benefits to certified eligible the same time, in accordance with the households in accordance with these timeframes specified in § 273.2 of this regulations. Those households com- chapter. prised of elderly or disabled members (d) Ongoing households. All house- which have difficulty reaching issuance holds shall be placed on an issuance offices, and households which do not schedule so that they receive their ben- reside in a permanent dwelling or of a efits on or about the same date each fixed mailing address shall be given as- month. The date upon which a house- sistance in obtaining their regular hold receives its initial allotment after monthly benefits. State agencies shall certification need not be the date that assist these households by arranging the household must receive its subse- for the mail issuance of coupons to quent allotments. them, by assisting them in finding au- (1) State agencies that use direct- thorized representatives who can act mail issuance shall stagger issuance on their behalf, or by using other ap- over at least 10 days of the issuance propriate means. month, and may stagger issuance over (b) Availability of benefits. All newly- the entire issuance month. State agen- certified households, except those that cies using a method other than direct- are given expedited service, shall be mail issuance may stagger issuance given an opportunity to participate no throughout the month, or for a shorter later than 30 calendar days following period. When staggering benefit deliv- the date the application was filed. An ery, however, State agencies shall not opportunity to participate consists of allow more than 40 days to elapse be- providing households with coupons or tween the issuance of any two allot- authorization documents and having ments provided to a household partici- issuance facilities open and available pating longer than two consecutive, for the households to obtain their bene- complete months. Regardless of the fits. State agencies must mail author- issuance schedule used, the State agen- ization documents or coupons in time cy shall adhere to the reporting re- to assure that the documents can be quirements specified in § 274.4. transacted, or the coupons spent after (2) Upon the request of the tribal or- they are received but before the 30-day ganization that exercises governmental standard expires. A household has not jurisdiction over a reservation, the been provided an opportunity to par- State agency shall stagger the issuance ticipate within the 30-day standard if of benefits for eligible households lo- the authorization document or benefits cated on reservations for at least 15 are mailed on the 29th or 30th day. Nei- days each month. ther has an opportunity to participate (3) When a participating household is been provided if the authorization doc- transferred from one issuance system ument is mailed on the 28th day but no or procedure to another issuance sys- issuance facility is open on the 30th tem or procedure, the State agency erowe on DSK5CLS3C1PROD with CFR day. For households entitled to expe- shall not permit more than 40 days to dited service, the State agency shall elapse between the last issuance under 877 VerDate Nov<24>2008 13:53 Jan 27, 2010 Jkt 220015 PO 00000 Frm 00887 Fmt 8010 Sfmt 8010 Y:\SGML\220015.XXX 220015 § 274.3 7 CFR Ch. II (1–1–10 Edition) the previous system or procedure, and ticable inconvenience to affected the first issuance under the new sys- households. tem or procedure. The 40-day require- (f) Issuance of coupons to households. ment does not apply to instances in The State agency shall issue coupon which actions by recipients, such as books in accordance with a table for failure to submit a monthly report, dis- coupon-book issuance provided by FNS, rupt benefits. Transfers include, but except as provided in paragraphs (e)(1), are not limited to, households being (e)(2), and (e)(3) of this section. The moved into or out of a staggered State agency shall issue the coupon issuance procedure, households on a books in consecutive serial number fluctuating schedule within a staggered order whenever possible, starting with system, and households being moved the lowest serial number in each cou- from a direct-mail issuance system to pon book denomination. The household an authorization document system. If member whose name appears on the ID the State agency determines that more card shall sign the coupon books; if than 40 days may elapse between more than one name appears, any issuances, the State agency shall di- named member may sign the books. vide the new issuance into two parts, (1) The State agency may deviate with one part being issued within the from the table if the specified coupon 40-day period, and the second part, or books are unavailable. supplemental issuance, being issued on (2) Exceptions from the table are au- the household's established issuance thorized for blind and visually-handi- date in the new system or procedure. capped participants who request that The supplemental issuance cannot pro- all coupons be of one denomination. vide the household more benefits than Recipients who have no fixed address the household is entitled to receive. (homeless), and residents of shelters for (4) Notwithstanding the above provi- battered women and children, as de- sions, in months in which benefits have fined in § 271.2, and which are not au- been suspended under the provisions of thorized by FNS to redeem through § 271.7, State agencies may stagger wholesalers, may request that all or issuance to certified households fol- part of their coupons be of the $1 de- lowing the end of the suspension. In nomination. State agencies are author- such situations, State agencies may, at ized to grant this request when fea- their option, stagger issuance from the sible. date issuance resumes through the end (3) If a household is eligible for an al- of the month or over a five-day period lotment of $1, $3, or $5, the State agen- following the resumption of issuance, cy shall adjust those allotments to $2, even if this results in benefits being $4, or $6, respectively. issued after the end of the month in (g) Issuance in rural areas. Unless the which the suspension occurred. area is served by an electronic benefit (e) Issuance services. State agencies transfer system, State agencies must are responsible for determining the lo- use direct-mail issuance in any rural cation and hours of operation of areas where the State agency deter- issuance services. In doing so, State mines that recipients face substantial agencies shall ensure that the issuance difficulties in obtaining transportation schedules set forth in paragraphs (b) in order to obtain their food stamp and (c) of this section are met. In addi- benefits by methods other than direct- tion, issuance authorization docu- mail issuance. State agencies must re- ments, such as ATP cards, should be port any exceptions to direct-mail valid only in the geographic area with- issuance as specified under § 272.3(a)(2) in the State that is encompassed by and (b)(2) of this chapter. the reconciliation system through [54 FR 7004, Feb. 15, 1989, as amended at 54 which the issuance will be processed; FR 51351, Dec. 15, 1989; 60 FR 20182, Apr. 25, however, the validity area may be ex- 1995; 65 FR 70212, Nov. 21, 2000] tended within the State at the State agency's option. State agencies may § 274.3 Issuance systems. also restrict the validity of these docu- (a) System classification. State agen- erowe on DSK5CLS3C1PROD with CFR ments to smaller areas or particular cies may issue benefits to households issuance sites with minimal prac- through any of the following systems: 878 VerDate Nov<24>2008 13:53 Jan 27, 2010 Jkt 220015 PO 00000 Frm 00888 Fmt 8010 Sfmt 8010 Y:\SGML\220015.XXX 220015 Food and Nutrition Service, USDA § 274.3 (1) An authorization document sys- with the Office of the Inspector Gen- tem that uses a document produced for eral, determines that Program integ- each month's issuance. The inter- rity would be improved by changing mediary document, such as an ATP, the issuance system of a State, the may be distributed on a monthly basis Secretary shall require the State agen- to each household and surrendered by cy to issue or deliver coupons using an- the household to the coupon issuer, or other method. The alternative method provided monthly to issuers with ei- may be one of the methods described in ther single household authorizations or paragraph (a) of this section, or the multiple household authorizations on Secretary may require a State agency each (such as a computer-generated to issue, in lieu of coupons, reusable listing). For reconciliation and identi- documents to be used as part of an fication purposes, the authorization automated data processing and infor- document shall contain the following: mation retrieval system and to be pre- (i) Serial number; sented by, and returned to, recipients (ii) Case name and address; at retail food firms for the purpose of (iii) Case number; purchasing food. The determination of (iv) Allotment amount; which alternative to use will be made (v) Benefit month or expiration date; by FNS after consultation with the (vi) Name of issuing project area; State agency. The cost of conversion and, will be shared by the Department and (vii) Space for signature of household the State agency in accordance with member. An additional space for an au- the cost accounting provision of part thorized representative may be in- 277. cluded. (2) The cost of documents or systems (2) A direct access system that di- which may be required as a result of a rectly accesses a master issuance file permanent alternative issuance system at the time that benefits are issued to pursuant to this section shall not be households. This system shall use man- imposed upon retail food firms partici- ual card access or an automated access pating in the Program. to the master issuance file. Systems of (d) System requirements. (1) The State this type include the manual House- agency shall establish a master hold Issuance Record (HIR) card sys- tem and on-line issuance terminals. issuance file which is a composite of (3) A mail issuance system that di- the issuance records of all certified rectly delivers coupons through the food stamp households. The State mail to households. agency shall establish the master (4) An on-line Electronic Benefit issuance file in a manner compatible Transfer system in which food stamp with its system used for maintaining benefits are stored in a central com- case record information and shall sepa- puter database and electronically rate the information on the master accessed by households at the point-of- issuance file into active and inactive sale via reusable plastic cards. case file categories. The master (5) An off-line Electronic Benefit issuance file shall contain all the infor- Transfer system in which benefit allot- mation needed to identify certified ments can be stored on a card or in a households, issue household benefits, card access device and used to purchase record the participation activity for authorized items at a point-of-sale ter- each household and supply all informa- minal without real-time authorization tion necessary to fulfill the reporting from a central processor. requirements prescribed in § 274.4. (b) Other systems. A State agency may (i) The master issuance file shall be develop an issuance system which can- kept current and accurate. It shall be not be readily categorized into one of updated and maintained through the the systems described in paragraph (a) use of documents such as notices of of this section. FNS shall prescribe the change and controls for expired certifi- reporting and reconciliation require- cation periods. ments which apply to that system. (ii) Before entering a household's erowe on DSK5CLS3C1PROD with CFR (c) Alternative benefit issuance system. data on the master issuance file, the (1) If the Secretary, in consultation State agency shall review the master 879 VerDate Nov<24>2008 13:53 Jan 27, 2010 Jkt 220015 PO 00000 Frm 00889 Fmt 8010 Sfmt 8010 Y:\SGML\220015.XXX 220015 § 274.4 7 CFR Ch. II (1–1–10 Edition) issuance file to ensure that the house- tended use, which may or may not be a hold is not currently participating in, calendar month. However, in instances or disqualified from, the Program. If an in which authorization documents are authorization document is issued under distributed, or benefits become avail- the expedited service requirements of able for ongoing households late in the §§ 273.2(i) and 274.2(b), the State agency issuance month, the State agency shall shall complete as much of the master extend the validity or availability pe- issuance file review as possible prior to riod for either twenty (20) additional issuing the authorization document. days, or until the end of the following Any uncompleted reviews shall be com- issuance month, at the State agency's pleted after issuance and appropriate option. The State agency may also corrective action shall be taken to re- choose one of two dates which will ini- cover overissuance. tiate this extension of the validity or (2) State agencies should divide availability period. The State agency issuance responsibilities between at may choose to extend the period for au- least two persons to prevent any single thorization documents distributed or individual from having complete con- for benefits made available, on or after trol over the authorization of issuances the 20th day of the issuance month or and the issuances themselves. Respon- after the 15th day of the issuance sibilities to be divided include mainte- month. Whichever date the State agen- nance of inventory records, assembly of cy chooses to initiate the required ex- benefits and preparation of envelopes tension, the State agency must use the for mailing. If issuance functions in an date consistently for all extensions in office are handled by one person, a sec- this category. A household which does ond-party review shall be made to not transact its authorization docu- verify coupon inventory, the reconcili- ment, or obtain the benefits directly ation of the mail log, and the number from an issuance point during the of mailings prepared. issuance's validity period, shall lose its (3) State agencies shall establish con- entitlement to the benefits, and the trols to prevent a household from con- State agency shall not issue benefits to currently receiving benefits through such a household for such a period. more than one issuance system. (2) State agencies experiencing exces- (4) State agencies shall clearly iden- sive issuance losses may develop sys- tify issuances in their accountability tems that have authorization docu- systems as initial, supplemental, re- ments that expire in shorter time placement, or restored benefits. frames than those set forth in para- (5) State agencies shall establish a graph (e) of this section. However, such Statewide record of replacement systems shall include methods that issuances granted to households to pre- allow households the opportunity to vent a household from receiving more obtain their benefits for the full valid- than two countable replacement ity period of a month's issuance. issuances as defined in § 274.6(b) in a [54 FR 7004, Feb. 15, 1989, as amended at 54 six-month period. FR 51351, Dec. 15, 1989; 57 FR 11249, Apr. 1, (6) State agencies which issue bene- 1992; 60 FR 20183, Apr. 25, 1995; Amdt. 390, 65 fits by mail shall, at a minimum, use FR 59110, Oct. 4, 2000] first class mail and sturdy nonfor- warding envelopes or packages to send § 274.4 Reconciliation and reporting. benefits to households. (a) Reconciliation. State agencies (e) Validity periods. (1) State agencies shall account for all issuance through a shall establish validity periods for reconciliation process. The manner in issuances made in both authorization which this is done varies depending on document and direct access systems. A the type of issuance system being used. validity period is the time frame dur- (1) Described below are the required ing which a household may obtain ben- reconciliation procedures for each type efits by transacting an authorization of system. document, or receiving the benefits di- (i) In all issuance systems coupon rectly at an issuance point. Generally, issuers shall reconcile their issuances erowe on DSK5CLS3C1PROD with CFR the validity period coincides with the daily using daily tally sheets, cashiers' issuance month or the period of in- daily reports, tapes or printouts. 880 VerDate Nov<24>2008 13:53 Jan 27, 2010 Jkt 220015 PO 00000 Frm 00890 Fmt 8010 Sfmt 8010 Y:\SGML\220015.XXX 220015 Food and Nutrition Service, USDA § 274.4 (ii) In systems where a record-for- report. At a minimum, such docu- issuance is used, all issuances author- mentation shall include documents ized for the month shall be merged into supporting coupon shipments, trans- one record-for-issuance at the end of fers, issuances, and destruction. each month. All issuances made during (iii) For those State agencies which the month shall then be posted to the use an authorization document record-for-issuance. The record-for- issuance system, coupon issuers shall issuance shall then be compared with submit transacted authorization docu- the master issuance file. Findings from ments batched according to each day's this comparison shall be reported on activity in accordance with a schedule the Form FNS–46 as prescribed in para- prescribed by the State agency, but not graph (b)(2) of this section. less often than monthly. (iii) In systems where no record-for- (iv) All mail issuance activity, in- issuance is used, issuances made during cluding the value of mail issuance re- each month shall be reconciled to the placements, shall be reported. Original master issuance file. Findings from allotments (first benefits issued for a this reconciliation shall be reported on particular month to an ongoing house- the Form FNS–46 as prescribed in para- hold) subsequently recovered by the graph (b)(2) of this section. issuance office during the current (iv) In addition to the reconciliation month shall be returned to inventory activity prescribed in the paragraphs and noted on the mail issuance log. (a)(1)(i), (a)(1)(ii) and (a)(1)(iii) of this When the original allotment is re- section, the following steps shall be turned to inventory and the replace- followed in authorization document ment issuance is issued during the cur- systems: rent month (month in which original (A) The State agency shall determine benefits were issued), the ''replace- and verify the transacted value of au- ment'' shall not be reported. thorized coupon issuances. (v) The Form FNS–250 shall be re- (B) Any batches of transacted au- viewed by the State agency for accu- thorization documents that do not rec- racy, completeness and reasonableness. oncile shall be maintained intact by the State agency until the discrepancy The State agency shall attest to the is resolved with the coupon issuer and/ accuracy of these reports and shall sub- or a review of the case files. mit the reports so they will be received (C) The State agency shall compare by FNS by the 45th day after the report all transacted authorization documents month. Any revisions to the Form with the record-for-issuance or master FNS–250 for a given month shall be sub- issuance file as appropriate. Any docu- mitted to FNS within 105 days after ments that do not match with the the end of the report month. record-for-issuance or master issuance (vi) FNS shall review each form, sub- file shall be identified and reported as mitted through the State agency, for required in paragraph (b)(2) of this sec- completeness, accuracy and reason- tion. ableness and shall reconcile inventory (b) Required reports. The State agency with shipping records, and shall review shall review and submit the following State agency verification of coupon reports to FNS on a monthly basis: issuer and bulk storage point monthly (1) Form FNS–250, Food Coupon Ac- reports. FNS may supplement the countability Report. above reviews by unannounced spot (i) This report, executed monthly by checks of inventory levels and coupon coupon issuers and bulk storage points, security arrangements at coupon shall be signed by the coupon issuer or issuers and at bulk storage points. appropriate official, certifying that the (2) Form FNS–46, Issuance Reconcili- information is true and correct to the ation Report, shall be submitted by best of that person's knowledge and be- each State agency operating an lief. issuance system. The report shall be (ii) Coupon issuers and bulk storage prepared at the level of the State agen- points shall submit supporting docu- cy where the actual reconciliation of erowe on DSK5CLS3C1PROD with CFR mentation to the State agency which the record-for-issuance and master will allow verification of the monthly issuance file occurs. 