Food stamp program : regulations pertinent to authorized firms and financial institutions.

              A q i . I~ : F 7.2 1~3
FOOD AND-NUTRITION SERVICE
FOOD STAMP PROGRAM
REGULATIONS PERTINENT TO AUTHORIZED
FIRMS AND FINANCIAL INSTITUTIONS
Current as of June 1993 U.S. DEPOSITORY
PROPERTY OF THE LIBRARY
AUG 251993
University of North Carolina
at Greensboro
Part 271
Sec. 271.1
Sec. 271.2
Sec. 271.3
Sec. 271.4
Sec. 271.5
Sec. 271.6 .·
Part 272
Sec. 272.1
Sec. 272.9
Part 278
Sec. 278.1
Sec. 278.2
Sec. 278.3
Sec. 278.4
Sec. 278.5
Sec. 278.6
Sec. 278.7
Sec. 278.8
Sec. 278.9
TABLE OF CONTENTS
General Information and Definitions.
General Purpose and Scope.
Definitions.
Definitions to FNS for administration.
Delegations to State agencies for administration.
coupons as obligations of the United states,
crimes and offenses.
Complaint procedure.
Requirements for Participating state Agencies.
General terms and conditions.
Approval of homeless meal providers.
Participation of Retail Food stores, Wholesale
Food Concerns and Insured Financial Institutions.
Approval of retail food stores and wholesale food
concerns.
Participation of retail food stores.
Participation of wholesale food concerns.
Procedure for redeeming coupons.
Participation of insured financial institutions.
Disqualification of retail food stores and
wholesale food concerns, and imposition of civil
money penalties in lieu of disqualifications.
Determination and disposition of claims-retail
food stores and wholesale food concerns.
Administrative review-retail food stores and
wholesale food concerns.
Implementation of amendments relating to the
participation of retail food stores, wholesale
food concerns and insured financial institutions.
Part 279 Administrative and Judicial Review-Food Retailers
and Food Wholesalers.
Subpart A-Administrative Review-General
Sec. 279.1 Scope and purpose.
Sec. 279.2 Food stamp review officer.
Sec. 279.3 Authority and jurisdiction.
Sec. 279.4 Rules of procedure.
Subpart B-Rules of Procedure
Sec. 279.5 Manner of filing requests for review.
Sec. 279.6 Content of request for review.
Sec. 279.7 Action upon receipt of a request for review.
Sec. 279.8 Determination of the food stamp review officer.
Sec. 279.9 Legal advice and extension of time.
Subpart C-Judicial Review
Sec. 279.10 Judicial review.
Sec. 279.11 Implementation of amendments relating to
administrative and judicial review.
PART 271--GENERAL INFORMATION
AND DEFINITIONS
Sec.
271.1 General purpose and
scope.
271.2 Definitions.
271.3 Delegations to FNS for
administration.
271.4 Delegations to State
agencies for
administration.
271.5 Coupons as obligations
of the United States,
crimes and offenses.
271.6 Complaint procedure.
271.1 General purpose and
scope.
{a) Purpose of the food
stamp program. The food stamp
program is designed to promote
the general welfare and to
safeguard the health and well
being of the Nation's
population by raising the
levels of nutrition among
low-income households. Section
2 of the Food Stamp Act of
1977 states, in part:
"Congress hereby .finds
that the limited food
purchasing power of low-income
households contributes to
hunger and malnutrition among
members of such households.
Congress further finds that
increased utilization of food
in establishing and
maintaining adequate national
levels of nutrition will
promote the distribution in a
beneficial manner of the
Nation's agricultural
abundance and will strengthen
the Nation's agricultural
economy, as well as result in
more orderly marketing and
distribution of foods. To
alleviate such hunger and
malnutrition, a food stamp
program is herein authorized
1
which will permit low-income
households to obtain a more
nutritious diet through normal
channels of trade by increas­ing
food purchasing power for
all eligible households who
apply for participation."
{b) Scope of the
regulations. Part 271
contains general information,
definitions, and other
material applicable to all
parts of this subchapter. Part
272 sets forth policies and
procedures governing state
agencies which participate in
the program. Part 273
describes the eligibility
criteria to be applied by
state agencies and related
processing requirements and
standards. Part 274 provides
requirements for the issuance
of coupons to eligible house­holds
and establishes related
issuance responsibilities.
Part 275 sets forth guidelines
for monitoring the food stamp
program, analyzing the results
and formulating corrective
action. Part 276 establishes
state agency liability and
certain Federal sanctions.
Part 277 outlines procedures
for payment of administrative
costs of State agencies. Part
278 delineates the terms and
conditions for the participa­tion
of retail food stores,
wholesale food concerns, meal
services, and insured
financial institutions. Part
279 establishes the procedures
for administrative and
judicial reviews requested by
food retailers, food whole­salers,
and meal services.
Part 280 explains procedures
for issuing emergency coupon
allotments to certain victims
of disasters unable to
purchase adequate amounts of
food. Part 281 sets forth
guidelines for designating
Indian tribes as State
agencies. Part 282 provides
guidelines for initiation,
selection, and operation of
demonstration, research, and
evaluation projects. Part 285
describes the general terms
and conditions under which
grant funds are provided to
the Commonwealth of Puerto
Rico.
271.2 Definitions.
Access device means any card,
plate, code, account number,
or other means of access that
can be used alone, or in
conjunction with another
access device, to obtain pay­ments,
allotments, benefits,
money, goods, or other things
of value, or that can be used
to initiate a transfer of
funds under the Food Stamp Act
of 1977, as amended.
Active case means a house­hold
which was certified prior
to, or during, the sample
month and issued food stamp
benefits for the sample month.
Active case error rate means
an estimate of the proportion
of cases with an error in the
determination of eligibility
or basis of issuance. This
estimate will be expressed as
a percentage of the completed
active quality control reviews
excluding all results from
cases processed by SSA
personnel or participating in
a demonstration project
identified by FNS as having
certification rules that are
significantly different from
standard requirements.
Adequate notice in a Monthly
Reporting and Retrospective
Budgeting system means a
written notice that includes a
2
statement of the action the
agency has taken or intends to
take; the reason for the
intended action; the house­hold's
right to request a fair
hearing; the name of the
person to contact for
additional information; the
availability of continued
benefits; and the liability of
the household for any
overissuances received while
awaiting a fair hearing if the
hearing official's decision is
adverse to the household.
Depending on the timing of a
State's system and the time­liness
of report submission by
participating households, such
notice may be received prior
to agency action, at the time
reduced benefits are received,
or, if benefits are termin­ated,
at the time benefits
would have been received if
they had not been terminated.
In all cases, however,
participants will be allowed
ten days from the mailing date
of the notice to contest the
agency action and to have
benefits restored to their
, previous level. If the 10-day
period ends on a weekend or a
holiday and a request is
received the day after the
weekend or holiday, the State
agency shall consider the
request to be timely.
Alien status Verification
Index (ASVI) means the
automated database maintained
by the Immigration and
Naturalization Service which
may be accessed by State
agencies to verify immigration
status.
Allotment means the total
value of coupons a household
is authorized to receive
during each month or other
time period.
Application form means:
(1) The application form
designed or approved by FNS,
which is completed by a
household member or authorized
representative; or
(2) For households consisting
solely of public assistance or
general assistance recipients,
it may also mean the
application form used to apply
for public assistance or
general assistance, including
attachments approved by FNS,
which is completed by a
household member or authorized
representative.
Assessment an in-depth
evaluation of employability
skills coupled with counseling
on how and where to search for
employment. If combined with
work experience, employment
search or training, an
assessment of this nature
could constitute part of an
approvable employment and
training component.
Authorization document means
an intermediary document
issued by the State agency and
used in an issuance system to
authorize a specific benefit
amount for a household.
Authorization to participate
card CATPl means a document
which is issued by the State
agency to a certified house­hold
to show the allotment the
household is authorized to
receive on presentation of
such document.
Base of Eligibles Employment
and training mandatory
participants plus persons who
volunteer for employment and
training participation.
Base Period means the first
6-month reporting periOd of
each fiscal year.
Beginning monthCsl in a
Monthly Reporting and
3
Retrospective Budgeting system
means either the first month
for which the household is
certified for food stamps
(where the State agency has
adopted a one month accounting
system) or the first month for
which the household is
certified for food stamps and
the month thereafter (where
the State agency has adopted a
two month accounting system).
Except for beginning months in
sequence as described in the
preceding sentences, a begin­ning
month cannot be any month
which immediately follows a
month in which a household is
certified. The month follow­ing
the month of termination
resulting from a one-month
temporary change in household
circumstances shall not be
considered a beginning month.
Budget month in a Monthly
Reporting and Retrospective
Budgeting system means the
fiscal or calendar month from
which the State agency uses
income and other circumstances
of the household to calculate
the household's food stamp
allotment to be provided for
the corresponding issuance
month.
Bulk storage point means an
office of the State agency or
any person, partnership,
corporation, organization,
political subdivision, or
other entity with which a
State agency has contracted
for, or to which it has
assigned responsibility for,
the security and storage of
food coupons.
Claims collection point
means any office of the State
agency or any person, partner­ship,
corporation, organiz­ation,
political subdivision
or other entity with which a
State agency has contracted,
or to which it has assigned
responsibility for the
collection of claims.
Communal dining facility
means a public or nonprofit
private establishment,
approved by FNS, which
prepares and serves meals for
elderly persons, or for
supplemental security income
(SSI) recipients, and their
spouses, a public or private
nonprofit establishment
(eating or otherwise) that
feeds elderly persons or SSI
recipients, and their spouses,
and federally subsidized
housing for the elderly at
which meals are prepared for
and served to the residents.
It also includes private
establishments that contract
with an appropriate State or
local agency to offer meals at
concessional prices to elderly
persons or SSI recipients, and
their spouses.
Coupon means any coupon,
stamp, access device or type
of certification provided
pursuant to the provisions of
this subchapter for the
purchase of eligible food.
Coupon issuer means any
office of the State agency or
any person, partnership,
corporation, organization,
political subdivision, or
other entity with which a
State agency has contracted
for, or to which it has
assigned responsibility for,
the issuance of coupons to
households.
Deficiency means any aspect
of a State's program
operations determined to be
out of compliance with the
Food Stamp Act, FNS
Regulations, or program
requirements as contained in
4
the State agency's manual, the
State agency's approved Plan
of Operation or other State
agency plans.
Department means the u.s.
Department of Agriculture.
Direct access system means
an issu~nce system in which
benefits are issued directly
to the household, without the
use of an intermediary
document, based on the
issuance agent's direct access
to information in the house­hold's
individual record on
the master issuance file,
which may be a card document
or an on~line computer system.
_ Drug addiction or alcoholic
treatment and rehabilitation
program means any drug addic­tion
or alcoholic treatment
and rehabilitation program
conducted by a private, non­profit
organization or
institution, or a publicly
operated community mental
health center, under part B of
title XIX of the Public Health
Service Act (42 U.S.C. 300x et
seq.). Under part B of title
XIX of the Public Health
Service Act is defined as
meeting the criteria which
would make it eligible to
receive funds, even if it does
not actually receive funding
under part B of title XIX.
Elderly or disabled member
means a member of a household
who: (1) Is 60 years of age or
older; (2) Receives supplemen­tal
security income benefits
under title XVI of the Social
Security Act or disability or
blindness payments under
titles I, II, X, XIV, or XVI -
of the Social Security Act;
(3) Receives federally or
State administered supplemen­tal
benefits under section
1616(a) of the Social Security
Act provided that the eligi­bility
to receive the benefits
is based upon the disability
or blindness criteria used
under title XVI of the Social
Security Act; (4) Receives
federally or State
administered supplemental
benefits under section 212 '(a)
of Pub. L. 93 - 66; (5)
Receives disability retirement
benefits from a governmental
agency because of a disability
considered permanent under
section 221(i) of the Social
Security Act. (6) Is a veteran
with a service-connected or
nonservice-connected
disability rated by the
Veteran's Administration (VA}
as total or paid as total by
the VA under title 38 of the
United States Code; (7) Is a
veteran considered by the VA
to be in need of regular aid
and attendance or permanently
housebound under title 38 of
the United States Code; (8) Is
a surviving spouse of a
veteran and considered by the
VA to be in need of regular
aid and attendance or
permanently housebound or a
surviving child·of a veteran
and considered by the VA to be
permanently incapable of self­support
under title 38 of the
United States Code; (9) Is a
surviving spouse or surviving
child of a veteran and
considered by the VA to be
entitled to compensation for a
service-connected death or
pension benefits for a
nonservice-connected death
under title 38 of the United
States Code and has a dis­ability
considered permanent
under section 221(i) of the
Social Security Act.
"Entitled" as used in this
definition refers to those
5
veterans' surviving spouses
and surviving children who are
receiving the compensation or
pension benefits stated or
have been approved for such
payments, but are not yet
receiving them; or (10)
Receives an annuity payment
under: section 2(a} (1} (iv) of
the Railroad Retirement Act of
1974 ~ is determined to be
eligible to receive Medicare
by the Railroad Retirement
Board; or section 2(a) (1} (v)
of the Railroad Retirement Act
of 1974 and is determined to
be disabled based upon the
criteria used under title XVI
of the Social Security Act.
