[Federal Register Volume 59, Number 48 (Friday, March 11, 1994)] [Unknown Section] [Page 0] From the Federal Register Online via the Government Publishing Office [www.gpo.gov] [FR Doc No: 94-5569] Federal Register / Vol. 59, No. 48 / Friday, March 11, 1994 / [[Page Unknown]] [Federal Register: March 11, 1994] VOL. 59, NO. 48 Friday, March 11, 1994 ======================================================================= ----------------------------------------------------------------------- DEPARTMENT OF AGRICULTURE Food and Nutrition Service 7 CFR Part 246 RIN No. 0584-AB13 Special Supplemental Food Program for Women, Infants, and Children (WIC): Coordination Rule: Mandates of the Child Nutrition and WIC Reauthorization Act of 1989 AGENCY: Food and Nutrition Service, USDA. ACTION: Final rule. ----------------------------------------------------------------------- SUMMARY: This final rule amends regulations governing the Special Supplemental Food Program for Women, Infants, and Children (WIC) to comply with the mandates of sections 123 and 213 of the Child Nutrition and WIC Reauthorization Act of 1989 enacted on November 10, 1989. This final rule contains both funding and nonfunding provisions. The major nonfunding provisions in this final rule include: Extending adjunct or automatic income eligibility to certain family members; enhancing outreach efforts and program access; defining breastfeeding and establishing breastfeeding promotion activities; referring and providing participants with information about other health and welfare programs; permitting State agencies the option to establish alternative means of issuing food instruments, such as mailing them to participants; and, reducing the frequency with which State agencies must review their local agencies. This final rule also incorporates other legislative mandates, such as, Governmentwide debarment and suspension (nonprocurement) requirements, a drug-free workplace, and new restrictions on lobbying. DATES: This rule is effective on March 11, 1994, except that the nondiscretionary funding provisions set forth in Sec. 246.14 and Sec. 246.16 were, by law, effective October 1, 1989. State agencies shall implement all other provisions no later than October 1, 1994. FOR FURTHER INFORMATION CONTACT: Barbara Hallman, Chief, Policy and Program Development Branch, Supplemental Food Programs Division, Food and Nutrition Service, USDA, 3101 Park Center Drive, room 542, Alexandria, VA 22302, (703) 305-2746. SUPPLEMENTARY INFORMATION: Classification Executive Order 12866 This final rule is issued in conformance with Executive Order 12866. Regulatory Flexibility Act This rule has been reviewed with regard to the requirements of the Regulatory Flexibility Act (5 U.S.C. 601-612). Pursuant to that review, the Administrator of the Food and Nutrition Service (FNS) has determined that this final rule will not have a significant impact on a substantial number of small entities. State and local agencies will be most affected because of the additional program administration and education requirements. However, some program administration requirements have also been reduced by this rule. The net effect on State and local agencies is expected to be minimal. Participants and applicants will also be affected by simplified application and benefits issuance procedures. Paperwork Reduction Act The reporting and recordkeeping requirements established in the proposed rulemaking of July 9, 1990 in Secs. 246.4, 246.6, 246.7, 246.11 and the reductions in the reporting and recordkeeping requirements set forth in Secs. 246.11 and 246.19 were reviewed and approved by the Office of Management and Budget under Control Number 0584-0043 in accordance with the Paperwork Reduction Act of 1980 (44 U.S.C. 3505). No changes in the reporting/recordkeeping burden for the sections cited above have been incorporated into the final rule. All existing reporting and recordkeeping requirements in Secs. 246.14 and 246.16 for funding activities have been incorporated into this final rule, and no changes in burden hours for those activities are reflected in this final rule. The requirements for these sections have been approved by OMB for use through November 30, 1995 under OMB control number 0584-0043. This final rule, however, does impose on WIC State and local agencies one additional reporting and recordkeeping requirement of documenting both direct and in-kind expenditures for breastfeeding promotion and support. As required by section 3504(h) of the Paperwork Reduction Act of 1980, the Department submitted to the Office of Management and Budget (OMB) for its review the information reporting and recordkeeping requirement of documenting both direct and in-kind expenditures for breastfeeding promotion and support. This reporting and recordkeeping requirement has been approved by OMB for use through August 31, 1995 under OMB control number 0584-0427. Organizations and individuals desiring to submit comments regarding any aspect of these information collection requirements, including suggestions for reducing the burdens, should direct them to the Director, Supplemental Food Programs Division, (address above) and to the Office of Information and Regulatory Affairs, OMB, room 3208, New Executive Office Building, Washington, DC 20503, Attn: Laura Oliven, Desk Officer for the Food and Nutrition Service. Executive Order 12372 The Special Supplemental Food Program for Women, Infants and Children (WIC) is listed in the Catalog of Federal Domestic Assistance Programs under 10.557 and is subject to Executive Order 12372, which requires intergovernmental consultation with State and local officials (7 CFR part 3015, subpart V, and 48 FR 29114 (June 24, 1983)). Executive Order 12778 This final rule has been reviewed under Executive Order 12778, Civil Justice Reform. This rule is intended to have preemptive effect with respect to any state or local laws, regulations or policies which conflict with its provisions or which would otherwise impede its full implementation. This rule is not intended to have retroactive effect unless so specified in the ``Effective Date'' paragraph of this preamble. Prior to any judicial challenge to the provisions of this rule or the application of its provisions, all applicable administrative procedures must be exhausted. In the WIC Program, the administrative procedures are as follows: (1) Local agencies and vendors--State agency hearing procedures issued pursuant to 7 CFR 246.18; (2) applicants and participants--State agency hearing procedures issued pursuant to 7 CFR 246.9; (3) sanctions against State agencies (but not claims for repayment assessed against a State agency) pursuant to 7 CFR 246.19--administrative appeal in accordance with 7 CFR 246.22; and (4) procurement by State or local agencies-- administrative appeal to the extent required by 7 CFR 3016.36. Good Cause Determinations This final rule incorporates several new statutory requirements from Public Law 101-147 which were not contained in a prior proposed rule. These are nondiscretionary funding provisions which revise the methodology for determining the amount of funds available for NSA, require that a portion of these funds be used for breastfeeding promotion and support, permit conversion of food funds to NSA funds under certain specified circumstances, provide optional spend forward authority to State agencies, and establish timelines for allocation and reallocation of funds. In light of the nondiscretionary nature of these requirements, and since the legislatively mandated effective date of these requirements was October 1, 1989, the Administrator of the Food and Nutrition Service has found, in accordance with 5 U.S.C. 553(b), that prior notice and comment are impracticable, unnecessary and contrary to the public interest, and that good cause exists for publishing revisions to Sec. 246.16 without prior notice and comment. Two additional changes which were not proposed are contained in this final rule. First, this final rule incorporates in Sec. 246.2 reference to the existing requirements of the non-discretionary department-wide rule governing lobbying which applies to WIC. This new reference merely incorporates existing, non-discretionary provisions of 7 CFR part 3018, ``New Restrictions on Lobbying,'' into WIC Program regulations. Second, current Sec. 246.7(c)(2)(v) contains a non- inclusive list of references of non-discretionary provisions of Federal law which prohibit certain benefits paid under other Federal programs from being considered as income for the WIC Program. This final rule renumbers that section as Sec. 246.7(d)(2)(iv)(c), and amends it to update it with additional references to other non-discretionary income exclusions. With respect to these revisions, the Administrator of the Food and Nutrition Service has found, pursuant to 5 U.S.C. 553(b), that prior notice and comment are impracticable, unnecessary and contrary to the public interest, and that good cause exists for publishing these revisions without prior notice and comment. Background Public Law 101-147, the Child Nutrition and WIC Reauthorization Act of 1989, enacted on November 10, 1989, amended a wide range of WIC Program functions in such areas as income eligibility determinations; program outreach, referral and access; coordination; breastfeeding promotion; and food delivery systems. Therefore, on July 9, 1990, the Department published a proposed rule (55 FR 28033) addressing primarily the discretionary and nondiscretionary mandates of Public Law 101-147 that were unrelated to funds utilization and allocation. These provisions have been commonly referred to as the ``nonfunding'' provisions of Public Law 101-147. Also included in the proposed rule were references to requirements in Department-wide rules which apply to WIC: Uniform Administrative Requirements for Grants and Cooperative Agreements to State and Local Governments, 7 CFR part 3016, and Governmentwide Debarment and Suspension (Non-Procurement) Requirements and Government Requirements for a Drug-Free Workplace, 7 CFR part 3017. Several nonfunding provisions were issued in separate rulemakings, as noted below. The proposed rule provided for a 30-day comment period, which ended on August 8, 1990. Forty-seven comment letters were received on the proposed rule from a variety of sources, including State and local agencies and health professionals, advocacy groups and other public interest groups, and the general public. The Department has given all comments careful consideration in the development of this final rule and would like to thank all commenters who responded to the proposal. In addition, subsequent meetings with various State and local agency staff on this rule provided a forum for staff to more fully discuss the concerns and recommendations made in their comment letters. Such discussions and individual comments on the proposed rule, which provided a detailed and thorough analysis of issues, were invaluable to the Department in developing this final rule. A summary of these meetings is contained in the Department's rulemaking record. Although the proposed rule contained both discretionary and nondiscretionary nonfunding provisions of Public Law 101-147, State agencies were encouraged to focus on and direct their comments to the discretionary provisions of the law. In addition, the Department has worked with WIC State agencies to voluntarily implement the provisions designated as nondiscretionary, including those provisions proposed verbatim from the law. These legislative provisions required no further interpretation on the part of the Department as to how State and local agencies would implement them. While all provisions addressed in the proposal will be discussed further, those which are discretionary will be addressed in greater detail. The proposed rulemaking published by the Department did not include any of the funding provisions mandated by Public Law 101-147 because the Department intended to publish these requirements in a separate rulemaking. However, because the law requires several nondiscretionary revisions to the WIC Program funds allocation procedures which preclude the Department from exercising discretion in their implementation, the Department has included these funding provisions in this final rule. As indicated previously, these funding provisions include: (1) Revising the methodology for determining the amount of funds available for NSA, (2) requiring that at least $8 million of the NSA funds must be spent on breastfeeding promotion and support, (3) permitting, under certain circumstances, the conversion of food funds to funds to support NSA and an option for States to spend forward up to 3 percent of their food grants into the succeeding fiscal year, and (4) establishing timelines for the allocation and reallocation of funds. These provisions cannot be modified in response to public comment because the legislative language is explicit regarding implementation of these provisions. Because these provisions result in significant changes to Sec. 246.16 of the WIC Program regulations, the Department is revising and republishing Sec. 246.16(a) through (k), redesignated in this final rule as paragraphs (a) through (i), in its entirety. In addition and as required by law, these provisions were effective on October 1, 1989 and were reflected in grants to State agencies since Fiscal Year 1990. This final rule also incorporates into Sec. 246.7 of the WIC Program regulations references to various cash payments which are required by statute to be excluded from consideration as income for Federal assistance programs. Further, due to the addition of these references and other changes necessary to incorporate adjunct income eligibility requirements, newly