881 VerDate Nov<24>2008 13:53 Jan 27, 2010 Jkt 220015 PO 00000 Frm 00891 Fmt 8010 Sfmt 8010 Y:\SGML\220015.XXX 220015 § 274.5 7 CFR Ch. II (1–1–10 Edition) (i) The State agency shall identify second preceding months of January and report the number and value of all and July. issuances which do not reconcile with (iii) State agencies shall submit any the record-for-issuance and/or master proposed changes in their estimation issuance file. All unreconciled procedures to be used in determining issuances shall be identified as speci- the Form FNS–388 data to the FNS re- fied on this reporting document. gional office for review and comment. (ii) The report shall be received by FNS shall monitor the accuracy of the FNS no later than 90 days following estimated dollar value of coupons the end of the report month. issued as reported on the Form FNS–388 (3) Form FNS–259, Food Stamp Mail against the Statewide total dollar Issuance Report. value of coupons as reported by the (i) Form FNS–259 reports shall be sub- issuance agents on the Form FNS–250, mitted by State agencies for each unit Food Stamp Accountability Report, for using a mail issuance system as speci- the corresponding month. FNS shall fied in the Mail Issuance Loss Report- monitor the accuracy of the Statewide ing Plan required in § 272.2(d)(1)(iv). estimated number of households and The State agency shall submit the persons participating as reported on Form FNS–259 reports so that they are the Form FNS–388 report against the received in FNS by the 45th day fol- Statewide actual total participation as lowing the end of each quarter. reported on succeeding Form FNS–388 (ii) The State agency shall verify the reports and against the semiannual issuance by a comparison with issuance project area participation totals at- on the appropriate coupon issuer's tached to the March and September Form FNS–250. Form FNS–388 reports. The FNS accu- (4) Form FNS–388, State Coupon racy standards for the issuance and Issuance and Participation Estimates. participation estimates are that esti- (i) State agencies shall telephone or mates for the current month be within transmit by computer the Form FNS– (+) or (¥) four (4) percent of actual lev- 388 data and mail the reports to the els, and the estimates for the previous FNS regional office no later than the month be within (+) or (¥) two (2) per- 19th day of each month. When the 19th cent of actual levels. State agencies falls on a weekend or holiday, the shall explain any unusual cir- Form FNS–388 data shall be reported by cumstances that cause coupon issuance telephone or transmitted by computer and/or participation data to not meet and mailed on the first work day after these accuracy standards. If a State the 19th. The Form FNS–388 report agency fails to meet these accuracy shall be signed by the person respon- standards, FNS shall notify the State agency and assist the State agency in sible for completing the report or a revising its estimating procedures to designated State agency official. improve its reporting. (ii) The Form FNS–388 report shall (iv) A participating household is one provide Statewide estimated or actual that is certified and has been, or will totals of issuance and participation for be, issued benefits (whether or not the the current and previous month, and benefits are used), and households that actual or final participation totals for have met the eligibility requirements, the second preceding month. In addi- but will receive zero benefits. tion to the participation totals for the second preceding months of January [54 FR 7004, Feb. 15, 1989, as amended at 54 and July, provided on the March and FR 51351, Dec. 15, 1989] September reports, non-assistance (NA) and public assistance (PA) household § 274.5 [Reserved] and person participation breakdowns shall be provided. As an attachment to § 274.6 Replacement issuances to the March and September Form FNS– households. 388 reports, State agencies shall pro- (a) Providing replacement issuance. (1) vide project area breakdowns of the Subject to the restrictions in para- erowe on DSK5CLS3C1PROD with CFR coupon issuance and NA/PA household graph (b) of this section, State agencies and person participation data for the shall provide replacement issuances to 882 VerDate Nov<24>2008 13:53 Jan 27, 2010 Jkt 220015 PO 00000 Frm 00892 Fmt 8010 Sfmt 8010 Y:\SGML\220015.XXX 220015 Food and Nutrition Service, USDA § 274.6 a household when the household re- the household, or an authorization doc- ports that: ument, coupons, or food purchased (i) Its authorization document was with food stamps is destroyed in a not received in the mail or was stolen household misfortune. In mail issuance from the mail, was stolen after receipt, (ATPs or coupons), the report must be was destroyed in a household misfor- made within the period of intended use, tune, or was improperly manufactured unless the original issuance was made or mutilated; after the 20th of the month, in which (ii) Its coupons were not received in case the period of intended use is 20 the mail, were stolen from the mail, days from original issuance, or the last were destroyed in a household misfor- day of the next month (State agency tune, or were improperly manufactured option). or mutilated; (2) The number of replacement (iii) Food purchased with food stamps issuances which a household may re- was destroyed in a household misfor- ceive shall be limited as follows: tune; or (i) State agencies shall limit replace- (iv) It received a partial coupon al- ment issuances to a total of two count- lotment. able replacements in six months for au- (2) State agencies shall not provide thorization documents or coupons not replacement issuances to households received in, or stolen from, the mail; when coupons are lost, stolen or mis- authorization documents stolen after placed after receipt, authorization doc- receipt; and partial coupon allotments. uments are lost or misplaced after re- However, no limit shall be put on the ceipt, when authorization documents number of replacements of partial al- or coupons are totally destroyed after lotments if the partial allotments were receipt in other than a disaster or mis- due to State agency error. Separate fortune, or when coupons sent by reg- limits shall not apply for each of these istered or certified mail are signed for types of loss. by anyone residing with or visiting the (ii) State agencies shall limit re- household. In addition, replacement placement issuances per household to issuances shall not be made if the two countable replacements in six household or its authorized representa- months for authorization documents or tive has not signed and returned the coupons reported as destroyed in a household statement required in para- household misfortune. This limit is in graph (c) of this section, where applica- addition to the limit in paragraph ble. (b)(2)(i) of this section. (3) Where FNS has issued a disaster (iii) No limit on the number of re- declaration and the household is eligi- placements shall be placed on the re- ble for disaster food stamp benefits placement of authorization documents under the provisions of part 280, the or coupons which were improperly household shall not receive both the manufactured or mutilated or food pur- disaster allotment and a replacement chased with food stamp benefits which allotment for a misfortune. was destroyed in a household misfor- (4) In order for a replacement to be tune. considered non-countable, the replace- (iv) The replacement issuance shall ment must not result in a loss to the not be considered a countable replace- Program. ment if: (b) Replacement restrictions. (1) Re- (A) The original or replacement placement issuances shall be provided issuance is returned or otherwise re- only if a household timely reports a couped by the State agency; loss orally or in writing, and provides a (B) The original authorization docu- statement of nonreceipt if the original ment is not transacted; authorization document or allotment (C) The replacement authorization has not been returned to the State document is not transacted; or agency at the time of the request for (D) The replacement is being issued replacement. The report will be consid- due to a State agency issuance error. ered timely if it is made to the State (3) Except for households certified erowe on DSK5CLS3C1PROD with CFR agency within 10 days of the date an under 7 CFR part 280, replacement authorization document is stolen from issuances shall be provided in the 883 VerDate Nov<24>2008 13:53 Jan 27, 2010 Jkt 220015 PO 00000 Frm 00893 Fmt 8010 Sfmt 8010 Y:\SGML\220015.XXX 220015 § 274.6 7 CFR Ch. II (1–1–10 Edition) amount of the loss to the household, up (iv) If the statement of nonreceipt is to a maximum of one month's allot- not signed and returned within ten (10) ment, unless the issuance includes re- days of the date the loss was reported, stored benefits which shall be replaced the State agency shall not replace the up to their full value. coupons or authorization document. (c) Household statement of nonreceipt. (d) Time limits for making replacements. (1) Prior to issuing a replacement, the (1) Replacement issuances shall be pro- State agency shall obtain from a mem- vided to households within 10 days ber of the household a signed state- after report of nondelivery or loss (15 ment attesting to the household's loss. days if issuance was by certified or reg- This statement shall not be required if istered mail) or within two (2) working the reason for the replacement is that days of receiving the signed household the original authorization document or statement required in paragraph (c) of coupons were improperly manufactured this section, whichever date is later. or mutilated, or if the original issuance (i) Replacement of mutilated coupons has already been returned. The re- shall be delayed until a determination quired statement may be mailed to the of the value of the coupons can be State agency if the household member made in accordance with paragraph is unable to come into the office be- (f)(3) of this section. cause of age, handicap or distance from (ii) If the household has already been the office and is unable to appoint an issued the maximum allowable number authorized representative. of countable replacements, subsequent (2) If the signed statement or affi- replacements shall be delayed until the davit is not received by the State agen- agency has verified that the original cy within 10 days of the date of report, issuance was returned or the original no replacement shall be made. If the authorization document was not trans- 10th day falls on a weekend or holiday, acted. In a system using authorization and the statement is received the day documents, due to the time it takes to after the weekend or holiday, the State post and reconcile all authorization agency shall consider the statement documents, it may not be known at the timely received. time of the replacement request wheth- (3) The statement shall be retained in er prior replacements are countable re- the case record. It shall attest to the placements and, therefore, whether the nonreceipt, theft, loss or destruction of household has reached its limit. In the original issuance and specify the such cases, the allotment shall be re- reason for the replacement. It shall stored when the State agency verifies also state that the original or replace- that the limit on countable replace- ment issuance will be returned to the ments has not been reached. State agency if the original issuance is (iii) The State agency shall deny or recovered by the household and that delay replacement issuances in cases in the household is aware of the penalties which available documentation indi- for intentional misrepresentation of cates that the household's request for the facts, including but not limited to, replacement appears to be fraudulent. a charge of perjury for a false claim. In (2) The household shall be informed addition, the statement shall advise of its right to a fair hearing to contest the household that: the denial or delay of a replacement (i) The household may request to be issuance. Replacements shall not be placed on an alternate issuance system made while the denial or delay is being after one report of nonreceipt; appealed. (ii) After two reports in a six-month (e) Replacing issuances lost in the mail period of loss or theft prior to receipt, or stolen prior to receipt by the household. the household shall be placed on an al- State agencies shall comply with the ternate delivery system; following procedures in replacing (iii) After two reports in a six-month issuances reported lost in the mail or period of loss or theft prior to receipt stolen prior to receipt by the house- and/or theft of an authorization docu- hold: ment after receipt the State agency (1) Determine if the authorization erowe on DSK5CLS3C1PROD with CFR may delay or deny further replace- documents or benefits were validly ments for such causes; and issued, if they were actually mailed, if 884 VerDate Nov<24>2008 13:53 Jan 27, 2010 Jkt 220015 PO 00000 Frm 00894 Fmt 8010 Sfmt 8010 Y:\SGML\220015.XXX 220015 Food and Nutrition Service, USDA § 274.6 sufficient time has elapsed for delivery authorization document matches that or if they were returned in the mail. If on the household statement. In a Photo a delivery of a partial allotment is re- ID or serialized area, the State agency ported, the State agency shall deter- shall determine if the ID serial number mine the value of the coupons not de- annotated on the authorization docu- livered and determine whether the re- ment matches the serial number on the port of receipt of a partial allotment is recipient's ID card. Any replacement corroborated by evidence that the cou- which results in duplicate participa- pon loss was due to damage in the mail tion shall be considered a household before delivery or by a discrepancy in error, and the replacement countable, the issuance unit's inventory; when the ID serial number shown on (2) Determine, to the extent possible, the authorization document matches the validity of the request for a re- the serial number on the recipient's placement. This includes determining card, unless the ID card was reported whether the original issuance has been lost or stolen prior to the replacement. returned to the State agency and, in a The State agency may require house- system utilizing authorization docu- holds, on a case-by-case basis, to report ments, whether the original authoriza- the theft to a law enforcement agency tion document has been transacted and to provide verification of such re- and, if so, whether the recipient's sig- port. nature on the authorization document (2) Prior to replacing destroyed cou- matches the signature on the ID card. pons or authorization documents, or In a Photo ID area, the State agency destroyed food that was purchased with shall determine if the ID serial number food stamp benefits, the State agency annotated on the authorization docu- shall determine that the destruction ment matches the serial number on the occurred in a household misfortune or recipient's ID card; disaster, such as, but not limited to, a (3) Issue a replacement in accordance fire or flood. This shall be verified with paragraphs (b), (c) and (d) of this through a collateral contact, docu- section if the household is eligible; mentation from a community agency (4) Place the household on an alter- including, but not limited to, the fire nate delivery system, if warranted, in department or the Red Cross, or a accordance with paragraph (g) of this home visit. The State agency shall pro- section; and vide replacements of coupons, author- (5) Take other action, such as cor- ization documents, and/or food in the recting the address on the master actual amount of the loss, but not ex- issuance file, warranted by the re- ceeding one month's allotment, unless ported nondelivery. the exception in paragraph (b)(3) of this (f) Replacing issuances after receipt by section, applies. the household. Upon receiving a request (3) Households cannot receive a re- for replacement of an issuance reported placement for coupons lost or stolen as stolen or destroyed after receipt by after receipt. the household, the State agency shall (4) The State agency shall provide re- determine if the issuance was validly placements for improperly manufac- issued. The State agency shall also tured or mutilated coupons or author- comply with all applicable provisions ization documents as follows: in paragraphs (b), (c) and (d) of this (i) Coupons received by a household, section, as well as the following proce- and subsequently mutilated or found to dures for each type of replacement: be improperly manufactured shall be (1) Prior to replacing an authoriza- replaced in the amount of the loss to tion document which was reported sto- the household. State agencies shall re- len after receipt by the household, the place mutilated coupons when three- State agency shall determine, to the fifths of a coupon is presented by the extent possible, the validity of the re- household. The State agency shall ex- quest for replacement. For example, amine the improperly manufactured or the State agency may determine mutilated coupons to determine the va- whether the original authorization doc- lidity of the claim and the amount of erowe on DSK5CLS3C1PROD with CFR ument has been transacted and, if so, coupons to be replaced. If the State whether the signature on the original agency can determine the value of the 885 VerDate Nov<24>2008 13:53 Jan 27, 2010 Jkt 220015 PO 00000 Frm 00895 Fmt 8010 Sfmt 8010 Y:\SGML\220015.XXX 220015 § 274.6 7 CFR Ch. II (1–1–10 Edition) improperly manufactured or mutilated replacement ATP's reported as non- coupons, the State agency shall replace delivered in a six-month period, the the unusable coupons in a dollar-for- State agency shall issue benefits to dollar exchange. After exchanging the that household under an alternate coupons and completing a Form FNS– issuance system. The two requests may 135, Affidavit of Return or Exchange of be for either an original or a replace- Food Coupons, the State agency shall ment ATP. The State agency shall destroy the coupons in accordance with keep the household on the alternate the procedures contained in § 274.7(f). If issuance system for the length of time the State agency cannot determine the the State agency determines to be nec- value of the improperly manufactured essary. The State agency may return or mutilated coupons, the State agency the household to the regular issuance shall cancel the coupons by writing or system if the State agency finds that stamping ''canceled'' across the face of the circumstances leading to the loss the coupons and forward the coupons have changed and the risk of loss has to FNS for a determination of the lessened. The placement of a household value by the U.S. Bureau of Engraving on an alternate issuance system and and Printing. the length of time the household is on (ii) Authorization documents re- this system is not subject to the fair ceived by a household and subsequently hearing process. mutilated or found to be improperly (h) Documentation and reconciliation of manufactured shall be replaced only if replacement issuances. (1) The State they are identifiable. ''Identifiable'' agency shall document in the house- means that the State agency is able to hold's case file each request for re- determine the amount of the issuance placement, the date, the reason, and and that the authorization document whether or not the replacement was was validly issued to the household provided. This information may be re- within the last 30 days. For example, if corded exclusively on the household the authorization document serial statement required in paragraph (c) of number is legible, the State agency can this section. determine from the record-for-issuance (2) The State agency shall maintain, or manual authorization document log in readily-identifiable form, a record of to which household the authorization the replacements granted to the house- document was issued, the date of hold, the reason, the month, and issuance, and the amount. Similarly, if whether the replacement was count- the case number and validity period able as defined in paragraph (b)(2)(iv) are legible, the State agency may be of this section. The record may be a able to determine to whom the author- case action sheet maintained in the ization document was issued and the case file, notations on the master amount. If more than one authoriza- issuance file, if readily accessible, or a tion document was issued to the house- document maintained solely for this hold and the State agency cannot de- purpose. At a minimum, the system termine which authorization document shall be able to identify and differen- was mutilated, the replacement shall tiate among: be issued in the lesser amount. Improp- (i) Authorization documents or cou- erly manufactured or mutilated au- pons not received in, or stolen from, thorization documents shall be surren- the mail, and authorization documents dered to the State agency. stolen after receipt; and (g) Alternate issuance system for a (ii) Replacement issuances which are household. The State agency shall offer not subject to a replacement limit. to place a household in an alternate (3) Upon completion of reconciliation issuance system after the first report in a system utilizing authorization of nonreceipt, or when circumstances documents, the State agency shall up- exist that indicate that the household date the record required in paragraph may not receive its benefits through (h)(2) of this section to indicate wheth- the normal issuance system, such as er both the original and replacement when a household has a history of re- authorization documents were trans- erowe on DSK5CLS3C1PROD with CFR ported nonreceipt of ATP's. After two acted. If both were not transacted, the requests for replacement of original or record shall clearly indicate that the 886 VerDate Nov<24>2008 13:53 Jan 27, 2010 Jkt 220015 PO 00000 Frm 00896 Fmt 8010 Sfmt 8010 Y:\SGML\220015.XXX 220015 Food and Nutrition Service, USDA § 274.7 replacement authorization document cordance with the requirements of was not a countable replacement. these regulations. (4) When a request for replacement is (1) State agencies shall monitor the made late in an issuance month, the re- coupon inventories of coupon issuers placement will be issued in a month and bulk storage points to ensure that subsequent to the month in which the inventories are neither excessive nor original authorization document was insufficient to meet the issuance needs issued. All replacements shall be post- and requirements. In determining rea- ed and reconciled to the month of sonable inventory needs, State agen- issuance of the replacement and may cies shall consider, among other be posted to the month of issuance of things, the ease and feasibility of re- the original authorization document, supplying such inventories from bulk so that all duplicate transactions may storage points within the State. The be identified. inventory levels at coupon issuers and (i) Further action on replacement bulk storage points should not exceed a issuances. The State agency shall take six-month supply, taking into account the following further actions on re- coupons on hand and on order. placements: (2) State agencies shall establish ac- (1) On at least a monthly basis, the counting systems for monitoring the State agency shall report to the appro- inventory activities of coupon issuers. priate office of the Postal Inspection State agencies shall review the Form Service all authorization documents FNS–250, from coupon issuers and bulk reported as stolen or lost in the mail. The State agency shall assist the Post- storage points, to determine the pro- al Service during any investigation priety and reasonableness of the inven- thereof and shall, upon request, supply tories. Forms FNS–261, Advice of Ship- the Postal Service with facsimiles of ment, Forms FNS–300, Advice of Trans- the original authorization document, if fer (or an approved State agency form), transacted, and the replacement au- and reports of returned mail-issued thorization document and a copy of the coupons, reports of replacements of nonreceipt statement. mail-issued coupons, reports of improp- The State agency shall advise the erly manufactured or mutilated cou- Postal Service if the original author- pons, reports of shortage or overage of ization document is not transacted. food coupon books and physical inven- (2) When a duplicate replacement au- tory controls shall be used by State thorization document is transacted, agencies to assure the accuracy of the State agency shall, at a minimum: monthly reports, issuers' compliance (i) Compare the handwriting on the with required inventory levels, and the authorization documents to documents accuracy and reasonableness of coupon contained in the household's case file, orders. including the nonreceipt statement; (b) Coupon controls. State agencies (ii) Establish a claim in accordance shall establish control and security with § 273.18, where it appears that the procedures to safeguard coupons that household has transacted, or caused are similar to those used to protect both authorization documents to be currency. The exact nature of security transacted; and arrangements will depend on State (iii) Refer the matter to the State agency evaluation of local coupon agency's investigation unit, where in- issuance and storage facilities. These dicated. arrangements must permit the timely [54 FR 7004, Feb. 15, 1989, as amended at 54 issuance of coupons while affording a FR 51351, Dec. 15, 1989; 56 FR 63617, Dec. 4, reasonable degree of coupon security. 1991] The State agencies, as well as all per- sons or organizations acting on their § 274.7 Coupon management. behalf, shall: (a) Coupon inventory management. (1) Safeguard coupons from theft, em- State agencies shall establish coupon bezzlement, loss, damage, or destruc- inventory management systems which tion; erowe on DSK5CLS3C1PROD with CFR ensure that coupons are requisitioned (2) Avoid unauthorized transfer, ne- and inventories are maintained in ac- gotiation, or use of coupons; 887 VerDate Nov<24>2008 13:53 Jan 27, 2010 Jkt 220015 PO 00000 Frm 00897 Fmt 8010 Sfmt 8010 Y:\SGML\220015.XXX 220015 § 274.7 7 CFR Ch. II (1–1–10 Edition) (3) Avoid issuance and transfer of al- tiable specimen coupons to State agen- tered or counterfeit coupons; and cies for the administration of the Pro- (4) Promptly report in writing to gram and enforcement of the rules, and FNS any loss, theft, or embezzlement to authorized food firms for the pur- of coupons. pose of educating and training employ- (c) Coupon requisitioning, shipping and ees on Program operations. transferring. (1) State agencies shall ar- (1) The State agency or firm shall range for the ordering of coupons on store specimen coupons in secure stor- the Form FNS–260, Requisition for age with access limited to authorized Food Coupon Books, and the prompt personnel. The State agency or firm verification and written acceptance of should maintain a record of specimen each coupon shipment. FNS shall be coupons received. furnished with appropriate delivery (2) Specimen coupons that are muti- hours and the names of the persons au- lated, improperly manufactured, or thorized to sign delivery acknowledge- otherwise unusable, shall not be dis- ments. tributed by the State agency. Such (2) FNS shall assess the reasonable- coupons shall be destroyed by the ness and propriety of food stamp req- State agency and the destruction shall uisitions submitted by State agencies be witnessed by two persons and noted based on prior inventory changes and on the perpetual inventory records shall notify the State agency of any maintained by the FNS regional offices adjustments made to requisitions. for specimen coupons. (3) FNS shall ship coupons, in such (3) Specimen coupons shall not be denominations as it may determine issued to private individuals or firms necessary, directly to State agency re- for the purpose of collection or display. ceiving points approved by FNS. FNS shall promptly advise the State agency (e) Replacement and destruction of cou- in writing when coupons are shipped to pons and authorization documents by receiving points using Form FNS–261, issuance points. (1) The State agency Advice of Shipment. Coupons shall be shall provide for the replacement to considered delivered to the State agen- issuers of improperly manufactured or cy when FNS or its carrier has a signed mutilated coupons as provided below. receipt. Replacement provisions pertaining to (4) Once coupons have been accepted households are contained in § 274.6. by receiving points within the State, (i) The State agency shall examine any further movement of the coupons the improperly manufactured or muti- between coupon issuers and bulk stor- lated coupons to determine the validity age points within the State is at the of the claim and the amount of coupons risk of the State agency. To minimize to be replaced. the risk of loss, coupons should be (ii) If the State agency can determine shipped by armored vehicle or some the value of an improperly manufac- other method of transportation that af- tured or mutilated coupon, the State fords the State agency the maximum agency shall replace the unusable cou- security available. pon, dollar for dollar, when at least (5) In every instance when coupons three-fifths of the coupon is presented are transported within a State, the per- by the issuer. After the exchange, the son(s) transporting coupons shall: State agency shall destroy the unus- (i) Acknowledge in writing the re- able coupon in accordance with the ceipt of the coupons; procedures contained in paragraph (f) (ii) Provide as much protection for of this section. the coupons as is reasonable; (iii) If the State agency cannot deter- (iii) Advise issuance supervisors of mine the value of the improperly man- the routes to be taken, the shipment ufactured or mutilated coupons, the departure time and the estimated ar- State agency shall cancel the coupons rival time. This information, if in writ- by writing or stamping ''canceled'' ten form, may be destroyed after the across the face of the coupons and for- coupons have been received. ward the coupons to FNS for a deter- erowe on DSK5CLS3C1PROD with CFR (d) Specimen coupons. FNS may pro- mination of the value by the U.S. Bu- vide upon written request, non-nego- reau of Engraving and Printing. The 888 VerDate Nov<24>2008 13:53 Jan 27, 2010 Jkt 220015 PO 00000 Frm 00898 Fmt 8010 Sfmt 8010 Y:\SGML\220015.XXX 220015 Food and Nutrition Service, USDA § 274.7 dollar amount shall be shown on the (ii) If either the coupon issuer or Form FNS–250 report. bulk storage point, or the State agency (2) The State agency shall void all cannot determine whether coupons or authorization documents mutilated or coupon books were in fact improperly otherwise rejected during the prepara- manufactured or cannot establish the tion process. The voided authorization value of the coupons involved, the documents shall either be filed for State agency shall promptly forward a audit purposes or destroyed, provided written statement of findings and the destruction is witnessed by at least canceled coupon(s) or coupon book(s) two persons and the State agency to FNS for determination. maintains a list of all destroyed au- (3) The State agency shall destroy thorization documents. Provisions per- the coupons and coupon books by burn- taining to the replacement of author- ing, shredding, tearing, or cutting so ized documents mutilated subsequent they are not negotiable. Two State to receipt by a household are provided agency officials shall witness and cer- in § 274.6. tify the destruction and report the de- (f) Destruction of unusable coupons struction information as follows: found in inventory or received as claim (i) The destruction of improperly payments. (1) The State agency shall re- manufactured, mutilated or exchanged quire coupon issuers, bulk storage coupons from coupon issuers and bulk points, and claims collection points to storage points shall be reported on the dispose of unusable coupons received Form FNS–471, Coupon Account and from the manufacturer or received as Destruction Report, and submitted payment for claims within 30 days with the Form FNS–250 for the appro- after the close of the month in which priate month. For coupons received unusable coupons shipped from the from recipients, a Form FNS–135 shall manufacturer are discovered, or are re- be completed and attached to the Form ceived from recipients as payment for FNS–471. claims. There is no dollar limit on the amount of coupons which may be dis- (ii) The destruction of coupons re- posed of by the State agency. Disposal ceived from claims collection points shall be by one of the following two that are the result of the payment of methods: household claims shall be reported on (i) Sending unusable coupons to the the Form FNS–471 (with Form FNS–135 State agency for destruction; or documentation) and submitted with (ii) Holding the unusable coupons in the Form FNS–209, Status of Claims secure storage pending examination Against Households, for the appro- and destruction by the State agency at priate rnonths. A State agency may the coupon issuance, bulk storage, or consolidate its monthly Form FNS–471 claims collection point. for claims collection destruction re- (2) Prior to the destruction of im- porting by providing one completed properly manufactured or mutilated Form FNS–471 that reflects the total coupons or coupon books that were ex- claims destruction figure for each changed, or collected from households month. However, the State agency for claims, the State agency shall: must attach a breakdown which re- (i) Verify that the coupons were im- ports the required Form FNS–471 infor- properly manufactured or mutilated. mation for each reporting point. If a If one or more boxes of coupons were State agency chooses to submit a con- improperly manufactured, the State solidated Form FNS–471, all individual agency shall contact FNS prior to dis- Forms FNS–471 must be retained by the position for instructions on the disposi- State agency for future review and tion of the coupons. If FNS has not re- audit purposes. The Form FNS–135 may sponded within the 30-day time limit, not be consolidated, and all originals of the State agency shall destroy the box that form must accompany a consoli- of coupons and document the manufac- dated Form FNS–471. turing irregularity and the book num- (g) Undeliverable or returned benefits. bers, and retain a copy of the State The State agency shall exercise the fol- erowe on DSK5CLS3C1PROD with CFR agency's request to FNS for permission lowing security and controls for au- to destroy. thorization documents and coupons 889 VerDate Nov<24>2008 13:53 Jan 27, 2010 Jkt 220015 PO 00000 Frm 00899 Fmt 8010 Sfmt 8010 Y:\SGML\220015.XXX 220015 § 274.8 7 CFR Ch. II (1–1–10 Edition) that are undeliverable or returned dur- (d) Supporting documentation. Coupon ing the valid issuance period. Forms issuers and bulk storage points shall FNS–471 and FNS–135 shall be completed submit to the State agency supporting by the State agencies, as appropriate. documentation which will allow (1) Coupons which are in book form, verification of the monthly report as complete, and with original and un- provided in § 274.4. At a minimum, such signed covers shall be returned to in- documentation shall include docu- ventory and noted as such on the ments supporting coupon shipments, issuance log, and the Form FNS–250. transfers, and issuances. In those (2) Authorization documents shall be States using issuance systems with au- recorded in the control log noting the thorization documents, coupon issuers serial number, household name and shall submit transacted authorization case number. The documents shall be documents batched according to each kept in secure storage with limited ac- day's activity, in accordance with the cess. The documents may be voided as long as households which report non- schedule prescribed by the State agen- delivery are provided an immediate re- cy but, in any case, not less often than placement. monthly. (h) Old series coupon exchange. House- (e) Handling of improperly manufac- holds which have old-series (no longer tured or mutilated coupons. Coupon issued) coupons shall be entitled to a issuers, and bulk storage and claims dollar-for-dollar exchange of old-series collection points shall cancel improp- coupons for current series coupons. erly manufactured or mutilated cou- Households in possession of old-series pons or coupon books by writing or coupons shall submit the coupons and a stamping ''canceled'' across the face of request for exchange to the State agen- the coupon(s) and coupon book(s). De- cy. State agencies may make direct ex- pending upon State agency policy, the change to claimants or request FNS to coupon issuer or bulk storage point make the exchange. Forms FNS–471 and shall forward the coupons with the ap- FNS–135 shall be completed by the propriate documentation (determined State agencies, as appropriate. by the State agency) to the State agen- [54 FR 7004, Feb. 15, 1989, as amended at 54 cy, or hold the coupons in secure stor- FR 51351, Dec. 15, 1989] age, pending examination and destruc- tion by the State agency at the coupon § 274.8 Responsibilities of coupon issuer, bulk storage point or claims issuers, and bulk storage and collection location. The documentation claims collection points. is not required if the State agency in- (a) Receipt of coupons. Coupon issuers, spects the coupons at the issuance, and bulk storage and claims collection storage or collection point. Additional points shall promptly verify and ac- requirements pertaining to the han- knowledge, in writing, the content of dling of these types of coupons by the each coupon shipment or coupon trans- State agency are provided in § 274.7(e). fer delivered to them and shall be re- sponsible for the custody, care, control, § 274.9 Closeout of a coupon issuer. and storage of coupons. (b) Inventory levels. Coupon issuers (a) Definition of responsibilities. When- and bulk storage points shall maintain ever the services of a coupon issuer or a proper level of coupon inventory not bulk storage point are terminated, the in excess of reasonable needs, taking State agency shall perform the respon- into consideration the ease and feasi- sibilities described below. If a coupon bility of resupplying such coupon in- issuer or bulk storage point has more ventories. Such inventory levels should than one functioning unit and one of not exceed the six-month supply pro- these facilities is terminated, the cou- vided for in § 274.7(a). pon issuer or bulk storage point shall (c) Monthly reporting. Coupon issuers, fulfill the responsibilities described in and bulk storage and claims collection paragraphs (b) and (c) of this section. points shall report monthly to FNS, The coupon issuer or bulk storage erowe on DSK5CLS3C1PROD with CFR through the State agency, using Form point shall notify the State