(11) Is a recipient of
interim assistance benefits
pending the receipt of
supplemented Security Income,
disability related medical
assistance under title XIX of
the social Security Act, or
disability-based State general
assistance benefits provided
that the eligibility to
receive those benefits is
based upon .disability or
blindness criteria which are
at least as stringent as those
used under title XVI of the
Social Security Act.
Eligible foods means (1) Any
food or food product intended
for human consumption except
alcoholic beverages, tobacco,
and bot foods and hot food
products prepared for
immediate consumption; (2)
Seeds and plants to grow foods
for the personal consumption
of eligible households; (3)
Meals prepared and delivered
by an authorized meal delivery
service to households eligible
to use coupons to purchase
delivered meals; or meals
served by an authorized
communal dining facility for
the elderly, for SSI house­holds
or both, to households
eligible to use coupons for
communal dining; (4) Meals
prepared and served by a drug
addict or alcoholic treatment
and rehabilitation center to
eligible households; (5) Meals
prepared and served by a group
living arrangement facility to
residents who are blind or
disabled recipients of
benefits under title I, title
II, title X, title XIV, or
title XVI of the Social
Security Act; (6) Meals
prepared by and served by a
shelter for battered women and
children to its eligible
residents; (7) In the case of
certain eligible households
living in areas of Alaska
where access to food stores is
extremely difficult and the
households rely on hunting and
fishing for subsistence,
equipment for the purpose of
procuring food for eligible
households, including nets,
lines, hooks, fishing rods,
harpoons, knives, and other
equipment necessary for
subsistence hunting and
fishing but not equipment for
the purpose of transportation,
clothing or shelter, nor
firearms, ammunition or other
explosives; and, (8) In the
case of homeless food stamp
households, meals prepared for
and served by an authorized
public or private nonprofit
establishment (e.g. soup
kitchen, temporary shelter),
approved by an appropriate
State or local ·agency, that
feeds homeless persons.
Employment and training
CE&Tl component a work
experience, work training or
job search program, as
described in section
6
6(d) (4) (B) (iv) of the Food
Stamp Act of 1977 (7 u.s.c.
2014(2) (4) (B)) designed to
help food stamp recipients
move promptly into
unsubsidized employment.
Employment and training
CE&T) mandatory participant a
Food Stamp Program applicant
or participant who is required
to work register under 7
u.s.c. 2014(d) (1) or (2) and ·
who the State determines
should not be. exempted from
participation in an employment
and training program.
Employment and training
CE&Tl program means a program
operated by each State agency
consisting of one or more
work, training, education or
job search components.
Error for active cases
results when a determination
is made by a quality control
reviewer that a household
which received food coupons
during the sample month is
ineligible or received an
incorrect allotment. Thus,
errors in active cases involve
dollar loss to either the
participant or the government.
For negative cases, an "error"
means that the reviewer
determines that the decision
to deny or terminate a
household was incorrect.
Exempted for purposes of
273.7 excluding paragraphs (a)
and (b) this term refers to a
work registered person or
persons excused by the State,
under the conditions in
273.7(f) from participation in
an employment and training
program.
Exercises governmental
iurisdiction means the active
exercise of the legislative,
executive or judicial powers
of government by an Indian
tribal organization.
Federal fiscal year means a
period of 12 calendar months
beginning with each October 1
and ending with September 30
of the following calendar
year.
Firm's practice means the
usual manner in which person­nel
of a firm or store accept
food coupons as shown by the
actions of the personnel at
the time of the investigation.
FNS means the Food and
Nutrition Service of the u.s.
Department of Agriculture.
Food Stamp Act means the
Food Stamp Act of 1977 (Pub.
L. 95- 113), including any
subsequent amendments thereto.
General assistance CGAl
means cash or another form of
assistance, excluding in-kind
assistance, financed by State
or local funds as part of a
program which provides
assistance to cover living
expenses or other basic needs
intended to promote the health
or well-being of recipients.
Group living arrangement
means a public or private
nonprofit residential setting
that serves no more than
sixteen residents that is
certified by the appropriate
agency or agencies of the
State under regulations issued
under section 1616(e) of the
Social Security Act or under
standards determined by the
Secretary to be comparable to
standards implemented by
appropriate State agencies
under section 1616(e) of the
Social Security Act. To be
eligible for food stamp
benefits, a resident of such a
group living arrangement must
be blind or disabled and
receiving benefits under title
I, title II, title X, title
7
XIV, or title XVI of the
Social Security Act.
Homeless individual means an
individual who lacks a fixed
and regular nighttime
residence or an individual
whose primary nighttime
residence is: (1) A supervised
shelter designed to provide
temporary accommodations (such
as a welfare hotel or
congregate shelter);
(2) A halfway house or
similar institution that
provides temporary residence
for individuals intended to be
institutionalized;
(3) A temporary
accommodation in the residence
of another individual; or
(4) A place not designed
for, or ordinarily used, as a
regular sleeping accommodation
for human beings (a hallway, a
bus station, a lobby or
similar places).
Homeless meal provider means
a public or private nonprofit
establishment (e.g. soup
kitchen, temporary shelter),
approved by an appropriate
State or local agency as
defined in 278.1(r), that
feeds homeless persons.
House-to-house trade route
means any retail food business
operated from a truck, bus,
pushcart, or other mobile
vehicle.
Identification CIDl means a
card which identifies the
bearer as eligible to receive
and use food coupons.
Immigration and
Naturalization Service CINSl
means the Immigration and
Naturalization Service, u.s.
Department of Justice.
Indian tribe means: (1) Any
Indian tribe, Band, Nation, or
other organized Indian group
on a reservation for example,
a Rancheria, Pueblo or Colony,
and including any Alaska
Native Village or regional or
village corporation (estab­lished
pursuant to the Alaska
Native Claims Settlement Act
(85 Stat. 688)), that is on a
reservation and is recognized
as eligible -for Federal
programs and services provided
to Indians because of their
status as Indians; or (2) any
Indian tribe or Band on a
reservation holding a treaty
with a State government.
Indian tribal organization
CITO) means: (1) The recog­nized
governing body of any
Indian tribe on a reservation;
or (2) the tribally recognized
intertribal organization which
the recognized governing
bodies of two or more Indian
tribes on a reservation
authorizes to operate the Food
Stamp Program or a Food
Distribution Program on their
behalf.
Institution of higher
education means any
institution which normally
requires a high school diploma
or equivalency certificate for
enrollment, including, but not
limited to, colleges,
universities and vocational or
technical schools at the
post-high school level.
Insured financial
institution means a financial
institution insured by the
Federal Deposit Insurance
Corporation (FDIC) or the
Federal Savings and Loan
Insurance Corporation (FSLIC)
or financial institutions
which are insured under the
Federal Credit Union Act and
which have retail food stores
or wholesale food concerns in
their field of membership.
Issuance month in a Monthly
8
Reporting and Retrospective
Budgeting system means the
fiscal or calendar month for
which the State agency shall
issue a food stamp allotment.
Issuance is based upon income
and circumstances in the
corresponding budget month.
In prospective budgeting, the
budget month and issuance
month are the same. In
retrospective budgeting, the
issuance month follows the
budget month and the issuance
month shall begin within 32
days after the end of the
budget month.
Large project area means
those project areas/management
units with monthly active
caseloads of more than 15,000
households based on the most
current information available
at the time the large project
area review schedule is
developed.
Low-income household means a
household whose annual income
does not exceed 125 percent of
the Office of Management and
Budget poverty guidelines.
Management Evaluation CMEl
reviews means reviews
co~ducted by States at the
project area level to
determine if State agencies
are administering and
operating the Food Stamp
Program in accordance with
program requirements.
Management unit means an
area based on a welfare
district, region, or other
administrative structure
designated by the State agency
and approved by FNS to be
reviewed for ME review
purposes.
Master issuance file means a
cumulative file containing the
individual records and status
of households, and the amount
of benefits, if any, each
household is authorized to
receive.
Meal delivery service means
a political subdivision, a
private nonprofit organiza­tion,
or a private establish­ment
with which a State or
local agency has contracted
for the preparation and
delivery of meals at
concessional prices to elderly
persons, and their spouses,
and to the physically or
mentally handicapped and
persons otherwise disabled,
and their spouses, such that
they are unable to adequately
prepare all of their meals.
Medicaid means medical
assistance under title XIX of
the Social Security Act, as
amended.
Medium project area means
those project areas/management
units with monthly active
caseloads of 2,001 to 15,000
households based on the most
current information available
at the time the medium project
area review schedule is
developed.
Minimum benefit means the
minimum monthly amount of food
stamps that one-and two-person
households receive. The amount
of the minimum benefit will be
reviewed annually and adjusted
to the nearest $5 each October
1 based upon the percentage
change in the Thrifty ·Food
Plan for the twelve month
period ending the preceding
June.
National standard payment
error rate means the weighted
mean of all States' payment
error rates during a base
period.
Negative case means a
household which was denied
certification or whose food
9
stamp benefits were terminated
effective for the sample
month. '
Negative case error rate
mean~ an estimate of the
proportion of denied or
terminated cases where the
household was incorrectly
denied or terminated. This
estimate will be expressed as
a percentage of completed
negative QC reviews excluding
those cases denied based upon
processing by SSA personnel or
denied/terminated based upon
the rules of certain
demonstration projects.
Newly work registered food
stamp participants work
registered at the point of
application.
Nonprofit cooperative food
purchasing venture means any
private nonprofit association
of consumers whose members
pool their resources to buy
food.
Overissuance means the
amount by which coupons issued
to a household exceeds the
amount it was eligible to
receive.
Overpayment error rate means
the percentage o~ the value of
all allotments issued in a
fiscal year that are either:
(1) Issued to households that
fail to meet basic program
eligibility requirements, or
(2) overissued to eligible
households.
Payment error rate means the
sum of the point estimates of
two component error rates: an
overpayment error rate and an
underpayment error rate. Each
component error rate is the
value of allotments either
overissued or underissued
expressed as a percentage of
all allotments issued to
completed active sample cases,
excluding those cases
processed by SSA personnel or
participating in certain
demonstration projects
designated by FNS.
Placed in an employment and
training CE&Tl program a State
agency may count a person as
"placed" in an employment and
training program when the
individual commences a
component or is sent a Notice
of Adverse Action (NOAA) for
noncompliance with a food
stamp employment and training
requirement. Persons who
refuse to work register or who
voluntarily quit a job and are
sent a NOAA may not be
considered "placed".
Program means the food stamp
program conducted under the
Food Stamp Act and
regulations.
Project area means the
county or -similar political
subdivision designated by a
State as the administrative
unit for program operations.
Upon prior FNS approval, a
city, Indian reservation,
welfare district, or any other
entity with clearly defined
geographic boundaries, or any
combination of such entities,
may be designated as a project
area, or a State as a whole
may be designated as a single
project area.
Prospective budgeting in a
Monthly Reporting and
Retrospective Budgeting system
means the computation of a
household's food stamp
allotment for an issuance
month based on an estimate of
income and circumstances which
will exist in that month.
Public assistance CPA> means
any of the following programs
authorized by the Social
Security Act of 1935, as
10
amended: Old-age assistance,
aid to families with dependent
children (AFDC), including
AFDC for children of
unemployed fathers, aid to the
blind, aid to the permanently
and totally disabled and aid
to aged, blind, or disabled.
Quality control review means
a review of a statistically
valid sample of active and
negative cases to determine
the extent to which households
are rece1v1ng the food stamp
allotments to which they are
entitled, and to ensure that
negative cases are not
incorrectly denied or
terminated.
Record-for-issuance file
means a file which is created
monthly from the master
issuance file, which shows the
amount of benefits each
eligible household is to
receive for the issuance
month, and the amount actually
issued to the household.
Regulations means the
provisions of this subchapter.
Regulatory citations refer to
provisions of this subchapter
unless otherwise specified.
Reservation m~ans the geo­graphically
defined area or
areas over which an ITO
exercises governmental juris­diction
so long as such area
or areas are legally recogni­zed
by the Federal or a State
government as being set aside
for the use of Indians.
Retail food store means: (1)
An establishment or recognized
department of an establish­ment,
or a house-to-house
trade route, whose eligible
food sales volume as deter­mined
by visual inspection,
sales records, purchase
records, or other inventory or
accounting recordkeeping
methods that are customary or
reasonable in the retail food
industry is more than 50
percent staple food items for
home preparation and
consumption;
(2) Public or private
communal dining facilities and
meal delivery services;
private nonprofit drug addict
or alcoholic treatment and
rehabilitation programs;
publicly operated community
mental health centers which
conduct residential programs
for drug addicts and/or
alcoholics; public or private
nonprofit group living
arrangements; public or
private nonprofit shelters for
battered women and children;
public or private nonprofit
establishments, approved by an
appropriate State or local
agency, that feed homeless
persons;
(3) Any stores selling
equipment for procuring food
by hunting and fishing to
eligible households in Alaska,
as specified in the definition
of eligible foods;
(4) Any private nonprofit
cooperative food purchasing
venture, including those whose
members pay for food prior to
receipt of the food; and
(5) A farmers' market.