designated paragraph (d) in Sec. 246.7 has been revised and republished in its entirety in this final rule. Department-wide rules implementing new Governmentwide lobbying restrictions, 7 CFR part 3018, are also included in this final rule. In addition, OMB Circular A-90, ``Cooperating with State and Local Governments to Coordinate and Improve Information Systems'' has been replaced by OMB Circular A-130. Therefore, all references to Circular A-90 have been revised to reference OMB Circular A-130. Several nonfunding provisions of Public Law 101-147 were implemented in previous rulemakings. Therefore, they were not included in the proposed rule of July 9, 1990 and are not addressed in this final rule. First, the provision that State agencies be given the option to certify and provide program benefits to incarcerated persons (sections 123(a)(4)(A)(iv) and 123(a)(4)(E)) were published in an interim rule on December 14, 1989 (54 FR 51289) and in a final rule on August 5, 1992 (57 FR 34500). On February 1, 1990 (55 FR 3385), a final rule was published which implemented two nondiscretionary benefit- related provisions of section 123(a)(2) of Public Law 101-147-- automatic WIC income eligibility for fully eligible current recipients of Food Stamps, AFDC, and/or Medicaid benefits, and the State agency option to exclude military off-base housing allowance payments from an applicant's countable income for purposes of determining WIC income eligibility. Finally, the requirements of sections 123(a)(3)(D) and 123(a)(4)(A)(i)(II) of the law regarding the provision of information on, and coordination with, substance abuse counseling and treatment services were included in a separate proposed rule issued on March 30, 1990 (55 FR 11946). This rule was issued in its final form on February 26, 1993 at 58 FR 11497. Following is a discussion of each provision, as proposed, comments received on the proposed rule, an explanation of the provisions set forth in this final rule, and a discussion of several nondiscretionary provisions, including four basic areas of funding provisions in Public Law 101-147, which have been incorporated into this final rule. 1. References to 7 CFR Part 3016 Until the publication of the final rule entitled ``Uniform Administrative Requirements for Grants and Cooperative Agreements to State and Local Governments'' on March 11, 1988 (53 FR 8044), the requirements for grants and cooperative agreements were set forth in 7 CFR part 3015. This rule was promulgated to establish consistency and uniformity among some 23 Federal agencies in the administration of grants to, and cooperative agreements with, State and local governments and federally-recognized Indian tribal governments. The final rule was published as 7 CFR part 3016, replacing part 3015 for most grants and subgrants to these government entities, including WIC grants, effective October 1, 1988. Therefore, as proposed, this final rule would change all references to 7 CFR part 3015 contained in part 246 to ``7 CFR part 3016.'' 2. Breastfeeding Provisions (Secs. 246.2, 246.3(e)(4), 246.11(c)(2), 246.11(c)(3), 246.11(c) (5)-(6) and (8), and 246.14(c)(10)) Public Law 101-147 established a number of mandates relative to breastfeeding. The significant number of provisions in Public Law 101- 147 concerning breastfeeding promotion and support activities, and the level of detail with which most of these provisions are addressed, clearly demonstrate strong Congressional support for breastfeeding promotion and support efforts in the WIC Program. This strong support, in turn, reflects nutritional science and medical opinion that breastfeeding offers significant nutritional and health benefits to infants. The Department shares this belief and has always actively encouraged the promotion and support of breastfeeding as the optimal method of infant feeding. Program regulations already contain a number of provisions in support of breastfeeding. Furthermore, the Department has taken non-regulatory actions in this area, including the development of publications to help local agency staff teach participants about breastfeeding; participation in cooperative efforts with other Federal agencies and organizations to promote breastfeeding, such as the USDA Breastfeeding Promotion Consortium which meets semi- annually; and the award of grants for projects on breastfeeding, such as the funding of a WIC Breastfeeding Promotion Study and Demonstration to identify, evaluate, and demonstrate approaches to promote breastfeeding effectively in WIC and, more recently, the award of grants to test the effectiveness of breastfeeding incentives in eight locations. The provisions regarding breastfeeding contained in Public Law 101-147 will serve to strengthen the emphasis in current regulations by focusing more attention on the promotion and support of breastfeeding activities at both the State and local levels. State and local agencies are encouraged to expand their efforts to increase the incidence and duration of breastfeeding among WIC participants. This final rule amends the regulations to include nondiscretionary provisions (many of which have already been implemented by State agencies) which: (1) Require that the State agency include in its annual plan of operation and administration a plan to promote breastfeeding and to coordinate WIC operations with local programs for breastfeeding promotion, (2) require each State agency to designate an agency staff member to coordinate breastfeeding promotion efforts, (3) require that the State agency provide training to persons providing breastfeeding promotion and support, (4) authorize the purchase of breastfeeding aids by State and local agencies as an allowable administrative expense, (5) require that the State agency provide breastfeeding promotion materials in languages other than English, and (6) establish a requirement that of the funds set aside for nutrition services and administration, at least $8 million must be spent in the area of breastfeeding promotion and support. This $8 million set-aside is discussed in further detail in section 11 of this preamble. This final rule also revises the regulations to implement the discretionary breastfeeding provisions, which are: (1) Definition of ``breastfeeding,'' (2) breastfeeding promotion and support standards, and (3) annual evaluation of breastfeeding promotion and support efforts. a. Definition of ``Breastfeeding'' (Sec. 246.2). Section 123(a)(6) of Pub. L. 101-147 adds a new section 17(h)(4)(A) to the Child Nutrition Act (CNA) of 1966 to require the Secretary, in consultation with the Secretary of Health and Human Services, to develop a definition of ``breastfeeding'' for the purpose of the WIC Program. Accordingly, the Department asked the Committee on Breastfeeding Promotion of the National Association of WIC Directors (NAWD), representatives from USDA and the Maternal and Child Health Bureau in the Department of Health and Human Services (DHHS), and other experts on breastfeeding, to provide input on developing a national definition of breastfeeding. The NAWD Committee recommended that ``breastfeeding'' be defined as ``the provision of mother's milk to her infant on the average of at least once a day.'' The DHHS concurred with this recommended definition for WIC Program purposes. Except as may otherwise be specified, this definition would be consistently applicable to all aspects of the WIC Program, including the evaluation of promotional efforts and the determination of categorical eligibility as a breastfeeding woman. The definition also recognizes that any breastfeeding, even if only on an average of once a day, provides some immunological and nutritional benefits which would otherwise not be provided to an infant, as well as significant psychological benefits, including assisting the transition to motherhood, and assisting the formation of strong bonds between the mother and her infant. It is the Department's belief that a result of successful breastfeeding promotion should be a serious commitment to breastfeeding on the part of mothers so that breastfeeding will be the rule rather than the exception. The Department also acknowledges that any amount of breastfeeding should be encouraged. Partial breastfeeding supplemented by formula feeding is preferable to no breastfeeding at all. Therefore, the Department proposed the following definition of ``breastfeeding'' be added to Sec. 246.2: ``the practice of feeding a mother's breastmilk to her infant(s) on the average of at least once per day.'' The majority of commenters addressing the definition of ``breastfeeding'' supported the provision as proposed. Therefore, in view of the comments received and the Department's previous consultation with the National Association of WIC Directors, and the Secretary of the Department of Health and Human Services, including the Centers for Disease Control (CDC), the definition of ``breastfeeding'' in this final rule remains unchanged from the proposed rule. b. Designation of breastfeeding coordinator (Sec. 246.3(e)(4)). Section 123(a)(6) of Pub. L. 101-147 amends section 17(h)(4)(C) of the CNA of 1966 to require each State agency ``to designate an agency staff member to coordinate breastfeeding promotion efforts identified in the State plan of operation and administration.'' Therefore, the Department proposed in its July 9, 1990 rulemaking to add the breastfeeding promotion coordinator position to the list of State staffing requirements set forth in Sec. 246.3(e)(4). One commenter addressed this issue and recommended that the Department specify the staffing standards per caseload as well as the duties and responsibilities of a breastfeeding coordinator. It was the intent of the Department to allow the State agency the flexibility under this provision to delineate the duties and responsibilities of the breastfeeding coordinator in its State. However, the Department strongly urges State agencies to make breastfeeding promotion and education duties the first priority for this position. Other duties, may be assigned to this position, but should be related to nutrition services if at all possible. In this way a breastfeeding coordinator will have the flexibility to perform duties specific to the needs of the particular State. Accordingly, the Department is adopting the provision as proposed. c. Training for breastfeeding promotion (Sec. 246.11(c)(2)). Section 123(a)(6) of Public Law 101-147 adds a new section 17(h)(4)(D) to the CNA of 1966 requiring the State agency ``to provide training on the promotion and management of breastfeeding to staff members of local agencies who are responsible for counseling (WIC) participants * * * concerning breastfeeding.'' Therefore, the proposed rule added a new sentence at the end of Sec. 246.11(c)(2) of the current WIC Program regulations to require State agencies to provide training on the promotion and management of breastfeeding to local agency staff. The majority of commenters approved this provision as proposed. One commenter approved the provision but indicated that additional funds would be needed to provide such training to local agency staff. Congress has already augmented the existing requirement that States expend at least one-sixth of their nutrition services and administration (NSA) grants on nutrition education by mandating in Public Law 101-147 a targeted expenditure nationally of at least $8 million for the promotion and support of breastfeeding among WIC participants. The Department has issued a policy memorandum which clarifies that salary and benefit expenses of staff and non-WIC staff to deliver/attend training on breastfeeding promotion and support have been and continue to be allowable breastfeeding promotion and support expenditures. Accordingly, the proposed modification of Sec. 246.11(c)(2) is adopted without changes. d. Provision of non-english breastfeeding materials (Sec. 246.11(c)(3)). Section 17(f)(14)(A) of the CNA of 1966 has long required State agencies to provide nutrition education materials to local agencies in languages other than English in areas where a substantial number of low-income households speak other languages. Section 123(a)(4)(D) of Public Law 101-147 amends section 17(f)(14)(A) of the CNA of 1966 specifically to add breastfeeding promotion materials and instruction to this requirement. The Department proposed to revise Sec. 246.11(c)(3) of the regulations to require that the State agency ``identify or develop resources and educational materials, including breastfeeding promotion and instruction materials, for use in local agencies, taking reasonable steps to include materials in languages other than English, in areas where a significant number or proportion of the population needs the information in a language other than English, considering the size and concentration of such population, and where possible, the reading level of the participants.'' One commenter responded affirmatively to the provision. This commenter, however, recommended these materials be developed at the Federal level. The Department may develop some materials to assist State agencies in meeting this requirement. However, such action on the part of the Department does not alleviate the obligation imposed by this legislation on State agencies to produce or provide such materials for their WIC participants. State agencies should note that the joint statement of explanation accompanying H.R. 24 (Congressional Record, October 10, 1989, H6863) clarifies that Congress does not expect State agencies to develop and produce all such materials on their own in cases where private entities have donated a sufficient supply of materials which include correct, complete, and up-to-date information. Furthermore, the Department believes