agency of FNS–250, as provided in § 274.4. the pending termination of any of its 890 VerDate Nov<24>2008 13:53 Jan 27, 2010 Jkt 220015 PO 00000 Frm 00900 Fmt 8010 Sfmt 8010 Y:\SGML\220015.XXX 220015 Food and Nutrition Service, USDA § 274.10 services prior to the actual termi- seek other issuance or storage alter- nation. The State agency shall prompt- natives. ly notify FNS as provided in § 274.1(d). (b) Closeout accountability. The State § 274.10 Use of identification cards and agency shall perform a closeout audit redemption of coupons by eligible of a coupon issuer or bulk storage households. point within 30 days of termination of (a) General provisions. State agencies the issuance or storage point. The shall issue an ID card to each certified State agency shall report the findings household as proof of Program eligi- of the audit to FNS immediately upon bility. Upon request, the household or its completion. If the audit determines the authorized representative, shall that the final Form FNS–250 is incor- present the household's ID card at rect, the State agency shall promptly issuance points, retail food stores or provide a corrected report to FNS. meal services in order to transact the (c) Transfer of coupon inventory. (1) allotment authorization or when ex- Prior to the transfer of coupon inven- changing benefits for eligible food. The tory to another coupon issuer or bulk household member or members whose storage point, the State agency shall name(s) appear on the ID card shall perform an actual physical count of sign the coupon books issued to the coupons on hand. household. (2) The State agency shall transfer (1) All ID cards shall be issued in the the inventory to another coupon issuer name of the household member who is or bulk storage point, preferably with- authorized to receive the household's in the same project area. The transfer issuance. In areas not designated by of coupons shall be properly reported FNS as requiring Photo ID cards, the and documented by both the point ID card shall contain space for the being terminated and the point receiv- name and signature of the household ing the inventory. member to whom the coupon allotment (d) Maintenance of participant service. is to be issued and for any authorized (1) At least 30 days before actual termi- representatives designated by the nation of a coupon issuer, the State household. Section 274.5(b) provides agency shall notify project area par- ticipants of the impending closure. No- further requirements pertaining to tification shall include identification emergency authorized representatives. of alternative issuance locations and Any person listed on the ID card shall available public transportation. The sign the ID card before that person can State agency shall post notices at the use it to obtain benefits. If the house- offices of the coupon issuer of the im- hold does not name an authorized rep- pending closure and may use mass resentative, the State agency shall media or notices with allotments to ad- void that area of the ID card to prevent vise participants about the expected names and signatures being entered at closure of the issuance office. a later date. The ID card may be seri- (2) If closure of the issuer will affect ally numbered. a substantial portion of the caseload or (2) The State agency shall limit a specific geographic area, the State issuance of ID cards to the time of ini- agency shall take whatever action is tial certification, with replacements necessary to maintain participant serv- made only in instances of loss, mutila- ice without interruption. tion, destruction, changes in the per- (3) If a coupon issuer or bulk storage son authorized to obtain coupons, or point is to be closed for noncompliance when the State agency determines that with contractual requirements and al- new ID cards are needed to keep the ternative issuance facilities or systems photographs up-to-date or if the State are not readily available, the State agency changes its ID card format or agency may continue to use the coupon system. Whenever possible, the State issuer or bulk storage point for a lim- agency shall collect the ID card that it ited time. In this situation, the State is replacing. agency shall perform weekly onsite (3) The State agency shall place an erowe on DSK5CLS3C1PROD with CFR reconciliations of coupon issuance. The expiration date on all temporary ID State agency shall continue to actively cards, and on the regular ID cards 891 VerDate Nov<24>2008 13:53 Jan 27, 2010 Jkt 220015 PO 00000 Frm 00901 Fmt 8010 Sfmt 8010 Y:\SGML\220015.XXX 220015 § 274.10 7 CFR Ch. II (1–1–10 Edition) issued to households certified for deliv- arms, ammunition, and other explo- ered meals for a specific period, and to sives. Any household residing in a re- homeless households certified for res- mote section of Alaska which has been taurant meals. determined by FNS to be an area in (4) Specially-marked ID cards shall which food coupons may be used to be issued in the following cir- purchase hunting and fishing equip- cumstances: ment shall have its ID card marked (i) Eligible household members 60 with the letters ''HF''. years of age or over or members who (5) ID cards delivered to households are housebound, physically handi- by mail shall not be mailed in the same capped, or otherwise disabled to the ex- envelope with authorization documents tent that they are unable to ade- or coupons. quately prepare all their meals, and (b) Photo ID cards. (1) Photo ID cards their spouses, may use coupons to pur- shall be issued in those project areas or chase meals prepared for and delivered portions thereof with 100,000 or more to them by a nonprofit meal delivery food stamp participants, except for service authorized by FNS. Any house- those project areas serviced entirely by hold eligible for and interested in using mail issuance or an Electronic Benefit delivered meal services shall have its Transfer system, or where FNS, in con- ID card marked with the letter ''M''. sultation with the Office of the Inspec- (ii) Eligible household members 60 tor General, approves a State agency's years of age or over and their spouses, request for an exemption. FNS shall re- or those receiving SSI and their spond to a State agency's request for spouses, may use coupons issued to exemption within 30 days of its receipt them to purchase meals prepared espe- of the request. cially for them at communal dining fa- (i) FNS shall evaluate the January cilities authorized by FNS for that pur- participation data reported as an at- pose. Any household eligible for and in- tachment to the March Form FNS–388 terested in using communal dining fa- report. Based on the evaluation, FNS cilities in those States or project areas shall notify State agencies at the be- where restaurants are authorized to ac- ginning of each fiscal year of any areas cept food stamps, shall have its ID card that either require or no longer require marked with the letters ''CD''. In areas the use of Photo ID cards. In cases where restaurants are not authorized where an entire State is a single to accept food stamps, the State or project area, FNS shall consult with project area may mark such ID's with the State agency to determine whether the letters ''CD''. Photo IDs should be required in any (iii) Eligible homeless households specific parts of the project area. At may use food stamp benefits to pur- the conclusion of this consultation, chase meals from restaurants author- FNS shall inform the State agency ized by FNS for such purpose. Any whether the use of Photo IDs will be homeless household eligible for, and in- mandated in any parts of the State terested in, using restaurants in those agency, based on the need to protect areas where restaurants are authorized Program integrity, and the cost-effec- to accept food stamp benefits shall tiveness of Photo ID cards. have a specially-marked ID card. The (ii) In cases where a project area State agency shall provide samples of serves between 100,000 and 110,000 par- specially-marked ID cards to author- ticipants, FNS shall inform the State ized restaurants. agency in which the project area is lo- (iv) Eligible households residing in cated that it is prepared to mandate areas of Alaska determined by FNS as the use of Photo IDs in the project areas where access to retail food stores area. FNS shall also inform the State is difficult and which rely substan- agency that it will not mandate use of tially on hunting and fishing for sub- Photo ID's if, within 30 days of being sistence may use all or any part of the notified by FNS that Photo ID's must coupons issued to purchase hunting be used, the State agency demonstrates and fishing equipment such as nets, to FNS that participation in the erowe on DSK5CLS3C1PROD with CFR hooks, rods, harpoons and knives, but project areas has fallen below the may not use coupons to purchase fire- 100,000 participant level in the recent 892 VerDate Nov<24>2008 13:53 Jan 27, 2010 Jkt 220015 PO 00000 Frm 00902 Fmt 8010 Sfmt 8010 Y:\SGML\220015.XXX 220015 Food and Nutrition Service, USDA § 274.10 past, or justifies to FNS why participa- (iii) Households entitled to expedited tion is likely to fall below that level service if the State agency's Photo ID during the next year. card system is incapable of producing a (2) FNS may, at any time, in con- Photo ID card in time for the house- sultation with the Office of the Inspec- hold to participate as required by tor General, designate project areas or § 273.2(i). A Photo ID card shall be portions thereof with less than 100,000 issued to the household prior to participants as requiring the use of issuance of the household's next allot- Photo ID cards if, in reviewing such ment; factors as the level of duplicate (iv) Households certified under the issuances and results of management SSA-food stamp joint processing rules evaluation reviews, the Department de- in § 273.2(k). State agencies shall not termines that the issuance of Photo ID require such households to obtain cards in such areas would be justified. Photo IDs as long as they continue to (3) A State agency may request that be certified for food stamps at SSA of- FNS require that Photo IDs be man- fices. However, a household shall ob- dated throughout either the entire tain a Photo ID if a household member State or specified project areas. FNS or authorized representative reports to shall respond to such requests within a food stamp office for recertification; 30 days of the request and, if the re- and, quest is not approved, FNS shall jus- (v) Residents of drug/alcohol treat- tify its reasons for the disapproval to ment and rehabilitation programs. the State agency. (5) In addition to the general provi- (4) In project areas where issuance of sions in paragraph (a) of this section, Photo ID cards is mandatory, the State Photo ID cards shall include the photo- agency shall issue a Photo ID card at graph of the person who will receive the time of certification to each eligi- the household's issuance; i.e., who will ble household except those listed in either transact the household's author- § 274.10(b)(4). Households exempt from ization document or pick up the house- mandated Photo ID cards shall be hold's allotment. A Photo ID card shall issued ID cards which meet the speci- be signed by only the person pictured fications in paragraph (d) of this sec- on the card, who may be the household tion except that in lieu of a photo- member or authorized representative. graph, the State agency shall annotate Only the person photographed may ob- the cards to show an exception was tain the household's coupons. All granted to the household and that the Photo ID card formats are subject to ID card is valid. The following house- FNS approval. holds are exempt from the Photo ID re- (6) Photo ID cards shall be serially quirement: numbered and laminated after they are (i) Households certified by out-of-of- signed by the person whose photograph fice interviews as specified in appears on the card. ID cards shall also § 273.2(e)(2). However, the State agency include a color photograph of the per- shall replace the non-Photo ID card son designated by the household to ob- issued to such households with a Photo tain coupons and the household's case ID card when the appropriate house- number or other identifying informa- hold member or authorized representa- tion. tive visits the certification office. The (7) A Photo ID card used to receive State agency shall not require any benefits under a welfare or public as- member of such a household to visit sistance program may be adapted for the office exclusively for the purpose of food stamp purposes if it meets the issuing a Photo ID card; specifications contained in this section (ii) Household members whose reli- and can be annotated to indicate food gion does not allow them to be photo- stamp eligibility. graphed. The State agency shall re- (8) The State agency shall provide a quire such a household to provide a household with a reasonable oppor- signed statement to the effect that the tunity to obtain a food stamp Photo ID erowe on DSK5CLS3C1PROD with CFR members' religious beliefs do not allow card in any project area where its use them to be photographed; is mandated. 893 VerDate Nov<24>2008 13:53 Jan 27, 2010 Jkt 220015 PO 00000 Frm 00903 Fmt 8010 Sfmt 8010 Y:\SGML\220015.XXX 220015 § 274.10 7 CFR Ch. II (1–1–10 Edition) (i) A household required to have a designating the emergency authorized Photo ID card shall not participate representative and attesting to the sig- until such time as a household member nature of the emergency authorized or a designated authorized representa- representative. The designation may be tive obtains such a card. If a des- on the ID card or authorization docu- ignated authorized representative does ment or a separate form. The house- not obtain the required Photo ID, the hold shall not be required to travel to household may designate a household a food stamp office to execute an emer- member or another authorized rep- gency designation. The emergency au- resentative to be photographed. thorized representative may present a (ii) If the person whose photograph separately written and signed state- appears on the ID is unable to travel to ment from the head of the household or the issuance point to obtain a par- his or her spouse, authorizing the ticular allotment, the household may issuance of the certified household's use the emergency authorized rep- food stamps to the authorized rep- resentative procedures provided in resentative. The emergency represent- § 274.5 and in paragraph (c) of this sec- ative shall sign the written statement tion. (9) State agencies which have the ca- from the household and present the pability may develop systems to issue statement and the household ID card more than one household member a to obtain the allotment. A separate Photo ID card. These systems shall en- written designation is required each sure that the safeguards provided by time an emergency representative is Photo ID cards, as specified in this sec- authorized. tion, are maintained. (2) In any issuance system, the cash- (10) If a mutilated or altered Photo ier shall compare the signatures on the ID card is presented at the issuance issuance document and on the ID card. point, the household shall obtain a re- If they do not match, issuance shall placement Photo ID card prior to not be made. issuance. (i) If the household is required by (11) A household shall be entitled to these regulations to present a Photo ID unobtained benefits, lost as a result of card, coupons shall be issued only when being unable to obtain a particular al- the person presenting the authoriza- lotment, if the issuance month elapses tion document or requesting the cou- between the time the household re- pons is pictured on the ID card. The quested a replacement Photo ID card cashier shall write the serial number of and the delivery of that card to the the Photo ID card on the authorization household. or issuance document. (12) FNS may waive one or more of (ii) If the Photo ID card appears to be the requirements in this section if a mutilated or altered, the issuing agent State agency can demonstrate to FNS shall not issue the coupons, but shall that its alternate ID card or system require the household to obtain a re- will provide adequate safeguards placement ID card from the State against fraudulent and/or duplicate issuances. agency. (c) Emergency authorized representative (d) Eligible food. A household member and recipient identification. State agen- should sign each coupon book issued to cies shall develop a method by which a the household. The coupons may be household may designate an emergency used only by the household, or other authorized representative to obtain the persons the household selects, to pur- household's allotment when none of chase eligible food for the household, the persons specified on the ID is avail- which includes, for certain households able. residing in certain designated areas of (1) At a minimum, the method devel- Alaska, the purchase of hunting and oped by the State agency shall require fishing equipment with coupons. a document with the signature of the Uncanceled and unendorsed coupons of emergency authorized representative $1 denomination, returned as change by erowe on DSK5CLS3C1PROD with CFR as well as a place for the household authorized retail food stores, may be member named on the ID card to sign presented as payment for eligible food. 894 VerDate Nov<24>2008 13:53 Jan 27, 2010 Jkt 220015 PO 00000 Frm 00904 Fmt 8010 Sfmt 8010 Y:\SGML\220015.XXX 220015 Food and Nutrition Service, USDA § 274.11 All other detached coupons may be ac- (i) Prior payment prohibition. Coupons cepted only if accompanied by the cou- shall not be used to pay for any eligible pon book which bears the same serial food purchased prior to the time at number as the detached coupons. It is which the coupons are presented to au- the right of the household or the au- thorized retail food stores or meal serv- thorized representative to detach the ices. Neither shall coupons be used to coupons from the book. pay for any eligible food in advance of (e) Meals-on-wheels. Eligible house- the receipt of food, except when prior hold members 60 years of age or over or payment is for food purchased from a members who are housebound, phys- nonprofit cooperative food purchasing ically handicapped, or otherwise dis- venture. abled to the extent that they are un- (j) Cash change. When change in an able to adequately prepare all their amount less than $1 is required in a meals, and their spouses, may use cou- coupon transaction, the household pons to purchase meals prepared for shall receive the change in cash not to and delivered to them by a nonprofit exceed 99 cents. However, in the case of meal delivery service authorized by homeless food stamp households, nei- FNS. ther cash change nor credit slips shall (f) Residents of certain institutions. (1) be returned for coupons used for the Members of eligible households who are purchase of prepared meals from au- narcotics addicts or alcoholics and who thorized homeless meal providers. Such regularly participate in a drug or alco- meal providers may use uncancelled holic treatment rehabilitation program and unmarked $1 coupons which were may use food stamp benefits to pur- previously accepted for meals served to chase food prepared for them during food stamp recipients when change is the course of such program by a pri- required for $5 and $10 coupons. How- vate nonprofit organization or institu- ever, in the case of homeless food tion or publicly operated community stamp households, neither cash change mental health center which is author- nor credit slips shall be returned for ized by FNS to redeem benefits in ac- food stamps used for the purchase of cordance with §§ 278.1 and 278.2(g) of prepared meals from authorized public this chapter. and private nonprofit homeless meal (2) Eligible residents of a group living providers. Such meal providers may