REFORM OF QUALITY CONTROL SYSTEM.

SEC. 4118. REFORM OF QUALITY CONTROL SYSTEM. (a) In General.—Section 16(c) of the Food Stamp Act of 1977 (7 U.S.C. 2025(c)) is amended— (1) by striking “(c)(1) The program” and all that follows through the end of paragraph (1) and inserting the following: “(c) Quality Control System.— “(1) In general.— “(A) System.—In carrying out the food stamp program, the Secretary shall carry out a system that enhances payment accuracy and improves administration by establishing fiscal incentives that require State agencies with high payment error rates to share in the cost of payment error. “(B) Adjustment of federal share of administrative costs for fiscal years before fiscal year 2003.— “(i) In general.—Subject to clause (ii), with respect to any fiscal year before fiscal year 2003, the Secretary shall adjust a State agency's federally funded share of administrative costs under subsection (a), other than the costs already shared in excess of 50 116 STAT. 317 percent under the proviso in the first sentence of subsection (a) or under subsection (g), by increasing that share of all such administrative costs by 1 percentage point to a maximum of 60 percent of all such administrative costs for each full 1/10 of a percentage point by which the payment error rate is less than 6 percent. “(ii) Limitation.—Only States with a rate of invalid decisions in denying eligibility that is less than a nationwide percentage that the Secretary determines to be reasonable shall be entitled to the adjustment under clause (i). “(C) Establishment of liability amount for fiscal year 2003 and thereafter.—With respect to fiscal year 2004 and any fiscal year thereafter for which the Secretary determines that, for the second or subsequent consecutive fiscal year, a 95 percent statistical probability exists that the payment error rate of a State agency exceeds 105 percent of the national performance measure for payment error rates announced under paragraph (6), the Secretary shall establish an amount for which the State agency may be Hable (referred to in this paragraph as the ‘liability amount’) that is equal to the product obtained by multiplying— “(i) the value of all allotments issued by the State agency in the fiscal year; “(ii) the difference between— “(I) the payment error rate of the State agency; and “(II) 6 percent; and “(iii) 10 percent. “(D) Authority of secretary with respect to liability amount.—With respect to the liability amount established for a State agency under subparagraph (C) for any fiscal year, the Secretary shall— “(i)(I) waive the responsibility of the State agency to pay all or any portion of the liability amount established for the fiscal year (referred to in this paragraph as the ‘waiver amount’); “(II) require that a portion, not to exceed 50 percent, of the liability amount established for the fiscal year be used by the State agency for new investment, approved by the Secretary, to improve administration by the State agency of the food stamp program (referred to in this paragraph as the ‘new investment amount’), which new investment amount shall not be matched by Federal funds; “(III) designate a portion, not to exceed 50 percent, of the amount established for the fiscal year for payment to the Secretary in accordance with subparagraph (E) (referred to in this paragraph as the ‘at-risk amount’); or “(IV) take any combination of the actions described in subclauses (I) through (III); or “(ii) make the determinations described in clause (i) and enter into a settlement with the State agency, only with respect to any waiver amount or new investment amount, before the end of the fiscal year in 116 STAT. 318 which the liability amount is determined under subparagraph (C). “(E) Payment of at-risk amount for certain states.— “(i) In general.—A State agency shall pay to the Secretary the at-risk amount designated under subparagraph (D)(i)(III) for any fiscal year in accordance with clause (ii), if, with respect to the immediately following fiscal year, a liability amount has been established for the State agency under subparagraph (C). “(ii) Method of payment of at-risk amount.— “(I) Remission to the secretary.—In the case of a State agency required to pay an at-risk amount under clause (i), as soon as practicable after completion of all administrative and judicial reviews with respect to that requirement to pay, the chief executive officer of the State shall remit to the Secretary the at-risk amount required to be paid. “(II) Alternative method of collection.— “(aa) In general.—If the chief executive officer of the State fails to make the payment under subclause (I) within a reasonable period of time determined by the Secretary, the Secretary may reduce any amount due to the State agency under any other provision of this section by the amount required to be paid under clause (i). “(bb) Accrual of interest.—During any period of time determined by the Secretary under item (aa), interest on the payment under subclause (I) shall not accrue under section 13(a)(2). “(F) Use of portion of liability amount for new investment.— “(i) Reduction of other amounts due to state agency.—In the case of a State agency that fails to comply with a requirement for new investment under subparagraph (D)(i)(II) or clause (iii)(I), the Secretary may reduce any amount due to the State agency under any other provision of this section by the portion of the liability amount that has not been used in accordance with that requirement. “(ii) Effect of state agency's wholly prevailing on appeal.—If a State agency begins required new investment under subparagraph (D)(i)(II), the State agency appeals the liability amount of the State agency, and the determination by the Secretary of the liability amount is reduced to $0 on administrative or judicial review, the Secretary shall pay to the State agency an amount equal to 50 percent of the new investment amount that was included in the liability amount subject to the appeal. “(iii) Effect of secretary's wholly prevailing on appeal.—If a State agency does not begin required new investment under subparagraph (D)(i)(II), the State agency appeals the liability amount of the State 116 STAT. 319 agency, and the determination by the Secretary of the liability amount is wholly upheld on administrative or judicial review, the Secretary shall— “(I) require all or any portion of the new investment amount to be used by the State agency for new investment, approved by the Secretary, to improve administration by the State agency of the food stamp program, which amount shall not be matched by Federal funds; and “(II) require payment of any remaining portion of the new investment amount in accordance with subparagraph (E)(ii). “(iv) Effect of neither party's wholly prevailing on appeal.