that any printed information, either about breastfeeding, nutrition education, or the application/certification process itself, should reflect, where possible, the reading level of WIC participants, regardless of the language used. Accordingly, the final rule retains the requirement as proposed. e. Breastfeeding promotion and support standards and evaluation (Sec. 246.11(c)(5)-(6) and (8)). Section 123(a)(3)(C) of Public Law 101-147 adds a new section 17(e)(2) to the CNA of 1966 mandating that the Department ``prescribe standards to ensure that adequate * * * breastfeeding promotion and support are provided.'' The Department requested the assistance of National Association of WIC Directors' (NAWD) Committee on Breastfeeding Promotion in developing and prescribing the breastfeeding promotion standards required by Public Law 101-147. The standards/requirements recommended by this Committee were based on a position paper previously developed by NAWD on Breastfeeding Promotion, and reflect the concern of NAWD that requirements such as these be general in nature. In its July 9, 1990 proposed rule, the Department proposed to add the following requirements in new Secs. 246.11(c)(8)(i)-(iv): (1) The State agency shall develop a policy that creates a positive clinic environment which endorses breastfeeding as the preferred method of infant feeding; (2) Each local agency shall designate a staff person to coordinate breastfeeding promotion and support activities; (3) The State and local agency shall incorporate task-appropriate breastfeeding promotion and support training into orientation programs for new staff involved in direct contact with WIC clients, and; (4) The State agency shall develop a plan to ensure that women have access to breastfeeding promotion and support activities during the prenatal and postpartum periods. New section 17(e)(2) of the CNA of 1966 also mandates that States annually evaluate breastfeeding promotion and support activities, including the views of participants concerning the effectiveness of the nutrition education and breastfeeding promotion and support they received. Section 246.11(c)(5) of the WIC regulations currently requires that WIC State agencies perform and document annual evaluations of nutrition education activities, which have always encompassed breastfeeding promotion. Because existing program regulations already contained annual nutrition education evaluation requirements, the Department proposed some minor modifications to existing Secs. 246.11 (c)(5) and (c)(8) to emphasize that breastfeeding education and promotion are to be included in these evaluations. A few commenters who addressed these proposed changes opposed the annual review requirement for breastfeeding promotion and support and recommended the frequency of this review activity be revised to be consistent with the biennial review of local agencies as required in Public Law 101-147. Because language in Public Law 101-147 requires that evaluations of breastfeeding promotion and support activities be performed annually by State agencies, this provision must be retained as proposed. However, as indicated above, this annual evaluation, for most States, will not be a new requirement, because most if not all have included it as a part of the currently required nutrition education evaluation. For those that have not, it is likely to be a simple extension of the evaluation currently being performed annually of nutrition education activities, and likely entails utilizing the same assessment tool currently used to evaluate nutrition education activities, such as a survey. Furthermore, during management evaluation reviews which must be conducted at least biennially, as set forth in Sec. 246.19(b)(3) of this final rule, State agencies are required to monitor compliance with all aspects of program operation including whether local agencies are complying with the nutrition education and breastfeeding promotion and support activities required by Sec. 246.11(c)(8). Therefore, in this final rule, Sec. 246.11 (c)(5), (c)(6), and (c)(8) are adopted as proposed. In addition to the assessment of participants' views concerning the effectiveness of nutrition education and breastfeeding promotion and support they received, the Department would encourage all State agencies to include in their evaluation an assessment of the outcomes of nutrition education and breastfeeding promotion and support, including the incidence and duration of breastfeeding. f. Breastfeeding aids as an allowable administrative expense (Sec. 246.14(c)(10)). Section 123(a)(6) of Public Law 101-147 adds a new section 17(h)(4)(B) to the CNA of 1966 mandating that the Department ``authorize the purchase of breastfeeding aids by State and local agencies as an allowable expense under nutrition services and administration.'' To implement this legislative mandate, a new Sec. 246.14(c)(10), which includes ``breastfeeding aids'' as allowable administrative costs, was proposed to be added by the Department in its proposed rulemaking. Accordingly, the proposed rule would allow, but would not require, State agencies to purchase, and authorize their local agencies to purchase, breastfeeding aids with WIC NSA funds. Although commenters generally supported the provision as proposed, several suggested that more detail be added on the breastfeeding aids which may be considered allowable costs. FNS believes the detailed discussion in the preamble to the proposed rule adequately addressed this subject. It has also issued additional guidance through its regional offices in a January 17, 1991 policy memorandum entitled, ``Allowable Costs for the Promotion and Support of Breastfeeding and the Reporting of Allowable Nutrition Services Expenditures.'' However, in this final rule a new paragraph (c)(10) has been modified to state that allowable NSA costs include ``the cost of breastfeeding aids which directly support the initiation and continuation of breastfeeding.'' This is consistent with the preamble of the proposed rule and policy issued by the Department, that breastfeeding aids include, but are not limited to, devices such as breast pumps, breastshells, and nursing supplementers, which directly support the initiation and continuation of breastfeeding. Breast pumps, including manual, battery-operated, or electric models, are used to express breast milk for storage and later use or to relieve over-fullness. Breastshells (i.e., breastshields and breast cups) are used for correcting inverted nipples. A pregnant woman with this problem is usually encouraged to start wearing such a device as early in pregnancy as possible. If the problem continues after the infant is born, it may be necessary to wear the aid between breastfeedings. Nursing supplementers are small tubes which are taped against the mother's body through which infant formula or other nourishment is expressed as the infant breastfeeds. This permits the mother to supplement breastfeeding when the supply of breastmilk is insufficient to meet the infant's nutritional needs without resorting to bottlefeeding. Avoiding the use of a bottle for supplementary feeding eliminates possible confusion for the infant who is learning how to breastfeed. Other devices or aids, such as nursing pads or nursing bras, which also directly support the initiation and continuation of breastfeeding, may also be purchased with NSA funds. However, State and local agencies should weigh the benefits of providing this more marginal equipment, which provides less direct support for the initiation and continuation of breastfeeding, against the importance of management functions and participant benefits (e.g., nutritional counseling) that could otherwise be provided or enhanced with the NSA funds. The Department recommends that States establish very specific policy for local agencies regarding what, if any, types of breastfeeding aids may be purchased so that the most efficient use is made of NSA funding resources. While all of the devices or aids mentioned in this section are Federally allowable expenses, the Department recommends that States restrict the use of administrative funds to aids or devices without which breastfeeding for particular participants would be overly difficult, e.g., breastshells, nursing supplementers, and breastpumps. However, items and aids for breastfeeding that go beyond the scope of the WIC Program would not be allowable costs. 3. Adjunct or Automatic WIC Income Eligibility (Secs. 246.2 and 246.7(d)(2)(vi)) Section 123(a)(2) of Public Law 101-147 amended section 17(d)(2)(A) of the CNA of 1966 to provide adjunct (i.e., automatic) WIC income eligibility to the following individuals applying for program benefits: (1) Recipients of Food Stamps, Aid to Families with Dependent Children (AFDC), or Medicaid Program benefits, and (2) a member of a family which contains an AFDC recipient or a pregnant woman or infant receiving Medicaid. The intent of Congress in passing this provision was to reduce the administrative burden on local agency WIC staff in the income determination process, expedite an applicant's entry into the program thereby removing potential barriers to program participation, and result in increased referrals from WIC to other health and social service programs (H.R. Rep. No. 101-194, p. 11-12). Final regulations were published on February 1, 1990 at 55 FR 3385 to implement the nondiscretionary, benefit-related provision of extending adjunct income eligibility to ``fully'' eligible recipients of Food Stamps, AFDC, or Medicaid Program benefits. However, that final rule left several issues outstanding including presumptive eligibility, definition of ``family'' for adjunct purposes, and the length of the certification periods. These and other issues were addressed in the proposed rule. Before discussing the proposed and final provisions in this area and the comments received on the proposed rule, several facts regarding adjunct income eligibility are important to restate. First, this provision provides only automatic income eligibility. Persons who are determined income eligible for WIC must still meet the other prong of WIC eligibility and be determined at nutritional risk before they can participate in the WIC Program and receive benefits. Secondly, in accordance with the language of Public Law 101-147, which specifically cites programs conducted under Federal law, these provisions apply only to recipients of the Federal AFDC, Medicaid, and Food Stamp Programs. A few States are administering programs financed solely by State funds that operate like and parallel the Federal AFDC or Medicaid programs. In addition, some States have chosen to extend Medicaid program benefits with State funds to pregnant women and infants who have incomes above 185 percent of poverty. Persons participating in such state-administered programs cannot be determined or classified as adjunctively income eligible for the WIC Program on that basis. As discussed in further detail below, however, some of these individuals may, at the State agency's discretion, be determined automatically income eligible for WIC based on participation in certain State-administered programs if the State program has income limits at or below the WIC Program income guidelines, as set forth in newly redesignated Sec. 246.7(d)(2)(vi)(B) of this final rule (previously set forth in Sec. 246.7(c)(2)(vii)). This provision has been in the WIC regulations since 1981. Third, while the legislation states that ``recipients'' of AFDC, Medicaid, or Food Stamp benefits or a member of a family which contains a recipient of certain programs are adjunctively income eligible for WIC, ``recipients'' in this context and as intended in this rule are individuals who have been certified or determined eligible to receive benefits from one or more of these programs. It would not be feasible to base adjunct income eligibility status for WIC on whether an individual actually receives AFDC, Medicaid, or Food Stamp benefits at the time of WIC application. For example, an individual may be certified as eligible to receive Medicaid benefits but at the time he/ she applies for WIC benefits is not in need of or has not sought Medicaid services. Section 246.7(d)(2)(vi)(A) has been modified by this final rule to clarify this point. Fourth, individuals are required to document that they are certified as eligible to receive AFDC, Medicaid, or Food Stamp Program benefits. This requirement was first established in the final rule published in the Federal Register on February 1, 1990 at 55 FR 3385. Such documentation would include, for example, a participant's program identification card, or notice of program eligibility. State agencies may also, if they have the capability, assist applicants in obtaining such documentation through use of available means such as an online access data system. Some of the State's program identification cards may not provide the data necessary to confirm that the individual is currently certified as eligible to receive program benefits. State agencies should ensure that the documentation required sufficiently confirms that a WIC applicant is currently certified as eligible to participate in any one of these programs. Note that for both Medicaid and AFDC, a recipient is an individual. This is not the case in the Food Stamp Program. Food Stamp benefits are for household units. Thus, a Food Stamp ``recipient'' may be one individual or a group of individuals who are determined eligible for benefits. Accordingly, some Food Stamp recipients may not have documentation to confirm that they are certified as eligible to receive food stamp benefits. They may only have documentation which identifies that the head of the household and other unnamed family members are