arrangement may use food stamp bene- use the lowest denomination coupons fits issued to them to purchase meals that are uncancelled and unmarked for prepared especially for them at a group making change in food stamp trans- living arrangement which is authorized actions. Restaurants which are author- by FNS to redeem benefits in accord- ized by FNS under § 278.1 to provide ance with §§ 278.1 and 278.2(g) of this meals to homeless food stamp recipi- chapter. ents shall return cash change to such (3) Residents of shelters for battered recipients in food stamp transactions women and children as defined in when the amount of change due is less § 278.1(g) of this chapter may use their than one dollar. If change of one dollar food stamp benefits to purchase meals prepared especially for them at a shel- or more is due, uncancelled and un- ter which is authorized by FNS to re- marked one dollar coupons shall also deem benefits in accordance with be used for change. §§ 278.1 and 278.2(g) of this chapter. [54 FR 7004, Feb. 15, 1989, as amended at 54 (g) Homeless food stamp households. FR 51352, Dec. 15, 1989; 57 FR 11249, Apr. 1, Homeless food stamp households may 1992; 61 FR 53600, Oct. 15, 1996; Amdt. 397, 70 use their food stamp benefits to pur- FR 72354, Dec. 5, 2005] chase prepared meals from authorized homeless meal providers. § 274.11 Issuance and inventory record (h) Use of ID cards. Upon request, the retention, and forms security. household or the authorized represent- (a) Availability of records. The State ative shall present the household's ID agency shall maintain issuance, inven- card to the retail food store or meal tory, reconciliation, and other ac- erowe on DSK5CLS3C1PROD with CFR service when exchanging food coupons countability records for a period of for eligible food. three years as specified in § 272.1(f) of 895 VerDate Nov<24>2008 13:53 Jan 27, 2010 Jkt 220015 PO 00000 Frm 00905 Fmt 8010 Sfmt 8010 Y:\SGML\220015.XXX 220015 § 274.12 7 CFR Ch. II (1–1–10 Edition) this chapter. This period may be ex- § 274.12 Electronic Benefit Transfer tended at the written request of FNS. issuance system approval stand- (1) Issuance, inventory, reconcili- ards. ation, and other accountability records (a) General. This section establishes shall include all Agency, State, and rules for the approval, implementation local forms involved in the State agen- and operation of Electronic Benefit cy's receipt, storage, handling, Transfer (EBT) systems for the Food issuance, and destruction of coupons Stamp Program as an alternative to completed by contract agents or any issuing food stamp coupons. By Octo- other individuals or entities involved ber 1, 2002, State agencies must have in issuance or inventory, as well as EBT systems implemented statewide, those completed by the State agency. unless the Secretary provides a waiver (2) In lieu of the records themselves, for a State agency that faces unusual easily retrievable microfilm, micro- barriers to implementing an EBT sys- fiche, or computer tapes which contain tem. In general, these rules apply to the required information may be main- both on-line and off-line EBT systems, tained. unless stated otherwise herein, or un- (b) Control of issuance documents. The less FNS determines otherwise for off- State agency shall control all issuance line systems during the system plan- documents which establish household ning and development process. eligibility while the documents are (b) Program administration. (1) The transferred and processed within the State food stamp agency shall submit State agency. The State agency shall Planning and Implementation Ad- use numbers, batching, inventory con- vanced Planning Documents (APDs) for trol logs, or similar controls from the FNS approval in accordance with the point of initial receipt through the requirements of § 277.18 of this chapter issuance and reconciliation process. and this section for development and The State agency shall also ensure the implementation of initial and subse- security and control of authorization quent EBT systems. The State agency documents in transit from the manu- shall implement EBT systems in a facturer to the State agency. pilot area prior to expansion Statewide (c) Accountable documents. (1) HIR or to other project areas. The areas of cards, authorization documents, and pilot operation and full-scale operation mandated Photo ID cards shall be con- shall be identified in the Planning APD sidered accountable documents. The when submitted to FNS for approval. State agency shall provide the fol- (2) The State agency shall be respon- lowing minimum security and control sible for the coordination and manage- procedures for these documents: ment of the EBT system. The Sec- (i) Preprinted serial numbers; retary may suspend or terminate some (ii) Secure storage; or all EBT system funding or withdraw (iii) Access limited to authorized per- approval of the EBT system from the sonnel; State agency upon a finding that the (iv) Bulk inventory control records; State agency or its contracted rep- resentative has failed to comply with (v) Subsequent control records main- the requirements of this section and/or tained through the point of issuance or § 277.18 of this chapter. use, and (3) All EBT systems within a State (vi) Periodic review and validation of must follow a singular EBT APD and inventory controls and records by par- system architecture submitted by the ties not otherwise involved in main- State agency. Multiple EBT designs taining control records. will be acceptable only if: such designs (2) For notices of change which ini- can be fully justified by the State tiate, update or terminate the master agency; the system differences are issuance file, and blank ID cards, the transparent to participating house- State agency shall, at a minimum, pro- holds that move within the State; oper- vide secure storage and shall limit ac- ating costs are the same or lower; and cess to authorized personnel. the ability of the different systems to erowe on DSK5CLS3C1PROD with CFR [54 FR 7004, Feb. 15, 1989, as amended at 60 readily communicate (transaction FR 20183, Apr. 25, 1995] interchange) with one another. 896 VerDate Nov<24>2008 13:53 Jan 27, 2010 Jkt 220015 PO 00000 Frm 00906 Fmt 8010 Sfmt 8010 Y:\SGML\220015.XXX 220015 Food and Nutrition Service, USDA § 274.12 (4) The State agency shall indicate (A) The types of testing to be per- how it plans to incorporate additional formed; programs into the EBT system if it an- (B) The organization of the test team ticipates the addition of other public and associated responsibilities, test assistance programs concurrent with database generation, test case develop- or after implementation of the Food ment, test schedule, and the docu- Stamp Program EBT system. The mentation of test results. Acceptance State agency shall also consult with testing shall include functional re- the State agency officials responsible quirements testing, error condition for administering the Special Supple- handling and destructive testing, secu- mental Nutrition Program for Women, rity testing, recovery testing, controls Infants and Children (WIC) prior to testing, stress and throughput perform- submitting the Planning APD for FNS ance testing, and regression testing. approval. FNS may require that any or all of (c) Pilot project approval require- these tests be repeated in instances ments—(1) EBT planning APD. The where significant modifications are State agency shall comply with the made to the system after these tests two-stage approval process for APDs in are initially completed or if problems submitting an EBT system proposal to that surfaced during initial testing FNS for approval. The Planning APD warrant a retest; shall contain the requirements speci- (C) A ''what-if'' component shall also fied under § 277.18(d)(1) of this chapter, be included to permit the opportunity including a brief letter of intent, plan- for observers and participants to test ning budget, cost allocation plan, and possible scenarios in a free-form man- schedule of activities and deliverables. ner. (2) EBT Implementation APD. The EBT (D) The Department reserves the Implementation APD shall include the right to participate and conduct inde- completed documents required under pendent testing as necessary during § 277.18 of this chapter for Implementa- the Acceptance testing and appropriate tion APDs, where appropriate. In addi- events during system design, develop- tion, EBT Implementation APDs shall ment, implementation and operation. include the detailed pilot project site (iii) An acceptance test report. The description and expanded site descrip- State agency shall provide a separate tion, as described in this paragraph. report after the completion of the ac- Also, the State agency shall commit to ceptance test only in instances where completing and submitting the fol- FNS is not present at the testing or lowing documents for FNS approval when serious problems are uncovered and obtaining such approval prior to during the testing that remain unre- issuance of benefits to eligible house- solved by the end of the test session. holds in the pilot project area: The report shall summarize the activi- (i) Functional demonstration. A func- ties, describe any discrepancies, de- tional demonstration of the functional scribe the proposed solutions to dis- requirements prescribed in paragraph crepancies, and the timetable for their (f) of this section in combination with retesting and completion. In addition, the system components described by the report shall contain the State the approved System Design is rec- agency's recommendations regarding ommended in order to identify and re- implementation of the EBT system in solve any problems prior to acceptance the pilot site. testing. The Department reserves the (iv) A prototype food retailer agree- right to participate in the Functional ment. The State agency shall enter an Demonstration if one is conducted. agreement with each food retailer that (ii) An acceptance test plan. The Ac- complies with the requirements of ceptance Test Plan for the pilot project paragraph (g)(6) of this section. shall describe the methodology to be (v) A pilot project implementation plan. utilized to verify that the EBT system The pilot project implementation plan complies with Food Stamp Program re- shall include the following: quirements and System Design speci- (A) A description of the tools, proce- erowe on DSK5CLS3C1PROD with CFR fications. At a minimum, the Accept- dures, detailed schedules, and resources ance Test Plan shall address: needed to implement the pilot project; 897 VerDate Nov<24>2008 13:53 Jan 27, 2010 Jkt 220015 PO 00000 Frm 00907 Fmt 8010 Sfmt 8010 Y:\SGML\220015.XXX 220015 § 274.12 7 CFR Ch. II (1–1–10 Edition) (B) The equipment acquisition and tion no later than one month after installation requirements, ordering completion of pilot operations. schedules, and system and component (d) Expansion requirements. The pilot testing; and expansion schedule must be delin- (C) A phase-in strategy which per- eated in the State agency's approved mits a measured and orderly transition implementation plan. As part of the to EBT. In describing this strategy, the plan, the State agency must indicate a plan shall address training schedules suitable pilot area to serve as the basis that avoid disruption of normal shop- of the three-month analysis and report- ping patterns and operations of partici- ing; however, expansion can occur si- pating households and food retailers. multaneously with pilot operation. Training of food stamp households, Submission of an Advanced Planning State agency personnel and retailers Document Update to request FNS ap- and/or their trainers shall be coordi- proval to implement and operate the nated with the installation of equip- EBT system in areas beyond the pilot ment in retail stores; area is only required in instances (D) A description of on-going tasks where there are substantial changes to associated with fine-tuning the system the implementation plan. However, if and making any corrective actions nec- significant problems arise during the essary to meet contractual require- pilot period or expansion, the Depart- ments. The description shall also ad- ment can require that roll-out be sus- dress those tasks associated with on- pended until such problems are re- going training, document updates, solved. equipment maintenance, on-site sup- (e) Functional requirements. The State port and system adjustments, as need- agency shall ensure that the EBT sys- ed to meet Food Stamp Program re- tem is capable of performing the fol- quirements; and, lowing functional requirements prior to implementation: (E) A plan for orderly phase-out of (1) Authorizing household benefits. (i) the pilot project if it is demonstrated Issuing and replacing EBT cards to eli- during the pilot project operations that gible households; the system is not acceptable. (ii) Permitting eligible households to (vi) A contingency plan. The State select a personal identification number agency shall submit a written contin- (PINs) at least four digits in length; gency plan for FNS approval. The con- (iii) Establishing benefit cards and tingency plan shall contain informa- accounts with the central computer tion regarding the back-up issuance database; system that will be activated in the (iv) Maintaining the master house- event of an emergency shut-down hold issuance record file data and cur- which results in short-term or ex- rent authorization information; tended system inaccessibility, or total (v) Training households and other discontinuation of EBT system oper- users in system usage; ations. The contingency plan shall be (vi) Authorizing benefit delivery; incorporated into the State system se- (vii) Posting benefits to each house- curity plan after FNS approval as pre- hold's account for regular and supple- scribed at § 277.18(p) of this chapter. mental issuances; (3) EBT Implementation APD Budget. (viii) Providing households with ac- The Implementation APD budget shall cess to information on benefit avail- be prepared and submitted for FNS ap- ability; proval in accordance with the require- (ix) Ensuring the privacy of house- ments of paragraph (k) of this section hold data and providing benefit and and § 277.18(d)(2) of this chapter. data security; (4) Pilot project reporting. The State (x) Inventorying and securing ac- agency is required to report to FNS all countable documents; and issues that arise during the pilot pe- (xi) Zeroing out benefit accounts and riod. Reports to FNS shall be provided other account authorization activity. as problems occur. In instances where (2) Providing food benefits to house- erowe on DSK5CLS3C1PROD with CFR the State agency must investigate the holds. (i) Verifying the identity of au- issue, FNS must receive the informa- thorized households or authorized 898 VerDate Nov<24>2008 13:53 Jan 27, 2010 Jkt 220015 PO 00000 Frm 00908 Fmt 8010 Sfmt 8010 Y:\SGML\220015.XXX 220015 Food and Nutrition Service, USDA § 274.12 household representatives at issuance (i) Convey retailer authorization in- terminals or POS; formation provided by FNS to the sys- (ii) Verifying the PIN and/or PIN off- tem operator using the Retailer Elec- set, primary account number (PAN), tronic Benefit Transfer (EBT) Data Ex- terminal identification number and re- change (REDE) system. The State tailer identification number; agency must access the REDE files to (iii) Determining the sufficiency of ensure that the FNS retailer files used the household's account balance in to authorize valid EBT Food Stamp order to debit or credit household ben- transactions are updated on a daily efit accounts at the point-of-sale; basis. Follow-up on actions taken re- (iv) Sending messages authorizing or garding any disqualification or with- rejecting purchases; drawal by an authorized food retailer (v) Providing back-up purchase pro- from the Food Stamp Program must cedures when the system is unavail- occur within two business days after able; receipt; (vi) Ensuring that benefits are avail- (ii) Add newly authorized food retail able and carried over from month-to- stores or third party processors to the month. EBT system as prescribed under para- (vii) Converting EBT benefits to cou- graph (g)(1)(ii) of this section. pons in accordance with paragraph (iii) Ensure that only currently au- (f)(6) of this section; and thorized retailers can access the sys- (viii) Responding to issuance prob- tem; lems in a timely manner. (iv) Monitor food retailers to ensure (3) Crediting retailers and financial in- that equipment deployment complies stitutions for redeemed benefits. (i) with paragraph (g)(4) of this section; Verifying electronic transactions flow- (v) Ensure that equipment and sup- ing to or from participating retailers' plies are maintained in working order bank accounts; for retail stores equipped by the State (ii) Creating and maintaining a file agency or its contractor. Equipment containing the individual records of shall be replaced or repaired within 48 EBT transactions; hours; (iii) Totalling all credits accumu- (vi) Ensure that retail store employ- lated by each retailer; ees are trained in system operation (iv) Providing balance information to prior to implementation. Retailer retailers or third party processors from training shall be offered by the State individual POS terminals, as needed; agency and include the provision of ap- (v) Providing each retailer informa- propriate written and program specific tion on total deposits in the system on materials. Retailers have the option to a daily basis; waive instruction by the State agency (vi) Preparing a daily tape in a Na- if they desire. State agencies shall di- tional Automated Clearinghouse for- rect retailers to confirm in writing mat or other process approved by FNS that they are waiving their option to with information on benefits redeemed training; for each retailer and in summary; (vii) Provide on-line read-only access (vii) Transmitting the automated to State EBT systems for compliance clearinghouse (ACH) tape to a financial investigations. The State agency is re- institution for transmission through quired to provide software and tele- the ACH or other method approved by communications capability as nec- FNS; essary to FNS Compliance Branch Area (viii) Transferring the information on offices, Regional offices and Field of- the ACH tape or other process approved fices so that FNS compliance inves- by FNS containing daily redemption tigators, other appropriate FNS per- activity of each retailer to the FNS sonnel and investigators from the De- Minneapolis Computer Support Center partment's Office of Inspector General at least once weekly. Transmittal may have access to the system in order to be by tape, disc, remote job entry or conduct investigations of program other means acceptable to FNS. abuse and alleged violations; erowe on DSK5CLS3C1PROD with CFR (4) Managing retailer participation. The (viii) Ensure that FNS compliance State agency shall: investigators and investigators from 899 VerDate Nov<24>2008 13:53 Jan 27, 2010 Jkt 220015 PO 00000 Frm 00909 Fmt 8010 Sfmt 8010 Y:\SGML\220015.XXX 220015 § 274.12 7 CFR Ch. II (1–1–10 Edition) the Department's Office of Inspector from the system host computer, to the General have access to EBT cards and switch, to the third party processors, accounts that are updated as necessary to a store's host computer or point of to conduct food stamp investigations. sale (POS) device. These adjustments (f) Household participation—(1) Trans- may occur after the availability date action limits. No minimum dollar and may result in either a debit or amount per transaction nor maximum credit to the household. limit on the number of transactions (A) Client-initiated adjustments. The shall be established. In addition, no State agency must act on all requests transaction fees shall be imposed on for adjustments made by client house- food stamp households utilizing the holds within 90 calendar days of the EBT