Retrospective budgeting in a
Monthly Reporting and
Retrospective Budgeting system
means the computation of a
household's food stamp
allotment for an issuance
month based on actual income
and circumstances which
existed in a previous month,
the "budget month."
Review date for quality
control active cases means a
day within the sample month,
either the first day of the
11
calendar or fiscal month or
the day the household was
certified, whichever is later.
The ' 'review date.' ' for
negative cases is the date of
the agency's decision to deny
or terminate program benefits.
For no case is the ''review
date'' the day the QC review
is conducted.
Review period means the
12-month period from October 1
of each calendar year through
September 30 of the following
calendar year.
sample frame means a list of
all units from which a sample
is actually selected.
Sample month means the month
of the sample frame from which
a case is selected (e.g., for
all cases selected from a
frame consisting of households
participating in January, the
sample month is January).
Screening an evaluation by
the eligibility worker as to
whether a person should or
should not be referred for
participation in an employment
and training program. This
activity would not be
considered an approvable E&T
component.
Secretary means the
Secretary of the u.s.
Department of Agriculture.
Shelter for battered women
and children means a public or
private nonprofit residential
facility that serves battered
women and their children. If
such a facility serves other
individuals, a portion of the
facility must be set aside on
a long-term basis to serve
only battered women and
children.
Small proiect area means
those project areas/management
units with monthly active
caseloads of 2,000 households
or fewer based on the most
current information available
at the time the small project
area review schedule is
developed.
Spouse refers to either of
two individuals: (1) Who would
be defined as married to each
other under applicable State
law; or
(2) Who are living together
and are holding themselves out
to the community as husband
and wife by representing them­selves
as such to relatives,
friends, neighbors, or trades-people.
.
SSA processed/ demonstration
case means a case that is
participating or has been
denied based upon processing
by SSA personnel or is
participating or has been ,
denied/terminated based upon
the rules of a demonstration
project with significantly
different certification rules
(as identified by FNS).
Staple food means those food
items intended for home
preparation and consumption,
which include meat, poultry,
fish, bread and breadstuffs,
cereals, vegetables, fruits,
fruit and vegetable juices,
and dairy products. Accessory
. food items, such as coffee,
tea, cocoa, carbonated and
uncarbonated drinks, candy,
condiments, and spices are not
staple foods for the purpose
of qualifying a firm to
participate in the program as
a retail food store or as a
wholesale food concern.
State means any one of the
fifty States, the District of
Columbia, Guam, the Northern
Mariana Islands, the Virgin
Islands of the United States,
and the reservation of an
Indian tribe whose ITO meets
12
the requirements of the Food
Stamp Act for participation as
a State agency.
State agency means: (1) The
agency of State government,
including the local offices
thereof, which is responsible
for the administration of the
federally aided public assist­ance
programs within the
State, and in those States
where such assistance programs
are operated on a decentrali­zed
basis, it includes the
counterpart local agencies
which administer such
assistance programs for the
state agency, and (2) the
Indian tribal o~ganization of
any Indian tribe determined by
the Department to be capable
of effectively administering a
Food Stamp Program or a Food
Distribution Program in
accordance with provisions of
the Food Stamp ·Act of 1977.
State Income and Eligibility
Verification System CIEVS)
means a system of information
acquisition and exchange for
purposes of income and
eligibility verification which
meets the requirements of
section 1137 of the Social
Security Act, generally
referred to as the IEVS •
State Wage Information
Collection Agency CSWICA)
means the State agency
administering the State
unemployment compensation law,
another agency administering a
quarterly wage reporting
system, or a State agency
administering an alternative
system which has been
determined by the Secretary of
Labor, in consultation with
the Secretary of Agriculture
and the Secretary of Health
and Human Services, to be as
effective and timely in
providing employment related
income and eligibility data as
the two just mentioned
agencies.
Sub-units means the physical
location of an organizational
entity within a project areaj
management unit involved in
the operation of the Food
Stamp Program, . excluding Post
Offices.
Supplemental Security
IncomeCSSI) means monthly cash
payments made under the
authority of: (1) Title XVI of
the Social Security Act, as
amended, to the aged, blind
and disabled; (2) section
1616(a) of the Social Security
Act; or (3) section 212(a) of
Pub. L. 93 - 66.
Systematic Alien
Verification for Entitlements
(SAVE) means the INS program
whereby State agencies may
verify the validity of
documents provided by aliens
applying for food stamp bene­fits
by obtaining information
from a central data file.
Thrifty food plan means the
diet required to feed a family
of four persons consisting of
a man and a woman 20 through
50, a child 6 through s, and a
child 9 through 11 years of
age, determined in accordance
with the Secretary's
calculations. The cost of such
diet shall be the basis for
uniform allotments for all
households regardless of their
actual composition. In order
to develop maximum food stamp
allotments, the Secretary
shall make household size and
other adjustments in the
Thrifty Food Plan taking into
account economies of scale and
other adjustments as required
by law.
Trafficking means the buying
13
or selling of coupons, ATP
cards or other benefit instru­ments
for cash or consider­ation
other than eligible
food; or the exchange of fire­arms,
ammunition, explosives,
or controlled substances, as
the term is defined in section
802 of title 21, United States
Code, for coupons.
Underissuance means the
amount by which the allotment
to which the household was
entitled exceeds the allotment
which the household received.
Underissuance error rate.
(See Underpayment error rate.)
Underpayment error rate
means the ratio of the value
of allotments underissued to
recipient households to the
total value of allotments
issued in a fiscal year by a
State agency.
Universe means all units for
which information is desired.
Variance means the incorrect
application of policy andjor a
deviation between the infor­mation
that was used to
authorize the sample month
issuance and the verified
information that should have
been used to calculate the
sample month issuance.
Wholesale food concern means
an establishment which sells
eligible food to retail food
stores or to meal services for
resale to households.
271.3 Dalaqations to FNS for
administration.
(a) Delegation. Within
the Department, FNS acts on
behalf of the Department in
the administration of the· Food
Stamp Program with the
exception of those functions,
which may be delegated to
other agencies within the
Department. The right is
reserved at any time to
withdraw, modify, or amend any
delegation of authority. When
authority is delegated to FNS,
the responsibilities may be
carried out by the
Administrator or by another
official of FNS, or by State
agencies with respect to
claims against households, as
designated.
(b) Claims settlement.
FNS shall have the power to
determine the amount of and to
settle and adjust any claim
arising under the provisions
of the Act or this subchapter,
and to compomise or deny all
or part of any claim.
(c) Demonstration
authority. FNS is authorized
to undertake demonstration
projects which test new
methods designed to improve
program administration and
benefit delivery. FNS is
authorized to initiate program
research and evaluation
efforts for the purposes of
improving and assessing
program administration and
effectiveness. The .procedure
for initiating and conducting
these projects is established
in Part 282.
271.4 Delegations to state
agencies for administration.
(a) General delegation.
The State agency shall be
responsible for the
administration of the program
within the State, including,
but not limited to:
(1) Certification of
applicant households;
(2) Issuance, control, and
accountability of coupons;
(3) Developing and
maintaining complaint
procedures;
(4) Developing, conducting,
14
and evaluating training;
(5) Conducting performance
reporting reviews;
(6) Keeping records
necessary to determine whether
the program is being conducted
in compliance with these
regulations; and
(7) Submitting accurate and
timely financial and program
reports.
(b) Claims delegation.
FNS delegates to the State
agency, subject to the
standards in 273.18, the
authority to determine the
amount of, and settle, adjust,
compromise or deny all or part
of any claim which results
from fraudulent or non­fraudulent
overissuances to
participating households.
271.5 coupons as obligations
of the United States, crimes
and offenses.
(a) Coupons as
obligations. Pursuant to
section 15(d) of the Food
Stamp Act, coupons are an
obligation of the United
states within the meaning of
18 United States Code (U.S.C.)
8. The provisions of Title 18
of the United States Code,
"Crimes and Criminal
Procedure," relative to
counterfeiting, misuse and
alteration of obligations of
the United States are
applicable to coupons.
(b) Penalties. Any
unauthorized issuance,
redemption, use, transfer,
acquisition, alteration, or
possession of coupons, ATP
cards, or other program access
device may subject an
individual, partnership,
corporation, or other legal
entity to prosecution under
sections 15(b) and (c) of the
Food Stamp Act or under any
other applicable Federal,
State or local law, regulation
or ordinance.
(1) Section 15(b) (1) of
the Food Stamp Act reads as
follows:
"Subject to the
provisions of paragraph (2) of
this subsection, whoever
knowingly uses, transfers,
acquires, alters, or possesses
coupons, authorization cards,
or access devices in any
manner contrary to this Act or
the regulations issued
pursuant to this Act shall, if
such coupons, authorization
cards, or access devices are
of a value of $5000 or more,
be guilty of a felony and
shall be fined not more that
·$250,000 or imprisoned for not
more than twenty years, or
both, and shall, if such
coupons or authorization cards
are of a value of $100 or more
but less than $5000 or if the
item used, transferred,
acquired., altered or possessed
is an access device that has a
value of $100 or more but less
than $5000 be guilty of a
felony and shall upon the
first conviction thereof, be
fined not more than $10,000 or
imprisoned for not more than
five years, or both, and upon
the second and any subsequent
conviction thereof, shall be
imprisoned for not less than
six months nor more than five
years and may also be fined
not more than $10,000 or, if
such coupons or authorization
cards are of a value of less
than $100, or if the item
used, transferred, acquired,
altered, or possessed is an
access device that has a value
of less than $100, shall be
guilty of a misdemeanor, and
15
upon the first conviction
thereof, shall be fined not
more than $1000 or imprisoned
for not more than one year, or
both, and upon the second and
any subsequent conviction
thereof, shall be imprisoned
for not more than one year and
may also be fined not more
than $1000. In addition to
such penalties, any person
convicted of a felony or
misdemeanor violation under
this subsection may be
suspended by the court from
participation in the food
stamp program for an
additional period of up to
eighteen months consecutive to
that period of suspension
mandated by section 6(b) (1) of
this Act."
(2) Section 15(b) (2) of
the Food Stamp Act reads as
follows:
"In the case of any
individual convicted of an
offense under paragraph (b) (1)
of this section, the court may
permit such individual to
perform work approved by the
court for the purpose of
providing restitution for
lo~ses incurred by the United
States and the State agency as
a result of the offense for
which such individual was
convicted. If the court
permits such individual to
perform such work and such
individual agrees thereto, the
court shall withhold the
imposition of the sentence on
the condition that such
individual perform the
assigned work. Upon the
successful completion of the
assigned work the court may
suspend such sentence."
(3) Section 15(c) of the
Food stamp Act reads as
follows: "Whoever presents,
or causes to be presented,
coupons for payment or
redemption of the value of
$100 or more, knowing the same
to have been received,
transferred, or used in any
manner in violation of the
provisions of this Act or the
regulations issued pursuant to
this Act, shall be guilty of a
felony and, upon the first
conviction thereof, shall be
fined not more than $20,000 or
imprisoned for not more than
five years, or both, and upon
the second and any subsequent
conviction thereof, shall be
imprisoned for not less than
one year nor more than five
years and may also be fined
not more than $20,000 or if
such coupons are of a value of
less than $100, shall be
guilty of a misdemeanor and,
upon the first conviction
thereof, shall be fined not
more than $1,000 or imprisoned
for not more than one year, or
both, and upon the second and
any subsequent conviction
thereof, shall be imprisoned
for not more than one year and
may also be fined not more
than $1,000. In addition to
such penalties, any persons
convicted of a felony or
misdemeanor violation under
this subsection may be
suspended by the court from
participation in the food
stamp program for an
additional period of up to
eighteen months consecutive to
that period of suspension
mandated by section 6(b) {1) of
this Act."
(c) Security for coupons
and ATP's. All individuals,
partnerships, corporations, or
other legal entities including
State agencies and their
delegatees (referred to in
16
this paragraph as "persons")
having custody, care and
control of coupons and ATP's
shall, at all times, take all
precautions necessary to avoid
acceptance, transfer,
negotiation, or use of
spurious, altered, or
counterfeit coupons and ATP's
and to avoid any unauthorized
use, transfer, acquisition,
alteration or possession of
coupons and ATP's. These
persons shall safeguard
coupons and ATP's from theft,
embezzlement, loss, damage, or
destruction.
(d) Coupon issuers. (1)
Any coupon issuer or any
officer, employee or agent,
thereof convicted of failing
to provide the monthly reports
required in 274.5 or
convicted of violating Part
274 shall be subject to a fine
of not more than $1,000, or
imprisoned for not more than 1
year, or both.
(2) Any coupon issuer or
any officer, employee or
agent, thereof convicted of
knowingly providing false
information in the reports
required under 274.5 shall be
subject to a fine of not more
than $10,000, or imprisoned
not more than 5 years, or
both.
271.& complaint procedure.