certified as eligible to receive benefits. In such cases, State agencies should require the WIC applicant to document that the person named as the head of the household for Food Stamp purposes is certified as eligible to receive Food Stamp benefits, and that the WIC applicant resides with the individual named as the Food Stamp head of household, or provide other similar documentation which proves that the applicant is certified as eligible to receive Food Stamp benefits. a. Definition of ``Family'' for members of families that contain an AFDC recipient or a pregnant woman or infant receiving assistance under the Medicaid program (Secs. 246.2 and 246.7(d)(2)(vi)). As mentioned previously, the legislation extends adjunct income eligibility for WIC to an individual who is a member of a family which contains an AFDC recipient or a member of family in which a pregnant woman or infant receives Medicaid. The purpose of this provision is to ensure that family members of AFDC and certain Medicaid participants, who might not themselves be AFDC or Medicaid participants, would be determined adjunctively income eligible for WIC. Consider, for example, a family unit which includes a pregnant woman and a 2-year old child. The pregnant woman participates in the Medicaid Program; however, the child does not qualify. By including family members as adjunctively income eligible for WIC, Public Law 101-147 extends automatic WIC income eligibility to the child, as well as to its mother. This provision also serves to facilitate closer coordination between WIC and other health and welfare programs that serve the same population and thereby streamlines administrative procedures. Prior to issuing a proposed rule on this provision, USDA considered the development of a new definition of ``family'' that was consistent across WIC, Medicaid and AFDC. After discussion with Federal Medicaid and AFDC Program counterparts, however, there was some concern that use of any one of the Federal programs' definitions of family for purposes of this provision might exclude, in some rare situations, an individual as adjunctively income eligible for WIC who in effect may have been considered or counted as a family member in one of these programs. AFDC and Medicaid approach the concept of ``family'' in a significantly different manner from each other and from WIC. The AFDC and Medicaid ``families''--referred to in these programs as ``budget units'' or ``filing units''--may be composed exclusively of persons directly receiving the program benefit or may include recipients and non- recipients. Additional persons who contribute to the economic unit may be excluded from consideration in these programs because they are not related to the applicant by blood, marriage, or some other form of legal relationship. In contrast, Sec. 246.2 of the WIC regulations defines ``family'' as ``a group of related or nonrelated individuals who are living together as one economic unit * * *'' FNS Instruction 803-3, Rev. 1, dated April 1, 1988, reiterates this regulatory definition. It considers persons as members of a single family, or economic unit, when their ``production of income and consumption of goods and services are related.'' In addition, use of the equivalents of ``family'' in AFDC and Medicaid for purposes of determining adjunct income eligibility in WIC would require either (1) that the WIC applicant provide information on the persons who were considered to be family members for AFDC or Medicaid; (2) WIC authorities to be charged with the responsibility for obtaining such information from these other programs; or (3) WIC staff master the complex eligibility determination procedures of these programs so that, working with the WIC applicant, they could, independent of the other programs, reestablish the composition of the applicant's AFDC or Medicaid ``family'' for WIC purposes. These alternatives would impose significant unnecessary burdens on the applicant and/or the program involved. Such procedures would increase the administrative complexity of the programs and adversely impact on the delivery of benefits to participants, and would, therefore, be in direct opposition to Congressional intent. In order to establish a proposed adjunct income eligibility procedure which effectively results in an expedited income determination process for such applicants and limits administrative burden on local agencies, as intended by Congress, the Department proposed to expand the definition of ``family'' in Sec. 246.2 of the regulations solely for use in establishing WIC adjunct income eligibility. The Department proposed in its rulemaking to use a definition of ``family'' that would not require the Food Stamp, AFDC or Medicaid Program to report information to WIC authorities. Nor would it require the WIC applicant to secure additional information from these programs. As proposed, the definition of ``family'' in Sec. 246.2 was revised to provide that, for purposes of determining WIC adjunct or automatic income eligibility only, ``family'' would be defined as persons living together, except that residents of an institution could not be considered members of a single family. WIC Program authorities could easily apply this definition with minimal burden on applicants. The Department believed that this proposed definition would not exclude any person who would have been encompassed by the AFDC and Medicaid concepts of ``family.'' The majority of commenters addressing this issue opposed the provision. They objected to different definitions being applied to three types of applicants--adjunct income eligibles, applicants not adjunctively income eligible, and homeless persons--and indicated that such variation would create a ``double standard'' for eligibility and confusion for WIC clinic staff. In addition, they indicated that individuals may make manipulations in their household compositions or family members, i.e., request AFDC or Medicaid recipients to move in with them, in order to gain WIC adjunct income eligibility status. Other commenters approved the provision with modifications. For example, one commenter expressed concern with the fact that the definition, as proposed, did not address how a foster child should be counted, and recommended the definition incorporate current policy which counts a foster child as a family of one. Several commenters concurred with the definition as proposed as long as the Department's ultimate goal was to move towards a single definition. In view of the concerns raised by commenters and the intent of Congress that the Department establish an expedited process yet limit the administrative burden on WIC local agencies, the Department has decided in this final rule to use the WIC Program's current definition of ``family'' for adjunct income eligibility purposes. Therefore, no change is necessary in this final rule to the regulatory text. The Department agrees with commenters that (1) the definition as proposed is broad and would bring into the WIC Program a number of persons who may not otherwise be income eligible for program benefits, and (2) the use of a common definition of ``family'' for adjunct and nonadjunct applicants in order to determine WIC income eligibility is preferable in order to ensure limited administrative burden on WIC local agencies. As reflected by commenters, merely living with an individual who has been determined eligible to receive AFDC or a pregnant woman or infant eligible for Medicaid benefits should not necessarily be the sole factor in determining what family members will also be deemed adjunctively income eligibility for WIC. The Department would like to note that the proposed definition of ``family'' for adjunct purposes was an attempt to account for any slight effect that might result from variation between the WIC Program's definition of ``family'' and the budgetary or filing unit used by the AFDC and Medicaid Programs. However, after further review, the Department believes that using the current WIC definition of ``family'' for adjunct income eligibility purposes would encompass all, or virtually all persons that were considered in the budgetary or filing unit for AFDC or Medicaid, and which are categorically eligible for WIC. For purposes of determining under Sec. 246.7(d)(2)(vii) which family members must also be deemed adjunctively income eligible for WIC, and as set forth in the current WIC Program regulations, Sec. 246.2, ```Family' means a group of related or nonrelated individuals who are living together as one economic unit, except that residents of a homeless facility or an institution shall not all be considered as members of a single family.'' Therefore, those family members, categorically eligible for WIC, who would be adjunctively income eligible are (as is currently the case in WIC) those individuals, related or nonrelated, who usually (although not necessarily) live together and share income and resources with an individual who has been certified eligible to receive AFDC or a pregnant woman or infant who has been certified as eligible to receive Medicaid benefits. Further, in response to commenter concerns, the Department would like to emphasize and clarify how this definition applies to foster children. As set forth in FNS Instruction 803-3, Rev. 1, a foster child who is the legal responsibility of a welfare or other agency is considered a family of one. Therefore, a foster child who remains the legal responsibility of the State and is certified as eligible to receive AFDC or Medicaid (if the foster child is an infant), can never confer adjunct income eligibility to family members. Only the foster child would be adjunctively income eligible for WIC. The Department also proposed to revise Sec. 246.7(d)(2)(vii) of the regulations to implement the legislative mandate that a person who documents that he/she is a member of a family which includes an AFDC recipient or a pregnant woman or an infant who receives Medicaid shall be determined adjunctively income eligible for WIC. No commenters addressed this issue. In this final rule, this paragraph has been renumbered as (d)(2)(vi)(A)(2) and has also been modified slightly to eliminate potential confusion by replacing the word ``receives'' with the phrase ``is certified eligible to receive.'' This change is explained fully in Section 3 of this preamble, above, and is intended to include persons who are currently certified as eligible for Medicaid or AFDC although they are not currently participating in those programs. The remainder of this provision remains as proposed. It retains the requirement that an applicant seeking adjunct eligibility must document, at a minimum, that the family member is certified as eligible to receive such benefits and that the family member resides with the applicant. Examples of documentation to confirm that a family member is certified as eligible to participate in AFDC or Medicaid is also addressed previously in this preamble. Documentation that the WIC applicant resides with the individual certified as eligible to receive such benefits need not be extensive. Such documentation would include, for example, a letter or envelope addressed to the family member who participates in, for example, AFDC, which matches the WIC applicant's address, or a program identification card or notice of eligibility which includes the family member's name and address and matches the WIC applicant's address. As set forth in newly designated Sec. 246.7(d)(2)(vi)(B) of this final rule, State agencies continue to have the option to accept, as evidence of income within Program guidelines, documentation of the applicant's participation in State administered programs that routinely require documentation of income, provided that those programs have income eligibility guidelines at or below the State agency's WIC Program income guidelines. This section had been redesignated as Sec. 246.7(d)(2)(x) in the proposed rule. It has again been renumbered in this final rule. As set forth in Public Law 101-147, section 123(a)(2) of the law revises section 17(d)(2) of the CNA of 1966 to specify that persons who are at nutritional risk shall be eligible for the WIC Program if the individual meets WIC's maximum income limit (which in the law is prescribed as the limit prescribed for the National School Lunch Program Act for free and reduced price meals), or receives food stamps, AFDC, or Medicaid benefits, or is a member of a family that receives AFDC or in which a pregnant woman or an infant receives Medicaid. Therefore, as set forth in the law, persons determined adjunctively income eligible for WIC are not further required to meet WIC's maximum income limit set at 185 percent of poverty. Accordingly, the Department proposed in Sec. 246.7(d)(2)(x) that persons who are adjunctively income eligible shall not be subject to these income limits. No comments were received on this proposed provision. Therefore, in this final rule, the Department has retained the provision as proposed, however, it has been redesignated as Sec. 246.7(d)(2)(vi)(C). State agencies should be aware that there are cases where an adjunctively income eligible individual's family income can actually exceed the income limit of 185 percent of poverty. For example, in the Medicaid Program, some States employ what is known as the ``Katie Beckett'' or ``TEFRA'' option to serve disabled children who in the past would have been institutionalized but now live at home. These children are deemed income eligible for Medicaid without regard to the income of the parents. However, as set forth in the law, participation in Medicaid (or one or more of the other programs described above) is the sole factor in determining an applicant as adjunctively income eligible for WIC benefits, assuming the