system to access their benefits. error transaction. The State agency (2) Access to balances. Households has 10 business days from the date the shall be permitted to determine their household notifies it of the error to in- food stamp account balances without vestigate and reach a decision on an making a purchase or standing in a adjustment and move funds into the checkout line. The State agency shall client account. This timeframe also ap- ensure that the EBT system is capable plies if the State agency or entity of providing a transaction history for a other than the household discovers a period of up two calendar months to system error that requires a credit ad- households upon request. justment to the household. Business (3) Transaction receipts. Households days are defined as calendar days other shall be provided printed receipts at than Saturdays, Sundays, and Federal the time of transaction. At a minimum holidays. this information shall: (B) Retailer-initiated adjustments. The (i) State the date, merchant's name State agency must act upon all adjust- and location, transaction type, trans- ments to debit a household's account action amount and remaining balance no later than 10 business days from the for the food stamp account; date the error occurred, by placing a (ii) Comply with the requirements of hold on the adjustment balance in the 12 CFR part 205 (Regulation E) in addi- household's account. If there are insuf- tion to the requirements of this sec- ficient benefits to cover the entire ad- tion; and justment, a hold shall be placed on any (iii) Identify the food stamp house- remaining balance that exists, with the hold member's account number (the difference being subject to availability PAN) using a truncated number or a only in the next future month. The coded transaction number. The house- household shall be given, at a min- hold's name shall not appear on the re- imum, adequate notice in accordance ceipt except when a signature is re- with § 273.13 of this chapter. The notice quired when utilizing a manual trans- must be sent at the time the initial action voucher. hold is attempted on the household's (4) Issuance of benefits. State agencies current month's remaining balance, shall establish an availability date for clearly state the full adjustment household access to their benefits and amount, and advise the household that inform households of this date. any amount still owing is subject to (i) The State agency may make ad- collection from the household's next justments to benefits posted to house- future month's benefits. hold accounts after the posting process (1) The household shall have 90 days is complete but prior to the avail- from the date of the notice to request ability date for household access in the a fair hearing. event benefits are erroneously posted. (2) Should the household dispute the (ii) A State agency shall make ad- adjustment and request a hearing with- justments to an account to correct an in 10 days of the notice, a provisional auditable, out-of-balance settlement credit must be made to the household's condition that occurs during the re- account by releasing the hold on the demption process as a result of a sys- adjustment balance within 48 hours of tem error. A system error is defined as the request by the household, pending erowe on DSK5CLS3C1PROD with CFR an error resulting from a malfunction resolution of the fair hearing. If no re- at any point in the redemption process: quest for a hearing is made within 10 900 VerDate Nov<24>2008 13:53 Jan 27, 2010 Jkt 220015 PO 00000 Frm 00910 Fmt 8010 Sfmt 8010 Y:\SGML\220015.XXX 220015 Food and Nutrition Service, USDA § 274.12 days of the notice, the hold is released households that their card is lost or on the adjustment balance, and this stolen. amount is credited to the retailer's ac- (v) The State agency may impose a count. If there are insufficient funds replacement fee by reducing the available in the current month to cover monthly allotment of the household re- the full adjustment amount, the hold ceiving the replacement card; however, may be maintained and settled at one the fee may not exceed the cost to re- time after the next month's benefits place the card. If the State agency in- become available. tends to collect the fee by reducing the (iii) The appropriate management monthly allotment, it must follow FNS controls and procedures for accessing reporting procedures for collecting pro- benefit accounts after the posting shall gram income. State agencies currently be instituted to ensure that no unau- operating EBT systems must inform thorized adjustments are made in ac- FNS of their proposed collection oper- cordance with paragraph (f)(7)(iii) of ations. State agencies in the process of this section. developing an EBT system must in- (5) Issuance and replacement of cards or clude the procedure for collection of PINs. (i) The State agency shall permit the fee in their system design docu- food stamp households to select their ment. All plans must specify how the Personal Identification Number (PIN). State agency intends to account for PIN assignment procedures shall be card replacement fees and include iden- permitted in accordance with industry tification of the replacement thresh- standards as long as PIN selection is old, frequency, and circumstances in available to clients if they so desire which the fee shall be applicable. State and clients are informed of this option. agencies may establish good cause poli- (ii) In general, the State agency shall cies that provide exception rules for replace EBT cards within two business cases where replacement card fees will days following notice by the household not be collected. to the State agency that the card has (6) Benefit conversion. (i) Households been lost or stolen. In cases where the leaving an EBT State must be able to State agency is using centralized card use their electronic benefits upon relo- issuance, replacement can be extended cation. States must provide a means to take place within up to five calendar for a client to be able to use their bene- days. In all instances, the State agency fits upon relocation. A State agency must ensure that clients have in hand may convert electronic benefits to an active card and PIN with benefits paper coupons if a household is relo- available on the card, within the time cating to a State that is not interoper- frame the State agency has identified able and where electronic benefits are for card replacement. not portable from the household's cur- (iii) The State agency shall ensure rent State of residence, or assist cli- that a duplicate account is not estab- ents in finding an authorized retail lo- lished which would permit households cation where out-of-State electronic to access more than one account in the benefits can be used. At State agency system. option, a household entering an EBT (iv) An immediate hold shall be area may be required to spend any re- placed on accounts at the time notice maining food coupons prior to utilizing is received from a household regarding the EBT system to access their bene- the need for card or PIN replacement. fits. Conversion shall occur within one The State agency shall implement a re- business day following notice to the porting system which is continually State agency by the household when operative. Once a household reports inventories of food coupons are stored that their EBT card has been lost or at local agency locations. Conversion stolen, the State agency shall assume shall occur within three business days liability for benefits subsequently if the State maintains coupon inven- drawn from the account and replace tories in a central location. any lost or stolen benefits to the (ii) Requests for conversions to food household. The State agency or its coupons solely for purposes of shopping erowe on DSK5CLS3C1PROD with CFR agent shall maintain a record showing outside the project area shall be pro- the date and time of all reports by hibited. However, the State agency 901 VerDate Nov<24>2008 13:53 Jan 27, 2010 Jkt 220015 PO 00000 Frm 00911 Fmt 8010 Sfmt 8010 Y:\SGML\220015.XXX 220015 § 274.12 7 CFR Ch. II (1–1–10 Edition) may allow benefits in an EBT account ly issuance reporting requirements pre- to be converted to coupons for short- scribed under § 274.4 of this part. term absences from the EBT system (iii) Procedures shall be established area for family emergencies or similar to permit the appropriate managers to isolated occurrences. adjust benefits that have already been (iii) Splitting food stamp benefits be- posted to a benefit account prior to the tween food coupons and an electronic household accessing the account; or, benefit access card at the time of after an account has become dormant issuance shall not be permitted. or the household has not used the funds (iv) At State agency option, a limit which remain after conversion. The may be imposed on the number of con- procedures shall also be applicable to versions per household that may occur removing stale accounts for off-line annually for the purposes prescribed storage of benefits or when the benefits under paragraph (f)(6)(ii) of this sec- are expunged. Whenever benefits are tion. A limit on conversions to food expunged or stored off-line, the State coupons shall not be imposed on house- agency shall document the date, holds moving from the EBT area. amount of the benefits and storage lo- (v) The State agency shall develop cation in the household case file. procedures for conversion whenever a (8) Timely benefit availability. The household has left a State. These pro- State agency shall ensure that the EBT cedures shall not conflict with mailing system complies with the expedited restrictions regarding Authorization to service benefit delivery standard and Participate documents or other author- the normal application processing izing documents. standards prescribed by §§ 273.2 and (vi) The State agency shall round 274.2 of this chapter. EBT benefits remaining in an account (9) Access to retail stores. The EBT sys- down to the nearest dollar amount tem shall provide for minimal disrup- suitable for coupon issuance. The State tion of access to and service in retail agency shall require the household to stores by eligible households. The EBT spend any remaining balance that can- system shall not result in a significant not be converted to food coupons. If a household fails to spend the remaining increase in the cost of food or cost of benefits within one week after conver- transportation to authorized food re- sion occurs, the State agency shall ex- tail stores for food stamp households. punge the benefits from the account Checkout lanes equipped with POS de- and report the adjustment to the De- vices shall be made available to Food partment. Stamp households during all retail (7) Stale account handling. Stale ben- store hours of operation. efit accounts are those food stamp ben- (10) Household training. The State efit accounts which are not accessed agency shall provide training to each for three months or longer. household prior to implementation and (i) If EBT accounts are inactive for as needed during ongoing operation of three months or longer, the State the EBT system. Training functions for agency may store such benefits off- an EBT system may be incorporated line. into certification procedures. At a min- (A) Benefits stored off-line shall be imum, the household training shall in- made available upon reapplication or clude: re-contact by the household; (i) Content which will familiarize (B) The State agency shall attempt each household with the provisions of to notify the household of this action paragraphs (f)(1) through (f)(9) of this before storage of the benefits off-line section; and describe the steps necessary to (ii) Hands-on experience in the use of bring the benefits back on-line; the EBT equipment must be available (ii) The State agency shall expunge for households that request it or dem- benefits that have not been accessed by onstrate a need for that kind of train- the household after a period of one ing; year. Issuance reports shall reflect the (iii) Notification to the household of erowe on DSK5CLS3C1PROD with CFR adjustment to the State agency the procedures for manual transactions issuance totals to comply with month- and re-presentation; 902 VerDate Nov<24>2008 13:53 Jan 27, 2010 Jkt 220015 PO 00000 Frm 00912 Fmt 8010 Sfmt 8010 Y:\SGML\220015.XXX 220015 Food and Nutrition Service, USDA § 274.12 (iv) The appropriate utilization and computer or hotline number to log the security of the Personal Identification transaction and obtain an authoriza- Number; tion number. If authorization cannot (v) Each household's responsibilities be obtained before or at the time of for reporting loss or damage to the purchase, the retailer assumes the risk EBT card and who to report them to, for sufficient benefits being available both during and outside business hours. in the household's account. Any alter- Information on a 24 hour hotline tele- nate method cannot be burdensome on phone number shall be provided to each either the household or the retailer, household during training; and it must include acceptable privacy (vi) Written materials and/or other and security features. Such systems information, including the specific shall only be available to retailers that rights to benefits in an EBT system, cannot be equipped with a POS ter- shall be provided as prescribed under 7 minal at the time of sale. CFR 272.4(b) for bilingual households (ii) Newly authorized retailers shall and for households with disabilities. have access to the EBT system within Written materials shall be prepared at two weeks after the receipt of the FNS an educational reading level suitable authorization notice. However, when- for food stamp households; ever a retailer chooses to employ a (vii) Information on the signs or third party processor to drive its ter- other appropriate indicators located in minals or elects to drive its own termi- checkout lanes that enable the house- nals, access to the system shall be ac- hold to identify lanes equipped to ac- complished within a 30 day period or a cept EBT cards. mutually agreed upon time to enable (viii) Disclosure information regard- the third party interface specifications ing adjustments and a household's and any State required functional cer- rights to notice, fair hearings, and pro- tification to be performed by the State visional credits. The disclosure must agency and/or its contractor. also state where to call to dispute an (2) Authorized retailers shall not be adjustment and request a fair hearing. required to pay costs essential to and State agencies that have already im- directly attributable to EBT system plemented EBT shall have one year in operations as long as the equipment or which to grandfather adjustment dis- services are provided by the State closure into their training materials. agency or its contractor and are uti- (g) Retailer participation. (1) All au- lized solely for the Food Stamp Pro- thorized retailers must be afforded the gram. In addition, if Food Stamp Pro- opportunity to participate in the EBT gram equipment is deployed under con- system. An authorized food retailer tract to the State agency, the State shall not be required to participate in agency may, with USDA approval, an EBT system. share appropriate costs with retailers (i) Retailers who do not have imme- if the equipment is also utilized for diate access to telephones at the time commercial purposes. The State agen- of purchase shall be accommodated by cy may choose to charge retailers rea- an alternative system (e.g., manual sonable fees in the following cir- vouchers with preliminary or delayed cumstances: telephone verification) for redeeming (i) Cost for the replacement of lost, food sales to eligible food stamp cus- stolen or damaged equipment; tomers. These retailers include sta- (ii) The cost of materials and supplies tionary food stores which opt to make for POS terminals not provided by the home deliveries to food stamp house- State agency; holds, house-to-house trade routes (iii) Telecommunication costs for all which operate on standing orders from non-EBT use by retailers when lines customers, e.g. milk and bread delivery are provided by the State agency. In routes, food buying cooperatives au- addition, State agencies may remove thorized to participate as well as other phone lines from retailers in instances food retailers authorized under § 278.1 where there is significant misuse of the of this chapter. Prior to delivery or lines. erowe on DSK5CLS3C1PROD with CFR upon returning to the store, the re- (3) The State agency shall ensure tailer shall telephone the EBT central that a sufficient number of authorized 903 VerDate Nov<24>2008 13:53 Jan 27, 2010 Jkt 220015 PO 00000 Frm 00913 Fmt 8010 Sfmt 8010 Y:\SGML\220015.XXX 220015 § 274.12 7 CFR Ch. II (1–1–10 Edition) food retailers have agreed to partici- dering the EBT system area, the State pate throughout the area in which the agency and food retailer shall nego- EBT system will operate to ensure that tiate a mutually agreed level of ter- eligible food stamp households will not minal deployment up to the number of suffer a significant reduction in their lanes per store. The State agency may choice of retail food stores and that a consult with the appropriate FNS field sufficient number of retail food stores office in order to determine the pre- serving minority language populations vious food stamp redemption activity are participating. that could be utilized in determining (4) The EBT system shall be imple- the initial number of terminals to de- mented and operated in a manner that ploy in newly authorized retailers or maintains equal treatment for food border stores. The State agency shall stamp households in accordance with examine household shopping patterns § 278.2(b) of this chapter. The following in the EBT operating area in order to requirements for the equal treatment establish the needs for border store of food stamp households shall directly equipment. The need to deploy equip- apply to EBT systems: ment outside the State is limited to (i) Retailers shall not establish spe- neighboring States that are not inter- cial checkout lanes which are only for operable due to exemptions for techno- food stamp households or welfare cus- logical barriers or temporary waivers. tomers. If special lanes are designated State agencies will also need to make for the purpose of accepting other elec- accommodations for border stores in tronic debit or credit cards and/or interoperable States that are deemed other payment methods such as necessary for client access. To do so, checks, food stamp customers with State agencies must ensure that proce- EBT cards may also be assigned to dures are in place to process manual such lanes as long as other commercial vouchers in instances when the system customers are assigned there as well. is down or for those retailers that do (ii) POS terminals shall be deployed not have POS equipment. Redemption as follows in EBT systems requiring information shall remain confidential. food stamp households to participate: (D) Any food retailer shall be able to (A) For an authorized food retail submit further evidence that it war- store with food stamp benefit redemp- tion amounting to 15 percent or more rants additional terminals after the of total food sales, all checkout lanes initial POS terminals are deployed. shall be equipped; Food stamp households may also sub- (B) For an authorized food retail mit evidence to the State agency that store with Food Stamp benefit redemp- additional POS terminals are needed. tions representing less than 15 percent State agencies may provide retailers of total food sales, supermarkets shall, with additional terminals above the at a minimum, receive one terminal for minimum number required by this every $11,000 in monthly redemption paragraph at customer service booths activity up to the number of lanes per or other locations if appropriate. store. All other