SNAP Auth-Reauth - Business Integrity

Overview

Sections 9 of the Food and Nutrition Act provides the Secretary with the authority to consider the business integrity and reputation of firms currently authorized or applying to become authorized to redeem Supplemental Nutrition Assistance Program (SNAP) benefits.

The Food and Nutrition Service (FNS) may only consider offenses committed by owners, officers, or managers of the firm that indicate a lack of business integrity.

In addition to firms seeking initial authorization, the business integrity standards in the regulations apply to authorized SNAP firms and may be the basis for withdrawal.

This memo clarifies business integrity requirements and factors that FNS may and may not consider when determining a firm’s participation in SNAP.

Definition of Business Integrity

Business integrity offenses are generally those that:

• Occur during business-to-business, business-to-government, or business-to-consumer interactions;
• Are committed during the performance of a job, marketplace transaction, or professional engagement;
• Involve the misuse of funds or negotiable instruments; and/or
• Involve fraudulent, misleading, or providing false records or statements to the government or to a court.

Convictions or Civil Judgment

FNS Action: Permanent denial/withdrawal of all locations.

If an owner or manager of a firm has been criminally convicted or found civilly liable for business integrity reasons provided in regulation, the applicant firm will be denied and any authorized firm will be withdrawn for as long as that person is an owner or manager of the firm.

Scope: Offenses that reflect on business integrity established on or after June 1, 1999.

FNS considers SNAP regulations at 7 CFR 278.1(b)(3)(i) to cover the below-listed offenses.

• Theft;
• Embezzlement;
• Forgery;
• Bribery;
• Falsification or destruction of records;
• Receiving stolen property;
• Making false statements or claims;
• Violation of federal, state, and/or local consumer protection laws;
• Violation of consumer protection or other laws relating to alcohol, tobacco, firearms, controlled substances, and/or gaming licenses;
• Trafficking, distributing, or intending to distribute controlled substances on store property;
• Traffic offenses, such as reckless driving or driving under the influence, for delivery routes and other mobile business operations; and
• Obstruction of justice.

The terminology used to refer to these offenses may change from jurisdiction to jurisdiction. For example, what may be “driving under the influence” for one state may be “driving while intoxicated” or “driving while impaired” in another. The above list is not intended to limit a business integrity finding to only those convictions referred to with the exact terminology listed above but is intended to be used as a reference for the types of activity FNS finds relevant.

Evidence: Information to be considered includes, but is not limited to:

• Firm’s completed program application.
• Notarized Affidavits or other sworn statements.
• Information and documentation provided by the firm.
• Collateral contact verification, such as through OIG or federal/state court systems.
• Whether the relevant judgement has been vacated, the relevant criminal conviction has been expunged, or the relevant individual has been pardoned.

Non-Considerations: In making a business integrity determination about a firm, FNS may not consider:

• Personal Integrity Convictions.
  • Except as noted above, drug offense convictions are not considered.
  • Except as noted above, traffic offense convictions are not considered.
• Seriousness -The legal classification of an offense (e.g., misdemeanor vs. felony).
• Sentence -The penalty imposed for the offense (e.g., probation vs. jailtime vs. fine).
• Satisfaction -Time served, fine paid, parole.
• Supportive Statements – Character references, letters of support, etc. for the firm and/or its owner(s).

Administrative Findings in Other Programs (Not SNAP) by Federal, State, or Local Officials

FNS Action:

• Denial/withdrawal from SNAP for the equivalent period of time that the firm was removed from a program other than SNAP.
• 1-year denial/withdrawal if the firm was not removed, but there is a “pattern” evidencing a lack of business integrity of the owners, officers, or managers of the firm.

Scope: Offenses that reflect on business integrity established on or after June 1, 1999.

• Removal of the firm from a program other than SNAP; or
• Pattern of three or more “instances”, showing a lack of business integrity. Instances that count towards establishing a pattern under this section include administrative findings resulting in a fine or penalty imposed in lieu of removal from another program, including WIC.

Non-Consideration: Warning letters or citations which do not also involve a fine or penalty.

Circumvention

FNS Action: 3-year denial/withdrawal of the applicant firm.

If FNS determines there is evidence of circumvention or attempted circumvention of a period of disqualification, a civil money penalty, or fine, the applicant firm will be denied authorization for 3 years or have their authorization withdrawn for 3 years in the event the circumvention is not discovered at the time of initial authorization.