applicant has elected to apply for WIC benefits on this basis. The fact that a few such individuals may actually have family incomes which exceed WIC guidelines is not determinative in these instances. b. Adjunct income eligibility for presumptively eligible recipients of assistance under AFDC or Medicaid (Sec. 246.7(d)(2)(vi)). Adjunct income eligibility for fully eligible recipients of Food Stamps and assistance under AFDC and Medicaid was established in a final rule published on February 1, 1990 at 55 FR 3385. That rulemaking did not grant adjunct income eligibility to ``presumptively,'' or provisionally, eligible recipients of AFDC or Medicaid who apply for WIC. No similar presumptive eligibility provision exists in the Food Stamp Program. Presumptive eligibility essentially entails granting full AFDC benefits to all or, at the option of the State, certain eligible recipient categories, and limited Medicaid benefits to pregnant women based on their categorical eligibility, before they have completed the application process and have been determined fully eligible. Such recipients are subsequently removed from the program if they are determined to be ineligible once the application process has been completed. In both the AFDC and Medicaid Programs, States have the option to provide presumptive eligibility determinations. Currently, approximately 30 States have opted to provide such determinations under the Medicaid Program and approximately 13 States under the AFDC Program. In the February 1, 1990 final rulemaking, the Department did not permit these presumptively eligible recipients of the AFDC and Medicaid Programs to be considered adjunctively income eligible for WIC because the Department needed first to gather more information about the meaning and implications of presumptive eligibility in these programs. Although, as indicated above, presumptively eligible AFDC and Medicaid recipients may ultimately prove to be ineligible for these programs, in actual practice, as confirmed with our Federal Medicaid and AFDC counterparts, such persons characteristically prove to be fully eligible upon completion of the eligibility determination process. This is not, therefore, a frequent cause of persons ceasing to be certified as eligible to receive benefits under these programs after relatively brief periods of participation, and it is by no means the only cause of early termination. Individuals may cease to be certified as eligible to participate in AFDC, Medicaid, or the Food Stamp Program at any time because these programs, for the most part, reassess eligibility more frequently than the WIC Program. Furthermore, persons may cease to be certified as eligible to receive benefits under these programs for reasons entirely unrelated to changes in their income, e.g., an AFDC recipient who neglects to submit the required monthly reporting form may be terminated from the program. Even when persons cease to be certified as eligible to receive benefits under these programs because of increases in their income, the possibility remains that they may still meet WIC income eligibility guidelines. Therefore, the Department intended, as explained in the preamble of its proposed rulemaking, that any WIC applicant determined presumptively eligible for AFDC or Medicaid would also be considered adjunctively income eligible for WIC. However, the proposed regulatory language in Sec. 246.7(d)(2)(vii)(A) inadvertently did not specifically mention presumptive eligibility. The majority of commenters approved the Department's proposal to extend WIC adjunct income eligibility to persons participating in AFDC or Medicaid based on presumptive eligibility determinations. However, several commenters recommended that the actual regulatory text be revised specifically to grant WIC adjunct income eligibility status to applicants determined presumptively eligible for AFDC or Medicaid. Therefore, based on the comments received, this final rule, in newly designated Sec. 246.7(d)(2)(vi)(A)(1), states that applicants who are certified as eligible to receive Food Stamps, AFDC or Medicaid, or applicants who are presumptively eligible for AFDC or Medicaid, and document such eligibility, shall be determined adjunctively income eligible for WIC. c. Cessation of food stamp, AFDC or medicaid benefits and its impact on WIC certification periods and mid-certification disqualification of adjunct income eligible participants (Sec. 246.7(h)(1)). An additional issue which was addressed in the Department's proposed rule is how to treat WIC participants who gain adjunct income eligibility only to be subsequently determined ineligible for Food Stamps, AFDC or Medicaid, and the impact, if any, such a determination should have on these individuals' WIC certification periods. Currently, WIC local agencies are required to make a WIC income eligibility determination at the time of initial application and subsequent applications. The standard certification period is 6 months, though pregnant women may be certified for the term of their pregnancies and up to 6 weeks postpartum, and State agencies may opt to certify infants who are under six months of age for a period extending to their first birthday. However, in Sec. 246.7(g) of the current WIC regulations and under current WIC policy, if a reassessment of program eligibility is performed mid-certification and the individual is determined ineligible, the local agency must disqualify the individual in the middle of a certification period. Examples of situations which might trigger a reassessment include a change in income reported by a participant, rehiring of temporarily laidoff workers and validated citizen complaints of eligibility violations. If the State agency has reason to believe that a participant may no longer be income-eligible, prudent management would dictate the need to conduct a reassessment. However, WIC participants are not required to report income changes during certification periods nor are local agencies required to inquire about such changes. State agencies have been informed that they may wish to establish formal policies for when it is appropriate to conduct a mid-certification reassessment. As discussed earlier in section 3.b. of this preamble, there are a variety of reasons why persons may cease to be certified as eligible to participate in one or more benefit programs that confer adjunct income eligibility for WIC, many of which do not signal a change in financial status. To require in these regulations that adjunctively income eligible WIC participants must report cessation of benefits in any one of these programs during their WIC certification periods would be inconsistent with current policy regarding the reporting of income changes for other WIC participants. Therefore, the Department proposed in its rulemaking to allow State agencies to confer adjunct income eligibility for the entire WIC certification period to persons who, at the time of application for WIC, were either recipients of Food Stamps, Medicaid, or AFDC, or were members of families which contain an AFDC recipient or a pregnant woman or an infant who receives Medicaid. In the proposed rule, a statement was added to newly designated Sec. 246.7(h)(1) to the effect that the State agency need not, during a certification period, reassess the income eligibility of a person who has been enrolled in WIC based on adjunct income eligibility. While the majority of commenters approved the proposal that adjunctively income eligible participants be given a full certification period, some commenters opposed the proposed change in the regulations. Although the intent of the proposal was to confer equal treatment for adjunct and nonadjunct income eligible participants by ensuring such participants are provided a full certification period, several commenters noted that the proposed regulatory language change to the mid-certification disqualification requirements resulted in and reflected inequitable treatment. In effect, nonadjunct participants could be disqualified mid-certification while participants adjunctively income eligible for WIC were guaranteed continued participation regardless of income changes during the certification period. Such commenters recommended the regulatory language be revised to reflect consistent mid-certification reassessment policy regardless of the method used to initially determine an individual's income eligibility for WIC. Therefore, in response to these concerns, the Department has clarified these issues in this final rule. First, no change is reflected in this final rule concerning WIC certification periods. All participants, including those determined adjunctively income eligible or income eligible under the State option set forth in newly designated Sec. 246.7(d)(2)(vi)(B) would be subject to the certification periods set forth in newly designated Sec. 246.7(g)(1), except in those cases where State policy permits shorter certification periods in certain circumstances, as permitted in newly designated Sec. 246.7(g)(1)(v). Secondly, newly designated Sec. 246.7(h)(1) has been revised with regard to mid-certification disqualification action. State agencies shall continue to ensure that local agencies disqualify an individual during a certification period if, on the basis of a reassessment of WIC eligibility, the individual is determined ineligible. In addition, newly designated paragraph (h)(1) has been revised to clarify the procedures to be followed in the case of participants who at the time of certification were determined adjunctively income eligible (or income eligible under the State option) for WIC. As set forth in this paragraph, an individual determined adjunctively income eligible or eligible under the State option, shall not be disqualified mid- certification solely on the basis of a determination that they (or where applicable for adjunct eligibility purpose, a member of their family) are no longer certified as eligible to participate in AFDC, Medicaid, Food Stamps, or another qualified State-administered program (as permitted in Sec. 246.7(d)(2)(vi)(B)). As discussed above, such participants or a family member or members may no longer be certified as eligible to participate in any one of these programs for reasons entirely unrelated to their income status. In addition, while the WIC participant may have been determined adjunctively income eligible for WIC due to certified eligibility for Medicaid but may have been recently terminated from the Medicaid Program, such an individual could be certified as eligible to participate in AFDC and/or Food Stamps. Therefore, such an individual would continue to be classified as an adjunct income eligible WIC participant and would not be disqualified mid-certification. Therefore, as set forth in paragraph (h)(1) of this final rule, State agencies are required to ensure that local agencies disqualify such an individual during a certification period if, on the basis of a reassessment of Program eligibility he/she is no longer deemed adjunctively income eligible (or income eligible under the State option), and after utilizing standard income screening procedures employed for other WIC applicants, such an individual does not meet income criteria. Any mid-certification reassessment of an adjunct income eligible participant must first involve a determination of whether the individual (1) is certified as eligible to participate in at least one of the programs which triggers adjunct income eligibility or (2) is a member of a family which contains an individual certified as eligible to receive AFDC or a pregnant woman or an infant is certified as eligible to receive Medicaid or (3) is participating in a qualified State-administered program, if the State agency has chosen to implement this option. If none of the conditions exist, the reassessment process would proceed with the usual income screening procedures used for individuals not adjunctively income eligible for the Program. If, utilizing these procedures, the individual is no longer income eligible, he/she must be disqualified or terminated from the program mid-certification. Such procedures ensure equal treatment of any WIC participant if his/her eligibility is reassessed mid- certification. The distinction in this final rule is that the process used to reassess an adjunctively income eligible participant must be approached differently in order to ensure an equitable determination of continued eligibility. Just as there is not a requirement for reporting income changes during the certification period, adjunctively income eligible participants are not required to report changes in their status which may effect the basis for their eligibility during the certification period. 