food retailers shall re- (5) The State agency shall ensure ceive one terminal for every $8,000 in that the EBT system provides credits monthly redemption activity up to the to the financial institution holding the number of lanes per store. However, a accounts for retailers or third party State agency may utilize an alter- processors within two business days of native deployment formula that per- the daily cut-over period for retailer mits equipment deployment at higher settlement. The cut-over period is the levels than required by this paragraph time of day established by the system up to the number of lanes in each in which a transaction day is estab- store. The State agency shall review lished for settlement and reconcili- terminal deployment on a yearly basis ation. and shall be authorized to remove ex- (6) The State agency shall enter into cess terminals if actual redemption ac- an agreement with each authorized tivity warrants a reduction. food retailer. The retailer agreement erowe on DSK5CLS3C1PROD with CFR (C) For newly authorized food retail- shall describe the terms and conditions ers and authorized food retailers bor- of participation in the Food Stamp 904 VerDate Nov<24>2008 13:53 Jan 27, 2010 Jkt 220015 PO 00000 Frm 00914 Fmt 8010 Sfmt 8010 Y:\SGML\220015.XXX 220015 Food and Nutrition Service, USDA § 274.12 EBT system. At a minimum, the agree- seconds. Leased line systems rent tele- ment shall: communications carriers specifically (i) Describe all terms and conditions to connect to the central authorizing with respect to equipment ownership, computer. For dial-up systems, 95 per- lease arrangements, handling and cent of the EBT transactions shall be maintenance for which the State agen- processed within 15 seconds or less and cy and merchant are liable; all EBT transactions shall be processed (ii) Describe the agreed upon proce- within 20 seconds or less. Dial-up sys- dures and policies for participation and tems utilize existing telecommuni- withdrawal from the EBT system; cations lines to dial up and connect to (iii) Comply with all Food Stamp the central computer at the time of the Program regulations with respect to transaction. Processing response time retailer participation in the program shall be measured at the POS terminal and treatment of Food Stamp Program from the time the 'enter' or 'send' key households. This shall include specific is pressed to the receipt and display of requirements with respect to the de- authorization or disapproval informa- ployment of terminals and the identi- tion. Third party processors, as defined fication of checkout lanes for food in paragraph (h)(5) of this section, shall stamp customers; be required by the State agency to (iv) Delineate the liabilities during comply with the same processing re- system downtime and the associated sponse times required of the primary responsibilities of each party with re- processor. spect to the use of off-line and/or (ii) The EBT system shall provide re- manually entered data, paper vouchers, ports, as determined by the State agen- and re-presented vouchers. cy, that document transaction proc- (h) Performance and technical stand- essing response time and the number ards. The State agency shall ensure and type of problematic transactions that EBT systems comply with Point that could not be processed within the of Sale (POS) technical standards es- standard response time. tablished by the American National (2) System availability and reliability. Standards Institute (ANSI) or Inter- (i) The EBT system central computer national Organization for Standardiza- shall be available 99.9 percent of sched- tion (ISO) where applicable. This in- uled up-time, 24 hours a day, seven cludes the draft EBT ISO 8583 Proc- days per week. Scheduled up-time shall essor Interface Technical Specifica- mean the time the database is avail- tions contained in the ANSI standards, able for transactions excluding sched- which delineates a standard message uled downtime for routine mainte- format for retailers and third parties. nance. The total system, including the In addition, the State agency shall en- system's central computer, any net- sure that the EBT system meets per- work or intermediate processing facili- formance and technical standards in ties and cardholder authorization proc- the areas of system processing speeds, essors, shall be available 98 percent of system availability and reliability, scheduled up-time, 24 hours per day, 7 system security, system ease-of-use, days per week. Scheduled downtime for minimum card and terminal require- routine maintenance shall occur during ments, performance bonding, and a non-peak transaction periods. State minimum transaction set. With prior certification procedures shall deter- written approval from FNS, the State mine whether intermediate processing agency may utilize the prevailing in- facilities and cardholder authorization dustry performance standards in its re- processors are capable of complying gion in lieu of those identified in this with system availability standards pre- section. The standards shall be in- scribed herein prior to permitting the cluded in all requests for proposals and interface with the central computer contracts. system. (1) System processing speeds. (i) For (ii) The system central computer leased line systems, 98 percent of EBT shall permit no more than 2 inaccurate transactions shall be processed within EBT transactions for every 10,000 EBT erowe on DSK5CLS3C1PROD with CFR 10 seconds or less and all EBT trans- transactions processed. The trans- actions shall be processed within 15 actions to be included in measuring 905 VerDate Nov<24>2008 13:53 Jan 27, 2010 Jkt 220015 PO 00000 Frm 00915 Fmt 8010 Sfmt 8010 Y:\SGML\220015.XXX 220015 § 274.12 7 CFR Ch. II (1–1–10 Edition) system accuracy shall include all types clude separate checks against the con- of food stamp transactions permitted trol files in order to validate each at POS terminals and processed transaction prior to authorization and through the host computer, manual limiting the number of unsuccessful transactions entered into the system, PIN attempts that can be made uti- credits to household accounts, and lizing standard industry practices be- funds transfers to retailer accounts. fore the card is deactivated; (iii) Reconciliation reports and other (C) Communications network secu- information regarding problematic rity that utilizes the Data Encryption transactions shall be made available to Standard algorithm to encrypt the the State agency by the system oper- PIN, at a minimum, from the point of ator, individual retailers, households entry. Other security may include au- or financial institutions as appro- thentication codes and check-sum dig- priate. Reports on problematic trans- its, in combination with data encoded actions, including inaccurate trans- on the magnetic stripe such as the PIN actions shall be delineated by the and/or PIN offset, to ensure data secu- source of the problem such as card fail- rity during electronic transmission. ure, POS terminal failure, interruption Any of the network security measures of telecommunications, or other com- may be utilized together or separately ponent failure. Errors shall be resolved and may be applied at the terminal or in a timely manner. central computer as indicated in the (3) System security. As an addition to approved system design to ensure com- or component of the Security Program munications control; required of Automated Data Processing (D) Manual procedures that provide systems prescribed under § 277.18(p) of for secure access to the system with this chapter, the State agency shall en- minimal risk to household or retailer sure that the following EBT security accounts. Manual procedures may in- requirements are established: clude the utilization of manager identi- (i) Storage and control measures to fication codes in obtaining telephonic control blank unissued EBT cards and authorization from the central com- PINs, and unused or spare POS devices; puter system; requirements for sepa- (ii) Measures to ensure communica- rate entry with audio response unit tion access control. Communication verification and authorization number; controls shall include the transmission and/or the utilization of 24 hour hotline of transaction data and issuance infor- telephone numbers to authorize trans- mation from point-of-sale terminals to actions. work-stations and terminals at the (iii) Message validation shall include data processing center. The following but shall not be limited to: specific security measures shall be in- (A) Message format checks for com- cluded, as appropriate, in the system pleteness of the message, correct order design documentation, operating pro- of data, existence of control char- cedures or the State agency Security acters, number and size of data fields Program: and appropriate format standards as (A) Computer hardware controls that specified in the approved system de- ensure acceptance of data from author- sign; ized terminals only. These controls (B) Range checks for acceptable date shall include the use of mechanisms fields, number and valid account num- such as retailer identification codes, bers, purchase and refund upper limita- terminal identifiers and user identi- tions in order to prevent and control fication codes, and/or other mecha- damage to the system accounts; nisms and procedures recognized by the (C) Reversals of messages that are industry; not fully processed and recorded. (B) Software controls, placed at ei- (iv) Administrative and operational ther the terminal or central computer procedures shall ensure that: or both, that establish separate control (A) Functions affecting an account files containing lists of authorized re- balance are separated or dually con- tailers, terminal identifying codes, and trolled during processing and when re- erowe on DSK5CLS3C1PROD with CFR user access and identification codes. questing Federal reimbursement EBT system software controls shall in- through a concentrator bank under the 906 VerDate Nov<24>2008 13:53 Jan 27, 2010 Jkt 220015 PO 00000 Frm 00916 Fmt 8010 Sfmt 8010 Y:\SGML\220015.XXX 220015 Food and Nutrition Service, USDA § 274.12 provisions of paragraph (i) of this sec- from the Master File and Issuance File, tion. These functions may include but network transactions from point-of- are not limited to the set up of ac- sale terminals to EBT central com- counts, transmittal of funds to and puter database and system file updates. from accounts, access to files to change (vi) The State agency shall incor- account records, and transmittal of re- porate the contingency plan approved tailer deposits to the ACH network or by FNS prior to pilot implementation other means approved by FNS for cred- and subsequently updated as part of iting retailer bank accounts; the Expansion Implementation Plan (B) Passwords, identity codes or into the Security Program. other security procedures must be uti- (4) System ease-of-use. (i) For all sys- lized by State agency or local per- tem users, the State agency shall en- sonnel and at data processing centers; sure that the system: (C) Software programming changes (A) Minimizes the number of separate shall be dual controlled to the extent steps required to complete a trans- possible; action; (D) System operations functions (B) Minimizes the number of codes or shall be segregated from reconciliation commands needed to make use of the duties; system; (v) A separate EBT security compo- (C) Makes available clear and com- nent shall be incorporated into the prehensive account balance informa- State agency Security Program for tion with a minimum number of ac- Automated Data Processing (ADP) sys- tions necessary; tems where appropriate and as pre- (D) Provides training and instruc- scribed under § 277.18(p) of this chapter. tions for all system users especially The periodic risk analyses required by those persons with disabilities; the Security Program shall address the (E) Makes available prompts on POS following items specific to an EBT sys- terminals or balance only terminals, tem: where appropriate; (A) EBT system vulnerability to (F) Identifies procedures for problem theft and unauthorized use; resolution; (B) Completeness and timeliness of the reconciliation system; (G) Provides reasonable accommoda- (C) Vulnerability to tampering with tion for the needs of households with or creating household accounts; disabilities in keeping with the Ameri- (D) Erroneous posting of issuances to cans with Disabilities Act of 1990. household accounts; (ii) In addition to the requirements of (E) Manipulation of retailers' ac- paragraph (h)(4)(i) of this section, the counts such as creation of false trans- State agency shall ensure that retail- actions or intrusion by unauthorized ers utilizing the EBT system: computer users; (A) Have available manual backup (F) Capability to monitor systematic procedures; abuses at POS terminals such as debits (B) Can obtain timely information on for a complete allotment, excessive daily credits to their banks; manual issuances, and multiple manual (C) Have available deposit informa- transactions at the same time. Such tion in a format readily comparable to monitoring may be accomplished information maintained in the store; through the use of exception reporting; and (G) Tampering with information on (D) Have available instructions on re- the ACH tape or similar information solving problems with equipment and utilized in a crediting method approved retailer accounts. by FNS; and, (5) Third party processors. Third party (H) The availability of a complete processors are financial institutions, audit trail. A complete audit trail cardholder authorization processors shall, at a minimum, be able to provide other than the party with which the a complete transaction history of each State agency has contracted for EBT individual system activity that affects services, and food retailers driving erowe on DSK5CLS3C1PROD with CFR an account balance. The audit trail their own terminals that are capable of shall include the tracking of issuances relaying electronic transactions to a 907 VerDate Nov<24>2008 13:53 Jan 27, 2010 Jkt 220015 PO 00000 Frm 00917 Fmt 8010 Sfmt 8010 Y:\SGML\220015.XXX 220015 § 274.12 7 CFR Ch. II (1–1–10 Edition) central database computer for author- (iv) State agencies may require the ization. The State agency shall afford use of a photograph of one or more retailers the opportunity to use third household members on the card. If the party processors and shall provide State agency does require the EBT interface specifications and certifi- cards to contain a photo, it must estab- cation standards in order for the third lish procedures to ensure that all ap- party processor to participate in the propriate household members or au- EBT system. thorized representatives are able to ac- (i) In order to participate in a Food cess benefits from the account as nec- Stamp Program EBT system, a third essary. party processor must be able to meet (7) POS terminals. POS terminals all third party interface specifications shall meet the following requirements: and certification standards associated (i) Balance information shall not be with this section. The State agency displayed on the screen of the POS ter- shall make available to third party minal except for balance-only inquiry processors the third party interface terminals; specifications prior to implementation (ii) PINs shall not be displayed at the of the EBT system to enable third terminal; and party processors to access the data- (iii) PIN encryption shall occur from base. Third party processors shall un- the point of entry in a manner which dergo functional and acceptance tests prevents the unsecured transmission as specified by the State agency; between any point in the system. (ii) Third party processors shall be liable for transactions until the trans- (8) Performance bonding. The State action has been electronically accepted agency may require a performance by the contracted vendor or an inter- bond in accordance with § 277.8 of this mediate processing facility; chapter or utilize other contractual (iii) The State agency shall ensure clauses it deems necessary to enforce that third party processors and food re- the requirements of this section. tailers driving their own terminals (9) Minimum transaction set. At a min- comply with this section and all appli- imum, the State agency shall ensure cable Food Stamp Program regula- that the EBT system, including third tions. party processors and retailers driving (6) Minimum card requirements. (i) The their own terminals, is capable of pro- State agency shall ensure that the fol- viding for authorizing or rejecting pur- lowing information is printed on the chases, refunds or customer credits, card: voids or cancellations, key entered (A) The address of the office where a transactions, balance inquiries and set- card can be returned if found or no tlement or close-out transactions. The longer in use; system must be capable of completing (B) The abbreviated statement of this transaction set across State bor- nondiscrimination, which reads as fol- ders nationwide in accordance with lows: ''The USDA is an equal oppor- standards specified in paragraph (h)(10) tunity provider and employer.'' In lieu of this section. of printing the required information on (10) Interoperability. State agencies the EBT card, the State agency shall must adopt uniform standards to facili- provide each household a card jacket or tate interoperability and portablilty sleeve containing the nondiscrimina- nationwide. The term ''interoper- tion statement. ability'' means the EBT system must (ii) FNS reserves the right to require enable a coupon issued in the form of State agencies to place a Department an EBT card to be redeemed in any logo on the EBT card and/or sleeves or State. The term ''portablity'' means jackets. the EBT system must enable a coupon (iii) EBT cards and/or sleeves or jack- issued in the form of an EBT card to be ets shall not contain the name of any used in any State by a household to State or local official. EBT informa- purchase food at a retail food store or tional materials shall not indicate as- a wholesale food concern approved erowe on DSK5CLS3C1PROD with CFR sociation with any political party or under the Food Stamp Act of 1977. The other political affiliation. standards must include the following: 908 VerDate Nov<24>2008 13:53 Jan 27, 2010 Jkt 220015 PO 00000 Frm 00918 Fmt 8010 Sfmt 8010 Y:\SGML\220015.XXX 220015 Food and Nutrition Service, USDA § 274.12 (i) EBT system connectivity. State connected to the State's authorization agencies are responsible for estab- system. Each terminal operator that lishing telecommunications links, uses a routing table for routing ac- transaction switching facilities and quired transactions must, within seven any other arrangements with other calendar days of receiving an IIN rout- State agencies necessary for the rout- ing table update, modify its routing ta- ing of interoperable transactions to bles to reflect the updated routing in- such other State EBT authorization formation. systems. State agencies are also re- (iv) Third Party Processor Require- sponsible for facilitating the settle- ments. Each Third Party Processor or ment of such interoperable trans- terminal operator must have primary actions and the handling of adjust- responsibility and liability for oper- ments. These connections need not be ating the telecommunications and direct connections between State au- processing system (including software thorization systems but may be facili- and hardware) through which trans- tated through agreements and linkages actions initiated at POS terminals it with other designated agents or third owns, operates, controls or for which it party processors. All State agencies has signed an agreement to accept EBT must agree to the timing and disposi- transactions, are processed and routed, tion of disputes, error resolution, and directly or indirectly, to the appro- adjustments