(a) State agency
responsibility--C1l General
scope. The State agency shall
maintain a system of its
choosing for handling program
complaints filed by
participants, potential
participants, or other
concerned individuals or
groups. This shall not include
complaints alleging
discrimination on the basis of
race, sex, age, religious
creed, national origin,
political beliefs or handicap;
such complaints shall be
handled in accordance with
272.6. This procedure also
need not include complaints
that can be pursued through a
fair hearing. Complaints
regarding such areas as
processing standards and
service to participants and
potential participants would
generally be handled under
this complaint procedure.
. {2) Minimum requirements.
The State agency shall follow
up on complaints, resolve
complaints and take corrective
action where warranted, and
respond to the complainant on
the State agency's disposition
of the complaint. The State
agency shall make information
on the complaint system and
how to file a complaint
available to participants,
potential participants and
other interested persons. The
State agency may make the
information available through
written materials or posters
at certification offices or
other appropriate means.
(3) Complaint analysis.
The State agency shall
maintain records of complaints
received and their
disposition, and shall review
records at least annually to
assess whether patterns of
problems may be present in
local offices, project areas,
or throughout the State. The
results of this review shall
be provided to the Performance
Reporting System coordinator
for appropriate action, and
for inclusion, if appropriate,
in the State Corrective Action
Plan in accordance with 275.16
of this chapter. The infor-
17
mation provided to the
Performance Reporting System
Coordinator shall include the
identification, if any, of
potential or actual patterns
of deficiencies in local
offices, project areas, or
throughout the State, and any
identification of causes of
these problems.
(4) Monitoring. FNS shall
monitor State compliance with
these requirements through the
Performance Reporting System.
(b) Regional office
responsibility. {1) Persons
or agencies desiring program
information or wishing to file
~ complaint may contact the
appropriate FNS Regional
Office.
(i) For Delaware, the
District of Columbia,
Maryland, New Jersey,
Pennsylvania, Puerto Rico,
Virginia, the Virgin Islands
of the United States, and West
Virginia: Mid-Atlantic
Regional Office, u.s.
Department of Agriculture,
Food and Nutrition Service, CN
02150, Trenton, N.J. 08650.
(ii) For Alabama,
Florida, Georgia, Kentucky,
Mississippi, North Carolina,
South Carolina, and Tennessee:
Southeast Regional ' office,
u.s. Department of
Agriculture, Food and
Nutrition Service, 1100 Spring
Street NW., Room 200, Atlanta,
Ga. 30367.
(iii) For Illinois,
Indiana, Michigan, Minnesota,
Ohio and Wisconsin: Midwest
Regional Of~ice, u.s.
Department of Agriculture,
Food and Nutrition Service, 50
East Washington Street,
Chicago, Ill. 60602.
(iv) For Arkansas,
Louisiana, New Mexico,
Oklahoma, and Texas: Southwest
Regional Office, u.s.
Department of Agriculture,
Food and Nutrition Service,
1100 Commerce Street, Suite 5
- c - 30, Dallas, Tex. 75242.
(v) For Alaska, Arizona,
California, Guam, Hawaii,
Idaho, Nevada, Oregon and
Washington: Western Regional
Office, U.S. Department of
Agriculture, Food and
Nutrition Service, 550 Kearny
Street, Room 400, San
Francisco, Calif. 94108.
(vi) For connecticut,
Maine, Massachusetts, New
Hampshire, New York, Rhode
Island, and Vermont: Northeast
Regional Office, u.s.
Department of Agriculture,
Food and Nutrition Service, 33
North Avenue, Burlington,
Mass. 01803.
(vii) For Colorado, Iowa,
Kansas, Missouri, Montana,
Nebraska, North Dakota, South
Dakota, Utah, and Wyoming:
Mountain Plains Regional
Office, u.s. Department of
Agriculture, Food and
Nutrition Service, 2420 West
26th Avenue, suite 430 - D,
Denver, Colo. &0211.
(2) Complainants shall be
advised of the appropriate
State complaint handling and
fair hearing procedures. Upon
household request, other
complaints shall be pursued by
the Department rather than the
State agency, unless the
complaint is one upon which
the complainant wishes to
request a fair hearing.
272--REQOIREMENTS POR
PARTICIPATING STATE AGENCIES
Sec.
272.1 General terms and
conditions.
272.9 Approval of homeless
18
meal providers.
Authority: 7 u.s.c. 2011-2032.
272.1 General teras and
conditions.
(a) Coupons do not reduce
benefits. The coupon allot­ment
provided any eligible
household shall not be
considered income or resources
for any purpose under any
Federal, State, or local laws
including, but not limited to,
laws on taxation, welfare, and
public assistance programs. No
participating State or
political subdivision shall
decrease any assistance
otherwise provided an
individual or individuals
because of the receipt of a
coupon allotment.
(b) No sales taxes on
food stamp purchases. (1) A
State shall not participate in
the Food Stamp Program if
State or local sales taxes or
other taxes or fees, including
but not limited to excise
taxes, are collected within
the State on purchases made
with food stamp coupons.
"Purchases made with food
coupons" for purposes of this
provision shall refer to
purchases of "eligible foods"
as defined in 271.2. Where the
total value of groceries being
bought by the recipient is
larger than the amount of
coupons being presented by the
recipient, only the portion of
the sale made in exchange for
food stamps must be exempt
from taxation in order for a
State to satisfy the
requirements of this
provision. Although a food
stamp recipient may use a
combination of cash and food
stamps in making a food
purchase, only the dollar
amount represented by the food
coupons needs to be exempt
from taxation.
{2) State and/or local
law shall not permit the
imposition of tax on food paid
for with coupons. FNS may
terminate the issuance of
coupons and disallow
administrative funds otherwise
payable pursuant to part 277
in any State where such taxes
are charged. Action to
disallow administrative funds
shall be taken in accordance
with the procedures set forth
in 276.4.
{3) A State or local area
which taxes some, but not all,
eligible food items shall
ensure that retail food stores
in that locale sequence
purchases of eligible foods
paid for with a combination of
coupons and cash so as to not
directly or indirectly charge
or assign a tax to food stamp
recipients on eligible food
items purchased with coupons.
Prohibited methods include,
but are not limited to, the
allocation of coupons first to
non-taxable eligible items,
and the application of cash,
rather than coupons, to
taxable eligible food.
272.1 Approval of homeless
meal providers.
The State food stamp agency,
or another appropriate State
or local governmental agency
identified by the State food
stamp agency, shall approve
establishments serving the
homeless upon sufficient
evidence, as determined by the
agency, that the establishment
does in fact serve meals to
homeless persons. Where the
State food stamp agency
19
identifies another appropriate
state or local agency for the
purpose of approving
establishments serving the
homeless, the State food stamp
agency will remain responsible
for insuring that the
provisions of the preceding
sentence are effectively
carried out.
278--PARTICIPATION OP RETAIL
FOOD STORES, WHOLESALE FOOD
CONCERNS AND INSURED FINANCIAL
INSTITUTIONS
Sec.
278.1 Approval of retail
food stores and
wholesale food
concerns.
278.2 Participation of retail
food stores.
278.3 Participation of whole­sale
food concerns.
278.4 Procedure for redeeming
coupons.
278.5 Participation of
insured financial
institutions.
278.6 Disqualification of
retail food stores and
wholesale food
concerns, and
imposition of civil
money penalties in lieu
of disqualifications.
278.7 Determination and
disposition of claims-­retail
food stores and
wholesale food
concerns.
278.8 Administrative review
-- retail food stores
and wholesale food
concerns.
278.9 Implementation of
amendments relating to
the participation of
retail food stores,
wholesale food concerns
and insured financial
institutions.
278.1 Approval of retail food
stores and wholesale food
concerns.
{a) Application. Any firm
desiring to participate in the
program shall file an
application as prescribed by
FNS. The FNS officer in
charge shall deny or approve
authorization, or request more
information, within 30 days of
receipt of the application.
(b) Determination of
authorization. An applicant
shall provide sufficient data
on the nature and scope of the
firm's business for the FNS
officer in charge to determine
whether the applicant's
participation will further the
purposes. of the program. In
making this determination the
FNS officer in charge shall
consider all of the followi'ng:
(1} The nature and extent of
the food business conducted by
the applicant. (i) Retail food
stores which sell primarily
food for home preparation and
consumption and in which one
or more staple food items, as
defined in 271.2, make up more
than 50 percent of eligible
food sales shall normally be
considered to have food
business of a nature and
extent which will further the
purposes of the program. These
stores shall include: Full­line
grocery stores;
convenience stores; stores
which sell meat, poultry, or,
fish; stands which sell
agricultural commodities;
farmers markets; milk routes;
bread routes; day-old bread
stores; bakeries which sell
bread; and non-profit
cooperative food-purchasing
ventures which are properly
licensed to sell food in the
state and locality in which
20
they are operating.
(ii) Firms whose primary
business is not the sale of
food for home preparation and
consumption, but who have
reco.gnized grocery departments
in which staple foods make up
more than 50 percent of
eligible food sales, shall
normally be considered to have
food business of a nature and
extent which will qualify the
store for participation in the
program. In determining
whether a store's staple food
business is sufficient for the
store to qualify for partici­pation
in the program, the FNS
officer in charge shall also
consider:
(A) The volume of staple
food business the store does;
(B) The amount of sales of
staple foods compared to other
business conducted by the
firm; and
{C) ·The availability of
other authorized food stores
in the area.
{iii) Wholesale food
concerns whose primary
business is the sale of
eligible food at wholesale,
and in which one or more
staple food items, as defined
in 271.2, make up more than 50
percent of eligible food
sales, shall normally be
considered to have adequate
food business for the purposes
of the program.
(iv) A firm whose primary
business is the sale of food
at the wholesale level may not
be authorized as a retail firm
unless it has a significant
volume of retail food sales.
In addition to criteria
applicable to all retail
firms, the FNS officer in
charge shall consider all of
the following factors in
determining whether a
wholesaler qualifies to be
authorized as a retailer: the
volume of the firm's retail
food business in relation to
the volume of its wholesale
food business, whether the
firm holds itself out to the
public as a food retailer, and
whether the firm actively
seeks retail food trade. The
absence or presence of any one
of the factors listed in this
paragraph will not necessarily
determine whether a wholesale
firm qualifies for authoriza­tion
as a retail food store.
In determining whether a
wholesale firm qualifies for
authorization as a retailer,
FNS shall consider each unit
of a multi-unit firm
separately. A firm authorized
under this paragraph may not
accept coupons as a wholesale
food concern.
(2) The volume of coupon
business which FNS may
reasonably expect the firm to
do. The FNS officer in charge
may consider such factors as
the location of a store and
previous food sales volumes in
evaluating the ability of an
applicant firm to attract food
stamp business.
(3) The business integrity
and reputation of the
applicant. The FNS officer in
charge may consider:
(i) Criminal conviction
records reflecting on the
honesty or integrity of
officers or managers of the
applicant firm;
(ii) Official records of
removal from other Federal,
State, or local programs;
(iii) Judicial determin­ations
in civil litigation
adversely reflecting on the
integrity of officers or
21
managers of the applicant
firm;
(iv) Evidence of an attempt
to circumvent a period of
disqualification from the food
stamp program or a civil money
penalty imposed for violations
of the Food Stamp Act and this
part;
(v) Evidence of prior
fraudulent behavior of
officers, managers or
employees of the applicant
firm; and
(vi) Any other evidence
reflecting on the business
integrity and reputation of
the applicant.
(4) Bonding for firms with
previous sanctions. (i) If the
applicant firm has been
sanctioned for violations of
this part, by withdrawal or
disqualification from program
participation, or by a civil
money penalty, the FNS officer
-in-charge shall, as a
condition of future authoriz­ation,
require the applicant
to present a collateral bond
which: (A) Is issued by a
bonding agent recognized under
the law of the state in which
the applicant is conducting
business, and which is
represented by a negotiable
certificate only.
(B) Is payable to the Food
and Nutrition Service, u.s.
Department of Agriculture;
(C) Cannot be canceled by
the bonding agent for non­payment
of the premium by the
applicant;
(D) Has a face value of
$1,000 or an amount equal to
ten percent of the average
monthly coupon redemption
volume of the applicant for
the immediate twelve months
prior to the effective date of
the most recent sanction which
necessitated the bond,
whichever amount is greater;
(E) Is valid at all times
during which the firm is
authorized to participate in
the program; and
(F) Remains in the custody
of the officer-in-charge
unless released to the
applicant as a result of the
withdrawal of the applicant's
authorization, without a
fiscal claim established
against the applicant by FNS.
(ii) Furnishing a collateral
bond shall not eliminate or
reduce a firm's obligation to
pay in full any civil money
penalty or previously
determined fiscal claim which
may have been assessed against
the firm by FNS prior to the
time the bond was required by
FNS, and furnished by the
firm. A firm which has been
assessed a civil money penalty
shall pay FNS as required, any
subsequent fiscal claim
asserted by FNS. In such cases
a collateral bond shall be
furnished to FNS with the
payment, or a schedule of
intended payments, of the
civi~ money penalty. A buyer
or transferee shall not, as a
result of the transfer or
purchase of a disqualified
firm, be required to furnish a
bond prior to authorization.