4. State Plan Requirements (Sec. 246.4(a)) a. Enhanced outreach. In recognition of the importance of enrolling women in WIC as early in their pregnancy as possible, section 123(a)(4)(A)(ii) of Public Law 101-147 amends section 17(f)(1)(C)(vii) of the CNA of 1966 to require that the State agency's outreach plan include ``emphasis on reaching and enrolling eligible women in the early months of pregnancy, including provisions to reach and enroll eligible migrants.'' This legislation adds an emphasis on outreach and also specifically refers to migrants as a target population. Therefore, the Department proposed to revise Sec. 246.4(a)(7) of the regulations to require a description in the State plan of how the State intends to emphasize contacting and enrolling eligible women in the early months of pregnancy and migrants through its outreach efforts. One commenter responded to this proposal by recommending additional resources be provided State agencies to reach potentially eligible migrants. This final rule retains the provision as proposed. In response to the commenter's recommendation, the Department notes that through the overall increases in the amount of NSA funding provided to State agencies as a result of increases in program funds appropriated by Congress and the increased percentage of the appropriation which is allocated as NSA funds as a result of Public Law 101-147, State agencies will receive more NSA funds to carry out the activities required by this provision to reach and enroll migrants. b. Plans to promote breastfeeding. Section 123(a)(4)(A)(i) of Public Law 101-147 amends section 17(f)(1)(C)(iii) of the CNA of 1966 to require that State plans include a plan to coordinate WIC operations with ``local programs for breastfeeding promotion.'' Because coordination between WIC and other programs is already covered in Sec. 246.4(a)(8) of program regulations, the Department proposed to modify this paragraph to include breastfeeding promotion. Further, section 123(a)(4)(A)(iv) of Public Law 101-147 amends section 17(f)(1)(C)(xi) of the CNA of 1966 to require that the State agency describe in its State plan the manner in which it intends to provide nutrition education ``and promote breastfeeding.'' Nutrition education goals and action plans are currently addressed in Sec. 246.4(a)(9). Therefore, the Department proposed in its rulemaking to revise Sec. 246.4(a)(9) of the WIC regulations to include, as part of the State's description of its nutrition education goals and action plans, a description of the methods that would be used to promote breastfeeding. No comments were received on these proposed provisions. Therefore, this final rule retains the provision as proposed. WIC Program regulations (Sec. 246.11(e)(1)) have long required State and local agencies to encourage all pregnant participants to breastfeed unless contraindicated for health reasons. The breastfeeding promotion and support provisions of Public Law 101-147 therefore serve to reinforce and intensify efforts by WIC Program staff to encourage breastfeeding. c. WIC benefits for foster children. Section 123(a)(4)(A)(ii) of Public Law 101-147 added a new paragraph (viii) to section 17(f)(1)(C) of the CNA of 1966, requiring State agencies to describe in their State plans how they will provide program benefits ``to infants and children under the care of foster parents, protective services, or child welfare authorities, including infants exposed to drugs perinatally.'' Accordingly, the Department proposed to add a new Sec. 246.4(a)(20) to the WIC regulations to incorporate this legislative mandate. The majority of commenters addressing this issue approved the provision, as proposed, but suggested modifications. One commenter recommended that the Department develop a method of allowing WIC staff access to such a child's medical records in order to determine nutritional risk. Another commenter recommended that the Department require Federally-funded State child social service programs to coordinate with WIC. While the Department is currently involved in coordination efforts with numerous Federal health and social service programs, we would encourage State agencies to initiate discussions with their State counterparts administering such programs in order to bring about the suggested actions and coordination efforts within the State. With regard to both recommendations, we would encourage State agencies to enter into written agreements with health and welfare programs serving foster children, as provided in Sec. 246.26(d) of the WIC regulations pertaining to confidentiality. Such written agreements provide an effective mechanism to encourage coordination of services and the sharing of information for eligibility and outreach purposes. Because these comments do not necessitate changes in the provision as proposed, the Department is adopting it without changes. In explaining the provision, Senator Leahy noted (Congressional Record, August 3, 1989, S10021-2) that Congress intended that implementation of this provision would entail State or local WIC agencies contacting foster care and protective service agencies and providing them with written information about the WIC Program. It would then be up to the foster care and protective service agencies to make this information available to their clients. In regard to a clarification requested by a commenter, this outreach effort and provision of WIC materials would include agencies serving foster children in group settings. Because such group settings would be considered only temporary arrangements, they would fall under the very broad definition of homeless facilities used in the WIC Program. As such, this clarification of policy was recently issued by the Department as guidance to States in implementing the final homeless regulations published in the Federal Register on August 5, 1992 (57 FR 34500). d. Improved access for employed persons and rural-area residents. Most local WIC clinics are located where WIC participants are concentrated within their service delivery areas, and are organized to take and process WIC applications during ``normal'' business hours. This may pose problems for WIC applicants and participants who are employed and cannot always take time off from their jobs long enough to complete the application/certification process or participate in nutrition education activities, and for applicants and participants who reside in rural areas which may be a considerable distance away from the nearest WIC local agency or clinic. Similar problems are encountered by these two groups of participants when they need to make subsequent trips to the local WIC office to pick up their food instruments. Section 123(a)(4)(A)(iv) of Public Law 101-147 focuses attention on this issue by adding a new section 17(f)(1)(C)(x) to the CNA of 1966 requiring State agencies to describe in their State plans how they will ``improve access to the program for participants and prospective applicants who are employed, or who reside in rural areas, by addressing their special needs through the adoption or revision of procedures and practices to minimize the time participants and applicants must spend away from work and the distances that participants and applicants must travel, including appointment scheduling, adjustment of clinic hours, clinic locations, or mailing of multiple vouchers.'' Therefore, a new Sec. 246.4(a)(21) was proposed by the Department with the intent to reiterate this legislative mandate. Of those commenters addressing this issue, the majority either opposed the provision or approved the provision but expressed some concerns. Some commenters expressed concern with staffing the clinic for late hours, and in one commenter's opinion such action would place too much demand on local agencies to change clinic hours which could result in clinic closings. Several commenters noted that additional funds would be needed to hire additional staff and provide clinic security for extended or after-hours operation. It should be noted that this State plan requirement addressing improved program access for employed applicants and residents of rural areas is flexible. As proposed, the Department inadvertently used language in the regulatory text which implied that a State's plan to improve program access for employed individuals or individuals who reside in rural areas must include appointment scheduling, adjustment of clinic hours and/or locations and alternate means of delivery of benefits. This inadvertent error may have generated the concerns raised by commenters. As noted above, the legislative language did not specify that all of these procedures must be implemented, but rather cited several examples of procedures which might be implemented. In other words, a State agency may choose to implement procedures to adjust clinic hours and/or locations, but may prefer not to implement alternative procedures for delivery of benefits, such as mailing vouchers. The intent of this legislative provision is to ensure State agencies take some action to recognize and accommodate the special needs of employed persons and those living in rural areas. Therefore, the proposed Sec. 246.4(a)(21) has been modified to clarify that at least one of the procedures/practices contained in this paragraph must be implemented, but that each State agency has the option of choosing which one. State agencies are encouraged, but not required, to implement more than one of these procedures/practices. In addition, this provision has been revised to incorporate the legislative requirement, as discussed below in Section 6.d. of the preamble, that each State agency must adopt policies to require local agencies to schedule appointments for adult individuals applying or reapplying for the WIC Program for themselves or on behalf of others who are employed, if the local agencies do not currently do so. While several commenters raised valid security and staffing concerns with adjusting clinic hours, there are alternatives available that achieve the goal of improved Program access without significant resource or security implications. For example, if extended evening hours are not feasible in all local agencies, the agencies might consider closing clinic offices early one day during the week and providing Saturday morning clinic hours. Local agencies might also provide ``early-bird'' morning services. In this way, both the security and staffing issues may have a minimal impact on the feasibility of implementing this procedure. Another option is to establish smaller satellite facilities that are open a half day to one day a week for purposes of certification and food instrument issuance that rotate throughout the local agency's ``catchment area'' in which hard to reach participants live. e. Conforming state plan amendments and related provisions. The proposed rule contained amendments to conform WIC Program regulations to ensure compliance with certain existing, Department-wide or government-wide requirements of general applicability. The first of these are the conforming amendments to State Plan requirements contained in Secs. 246.24(a) (22) and (23). They concern the Department's requirements, set-forth in 7 CFR part 3017, on debarment and suspension and maintenance of a drug-free workplace. In addition, Sec. 246.6(b), which contains the requirements for agreements entered by the State agency with local agencies, was amended in the proposed rule to reflect the debarment and suspension provisions in 7 CFR part 3017. This final rule further amends it to incorporate by reference any applicable restrictions on the use of Federal funds for lobbying which are contained at 7 CFR part 3018. The substance of these provisions is more fully discussed in section 20 of this preamble. In addition, as discussed in section 10 of this preamble, Public Law 101-147, as set forth in the Department's proposed rulemaking and these final regulations (Sec. 246.12(r)(8)), authorizes State agencies to issue food instruments to participants through means other than direct participant pick-up. As set forth in this final rule in Sec. 246.4(a)(21), a State agency which chooses to issue food instruments through alternative means must include a description of this system in its State Plan and describe measures to ensure the integrity of program services, such as nutrition education and health care/social services linkages, and fiscal accountability. In addition, as required by Sec. 246.12(r)(8) of this final rule, if a State agency opts to mail WIC food instruments, it must provide justification, in the description of the alternative issuance system in its State Plan, for mailing WIC food instruments to areas where food stamps are not mailed. 5. Outreach/Certification in Hospitals (Sec. 246.6(f)) A number of local agencies operate the WIC Program within a hospital, or have cooperative arrangements with an area hospital to certify WIC applicants. Such arrangements enable eligible newborn infants to begin receiving WIC benefits from the earliest possible date, and facilitate enrollment of at-risk mothers who may not have been eligible during pregnancy immediately after the birth of their child. Section 123(a)(4)(B) of Public Law 101-147 builds upon existing local agency/hospital WIC relationships by adding a new section 17(f)(8)(D) to the CNA of 1966 to require each local agency which either operates a WIC Program within a hospital or has a cooperative arrangement with one or more hospitals to ``advise potentially eligible individuals that receive inpatient or outpatient prenatal, maternity, or postpartum services, or accompany a child under the age of 5 who receives well-child services, of the availability of Program benefits.'' The legislation also requires that local agencies, ``to the extent feasible, provide an opportunity for individuals who may be eligible to be certified within the hospital for participation in the program.'' The Department proposed to add a new paragraph (f) to Sec. 246.6 to state that a local agency which has such an arrangement with a hospital would be required to enter into a written agreement with the hospital incorporating the provisions of the legislative mandate. This agreement would, in turn, be appended to the State agency's agreement with the local agency. No requirement exists for local WIC agencies which do not operate the program in a hospital or through a cooperative agreement with a hospital to establish such an arrangement. An overwhelming majority of commenters opposed the provision as proposed. The main concern expressed by commenters was the Department's proposal that local agencies enter into written agreements with hospitals. Several commenters indicated that such an agreement could potentially jeopardize existing arrangements and cooperative efforts local agencies have established with many hospitals and would be unnecessarily prescriptive. Based on commenters' concerns, the Department has deleted in this final rule the requirement that local agencies enter into written agreements with hospitals. The remainder of Sec. 246.6(f) is adopted as proposed. As set forth in this paragraph, the State agency is required to ensure that each local agency operating the program within a hospital and/or that has a cooperative arrangement with a hospital advises potentially eligible individuals that receive inpatient or outpatient prenatal, maternity, or postpartum services, or that accompany a child under the age of 5 who receives well-child services, of the availability of program services. In addition, to the extent feasible, individuals who may be eligible to be certified for WIC within the hospital should be provided such an opportunity. 