—The Secretary shall promulgate regulations regarding obligations of the Secretary and the State agency in a case in which the State agency appeals the liability amount of the State agency and neither the Secretary nor the State agency wholly prevails. “(G) Corrective action plans.—The Secretary shall foster management improvements by the States by requiring State agencies, other than State agencies with payment error rates of less than 6 percent, to develop and implement corrective action plans to reduce payment errors.”; (2) in paragraph (4), by striking “(4)” and all that follows through the end of the first sentence and inserting the following: “(4) Reporting requirements.—The Secretary may require a State agency to report any factors that the Secretary considers necessary to determine a State agency's payment error rate, liability amount or new investment amount under paragraph (1), or performance under the performance measures under subsection (d).”; (3) in paragraph (5)— (A) by striking “(5)” and all that follows through the end of the second sentence and inserting the following: “(5) Procedures.—To facilitate the implementation of this subsection, each State agency shall expeditiously submit to the Secretary data concerning the operations of the State agency in each fiscal year sufficient for the Secretary to establish the State agency's payment error rate, liability amount or new investment amount under paragraph (1), or performance under the performance measures under subsection (d).”; and (B) in the last sentence, by striking “paragraph (1)(C)” and inserting “paragraph (1)”; (4) in paragraph (6)— (A) by striking “(6) At” and inserting the following: “(6) National performance measure for payment error rates.— “(A) Announcement.—At”; (B) in subparagraph (A) (as designated by subparagraph (A)), by striking “and incentive payments or claims pursuant to paragraphs (1)(A) and (1)(C)”; (C) in the first and third sentences, by striking “paragraph (5)” each place it appears and inserting “paragraph (8)”;116 STAT. 320 (D) by striking “Where a State” and inserting the following: “(B) Use of alternative measure of state error.—Where a State”; (E) by striking “The announced” and inserting the following: “(C) Use of national performance measure.—The announced”; (F) in subparagraph (C) (as designated by subparagraph (E)), by striking “the State share of the cost of payment error under paragraph (1)(C)” and inserting “the liability amount of a State under paragraph (1)(C) , and (G) by adding at the end the following: “(D) No administrative or judicial review.—The national performance measure announced under this paragraph shall not be subject to administrative or judicial review.”; (5) in paragraph (7)— (A) by striking “(7) If the Secretary asserts a financial claim against” and inserting the following: “(7) Administrative and judicial review.— “(A) In general.—Except as provided in subparagraphs (B) and (C), if the Secretary asserts a financial claim against or establishes a liability amount with respect to”; (B) in subparagraph (A) (as designated by subparagraph (A)), by striking “paragraph (1)(C)” and inserting “paragraph (1)”; and (C) by adding at the end the following: “(B) Determination of payment error rate.—With respect to any fiscal year, a determination of the payment error rate of a State agency or a determination whether the payment error rate exceeds 105 percent of the national performance measure for payment error rates shall be subject to administrative or judicial review only if the Secretary establishes a liability amount with respect to the fiscal year under paragraph (1)(C). “(C) Authority of secretary with respect to liability amount.—An action by the Secretary under subparagraph (D) or (F)(iii) of paragraph (1) shall not be subject to administrative or judicial review.”; and “(6) in paragraph (8)— (A) in subparagraph (A), by striking “paragraph (1)(C)” and inserting “paragraph (1)”; (B) in subparagraph (C)— (i)in clause (i), by striking “payment claimed against State agencies; and” and inserting “payment claimed against State agencies or liability amount established with respect to State agencies;”; (ii)in clause (ii), by striking “claims.” and inserting “claims or liability amounts; and”; and (iii)by adding at the end the following: “(iii) provide a copy of the document providing notification under clause (ii) to the chief executive officer and the legislature of the State.”; and (C) in subparagraphs (D) and (H), by inserting “or liability amount” after “claim” each place it appears.116 STAT. 321 (b) Authority To Settle Claims Concerning At-Risk Amounts.—Section 13(a) of the Food Stamp Act of 1977 (7 U.S.C. 2022(a)) is amended— (1) by striking “(a)(1) The” and inserting the following: “(a) General Authority of the Secretary.— “(1) Determination of claims.—Except in the case of an at-risk amount required under section 16(c)(1)(D)(i)(III), the”; (2) by striking the fourth sentence; (3) by striking “To the extent” and inserting the following: “(2) Claims established under quality control system.—To the extent”; (4) in paragraph (2) (as designated by paragraph (3)), by striking “section 16(c)(1)(C)” and inserting “section 16(c)(1)”; (5) by striking “Any interest” and inserting the following: “(3) Computation of interest.—Any interest”; and (6) by striking “(2) Each adult” and inserting the following: “(4) Joint and several liability of household members.—Each adult”. (c) Crediting of Payments to Food Stamp Appropriations Account.—Section 18(e) of the Food Stamp Act of 1977 (7 U.S.C. 2027(e)) is amended in the first sentence— (1) by striking “11(g) and (h), and” and inserting “subsections (g) and (h) of section 11,”; and (2) by inserting “and section 16(c)(1),” after “section 13,”. (d) Conforming Amendments.—Section 22(h) of the Food Stamp Act of 1977 (7 U.S.C. 2031(h)) is amended— (1) in the second sentence, by striking “section 16(c)(1)(C)” and inserting “section 16(c)(1)”; and (2) by striking the third sentence. (e) Applicability.—The amendments made by this section shall not apply with respect to any sanction, appeal, new investment agreement, or other action by the Secretary of Agriculture or a State agency that is based on a payment error rate calculated for any fiscal year before fiscal year 2003.