(5} Taxpayer identification
numbers. At the time of an
initial request for
authorization as well as
reauthorization, an applicant
firm must provide its employer
identification number and
social security numbers as
described below:
(i} EmPloyer Identification
Number. The firm must provide
its employer identification
number (EIN} if one has been
22
assigned to the firm by the
Internal Revenue Service. The
authority to requesb EINs and
the guidelines for requesting
EINs are set forth in section
6109 (f) of the Internal
Revenue Code of 1986 and
Treas. Reg. s301.6109-2 (26
CFR s301.6109-2).
(ii} Social Security Number.
In addition to the EIN, the
firm must provide the social
security numbers (SSNs) of the
following individuals:
(A) The SSN of an owner of
a sole proprietorship.
(B) The SSNs of general
partners of firms which are
partnerships.
(C) The SSNs of up to five
of the largest shareholders
(owners} of privately owned
corporations. (For purposes of
this section, a privately
owned corporation is one which
has shares or stock that are
not traded on a stock exchange
or available for purchase by
the general public.)
(6) Other factors. Any other
factors which the FNS officer
in charge considers pertinent
to the application under
consideration.
(c) Wholesalers. A wholesale
food concern may be authorized
to accept coupons only from a
specified customer or
customers if it meets the
requirements of paragraphs (a}
and (b) of this section, and
FNS determines it is required
as a redemption outlet:
(1) For one or more
specified authorized drug
addict or alcoholic treatment
programs, (2} For one or more
specified authorized group
living arrangements, (3} For
one or more specified
authorized shelters for
battered women and children,
(4) For one or more specified
authorized nonprofit
cooperative food-purchasing
ventures, (5) For one or more
specified authorized homeless
meal providers, or (6) For one
or more specified authorized
retail food stores which are
without access to an insured
financial institution which
will redeem their coupons.
No firm may be authorized to
accept and redeem coupons
concurrently as both a retail
food store and a wholesale
food concern. Authorizations
of wholesale food concerns
granted prior to January 28,
1982 shall expire on May 31,
1982. Wholesale food concerns
desiring to participate in the
program after that date must
reapply for authorization in
accordance with the provisions
of this paragraph.
(d) Meal services. A meal
delivery service or communal
dining facility desiring to
prepare and serve meals to
households eligible to use
coupons for those meals in
addition to meeting the
requirements of paragraphs (a)
and (b) of this section, must
establish that:
(1) It is recognized as a
tax exempt organization by the
Internal Revenue Service; or
(2) It is a senior citizens'
center or apartment building
occupied primarily by elderly
persons and SSI recipients,
and their spouses; or
(3) It is a private
establishment operating under
a contract with a State or
local agency to prepare and
serve (or deliver) low-cost
meals to elderly persons and
SSI recipients (and, in the
case of meal delivery
services, to elderly persons
23
or handicapped persons) and
their spouses. The ~ontracts
of private establishments must
specify the approximate prices
which will be charged.
(e) Treatment programs. Drug
addict or alcoholic treatment
and rehabilitation programs
wishing to redeem through
wholesalers food stamps
received from or on behalf of
their participants shall in
addition to meeting the
requirements of paragraphs
(a), (b) and (d) (1) of this
section, be under Part B of
Title XIX of the Public Health
Service Act (42 u.s.c. 300x et
seq.). Approval to participate
is automatically withdrawn
once the treatment and
rehabilitation program no
longer meets the criteria
which would make it eligible
for funding under part B of
Title XIX (in accordance with
the definition in ''~
addiction or alcoholic
treatment and rehabilitation
program'' in 271.2).
(f) Group living
arrangements. FNS shall
authorize as retail food
stores those group living
arrangements wishing to redeem
coupons directly through
wholesalers. The group living
arrangement must, in addition
to meeting requirements of
paragraphs (a),(b), and (d)(l)
of this section, be certified
by the appropriate agency or
agencies of the State under
regulations issued under
section 1616(e) of the Social
security Act or under
standards determined by the
Secretary to be comparable to
standards implemented by
appropriate State agencies
under section 1616(e) of the
Social Security Act. Approval
to participate is auto­matically
cancelled at any
time that a program loses its
certification from the State
agency or agencies.
(g) Shelters for battered
women and children. FNS shall
authorize as retail food
stores those shelters for
battered women and children
wishing to redeem coupons
directly through wholesalers.
The shelter must be public or
private nonprofit, as defined
in paragraph (d) (1) of this
section, and meet the require­ments
of paragraphs (a) and
(b) of this section. Shelters
which also serve other groups
of individuals must have a
portion of the facility set
aside on a long-term basis to
shelter battered women and
children. Also required is
that the shelter be a
residence which serves meals
or provides food to its
residents.
(h) House-to-house trade
routes. FNS shall, in
consultation with the
Department's Office of
Inspector General, determine
those locations where the
operation of trade routes
damages the program's
integrity. FNS may limit the
authorization of house-to­house
trade routes to those
trade routes whose services
are required by participating
households in such areas in
order to obtain food. The FNS
Officer in Charge, in deciding
whether households in such
areas require a trade route's
services, shall consider the
volume of food business the
trade route does and the
availability of alternate
sources of comparable food.
An FNS official shall inspect
24
any applicant trade route's
vehicle to ensure that the
trade route is a retail food
store before authorizing it to
accept coupons. An FNS
official may require, as a
condition of continuing
authorization, that the trade
route vehicle be reinspected
semiannually to ensure that it
continues to be a retail food
store.
(i) Authorization card.
Upon approval, FNS shall issue
a nontransferable authoriza­tion
card to the firm. The
authorization card shall be
retained by the firm until
superseded, surrendered, or
revoked as provided in this
part.
(j) Denying authorization.
FNS shall deny the application
of any firm if it determines
that:
(1) The firm does not
qualify for participation in
the program as specified in
paragraphs (b), (c), (d), and
(e) of this section; or
(2) The firm has failed to
pay in full any fiscal claim
assessed against the firm
under 278.7 or any fines
assessed under 278.6(1) or
278.6(m). The FNS officer in
charge shall issue ·a notice to
the firm by certified mail or
personal service of any
authorization denial and shall
advise the firm that it may
request review of that
determination.
(k) Withdrawing
authorization. (1) FNS shall
withdraw the authorization of
any firm authorized to
participate in the program for
any of the following reasons.
(i) The firm's continued
participation in the program
will not further the purposes
of the program;
(ii) The firm fails to meet
the specifications of
paragraphs (b), (c), (d), or
(e) of this section;
(iii) The firm has been
found to be circumventing a
period of disqualification or
a civil money penalty through
a purported transfer of
ownership;
(iv) The firm has ,failed to
pay fines assessed under
278.6(1) or 278.6(m); or
(v) The firm is required
under State and/or local law
to charge tax on eligible food
purchased with coupons or to
sequence or allocate purchases
of eligible foods made with
coupons and cash in a manner
inconsistent with 272.1 of
these regulations.
(2) The FNS officer in
charge shall issue a notice to
the firm by certified mail or
personal service to inform the
firm of the determination and
of the review procedure. FNS
shall remove the firm from the
program if the firm does not
request review within the
period specified in 279.5.
(1) Refusal to accept
correspondence or to respond
to inquiries. FNS may
withdraw the authorization of
any firm which:
(1) Refuses to accept
correspondence from FNS;
(2) Fails to respond to
inquiries from FNS within a
reasonable time; or
(3) Cannot be located by FNS
with reasonable effort.
(m) Updating information.
FNS may require, from time to
time, but not more than once
each Federal fiscal year, a
firm to update any or all of
the information on the firm's
application form. Failure to
25
provide this information may
result in the withdrawal of
the firm's approval to
participate in the program.
(n) Removal from the Special
supplemental Food Program. for
Women. Infants. and Children
CWIC). (1} FNS shall withdraw
the Food Stamp Program
authorization of any firm
which is disqualified from the
WIC Program based in whole or
in part on any act which
constitutes a violation of
that program's regulation and
which is shown to constitute a
misdemeanor or felony
violation of law, or for any
of the following specific
program violations:
(i) Claiming reimbursement
for the sale of an amount of a
specific food item which
exceeds the store's documented
inventory of that food item
for a specified period of
time.
(ii) Exchanging cash or
credit for WIC food
instruments;
(iii) Receiving, transacting
and/or redeeming WIC food
instruments outside of
authorized channels;
(iv) Accepting WIC food
instruments from unauthorized
persons;
(v) Exchanging non-food
items for a WIC food
instrument;
(vi) Charging WIC customers
more for food than non-WIC
customers or charging WIC
customers more than current
shelf price; or
(vii) Charging for food
items not received by the WIC
customer or for foods provided
in excess of those listed on
the food instrument.
(2} FNS shall not withdraw
the Food Stamp Program
authorization of a firm which
is disqualified from the WIC
Program unless prior to the
time prescribed for securing
review of WIC disqualification
action, the firm was provided
notice that it could be
withdrawn from the Food Stamp
Program based on the WIC
violation. Once a firm has
served the period of removal
from WIC specified by the
State agency, the firm may
reapply for Food Stamp Program
authorization and be approved
if otherwise eligible.
(o) Applications containing
false information. The filing
of any application containing
false or misleading informa­tion
may result in the denial
or withdrawal of approval to
participate in the program and
may subject the firm and
persons responsible to civil
or criminal action.
(p) Administrative review.
Any withdrawal or denial of
authorization to participate
in the program shall be
subject to administrative
review under 278.8.
(q) Safeguarding privacy.
Except for employer
identification numbers (EINs)
and social security numbers
(SSNs), the contents of
applications or other informa­tion
furnished by firms,
including information on their
gross sales and food sales
volumes and their redemptions
of coupons, may not be used or
disclosed to anyone except for
purposes directly connected
with the administration and
enforcement of the Food Stamp
Act and these regulations,
except that such information
may be disclosed to and used
by State agencies that
administer the Special
26
Supplemental Food Program for
Women, Infants and Children
(WIC). Such purposes shall
not exclude the audit and
examination of such infor­mation
by the Comptroller
General of the United States
authorized by any other
provision of law. For safe­guards
with respect to EINs,
see 278.1(q) (1) below. For
safeguards with respect to
SSNs, see 278.1(q) (2) below.
(1) Employer identification
numbers. (i) The Department
may have access to the EINs
obtained pursuant to 278.1
(b) (5) only for the purpose of
establishing and maintaining a
list of the names and EINs of
tbe stores and concerns for
use in determining those
applicants who previously have
been sanctioned or convicted
under section 12 or 15 of the
Food Stamp Act of 1977
(7 u.s.c. 2021 or 2024). The
Department may use this
determination of sanctions or
convictions in administering
sections 9 and 12 of the Food
stamp Act of 1977 (7 u.s.c.
2018, 2021). See Treas. Reg.
s301.6109-2(b) (26 CFR
s301.6109-2(b)).
(ii) The only persons
permitted access to the EINs
obtained pursuant to 278.1(b)
(5) are officers and employees
of the United States whose
duties or responsibilities
require access to the EINs for
the administration or
enforcement of the Food Stamp
Act of 1977. See Treas. Reg.
s301.6109-2 (c) (1) (26 CFR
301.6109-2 (c)(1)).
(iii) The Department shall
provide for any additional
safeguards that the Secretary
of the Treasury determines to
be necessary or appropriate to
r
protect the confidentiality of
the EINs. The Department may
also provide for any
additional safeguards to
protect the confidentiality of
EINs so long as these safe­guards
are consistent with any
safeguards determined by the
secretary of the Treasury to
be necessary or appropriate.
See Treas. Reg. s301.6109-
2 (c) (2) (26 CFR 301.6109-2
(c) (2)).
(iv) EINs maintained by the
Department pursuant to 278.1
(b) (5) are confidential.
Except as provided in 278.1
(s) (1) (ii) above, no officer
or employee of the United
States who has or had access
to any such EIN may disclose
that number in any manner.
For purposes of 278.1(q) (1)
(iv) the term "officer or
employee" includes a former
officer or employee. See
Treas. Reg. s301.6109-2(d) (26
CFR s301.6109(d)).
(v) Sections 7213(a) (1),(2)
and (3) of the Internal
Revenue Code of 1986 apply
with respect to the un­authorized,
willful disclosure
to any person of EINs obtained
by the Department pursuant to
278.1(b) (5) in the same manner
and to the same extent as
sections 7213 (a) (1) ,, (2) and
(3) apply with respect to un­authorized
disclosure of
returns and return information
described in those sections.
Section 7213 (a) (4) of the
Internal Revenue Code of 1986
applies with respect to the
willful offer of any item of
material value in exchange for
any EIN obtained by the
Department pursuant to 278.1
(b) (5) in the same manner and
to the same extent as section
7213(a) (4) applies with
27
respect to offers (in exchange
for any return or return
information) described in that
section. See Treas. Reg.
s301.6109-2(e) (26 CFR
s301.6109-2(e)).
(2) Social Security Numbers.
(i) The Department may have
access to SSNs obtained pur­suant
to 278.1(b) (5) only for
the purpose of establishing
and maintaining a list of the
names and SSNs for use in
determining those applicants
who previously have been
sanctioned or convicted under
section 12 or 15 of the Food
Stamp Act of 1977 (7 u.s.c.
2_021 or 2024). The Department
may use this determination of
sanctions and convictions in
administering sections 9 and
12 of the Food Stamp Act of
1977 (7 u.s.c. 2018, 2021).