6. Program Referral and Access (Sec. 246.7(b)) In response to mandates of Public Law 101-147 which place increased emphasis on improving access to the WIC Program and referrals to other health-related or public assistance programs, the Department proposed to add a new paragraph (b) to Sec. 246.7. The specific proposed requirements regarding improved program access and referral, including comments received and changes made in this final rule, are discussed in detail below. a. Providing written information on other programs to WIC applicants/participants. Section 123(a)(3)(D) of Public Law 101-147 adds a new section 17(e)(3)(A) to the CNA of 1966 which requires State agencies to ``ensure that written information concerning food stamps, the program for aid to families with dependent children under part A of title IV of the Social Security Act, and the child support enforcement program under part D of title IV of the Social Security Act is provided on at least 1 occasion to each adult participant in and each applicant for the program.'' The Department proposed to implement this requirement by adding a new subparagraph (1) in newly designated Sec. 246.7(b). While the majority of commenters approved the provision as proposed, many of these commenters recommended various changes to the regulatory text or questioned the intent of the provision as discussed in the preamble to the proposed rule. First, several commenters recommended that such information be provided to one adult member in any family as opposed to ``each adult participant in and each applicant for the program.'' Commenters noted that as proposed, the requirement could result in multiple copies of the same materials being provided to different household members, including children, in the same family. One commenter recommended the provision of materials be extended to adult caretakers. Secondly, several commenters recommended such information be provided to applicants and participants ``on at least one occasion'' as required by law and not once each certification period as noted in the proposed preamble. Based on commenters' concerns, Sec. 246.7(b)(1) has been modified to require State agencies to ensure that written information concerning the Food Stamp, Aid to Families with Dependent Children and the Child Support Enforcement Programs is provided on at least one occasion to ``adult participants and adult individuals applying for the WIC Program for themselves or on behalf of others.'' Because Congress did not intend this provision to result in an inordinate administrative burden, the Department believes that providing one adult member or caretaker of a household with the required information is sufficient and meets the intent of Congress. In addition, while the proposed rule did not specifically define the phrase ``on at least one occasion,'' the Department suggested in the preamble that the requirement should mean at each certification or recertification. However, based on commenters' concerns that this suggestion went beyond the intent of Congress, the Department wishes to make clear that State agencies have the flexibility to define what ``on at least one occasion'' means. It may be defined as only at the initial application or at each application or reapplication. Since these comments arose only in connection with the proposed preamble, this portion of Sec. 246.7(b)(1) is being adopted as proposed. State agencies may find that a routine distribution at every application is actually administratively easier or less burdensome than distribution only at initial application. Also, household circumstances can change dramatically in a 6-month period. For example, some applicants and participants who received the information at the initial WIC application visit may not have contacted one of these programs because they felt their circumstances at that point in time did not necessitate seeking other types of assistance. However, 6 months later at a subsequent WIC application visit, the family's circumstances may warrant contacting other assistance programs. Therefore, the availability of such program information at the reapplication visit would assist the family in seeking additional services. Further, a program's requirements can change from year to year, in which case WIC applicants and participants should be apprised or updated regarding these changes. While the State agency must require local agencies to provide this information on one occasion, it should consider such factors when determining if more frequent distribution is appropriate. In addition, a statement of explanation agreed on by the House and Senate to accompany H.R. 24 makes it clear that this requirement can be satisfied by providing a fact sheet which contains basic information about these programs and the addresses and phone numbers of local offices where low-income families can apply (Congressional Record, October 10, 1989, H6863). Further, WIC agencies are not required to document in each WIC participant's or applicant's file that the fact sheet was provided, as this would unnecessarily increase paperwork burdens for local WIC agency staff. Finally, it is not the intent of this provision to require WIC agencies to develop and create fact sheets on other assistance programs. WIC State and/or local agencies are encouraged to consult with their State and/or local counterparts administering the Food Stamp, AFDC and Child Support Enforcement Programs to ascertain the existence and availability of program fact sheets for dissemination in WIC clinics. State and/or local agencies may simply need to duplicate copies of a fact sheet or materials developed by another assistance program. The Department wishes to reiterate that this final rule attempts to minimize the administrative and paperwork burden associated with providing information to Program applicants concerning the Food Stamp, AFDC, Medicaid, and Child Support Enforcement Programs. However, the Department believes very strongly that WIC's role in providing referrals to other health and social service programs is critical to WIC's mission to promote and protect the health and well-being of at- risk women, infants, and children. Therefore, the Department fully expects State and local agencies to aggressively promote and pursue appropriate referrals on behalf of their clients and, as appropriate, institute measures to determine whether clients have in fact made contact with other service providers. b. Referrals to Medicaid. Section 123(a)(3)(D) of Public Law 101- 147 adds a new section 17(e)(3)(B) to the CNA of 1966 requiring State agencies to ``provide each local WIC agency with materials showing the maximum income limits, according to family size, applicable to pregnant women, infants, and children up to age 5 under the medical assistance program established under title XIX of the Social Security Act (in this section referred to as the `medicaid program').'' In addition, a new section 17(e)(3)(C) is added to the CNA by the same section of Public Law 101-147 to require that local agencies, in turn, ``provide to individuals applying for the program under this section, or reapplying at the end of their certification period, written information about the Medicaid program and referral to such program or to agencies authorized to determine presumptive eligibility for such program, if such individuals are not participating in such program and appear to have family income below the applicable maximum income limits for the program.'' In the proposed rule, the Medicaid referral provisions were addressed by adding a new subparagraph (2) to newly designated Sec. 246.7(b). The majority of commenters approved the provision as proposed. Therefore, the proposed rule is adopted with two minor clarifications the Department feels are needed. First, this final rule clarifies in the regulatory text that information about the Medicaid Program must be provided to ``adult individuals applying and reapplying for the WIC Program for themselves or on behalf of others.'' This clarification is intended to ensure that duplicative materials are not provided to multiple family members applying for the program, which the Department believes was not intended by Congress. This is also consistent with the revision made in this final rule to newly designated Sec. 246.7(b)(1) regarding the provision of written information on the Food Stamp, AFDC and Child Support Enforcement Programs. State and local agencies should note, however, that Congress specified in the law that information on the Medicaid Program must be provided to individuals at the time of application and reapplication. In addition, the joint statement of explanation accompanying H.R. 24 further supports this requirement by directing State agencies to provide local agencies with ``the information necessary to conduct such referrals, including * * * the appropriate agency where the participant or applicant could apply for Medicaid'' (Congressional Record, October 10, 1989, H6863). Thus, this final rule retains reference to providing this information to those both applying and reapplying to the WIC Program. Second, the proposed regulatory language has been revised to clarify that referrals to the Medicaid Program include the referral of infants and children to the appropriate agency in the area authorized to determine eligibility for early and periodic screening, diagnostic, and treatment (EPSDT) services. EPSDT services are authorized under title XIX of the Social Security Act and are a component of and provided under the Medicaid Program. In addition, the proposed requirement has been revised to clarify that it includes the referral of pregnant women to the appropriate entity in the area authorized to determine presumptive eligibility for the Medicaid Program, if the State has chosen to make such determinations. As mentioned previously, based on current data, approximately 30 States have opted to provide presumptive eligibility determinations under the Medicaid Program. Several clarifications are necessary regarding this requirement since it was misunderstood by some commenters. First, the requirement to refer individuals to the Medicaid Program applies only to individuals seeking WIC benefits who do not currently participate in the Medicaid Program. Therefore, the effects of implementing this provision could be minimal if a large majority of WIC applicants and participants already participate in the Medicaid Program. Second, while Medicaid eligibility is based on various factors, including citizenship and alien status, it is not the intent of this provision that WIC local agency staff become experts in Medicaid eligibility and screen WIC applicants based on various Medicaid eligibility factors, including for example, whether such individuals are U.S. citizens. Such extensive screening procedures would be outside the intent and scope of this requirement and are not the responsibility of WIC local agencies in implementing this provision. As reflected in this requirement, the determination by local clinic staff of whether to refer an individual to Medicaid would entail a comparison of the family income, as determined for WIC income eligibility purposes, to the State Medicaid Program's maximum income limits according to family size, supplied by the WIC State agency to its local agencies. One factor which local clinic staff need to consider, however, in performing this comparison is that Medicaid by law counts a pregnant woman as if the child were born and living with her, whereas by law the WIC Program does not count the child. For example, a pregnant woman applies for WIC benefits and her family size, which includes herself and her spouse, is a two-person household for WIC income eligibility purposes. In performing the comparison of this family's potential Medicaid eligibility, this household's income should be compared to a family size of three persons on the State's Medicaid income eligibility scale. Further, as indicated by Congress, it is not the intent that such referrals to Medicaid by local WIC agencies be documented in each individual's WIC file. Moreover, as indicated above in Section 6.a. of this preamble, the requirement to provide Medicaid information can be met by use of a simple fact sheet, and it is not the intent of this provision to require WIC agencies to develop and create a fact sheet on the Medicaid Program. WIC State and/or local agencies are encouraged to consult with their State and/or local Medicaid counterparts to determine the existence and availability of program fact sheets for dissemination in WIC clinics. State and/or local agencies may simply need to duplicate copies of a fact sheet or materials developed by the State's Medicaid Program. Although Congress envisioned minimal administrative burden on State and local agencies in providing applicants/participants with information