If, upon reapplication, the circumstances of the attempted circumvention have not been remedied (i.e., the sanctioned firm ownership continues to be operationally or financially involved), the applicant firm shall again be denied authorization for another 3 years.

Scope: Circumvention means the ownership of a sanctioned firm is (or is attempting to evade their sanction by) financially benefitting from, or (being) operationally involved in, the applicant firm at the same location. Circumvention occurs when:

1. A firm is currently subject to a disqualification or outstanding penalty or fine imposed by FNS for program violations; and
2. The owner(s) of that sanctioned store, to avoid serving the imposed sanction,
   1. Sells or otherwise transfers ownership or inventory of the firm to a spouse;
   2. Sells or otherwise transfers ownership or inventory of the firm to another individual (other than a spouse) and remains involved with the firm in any operational capacity;
   3. Is otherwise financially benefiting from the firm’s participation in SNAP; or
   4. In any way attempts to conceal from FNS the continued operational involvement or financial benefit of the sanctioned individual(s) at the applicant firm.

Evidence: Evidence FNS may consider to determine if a sanctioned owner is still operationally involved or would financially benefit from the applicant firm’s participation in SNAP includes but is not limited to:

• Bill of sale or sales contract.
• Business licensing.
• Articles of incorporation.
• Lease agreement.
• Proof of payments.
• Bank statements.
• Tax records.
• Verification of the above or other submitted documentation, such as through business entity search on a Secretary of State webpage.

Non-Considerations: Evidence of circumvention does not include:

• Bona Fide Transfer. A “bona fide transfer” occurs when a sanctioned firm’s ownership transfers ownership of the firm to the transferee and does not remain operationally or financially involved. The transferee may be authorized if otherwise eligible regardless of whether the sanctioned firm’s ownership (seller) has paid a TOCMP or any other CMP imposed by FNS.
• Different Location. If an applicant firm reflects ownership associated with a sanctioned firm at a location different from the location of that sanctioned firm, that applicant may be ineligible to apply on behalf of other firms but is not committing circumvention.

SNAP Violation Established but Sanction Not Imposed nor Satisfied

FNS Action: Denial of the application.

Scope: Previous SNAP violations administratively and/or judicially established as having been committed by owners, officers, or managers of the firm for which a sanction had not been previously imposed and satisfied.

Non-Consideration: Sanctions or authorization determinations cannot be applied if, prior to the issuance of a charge letter, a retailer action leaves FNS incapable of imposing a subsequent penalty.

SNAP Violations Committed by One or More Units of a Multi-Unit Firm

FNS Action: Permanent denial/withdrawal of all pending applications for new locations as well as all authorized locations under the same ownership.

Scope: 

• Established violation personally committed by owners or officers of the firm; or
• If ownership is not involved:
  • Management is involved in violations at multiple locations under the same ownership; and
  • The results of the investigations, taken as a whole, indicate an overall operating practice of the firm, as opposed to that of individual locations.

Non-Consideration: If sanctions are warranted for two or more locations investigated at the same time and the evidence does not indicate ownership involvement or an overall practice of program violations, the sanction for each violating location will be determined independently of each other and based solely on the violations committed at each individual location.

Other Business Integrity Considerations

Sanction: 1-year denial/withdrawal.

Scope: Commission of any other offense by any owner, officer, or manager that indicates a lack of business integrity.

Non-Consideration: An individual who served as an employee of a firm that was permanently disqualified or for which a disqualification is pending (i.e., appeal rights have not been exhausted), may continue to work in any authorized firm, even at the same location as the sanctioned firm.

Notarized Affidavit

A notarized affidavit may be required to assess if a firm at a high-risk location meets the business integrity requirements to be an authorized retailer.

An affirmative answer to any of the questions on the affidavit does not automatically prevent a retailer from being authorized to participate in SNAP. FNS may ask for additional information needed to make a business integrity determination.

If FNS determines that the applicant firm submitted an affidavit or application that reported misinformation or failed to report requested information concerning a matter that could affect the firm’s eligibility for program authorization, the firm may be subject to denial or disqualification per §278.1(k)(4) and 278.6(e)(1) and (3).

Any questions regarding this policy should be directed to: SM.FN.RPMDHQ-WEB@usda.gov.

Andrea Gold
Director
Retailer Policy Division
Supplemental Nutrition Assistance Program