(ii) The only persons
permitted access to the SSNs
obtained pursuant to 278.1(b)
(5) are officers and employees
of the United States whose
duties or responsibilities
require access to the SSNs for
the administration or
enforcement of the Food Stamp
Act of 1977.
(iii) The Department shall
provide for all additional
safeguards that the Secretary
of Health and Human Services
determines to be necessary or
appropriate to protect the
confidentiality of the SSNs.
The Department may also
provide for any additional
safeguards to protect the
confidentiality of SSNs so
long as these safeguards are
consistent with any safeguards
determined by the Secretary of
Health and Human Services to
be necessary or appropriate.
(iv) The SSNs and related
records that are obtained or
maintained by authorized
persons are confidential, and
no officer or employee shall
disclose any such SSN or
related record except as
authorized. The term "related
record" means any record,
list, or compilation that
indicates, directly or
indirectly, the identity of
any individual with respect to
whom a request for a SSN is
maintained. For purposes of
278.1(q) (2) (iv) the term
"officer or employee" includes
a former officer or employee.
(v) The sanctions under
sections 7213 (a) (1), (2) and
(3) of the Internal Revenue
Code of 1986 will apply with
respect to the unauthorized,
willful disclosure to any
person of SSNs and related
records obtained or maintained
in the same manner and to the
same extent as sections
7213(a) (1),(2) and (3) apply
with respect to unauthorized
disclosures of returns and
return information described
in those sections. The
sanction under section
7213(a) (4) of the Internal
Revenue Code of"l986 will
apply with respect to the
willful offer of any item of
material value in exchange for
any SSN or related record in
the same manner and to the
same extent as section 7213
(a) (4) applies with respect to
offers (in exchange for any
return or return information)
described in that section.
(r) Homeless Meal Providers.
FNS shall authorize as retail
food stores, those homeless
meal providers which apply and
qualify for authorization to
accept food stamps from home­less
food stamp recipients.
Such meal providers must be
28
public or private nonprofit
organizations as defined by
the Internal Revenue Service
(I.R.C. 501(c) (3)), must serve
meals that include food pur-chased
by the meal provider,
must meet the requirements of
paragraphs (a) and (b) of this
section, and must be approved
by an appropriate State or
local agency, pursuant to
272.9. Homeless meal
providers shall be responsible
for obtaining approval from an
appropriate State or local
agency and shall provide
written documentation of such
approval to FNS prior to
approval of the meal
provider's application for
authorization. (If such
approval is subsequently
withdrawn, FNS authorization
shall be withdrawn). Homeless
meal providers serving meals
which consist wholly of
donated foods shall not be
eligible for authorization.
In an area in which FNS, in
consultation with the Depart­ment's
Office of Inspector
General, finds evidence that
the authorization of a home­leas
meal provider would
damage the Food Stamp
Program's integrity, FNS shall
limit the participation of
that homeless meal provider,
unless FNS determines that the
establishment or shelter is
the only one of its kind
serving the area.
(s) Each authorized retail
food store shall post in a
suitable and conspicuous
location in the store a sign
designed and provided by FNS
which provides information on
how persons may report abuses
they have observed in the
operation of the program.
Refusal or repeated failure to
display such a sign by an
authorized retail food store
may result in the withdrawal
of the firm's approval to
participate in the program.
278.2 Participation of retail
food stores.
(a) Use of coupons. Coupons
may be accepted by an
authorized retail food store
only from eligible households
or the households' authorized
representative, and only in
exchange for eligible food.
Coupons may not be accepted in
exchange for cash, except when
cash is returned as change in
a transaction in which coupons
were accepted in payment for
eligible food under paragraph
(d) of this section. Coupons
may not be accepted in payment
of interest on loans or for
any other nonfood use. An
authorized- retail food store
may not accept coupons from
another retail food store,
except that homeless meal
providers may redeem coupons
for eligible food through
authorized retail food stores.
(b) Equal treatment for
coupon customers. Coupons
shall be accepted for eligible
foods at the same prices and
on the same terms and
conditions applicable to cash
purchases of the same foods at
the same store except. that tax
shall not be charged on
eligible foods purchased with
coupons. However, nothing in
this part may be construed as
authorizing FNS to specify the
prices at which retail food
stores may sell food. How­ever,
homeless meal providers
may only request voluntary use
of food stamps from homeless
food stamp recipients and may
not request such household
29
using food stamps to pay more
than the average cost of the
food purchased by the homeless
meal provider contained in a
meal served to the patrons of
the meal service. For purposes
of this section, "average
cost" is determined by
averaging food costs over a
period of up to one calendar
month. Voluntary payments by
food stamp recipients in
excess of such costs may be
accepted by the meal
providers. The value of
donated foods from any source
shall not be considered in
determining the amount to be
requested from food stamp
recipients. All indirect
costs, such as those incurred
in the acquisition, storage,
or preparation of the foods
used in meals shall also be
excluded. In addition, if
others have the option of
eating free or making a
monetary donation, food stamp
recipients must be provided
the same option of eating free
or making a donation in money
or food stamps. No retail
food store may single out
coupon users fo~ special
treatment in any way.
{c) Accepting coupons. No
authorized retail food store
may accept coupons marked
"paid," "canceled," or
"specimen." Nor may a retail
food store accept coupons
bearing any cancellation or
endorsement, or coupons of
other than the 1-dollar
denomination which have been
detached from the coupon books
prior to the time of purchase
or delivery of eligible food
unless the detached coupons
are accompanied by the coupon
books which bear the same
serial numbers that appear on
the detached coupons. How­ever,
in the case of homeless
meal providers, retail food
stores may accept detached
coupons which have been
accepted by the homeless meal
provider. It is the right of
the household member or the
authorized representative to
detach the coupons from the
book.
(d) Making change. An
authorized retail food store
shall use, for the purpose of
making change, uncanceled and
unmarked 1-dollar coupons
which were previously accepted
for eligible foods. If change
in an amount of less than
1-dollar is required, the
eligible household shall
receive the change in cash.
However, in the case of home­less
meal providers, neither
cash change nor credit slips
shall be provided under any
circumstances when food stamps
are used to purchase meals.
At no time may cash change in
excess of 99 cents be returned
in a coupon transaction. An
authorized retail food store
may not engage in a series of
coupon transactions the
purpose of which is to provide
the same food stamp customer
an amount of cash change
greater than the maximum 99
cents cash change allowed in
one transaction.
(e) Accepting coupons before
delivery. Food retailers may
not accept coupons before
delivering the food, retain
custody of any unspent
coupons, or in any way prevent
an eligible household from
using coupons in making pur­chases
from other authorized
firms. However, a nonprofit
cooperative food purchasing
venture may accept coupons
30
from a member of the coopera­tive
at the time the member
places a food order. The food
ordered must be made available
to the member within 14 days
from the day the cooperative
receives the member's coupons.
(f) Paying credit accounts.
Coupons may not be accepted by
an authorized retail food
store in payment for any
eligible food sold to a
household on credit.
(g) Redeeming coupons.
Authorized retail food stores
may exchange coupons in
accordance with this part for
face value upon presentation
through the banking system or
through a wholesale food
concern authorized to accept
coupons from that retailer.
Authorized drug addict or
alcoholic treatment and
rehabilitation programs, group
living arrangements, and
shelters for battered women
and children may present
coupons for redemption through
authorized wholesale food
concerns. A drug addict or
alcoholic treatment center,
group living arrangement, or
shelter for battered women and
children may purchase food in
authorized retail food stores
as the authorized representa­tive
of its participating
households. Homeless meal
providers may purchase food in
authorized retail food stores
and through authorized whole­sale
food concerns. Authorized
drug addict and alcoholic
treatment and rehabilitation
programs, group living
arrangements, shelters for
battered women and children,
and homeless meal providers
for homeless food stamp
households shall not present
coupons directly to an insured
financial institution for
redemption.
(h) Identifying coupon
users. Coupons may not
knowingly be accepted from
persons who have no right to
possession of coupons. If a
food retailer has any cause to
believe that a person present­ing
coupons has no right .to
use the coupons, the food
retailer should request the
person to show the ID card of
the household to establish the
right of that person to use
the coupons. Where photo ID
cards are in use, the person
presenting the ID card need
not be pictured on the card.
Homeless meal providers
redeeming detached coupons
through retail food stores
shall present their retailer
authorization card as proof of
their eligibility to redeem
coupons through retail food
stores.
(i) Checking meal delivery
service recipients. A non­profit
meal delivery service
shall require the recipient of
a delivered meal to show the
marked ID card establishing
the recipient's right to use
coupons for that service the
first time that the recipient
offers coupons in payment for
the service, and shall request
the marked ID card at any time
the nonprofit meal delivery
service has cause to question
the continued eligibility of
the recipient to use coupons
for delivered meals.
(j) Checking hunting and
fishing equipment users.
Authorized Alaskan retailers
shall require coupon customers
wanting to purchase hunting
and fishing equipment with
coupons to show their ID cards
to determine that they live in
31
an area designated by FNS as
one in which persons are
dependent upon hunting and
fishing for subsistence.
(k) Checking participants in
restaurants. A restaurant
operating under a State con­tract
shall require a house­hold
purchasing meals to show
the marked ID card establish­ing
the household's right to
purchase meals with coupons
unless the personnel of the
restaurant know that the
program participant tendering
coupons is eligible to use
coupons to purchase meals.
(1) Checking homeless meal
provider recipients. Homeless
meal providers shall establish
a food stamp patron's right to
purchase meals with coupons.
278.3 Participation of
wholesale food concerns.
(a) Accepting coupons. An
authorized wholesale food
concern may accept endorsed
coupons from one or more
specified authorized retail
food stores, from one or more
specified authorized nonprofit
cooperative food-purchasing
ventures, from one or more
specified authorized group
living arrangements, from one
or more specified authorized
drug addict or alcoholic
treatment programs, from one
or more specified authorized
shelters for battered women
and children or,from one or
more specified homeless meal
providers if the coupons are
accompanied by a properly
filled-out and signed
redemption certificate, and
are not marked "paid,"
"canceled," or "specimen." A
wholesaler authorized to
accept coupons from an
authorized drug addict or
alcoholic treatment program,
or from an authorized group
living arrangement, or from an
authorized shelter for
battered women and children,
or from one or more homeless
meal providers may accept
coupons from that treatment
program, or group living
arrangement, or shelter for
battered women and children,
or from one or more homeless
meal providers only in
exchange for food.
{b) Accepting legally
obtained coupons. No
authorized wholesale food
concern may accept coupons if
the wholesaler knows or has
reasonable cause to believe
that the coupons were not
legally obtained for eligible
food.
{c) Redeeming coupons. An
authorized wholesale food
concern may redeem coupons,
properly accepted from
retailers, through the banking
system, upon presentation of
the coupons with:
{1) The authorized retail
food store's properly
filled-out and signed
redemption certificate for the
coupons; and
{2) The authorized wholesale
food concern's properly
filled-out and signed
redemption certificate.
{d) Handling retailer
redemption certificates. No
authorized wholesale food
concern may alter, prepare, or
complete an authorized retail'
food store's redemption
certificate.
278.4 Procedure for redeeming
coupons.
{a) Coupons accepted with­out
authorization. Coupons
accepted by a retail food
32
store or a wholesale food
concern before the receipt by
the firm of an authorization
card from FNS may not be
presented for redemption
unless the FNS officer in
charge has approved the
redemption under 278.7{b).
Burned or mutilated coupons
shall be presented for
redemption to the FNS officer
in charge as provided in
278.7{c).
(b) Endorsing coupons. Each
authorized retail food store
or authorized wholesale food
concern shall mark its
authorization number or name
on each coupon before it
presents the coupons for
redemption.
(c) Using redemption
certificates. FNS will
provide all authorized firms
with redemption certificates.
Wholesale food concerns and
retail food stores, except for
drug addict and alcoholic
treatment and rehabilitation
programs and homeless meal
providers shall use the
redemption certificates to
present coupons to insured
financial institutions for
credit or for cash. All
retail food stores wh'ich wish
to redeem coupons at wholesale
food concerns shall use the
redemption certificates for
that purpose. An authorized
retail firm using redemption
certificates to redeem coupons
shall fill out the redemption
certificate to show the value
of the coupons redeemed, the
name of the insured financial
institution or wholesaler, the
date, and the signature and
title of the official of the
firm redeeming coupons.
278.5 Participation of
ins~ed financial
institutions.
(a) Accepting coupons. (1)
Financial institutions that
are insured by the Federal
Deposit Insurance Corporation
(FDIC) or the Federal Savings
and Loan Insurance Corporation
(FSLIC) or financial institut­ions
which are insured under
the Federal Credit Union Act
and which have retail food
stores or wholesale food
concerns in their field of
membership may redeem coupons
only from authorized retail
food stores, meal services,
and wholesale food concerns in
accordance with the rules
contained in this Part and
instructions of the Federal
Reserve Banks. No financial
institution may impose on or
collect from a retail food
store a fee or other charge
for redemption of coupons that
are submitted to the financial
institution in a manner con­sistent
with the requirements,
except for coupon cancella­tion,
for the presentation of
coupons by the financial
institution to the Federal
reserve banks. Coupons
submitted to insured financial
institutions for credit or
cash must be properly endorsed
in accordance with 278.4 of
this part and shall be
accompanied by a properly
completed and signed
redemption certificate.