in accordance with De- priate State authorization system. partment regulations at § 273.13(a), Each terminal operator must maintain § 273.15(k) and paragraph (f) of this sec- the necessary computer hardware and tion. State agencies or their designated software to interface either directly agents must draw funds from State with a State authorization system or food stamp accounts for food stamp with a third party service provider to benefits transacted by that State's obtain access to one or more State au- food stamp recipients, regardless of thorization systems. Each terminal op- where benefits were transacted. erator must establish a direct or indi- (ii) Message format. Each authoriza- rect telecommunications connection tion system must use the International for the routing of transactions to the Organization for Standards (ISO) 8583 State authorization system or to a message format, modified for EBT, in a processor directly or indirectly con- version mutually agreed to between nected to the State authorization sys- the authorization agent and the party tem. connected for all transactions. Each (v) REDE File. The State agency must authorization system must process ensure that their EBT system verifies each financial transaction as a single FNS retailer numbers for all interstate message financial transaction, except transactions against the National for pre-authorized transactions and re- REDE file of all FNS EBT retailers to versals, processed as paired trans- validate these transactions. actions. (11) Waivers. The State agency may (iii) Card Primary Account Number request a waiver from the Department (PAN) Requirements. Track 2 on each for a temporary exemption from com- card shall contain the PAN. Each Gov- pliance with the requirements for ernment entity must obtain an Issuer interoperability and portability, as Identification Number (IIN) from the found in this section, if they can ade- American Banker's Association (ABA). quately demonstrate that: (1) There are The IIN should be included as the first unusual technological barriers to the six digits of the Primary Account implementation of interoperability; Number. The PAN must comply with and (2) it is in the best interest of the International Organization for Stand- FSP to grant the waiver. All waivers ards (ISO) 7812, Identification Cards— must specify a date by which the State Numbering System and Registration agency will achieve interoperability Procedures for Issuer Identifiers. Each and portability. State agency must be responsible for (i) Concentrator bank responsibilities. generating, updating, and distributing The concentrator bank shall be a Fed- erowe on DSK5CLS3C1PROD with CFR IIN files of all States to each retailer, erally insured financial institution or processor, or acquirer that is directly other entity acceptable to the Federal 909 VerDate Nov<24>2008 13:53 Jan 27, 2010 Jkt 220015 PO 00000 Frm 00919 Fmt 8010 Sfmt 8010 Y:\SGML\220015.XXX 220015 § 274.12 7 CFR Ch. II (1–1–10 Edition) Reserve which has the capability to (1) Reconciliation. Reconciliation take retailer credits and/or debits, ob- shall be conducted and records kept as tained from the EBT system operator, follows: and transmit them to the ACH network (i) Reconciliation of benefits posted operated by the Federal Reserve or to household accounts on the central through another process for crediting computer against benefits on the retailers approved by FNS. Trans- Issuance Authorization File; mittal shall be by tape or on-line in a (ii) Reconciliation of individual format suitable for the Automated household account balances against ac- Clearinghouse (ACH) or as approved by count activities on a daily basis; FNS. (iii) Reconciliation of each individual (1) The minimum functions of the retail store's food stamp transactions concentrator bank are: per POS terminal and in total to depos- (i) Preparing a daily ACH tape or its on a daily basis; other crediting process approved by (iv) Verification of retailer's credits FNS with information on benefits re- against deposit information entered deemed and creditable to each retailer; into the ACH network; (ii) Transferring the ACH tape or (v) Reconciliation of total funds en- other crediting process approved by tered into, exiting from, and remaining in the system each day; FNS to the Federal Reserve or other (vi) Maintenance of audit trails that entity approved by FNS; document the full cycle of issuance (iii) Initiating and accepting reim- from benefit allotment posting to the bursement from the appropriate U.S. State issuance authorization file Treasury account through the Auto- through posting to point-of-sale trans- mated Standard Application for Pay- actions at retailers through settlement ment (ASAP) system or other payment of retailer credits. process approved by FNS. At the op- (2) Management reports. The State tion of FNS, the State agency may des- agency shall require the EBT system to ignate another entity as the initiator provide reports that enable the State of reimbursement for food stamp re- agency to manage the system. The re- demptions provided the entity is ac- ports shall be available to the State ceptable to FNS and U.S. Treasury. agency or FNS as requested on a time- (iv) Cooperating in the reconciliation ly basis and consist of: of discrepancies and error resolution (i) Information on how the system when necessary. operates relative to its performance (2) With the approval of FNS, another standards, the incidence, type and procedure, other than the ACH system, cause of system problems, and utiliza- may be utilized to credit retailer ac- tion patterns. counts and/or debit FNS' account, if it (ii) Retailer transaction data sub- meets the needs of FNS and the EBT mitted to FNS on a monthly basis. system. This data must be submitted in the (3) The State agency shall be liable specified format in accordance with the for any errors in the creation of the required schedule. ACH tape or its transmission. The (iii) Data detailing by specified cat- State agency may transfer the liability egory the amount of food stamp bene- associated with creation of the ACH fits issued or returned through the tape, its transmission or another cred- EBT system. Data shall be provided in iting process approved by FNS as ap- a format and mechanism specified by propriate to the EBT system operator FNS to the FNS Account Management or the concentrator bank. Appropriate Agent as the benefits become available system security administrative and to recipients. This data will be used to operational procedures shall be insti- increase or decrease the food stamp tuted in accordance with paragraph EBT benefit funding authorization for (h)(3) of this section. the State's ASAP account. (j) Reconciliation, management report- (3) Pilot project reports. The State ing, examinations and audits. The EBT agency shall provide quarterly reports erowe on DSK5CLS3C1PROD with CFR system shall provide reports and docu- as described in paragraph (c)(4) of this mentation pertaining to the following: section during the pilot project. 910 VerDate Nov<24>2008 13:53 Jan 27, 2010 Jkt 220015 PO 00000 Frm 00920 Fmt 8010 Sfmt 8010 Y:\SGML\220015.XXX 220015 Food and Nutrition Service, USDA § 274.12 (4) Program reporting. When benefits (vi) FNS and the USDA OIG shall are initially issued through an EBT rely on SAS No. 70 reports on EBT system, the State agency shall report transaction processing services pro- as required by FNS in § 274.4 and in ac- vided by contractors to the State. FNS cordance with the FNS instructions and USDA OIG reserve the right to specific to EBT issuances. conduct other reviews or audits if nec- (5) Examinations and audits. (i) The essary. state agency must obtain an examina- (vii) EBT services provided directly tion by an independent auditor of the by the State are not subject to SAS No. transaction processing of the State 70 examination requirements of this EBT service provider regarding the section but remain subject to the sin- issuance, redemption, and settlement gle audit requirements at 7 CFR 277.7 of Food Stamp Program benefits. The and the Office of Management and examination must be done at least an- Budget Circular A–133. nually and the report must be com- (k) Federal Financial Participation. (1) pleted ninety days after the examina- The cost of administering statewide tion period ends. Subsequent examina- benefit issuance after implementation tions must cover the entire period of the EBT system shall be funded at since the previous examination. Ex- the regular Federal financial participa- aminations must follow the American tion rate. Institute of Certified Public Account- (2) The State agency shall comply ants (AICPA) Statement on Auditing with the provisions set forth under 7 Standards No. 70, Service Organiza- CFR 277.18 and appendix A of 7 CFR tions (SAS No. 70), requirements for re- 277.18 in determining and claiming al- ports on controls placed in operation lowable costs for the EBT system. and tests of the operating effectiveness (3) Access to system documentation, of the controls. including cost records of contractors or (ii) The examination report must in- subcontractors shall be made available clude a list of all States whose systems and incorporated into contractual operate under the same control envi- agreements in accordance with ronment. Auditors conducting the ex- § 277.18(k) of this chapter. amination must follow EBT guidance (4) State agencies may receive one contained in the Office of Management hundred percent federal funding for the and Budget (OMB) Circular A–133 Com- costs they incur for switching and set- pliance Supplement to the extent the tling all food stamp interstate trans- guidelines refer to FSP benefits. (For actions. For purposes of this section, availability of OMB Circulars ref- the term ''switching'' means the rout- erenced in this section, see 5 CFR ing of an interstate transaction that 1310.3.) consists of transmitting the details of (iii) The State agency must retain a a transaction electronically recorded copy of the SAS No.70 examination re- through the use of an EBT card in one port. State to the issuer of the card that is (iv) The State agency shall respond in another State; and the term ''set- to written requests from the Food and tling'' means movement, and reporting Nutrition Service (FNS), USDA Office such movement, of funds from an EBT of the Inspector General (OIG), or the card issuer located in one to a retail General Accounting Office (GAO) for food store, or wholesale food concern, completed SAS No.70 examination re- that is located in another State, to ac- ports by providing the report within complish an interstate transaction. thirty days of receipt of the written re- The total amount of one hundred per- quest. cent funding available annually is lim- (v) The State agency shall respond to ited to $500,000 nationwide. Once the written requests from FNS, OIG, or $500,000 limitation is exceeded, federal GAO to view auditor's workpapers from financial participation reverts to the SAS No. 70 reports by arranging to standard fifty percent program reim- have workpapers made available within bursement rate and procedure. In order erowe on DSK5CLS3C1PROD with CFR thirty days of receipt of the written re- to qualify for this funding, the State quest. agency must: 911 VerDate Nov<24>2008 13:53 Jan 27, 2010 Jkt 220015 PO 00000 Frm 00921 Fmt 8010 Sfmt 8010 Y:\SGML\220015.XXX 220015 § 274.12 7 CFR Ch. II (1–1–10 Edition) (i) Adhere to the standard of inter- (A) The manual transaction occurred operability and portability adopted by because the host computer was down a majority of State agencies for inter- and authorization was obtained by the operability costs incurred for the pe- retailer for the transaction; or riod from February 11, 2000 through (B) The manual transaction occurred September 30, 2002; because telephone lines were down. (ii) Meet standards of interoper- (ii) Re-presentation of manual vouch- ability and portability under para- ers shall not be permitted when the graphs (e) and (h) of this section for EBT card, magnetic stripe, PIN pad, costs incurred after September 30, 2002; card reader, or POS terminal fails and (iii) Sign and submit, in each fiscal telephone lines are operational. Man- year for which the State agency re- ual transactions shall not be utilized to quests enhanced funding, an Interoper- extend credit to a household via re- ability Funding Agreement to comply presentation when the household's ac- with the administrative procedures es- count balance is insufficient to cover tablished by the Department. The the planned purchase. State agency must submit the signed (iii) The State agency may debit the agreement to the Department before benefit allotment of a household fol- the end of the fiscal year in which lowing the insufficient funds trans- costs are incurred in order to qualify action in either of two ways: for payment for that fiscal year, and (A) Any amount which equals at least $10 or up to 10% of the trans- (iv) Submit requests for payment on action. This amount will be deducted a quarterly basis after the end of the monthly until the total balance owed quarter in which interoperability costs is paid-in-full. State agencies may opt are incurred, in accordance with the to re-present at a level that is less than Department's administrative proce- the 10% maximum, however, this lesser dures. Requests for payments shall be amount must be applied to all house- due February 15 (for the period October holds. through December), May 15 (January (B) $50 in the first month and the through March), August 15 (April greater of $10 or 10% of the allotment through June), and November 15 (July in subsequent months until the total through September). Requests for pay- balance owed is paid-in-full. If the ment submitted after the required date monthly allotment is less than $50, the for a quarter shall not be considered State shall debit the account for $10. until the following quarter, when such (2) The State agency shall establish requests for payments are scheduled to procedures for determining the validity be processed. of each re-presentation and subsequent (l) Re-presentation. The State agency procedures authorizing a debit from a shall ensure that a manual purchase household's monthly benefit allotment. system is available for use during The State agency may ask households times when the EBT system is inacces- to voluntarily pay the amount of a re- sible. presented transaction or arrange for a (1) Under certain circumstances, faster schedule of payment than identi- when a manual transaction occurs due fied in paragraph (l)(1)(iii) of this sec- to the inaccessibility of the host com- tion. puter and the transaction is rejected (3) The State agency shall ensure because insufficient funds are available that retailers provide notice to house- in a household's account, the State holds at the time of the manual trans- agency may permit the re-presentation action that re-presentation may occur of the transaction during subsequent if there are insufficient benefits in the months. At the State agency's option, account to cover the transaction. The re-presentation may be permitted with- statement shall be printed on the paper in the EBT system as follows: voucher or on a separate sheet of (i) Re-presentation of manual vouch- paper. The State agency shall also pro- ers when there are insufficient funds in vide notice to the household prior to the EBT account to cover the manual the month when a benefit allotment is erowe on DSK5CLS3C1PROD with CFR transaction may be permitted only reduced when a re-presentation is nec- under the following circumstances: essary. Notice shall be provided to the 912 VerDate Nov<24>2008 13:53 Jan 27, 2010 Jkt 220015 PO 00000 Frm 00922 Fmt 8010 Sfmt 8010 Y:\SGML\220015.XXX 220015 Food and Nutrition Service, USDA Pt. 275 household for each insufficient trans- with the balance remaining in the ac- action that is to be re-presented in a count through a one-step process; future month. The notice shall be pro- (B) The transaction should be in ac- vided prior to the month it occurs and cordance with the standard message shall state the amount of the reduction format requirements for store and for- in the benefit allotment. ward; and (4) The Department shall not accept (C) Re-presentation, as described in liability under any circumstances for paragraph (m) of this section, to obtain the overissuance of benefits due to the the uncollected balance from current utilization of manual vouchers, includ- or future months' benefits shall not be ing those situations when the host allowed for store-and-forward trans- computer is inaccessible or tele- actions. communications lines are not func- (n) Ownership rights and procurement tioning. However, the State agency, in requirements. (1) The State agency shall consultation with authorized retailers comply with the software and auto- and with the mutual agreement of the mated data processing equipment own- State agency's vendor, if any, may ac- ership rights prescribed under §§ 277.13 cept liability for manual purchases and 277.18(l) of this chapter. within a specified dollar limit. Costs (2) The State agency shall comply associated with liabilities accepted by with the procurement standards pre- the State agency shall not be reimburs- scribed under § 277.18(j) of this chapter. able. Under service agreements, the procure- (5) The State agency shall be strictly ment of equipment and services which liable for manual transactions that re- will be utilized in a Food Stamp EBT sult in excess deductions from a house- system shall be conducted in accord- hold's account. ance with the provisions set forth (m) Store-and-Forward. As an alter- under § 277.18(f) of this chapter. native to manual transactions: [57 FR 11249, Apr. 1, 1992; 57 FR 44791, Sept. (1) State agencies may opt to allow 29, 1992, as amended by Amdt. 378, 64 FR retailers, at the retailer's own choice 48938, Sept. 9, 1999; 65 FR 10678, Feb. 29, 2000; and liability, to perform store-and-for- Amdt. 385, 65 FR 33439, May 24, 2000; Amdt. ward transactions when the EBT sys- 378, 65 FR 41325, July 5, 2000; Amdt. 384, 65 FR tem cannot be accessed for any reason. 49724, Aug. 15, 2000; Amdt. 390, 65 FR 59110, The retailer would be able to forward Oct. 4, 2000; Amdt. 384, 68 FR 37697, June 25, the transaction to the host one time 2003; Amdt. 394, 70 FR 18270, Apr. 11, 2005; Amdt. 397, 70 FR 72354, Dec. 5, 2005] within 24 hours of when the system again becomes available. Should the 24- hour window cross into the beginning PART 275—PERFORMANCE of a new benefit issuance period, retail- REPORTING SYSTEM ers may draw against all available ben- efits in the account. Subpart A—Administration (2) State agencies may also opt, in in- Sec. stances where there are insufficient 275.1 General scope and purpose. funds to authorize an otherwise ap- 275.2 State agency responsibilities. provable store-and-forward trans- 275.3 Federal monitoring. action, to allow the retailer to collect 275.4 Record retention. the balance remaining in the client's account, in accordance with the re- Subpart B—Management Evaluation (ME) quirements detailed in this section. In Reviews States that elect not to give retailers 275.5 Scope and purpose. this option, all store-and-forward 275.6 Management units. transactions with insufficient funds 275.7 Selection of sub-units for review. will be denied in full. 275.8 Review coverage. (i) State Agencies may elect to allow 275.9 Review process. store and forward to provide remaining balances to retailers as follows: Subpart C—Quality Control (QC) Reviews (A) The EBT processor may provide erowe on DSK5CLS3C1PROD with CFR 275.10 Scope and purpose. partial approval of the store-and-for- 275.11 Sampling. ward transaction, crediting the retailer 275.12 Review of active cases. 913 VerDate Nov<24>2008 13:53 Jan 27, 2010 Jkt 220015 PO 00000 Frm 00923 Fmt 8010 Sfmt 8010 Y:\SGML\220015.XXX 220015
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