(2) An insured financial
institution shall verify the
amount of the coupons being
redeemed by recording its
count on the redemption
certificate. The count may
either be encoded to permit
Magnetic Ink Character
Recognition (MICR) or hand-
33
written. However, financial
institutions are encouraged to
MICR encode the count. Redemp­tion
certificates accepted by
insured financial institutions
shall be forwarded, with the
corresponding coupon deposits,
to the Federal Reserve Bank
along with the transmitting
Food Coupon Deposit Document
(Form FNS-521).
(3) Redeemed coupons must be
indelibly cancelled on the
face of the coupon by the
first insured financial
institution receiving them.
If the cancellation on the
coupon face does not show the
depositing institution's name
or its routing symbol transit
number, this identifying
information must appear on the
straps affixed to each bundle
of coupons of like denomina­tion.
Deposits not meeting
these cancellation require­ments
may be returned to the
depositing institution for
reprocessing. Retail food
stores may not be required to
cancel the coupons by the
insured financial institution
nor may the insured financial
institution charge the retail
food stores a fee or other
charge for cancellation of
coupons. A portion of a
coupon consisting of less than
three-fifths of a whole coupon
may not be redeemed.
(4) Insured financial
institutions which are members
of the Federal Reserve System,
insured nonmember clearing
institutions, and insured
nonmember institutions which
have arranged with a Federal
Reserve Bank to deposit
coupons for credit to the
account of a member
institution on the books of a
Federal Reserve Bank may
forward coupons directly to
the Federal Reserve Bank.
Other insured financial
institutions may forward
cancelled coupons through
ordinary collection channels.
(b) Role of Federal Reserve
Banks. Federal Reserve Banks,
acting as fiscal agents of the
United States, will receive
canceled coupons for collect­ion
as cash items from armed
forces installations, member
insured financial institutions
of the Federal Reserve system,
nonmember clearing insured
financial institutions, and
nonmember insured financial
institutions which have
arranged with a Federal
Reserve Bank to deposit
coupons for credit to the
account of a member insured
financial institution on the
books of the Federal Reserve
Bank, and will charge those
items to the general account
of the Treasurer of the United
States.
(c) FNS liability for
losses. FNS shall not be
liable for the value of any
coupons lost, stolen, or
destroyed while in the custody
of an insured financial
institution or for the value
of coupons lost, stolen, or
destroyed while in transit
from an insured financial
institution to a Federal
Reserve Bank.
(d) FNS use of couoons to
detect violations. Regardless
of any other provision in
these regulations, coupons may
be issued to, purchased by, or
redeemed by persons authorized
by FNS to use those coupons in
examining and inspecting
program operations, and for
other purposes determined by
FNS to be required for proper
34
administration of the program.
Coupons which have been so
issued and used, as well as
any coupons which have been
issued under paragraph (g) of
this section, or which FNS
believes may have been issued,
transferred, negotiated, used,
or received in violation of
this subchapter or of any
applicable statute, shall at
the request of FNS and on
issuance of a receipt for them
be turned over to FNS by the
insured financial institution
receiving the coupons, or by
any other person to whom the
request is addressed, together
with any certificate(s) of
redemption accompanying the
coupons. Any coupons so
requested shall not be
eligible for redemption
through Federal Reserve Banks
or other collection channels.
However, FNS may redeem
coupons from any insured
financial institution or
person by payment of the face
amount of the coupons upon
determination by FNS that this
direct redemption of coupons
is warranted. FNS shall
determine the proper dis- ·
position of any coupons held
by FNS on completi9n of the
examination or inspection in
which the coupons were used.
Claims or demands for un­redeemed
coupons surrendered
to FNS may be mailed to the
local FNS field office for the
project area involved.
(e) Selling coupons to
stores for internal checks.
FNS may sell coupons at face
value to any authorized retail
food store which wishes to use
coupons to conduct internal
checks of coupon transactions.
The retail food store must
submit a written request to
FNS which Shall include a
certification that the store
recognizes that its use of
coupons will not affect FNS
action to enforce program
regulations and that the
requested coupons will be used
only for internal checks of
the store's employees and only
to uncover sales of items
other than eligible foods.
The request shall also include
the name of the city or county
in which the stores to be
checked through the use of the
requested coupons are located
and the name and address of
any outside agency with which
the retail food store has or
will have a contract to
conduct checks of the store's
employees using coupons. The
request shall be directed to
the Federal Operations
Division, FNS, u.s. Department
of Agriculture, Washington, DC
20250, and shall be
accompanied by a check or
money order made payable to
the Food and Nutrition Service
to cover the face value cost
of the coupons requested.
Coupons bought by retail food
stores for use in internal
checks may be later redeemed
for full value in accordance
with 278.4, and in redeeming
those coupons, retail food
stores are authorized to make
the certification required for
redemption.
(f) Continued participation
of households under
investigation. Upon the
written request of Federal,
State, or local government
agencies which have authority
to investigate, and are
investigating, suspected
violations of Federal or State
statutes concerning the enfor­cement
of the Food Stamp Act
35
or the regulations, the State
agency may allow ineligible
households to continue program
participation. The State
agency may allow the house­holds
to continue participa­tion
in the program until the
earlier of (1) expiration of
the per.iod of 90 days after
the request is received or any
longer period which FNS, upon
request of the State agency,
may approve in a particular
case, or (2) receipt of
notification from the investi­gative
agency that participa­tion
may be terminated or that
the investigation has been
completed. Regardless of any
other provision of these
regulations, FNS may not hold
the State agency liable for
the value of any coupons
issued to households under
this paragraph.
278.6 Disqualification of
retail food stores and
wholesale food concerns, and
imposition of civil aoney
penalties in lieu of
disqualifications.
(a) Authority to disqualify
or·subject to a civil money
penalty. FNS may disqualify
any authorized retail food
store or authorized wholesale
food concern from further
participation in the program
if the firm fails to comply
with the Food Stamp Act or
this part. Disqualification
shall be for from 6 months to
5 years for the firm's first
sanction; for from 12 months
to 10 years for a firm's
second sanction; and
disqualification shall be
permanent for a firm's third
sanction or a disqualification
based on trafficking as
defined in 271.2. Any firm
which has been disqualified
and which wishes to be
reinstated at the end of the
period of disqualification or
at any later time shall file a
new application under 278.1 of
this part so that FNS may
determine whether reauthoriza­tion
is appropriate. The
application may be filed no
earlier than 10 days before
the end of the period of
disqualification. FNS may, in
lieu of a disqualification,
subject the firm to a civil
money penalty of up to $10,000
for each violation if FNS
determines that a disqualifi­cation
would cause hardship to
participating households. FNS
may impose a civil money
penalty of up to $20,000 for
each violation in lieu of a
permanent disqualification for
trafficking, as defined in
271.2, in accordance with the
provisions of 278.6(i) and
278.6(j).
(b) Charge letter. (1)
General provisions. ~y firm
considered for disqualifica­tion
or imposition of a civil
money penalty under paragraph
(a) of this section or a fine
as specified under paragraph
(1) or (m) of this section
shall have full opportunity to
submit to FNS information,
explanation, or evidence
concerning any instances of
noncompliance before FNS makes
a final administrative deter­mination.
The FNS regional
office shall send the firm a
letter of charges before
making such determination.
The letter shall specify the
violations or actions which
FNS believes constitute a
basis for disqualification or
imposition of a civil money
penalty or fine. The letter
36
shall inform the firm that it
may respond either orally or
in writing to the charges
contained in the letter within
10 days of receiving the
letter. The firm's response
shall set forth a statement of
evidence, information, or
explanation concerning the
specified viol~tions or acts.
The firm shall make its
response, if any, to the
officer in charge of the FNS
field office which has
responsibility for the project
area in which the firm is
located.
(2) Charge letter for
trafficking. (i) The charge
letter shall advise a firm
bei.ng considered for permanent
disqualification based on
evidence of trafficking as
defined in 271.2 that the firm
must notify FNS if the firm
desires FNS to consider the
sanction of a civil money
penalty in lieu of permanent
disqualification.
(ii) Firms that request
consideration of a civil money
penalty in lieu of a permanent
disqualification for traffick­ing
shall have the opportunity
to submit to FNS information
and evidence as specified in
278.6(i), that establishes the
firm's eligibility for a civil
money penalty in lieu of a
permanent disqualification in
accordance with the criteria
included in 278.6(i). This
information and evidence shall
be submitted within 10 days,
as specified in 278.6(b) (1).
(iii) If a firm .fails to
request consideration for a
civil money penalty in lieu of
a permanent disqualification
for trafficking and submit
documentation and evidence of
its eligibility within the 10
days specified in 278.6(b)
(1), the firm shall not be
eligible for such a penalty.
(c) Review of evidence. The
letter of charges, the
response, and any other
information available to FNS
shall be reviewed and
considered by the appropriate
FNS regional office, which
shall then issue the
determination.
(d) Basis for determination.
The FNS regional office making
a disqualification or penalty
determination shall consider:
(1) The nature and scope of
the violations committed by
personnel of the firm, (2) any
prior action taken by FNS to
warn the firm about the
possibility that violations
are occurring, and (3) any
other evidence that shows the
firm's intent to violate the
regulations.
(e) Penalties. FNS shall
take action as follows against
any firm determined to have
violated the Act or regula­tions.
For the purposes of
assigning a period of disqual­ification,
a warning letter
shall not be considered to 'be
a sanction. A civil money
penalty and a disqualification
shall be considered sanctions
for such purposes. The FNS
regional office shall: (1)
Disqualify a firm permanently
if: (i) Personnel of the firm
have trafficked as defined in
271.2; or
(ii) Violations such as, but
not limited to, the sale of
ineligible items occurred and
the firm had twice before been
sanctioned.
(2) Disqualify the firm for
5 years if it is to be the
firm's first sanction, the
firm had been previously
37
advised of the possibility
that violations were occurring
and of possible consequences
of violating the regulations,
and the evidence shows that:
(i) It is the firm's
practice to sell expensive or
conspicuous nonfood items,
cartons of cigarettes, or
alcoholic beverages in
exchange for food coupons; or
(ii) The firm's coupon
redemptions for a specified
period of time exceed its food
sales for the same period of
time; or
(iii) A wholesale food
concern's redemptions of
coupons for a specified period
of time exceed the redemptions
of all the specified
authorized retail food stores,
nonprofit cooperative food­purchasing
ventures, group
living arrangements, drug
addict and alcoholic treatment
programs, homeless meal
providers, and shelters for
battered women and children
which the wholesale food
concern was authorized to
serve .during that time; or
(iv) A wholesale food
concern's stated redemptions
of coupons for a particular
retail food store, nonprofit
cooperative food-pUrchasing
venture, , group living
arrangement, drug addict and
alcoholic treatment program,
homeless meal providers, or
shelters for battered women
and children exceeded the
actual amount of coupons which
that firm or organization
redeemed through the whole­saler;
or
(v) Personnel of the firm
knowingly accepted coupons
from an unauthorized firm or
an individual known not to be
legally entitled to possess
coupons.
(3) Disqualify the firm for
3 years if it is to be the
first sanction for the firm
and the evidence shows that:
(i) It is the firm's
practice to commit violations
such as the sale of common
nonfood items in amounts
normally found in a shopping
basket and the firm was
previously advised of the
possibility that violations
were occurring and of the
possible consequences of
violating the regulations; or
(ii) Any of the situations
described in paragraph (e) (2)
of this section occurred and
FNS had not previously advised
the firm of the possibility
that violations were occurring
·and of the possible
consequences of violating the
regulations; or
(iii) The firm is an
authorized communal dining
facility, drug addiction or
alcoholic treatment and
rehabilitation program, group
living arrangement, homeless
meal provider, meal delivery
service, or shelter for
battered women and children
and it is the firm's practice
to sell meals in exchange for
food coupons to persons not
eligible to purchase ~eals
with food coupons and the firm
has been previously advised of
the possibility that viola­tions
were occurring and of
the possible consequences of
violating the regulations; or
(iv) A wholesale food .
concern accepted coupons from
an authorized firm which it
was not authorized to serve
and the wholesale food concern
had been previously advised of
the possibility that viola­tions
were occurring and of
38
possible consequences of
violating the regulations; or
(v) The firm is an
authorized retail food store
and personnel of the firm have
engaged in food coupon trans­actions
with other authorized
retail stores, not including
treatment programs, group
living arrangements, homeless
meal providers, or shelters
for battered women and
children, and the firm had
been previously advised of the
possibility that violations
were occurring and of the
possible consequences of
violating the regUlations.
(4) Disqualify the firm for
1 year if it is to be the
first sanction for the firm
and the ownership or manage-
, ment personnel of the firm
have committed violations such
as the sale of common nonfood
items in amounts normally
found in a shopping basket,
and FNS had not previously
advised the firm of the
possibility that violations
were occurring and of the
possible consequences of
violating the regulations.
{5) Disqualify the firm for
6 months if it is to be the
first sanction for the firm
and the evidence shows that
personnel of the firm have
committed violations such as
but not limited to the sale of
common nonfood items due to
carelessness or poor super­vision
by the firm's ownership
or management.
{6) Double the appropriate
period of disqualification
prescribed in paragraphs {e)
{2) through {5) of this
section as warranted by the
evidence of violations if the
same firm has once before been
assigned a sanction.
(7) Send the firm a warning
letter if violations are too
limited to warrant a
disqualification.
(f) Criteria for civil money
penalties for hardship and
transfer of ownership. (1} FNS
may impose a civil money
penalty as a sanction in lieu
of disqualification when the
firm subject to a disqualifi­cation
is selling a sub­stantial
variety of staple
food items, and the firm's ·
disqualification would cause
hardship to food stamp house­holds
because there is no
other authorized retail food
store in the area selling as
large a variety of staple food
items at comparable prices.
FNS may disqualify a store
which meets the criteria for a
civil money penalty if the
store had previously been
assigned a . sanction. A civil
money penalty for hardship to
food stamp households may not
be imposed in lieu of a
permanent disqualification.
(2) In the event any retail
food store or wholesaie food
concern which has been
disqualified is sold or the
ownership thereof is otherwise
transferred to a purchaser or
transferee, the person or
other legal entity who sells
or otherwise transfers owner­ship
of the retail fopd store
or wholesale food ·concern
shall be subjected to and
liable for a civil money
penalty in an amount to
reflect that portion of the
disqualification period that
has not expired, to be
calculated using the method
found at 278.6(g). If the
retail food store or wholesale
food concern has been
permanently disqualified, the
39
civi-l money penalty shall be
double the penalty for a ten
year disqualification period.
The disqualification shall
continue in effect at the
disqualified location for the
person or other legal entity
who transfers ownership of the
retail food store or wholesale
food concern notwithstanding
the imposition of a civil
money penalty under this
paragraph.
(3) At any time after a
civil money penalty imposed
under paragraph (f) (2) of
this section has become final
under the provisions of Part
279, the Food and Nutrition
Service may request the
Attorney General i nstitute a
civil action to collect the
penalty from the person or
persons subject to the penalty
in a district court of the
United .States for any district
in which such person or
persons are found, reside, or
transact business.
(4) A bona fide transferee
of a retail food store shall
not be required to pay a civil
money penalty imposed on the
firm prior to its transfer. A
buyer or transferee (other
than a bona fide buyer or
transferee) may not be
authorized to accept or redeem
coupons and may not accept or
redeem coupons until the
Secretary receives full
payment of any penalty imposed
on such store or concern.
(g) AmOUnt of civil money
penalties for hardship and
transfer of ownership. FNS
shall determine the amount of
the civil money penalty as
follows:
(1) Determine the firm's
average monthly redemptions of
coupons for the 12-month
period ending with the month
immediately preceding that
month during which the firm
was charged with violations.
(2) Multiply the average
monthly redemption figure by
10 percent.
(3) Multiply the product
arrived at in paragraph (g) (2)
by the number of months for
which the firm would have been
disqualified under paragraph
(e) of this section. The
civil money penalty may not
exceed $10,000 for each
violation.
(h) Notifying the firm of
civil money penalties for
hardship and transfer of
ownership. A firm has 15 days
from the date the FNS regional
office notifies the firm in
writing in which to pay the
civil money penalty, or to
notify the regional office in
writing of its intent to pay
in installments as specified
by the regional office. The
firm must present to FNS a
collateral bond as specified
in 278.1(b) (4), within the
same 15-day period. The civil
money penalty must be paid in
full by the end of the period
for which the firm would have
been disqualified. FNS shall:
(1) Disqualify the firm for
the period determined to be
appropriate under paragraph
(e) of this section if the
firm refuses to pay any of the
civil money penalty;
(2) -Disqualify the firm for
a period corresponding to the
unpaid part of the civil money
penalty if the firm. does not
pay the civil money penalty in
full or in installments as
specified by the FNS regional
office; or
(3) Disqualify the firm for
the prescribed period if the
40
firm does not present a
collateral bond within the
required 15 days. Any payment
on a civil money penalty which
have been received by FNS
shall be returned to the firm.
If the firm presents the
required bond during the
disqual~fication period, the
civil money penalty may be
reinstated for the duration of
the disqualification period.
(i) Criteria for eligibility
for a civil money penalty in
lieu of permanent disqualifi­cation
for trafficking. FNS
may impose a civil money
penalty in lieu of a permanent
disqualification for
trafficking as defined in
271.2 if the firm timely
submits to FNS substantial
evidence which demonstrates
that the firm had established
and implemented an effective
compliance policy and program
to prevent violations of the
Program. Firms assessed a CMP
under this paragraph shall be
subject to the applicable
penalties included in 278.6(e)
(2) through (6) for the sale
of ineligible items. Only
those firms for which a
permanent disqualification for
trafficking took effect on or
after October 1, 1988, are
eligible for a civil money
penalty in lieu of permanent
disqualification for traffick­ing,
except that firms that
have been disqualified but are
awaiting a judicial review
decision are eligible for a
civil money penalty in lieu of
a permanent disqualification.
In determining the minimum
standards of eligibility of a
firm for a civil money penalty
in lieu of a permanent dis­qualification
for trafficking,
the firm shall, at a minimum,
establish by substantial
evidence its fulfillment of
each of the following
criteria:
Criterion 1. The firm shall
have developed an effective
compliance policy as specified
in 2 7 8 • 6 ( i) ( 1) ; and
Criterion 2. The firm shall
establish that both its
compliance policy and program
were in operation at the
location where the
violation(s) occurred prior to
the occurrence of violations
cited in the charge letter
sent to the firm; and
Criterion 3. The firm had
developed and instituted an
effective personnel training
program as specified in
2 7 8 • 6 ( i) ( 2 ) ; and
Criterion 4. Neither firm
ownership nor management were
aware of, approved, benefitted
from, or were in any way
involved in the conduct or
approval of trafficking
violations. For purposes of
this section, a person is
considered to be part of firm
management if that individual
has substantial supervisory
responsibilities with regard
to directing the activities
and work assignments of store
employees. Such supervisory
responsibilities shall include
the authority to hire
employees for the store or to
terminate the employment of
individuals working for the
store.
(1) Compliance policy
standards. As specified in
Criterion 1 above, in
determining whether a firm has
established an effective
policy to prevent violations,
FNS shall consider written and
dated statements of firm
policy which reflect a commit-
41
ment to ensure that the firm
is operated in a manner con­sistent
with this Part 278 of
current FSP regulations and
current FSP policy on the
proper acceptance and handling
of food coupons. As required
by Criterion 2, such policy
statements shall be considered
only if documentation is
supplied which establishes
that the policy statements
were provided to the violating
employee(s) prior to the
commission of the violation.
In addition, in evaluating the
effectiveness of the firm's
policy and program to ensure
FSP compliance and to prevent
FSP violations, FNS may
consider the following:
(i) Documentation reflecting
the development and/or
operation of a policy to
terminate the employment of
any firm employee found
violating FSP regulations;
(ii) Documentation of the
development and/or continued
operation of firm policy and
procedures resulting in
appropriate corrective action
following complaints of FSP
violations or irregularities
committed by firm personnel;
(iii) Documentation of the
development and/or continued
operation of procedures for
internal review of firm
employees' compliance with FSP
regulations;
(iv) The nature and scope of
the violations charged against
the firm;
(v) Any record of previous
firm violations under the same
ownership or management; and
(vi) Any other information
the firm may present to FNS
for consideration.
(2) Compliance training
program standards. As pre-
scribed in Criterion 3 above,
the firm shall have developed
and implemented an effective
training program for all
managers and employees on the
acceptance and handling of
food coupons in accordance
with this Part 278. A firm
which seeks a civil money
penalty in lieu of a permanent
disqualification shall
document its training activity
by submitting to FNS its dated
training curricula and records
of dates training sessions
were conducted; a record of
dates of employment of firm
personnel; and contemporaneous
documentation of the partici­pation
of the violating
employee(s) in initial and any
follow-up training held prior
to the violation(s). FNS shall
consider a training program
effective if it meets or is
otherwise equivalent to the
following standards:
(i) Training for all
managers and employees whose
work brings them into contact
with food stamps or who are
assigned to a location where
food stamps are accepted,
handled or processed shall be
conducted within one month of
the institution of the
compliance policy under
Criterion 1 above. Employees
hired subsequent to the
institution of the compliance
policy shall be trained within
one month of employment. All
employees shall be trained
periodically thereafter;
(ii) Training shall be
designed to establish a level
of competence that assures
compliance with Program
requirements as included in
this part 278;
(iii) Written materials,
which may include FNS
42
publications and program
regulations that are available
to all authorized firms, are
used in the training program.
Training materials shall
clearly state that the follow­ing
acts are prohibited and
are in violation of the Food
Stamp Act and regulations: the
exchange of food coupons, ATP
cards or other program access
devices for cash; and, in
exchange for coupons, the sale
of firearms, ammunition,
explosives or controlled
substances, as the term is
defined in section 802 of
title 21, United States Code.
(j) AmOUnt of civil money
penalty in lieu of permanent
disqualification for traffick­ing
• . A civil money penalty
assessed in accordance with
278.6(i) shall not exceed
$20,000 for each violation,
and shall not exceed $40,000
during a 2-year period. FNS
shall determine the amount of
the civil money penalty as
follows:
(1) Determine the firm's
average monthly redemptions
for the 12-month period ending
with the month immediately
preceding the month during
which the firm was charged
with violations;
(2) Multiply the average
monthly redemption figure by
10 percent;
(3) For the first
trafficking offense by a firm,
multiply the product obtained
in 27~.6(j) (2) by 60 if the
largest amount of food
coupons, ATP cards, or other
benefit instruments involved
in a single trafficking
transaction had a face value
of $99 or less. If the face
value of coupons, ATP cards or
other benefit instruments
involved in the largest single
trafficking transaction was
$100 or more, the amount of
the product obtained in this
paragraph shall be doubled;
(4) For a second trafficking
offense by a firm, multiply
the product obtained in
278.6(j) (2) by 120 if the
largest amount of food
coupons, ATP cards, or other
benefit. instruments involved
in a single trafficking
transaction had a face value
of $99 or less and the same
firm has once before been
sanctioned for trafficking in
food coupons, ATP cards, or
other benefit instruments. If
the face value of food
coupons, ATP cards, or other
benefit instruments involved
in the largest single
trafficking transaction was
$100 or more, the amount of
the product obtained in this
paragraph shall be doubled;
and
(5) If a third trafficking
offense is committed by the
firm, the firm shall not be
eligible for a civil money
penalty in lieu of
disqualification.
(k) Payment of civil money
penalty in lieu of a permanent
disqualification for traffick­ing.
Payment of the full
amount of the civil money
penalty in lieu of permanent
disqualification for traffick­ing
shall be made within 30
days of the date the final
determination was received by
the firm. If payment is not
made within the prescribed
period, the right to the civil
money penalty in lieu of a
permanent disqualification is
forfeited and disqualification
shall become effective
immediately.
43
(1) Fines for the acceptance
of loose coupons. FNS may
impose a fine agains~ any
retail food store or wholesale
food concern that accepts
coupons that are not accompa­nied
by the corresponding book
cover, other than the demonin­ation
of coupons used for
making change as specified in
278.2(d) or coupons accepted
from homeless meal providers
as specified in 278.2(c). The
fine to be assessed against a
firm found to be accepting
loose coupons shall be $500
per investigation plus an
amount equal to double the
face value of each loose
coupon accepted, and may be
assessed and collected in
addition to any fiscal claim
established by FNS. The fine
shall be paid in full within
30 days of the firm's receipt
of FNS' notification to pay
the fine. The Attorney General
of the United States may
institute judicial action in
any court of competent juris­diction
against' the store or
concern to collect the fine.
FNS may withdraw the authori­zation
of the store, as well
as other authorized locations
of a multi-unit firm which are
under the same ownership, for
failure to pay such a fine as
specified under 278.1(k). FNS
may deny the authorization of
any· firm that has failed to
pay such fines as specified
under 278.1(j).
(m) Fines for unauthorized
third parties that accept food
stamps. FNS may impose a fine
against any individual, sole
proprietorship, partnership,
corporation or other legal
entity not approved by FNS to
accept and redeem food coupons
for any violation of the
provisions of the Food stamp
Act or the program regula­tions,
including violations
involving the acceptance of
coupons. The fine shall be
$1,000 for each violation plus
an amount equal to three times
the face value of the
illegally accepted food
coupons. The fine shall be
paid in full within 30 days of
the individual's or legal
entity's receipt of FNS'
notification to pay the fine.
The Attorney General of the
United states may institute
judicial action in any court
of competent jurisdiction
against the person to collect
the fine. FNS may withdraw
the authorization of any firm
that is under the same owner­ship
as an unauthorized firm
that has failed to pay such a
fine, as specified under
278.1(k). FNS may deny
authorization to any firm that
has failed to pay such a fine,
as specified under 278.1(j).
(n) Review of determination.
The determination of the FNS
regional