about other assistance programs, the Department believes, as stated above, that the referral of WIC applicants and participants to other health and welfare programs is a vital WIC function and critical to the WIC Program's mission to promote and protect the health and well-being of at-risk women, infants, and children. c. Referrals to other food assistance programs when WIC is fully enrolled. Section 123(a)(4)(F) of Public Law 101-147 adds a new paragraph 17(f)(19) to the CNA of 1966 which requires each local agency to ``provide information about other potential sources of food assistance in the local area to individuals who apply in person to participate in the program under this section, but who cannot be served because the program is operating at capacity in the local area.'' The Department proposed to incorporate this legislative mandate in the WIC regulations by adding a new subparagraph (3) to newly designated Sec. 246.7(b) of the regulations. No comments were received on this specific requirement, and the Department is retaining this provision with one minor change to clarify that the information need only be provided to adults who apply or reapply for themselves or on behalf of others. This eliminates duplicative and unnecessary distribution of this information to infants or children. If individuals cannot be served because the program is operating at capacity in the local area, local agencies shall provide to individuals applying or reapplying for the program for themselves, or on behalf of others, information about other potential sources of food assistance in the local area. Such potential sources of food assistance would include, but are not limited to, food banks, food pantries, and soup kitchens which provide emergency or immediate food assistance, as well as more structured food assistance programs such as the Food Stamp Program, the Commodity Supplemental Food Program where available, the Emergency Food Assistance Program, and/or the Food Distribution Program on Indian Reservations (FDPIR), as appropriate. Information and referrals provided under this section need not be documented in participant files. d. Scheduled appointments for employed participants and applicants. Most local agencies utilize an appointment system for the WIC application/certification process. However, in some local agencies, particularly the smaller ones, persons wishing to apply for WIC are seen on a first-come, first-served basis. This type of intake system creates a particular hardship for the employed applicant or participant who must take time off from work in order to be certified for WIC, and may be required to wait a long time for service at the clinic if a number of clients are in line ahead of her. In order to facilitate participation of working families in WIC, section 123(a)(4)(F) of Public Law 101-147 adds a new Section 17(f)(20)(B) to the CNA of 1966 requiring local agencies that do not routinely schedule certification appointments to ``schedule appointments for each employed individual seeking to apply or be recertified for participation in such program so as to minimize the time each such individual is absent from the workplace due to such application or request for recertification.'' Therefore, the Department proposed to incorporate the requirement that local agencies schedule appointments for employed WIC applicants/ participants through the addition of a new Sec. 246.7(b)(4). The majority of commenters supported the provision as proposed. This final rule retains the requirement as proposed, but clarifies, consistent with the preceding referral provisions, that this requirement applies to adult applicants seeking to apply or reapply for themselves or on behalf of others. 7. Contacting Pregnant Women Who Miss Certification Appointments (Sec. 246.7(b)(5)) Section 123(a)(4)(F) of Public Law 101-147 adds a new section 17(f)(20)(A) to the CNA of 1966 requiring the State agency to adopt a policy that would ``require each local agency to attempt to contact each pregnant woman who misses an appointment to apply for participation in the program, in order to reschedule the appointment, unless the phone number and the address of the woman are unavailable to such local agency.'' The statement of explanation agreed upon by the House and Senate which accompanied H.R. 24 provides specific guidance regarding how this mandate should be implemented. First, Congress did not envision that compliance would entail ``elaborate efforts'' by the local agency; rather, ``a brief phone call or the mailing of a post card would suffice'' (Congressional Record, October 10, 1989, H6863). Second, although the legislation does not require that an effort be made to contact the pregnant woman who has missed an appointment if the local agency lacks her address and phone number, Congress expressed the view that ``local agencies should get her phone number (and/or the address) when a pregnant woman makes an appointment. This should become a routine part of making appointments for pregnant women, * * * (if it) * * * is not already'' (Congressional Record, October 10, 1989, H6863). The Department believes that this is, in fact, standard practice at most local agencies. In commenting on this provision at the time S. 1484 was introduced, Senator Leahy indicated that it ``applies at the initial certification interview only. It does not apply to missed appointments for picking up WIC vouchers or to missed appointments at recertification'' (Congressional Record, August 3, 1989, S10018). Pursuant to the direction of Congress that follow-up contacts be made, but that the process not be labor-intensive (Congressional Record, October 10, 1989, H6863), the Department proposed to add a new paragraph (b)(5) in Sec. 246.7 which required each local agency to contact each pregnant woman who misses her first appointment to apply for participation in the Program in order to reschedule the appointment. In addition, the Department proposed that each local agency, at the time of initial contact, would be required to request an address and telephone number where the pregnant woman could be reached. Without this requirement, it would be difficult for local agencies to conduct the Congressionally mandated follow-up with pregnant women who miss their first certification appointment, and the Congressional intent of promoting early program intervention for these women would be thwarted. In addition, the Department proposed several minimum procedures to comply with the legislative requirement. First, if the applicant failed to attend her first certification appointment, the local agency would be required to attempt to contact her by telephone or mail. If she is contacted by phone, she must be offered one additional certification appointment. Second, if the applicant could not be reached by telephone and initial contact is by mail, the local agency would be required to send the applicant one card or letter requesting that the applicant contact the local agency for a second appointment. The majority of commenters supported these proposed requirements and indicated that it is essential that the program facilitate the certification of this high-risk population. Several commenters focused their concerns on the proposed minimum procedural requirements. One of these commenters indicated that follow-up calls are ineffective due to nonworking numbers, recordings, and frequent moves by some individuals, and further noted that there is no consensus such calls increase the show rate. Some commenting State agencies recommended the Department provide State and local agencies with the flexibility to determine procedurally how to implement the provision. They indicated that other types of follow-up procedures could produce more effective show rates. For example, a local agency could schedule an appointment and provide an alternate appointment in a followup postcard. Applicants would be instructed to call if the scheduled appointment was unacceptable. These commenters emphasized that local agencies should have the option to use a reminder (before the appointment) and/or follow-up system. They indicated the postcard and reminder system and calling the day before the appointment are effective procedures. While the Department must require compliance with the legislative mandate to contact pregnant women who miss their initial certification appointment, the Department does have flexibility to modify in this final rule the minimum procedural requirements to accomplish this mandate. Therefore, based on commenters' concerns, proposed paragraph (b)(5) has been modified in this final rule to only require that each local agency must attempt to contact each pregnant woman who misses her first appointment to apply for participation in the Program in order to reschedule the appointment. As noted above, Congress intends this requirement to apply at the initial certification interview only and does not apply to missed appointments for WIC voucher pick up or to missed appointments at subsequent applications. In order to facilitate such an attempt to contact these women if an initial certification appointment is missed, this final rule retains the requirement, from the proposed rule, that local agencies must request an address and telephone number of each pregnant woman at the time of the initial contact. As requested by commenters, the specific procedures for implementing this requirement have been deleted from this final rule. It is the responsibility of State and/or local agencies to determine appropriate procedures and they should be addressed in each State's procedure manual. In developing such procedures, State and/or local agencies should consider those addressed in the proposed rule, commenters' recommendations as noted above and any first-hand experiences in attempting to contact applicants in order to minimize no-show rates. As suggested by commenters, the Department also encourages, but does not require, local agencies to send out a reminder notice prior to the certification appointment, especially where there is a long lag time between the initial contact and the date of the appointment. Such a precaution could reduce the number of missed initial appointments requiring follow-up action. 8. Prior Notification to Participants for Termination Due to Funding Shortages (Sec. 246.7(h)(2)) Section 246.7(g)(2) in current regulations (redesignated Sec. 246.7(h)(2) in the proposed rulemaking) permits a State agency to discontinue program benefits to certified participants in the event that it experiences funding shortages which would warrant taking such action. Because such a step would constitute an adverse action against a participant, section 123(a)(4)(C)(ii) of Pub. L. 101-147 adds a new section 17(f)(9)(B) to the CNA of 1966 requiring State agencies in this situation to first issue a notice to affected participants identifying ``the categories of participants whose benefits are being suspended or terminated due to the shortage.'' The Department proposed to add this requirement in a new paragraph (j)(9) in Sec. 246.7. Current regulations require State agencies to provide 15 days advance notification of disqualification. To maintain consistency with the statutory language, the Department proposed that the first sentence of redesignated Sec. 246.7(j)(6) (formerly Sec. 246.7(i)(6)) be revised to indicate that 15 days advance notice must be given in cases of suspension, as well as disqualification. No comments were received on these proposed provisions. Therefore, the Department is retaining these requirements as proposed. As discussed in the proposed rule preamble, State agencies would be able to define the ``categories'' of participants to be terminated or suspended in a variety of ways, given the alternative methods available to them to achieve the necessary reduction in costs through mid- certification disqualifications. Further, as discussed in Section 6.c. of this preamble, Sec. 246.7(h)(3) of the final rule requires local agencies to provide referrals to other food assistance programs when their caseloads are full. State agencies may wish to advise their local agencies to provide similar referrals to WIC participants who are disqualified or suspended due to a funding shortage. 9. Documentation of Nutrition Education in a Master File (Sec. 246.11(e)(4)) Nutrition education has always been an integral component of the WIC Program. Any nutrition education provided to WIC participants has always been required by regulations to be documented in each WIC participant's casefile. However, many nutrition education activities, especially those directed toward children or involving considerable dialogue (such as food preparation demonstrations), lend themselves to group activities. In such cases, individual casefile documentation becomes an administrative hardship for the local agency staff. Therefore, section 213(a)(1) of Public Law 101-147 adds a new Section 17(e)(5) to the CNA of 1966 which alleviates this paperwork requirement by allowing local agencies to ``use a master file to document and monitor the provision of nutrition education services (other than the initial provision of such services) to individuals that are required, under standards prescribed by the Secretary, to be included by the agency in group nutrition education classes.'' The law applies the master file documentation option to nutritional education contacts, after the first such contact during a certification period, which are provided, per Departmental mandate, to persons in groups. However, because of the wide variety of both the nutrition education services that can be provided to WIC participants and the techniques and strategies appropriate for providing these various services, the Department does not dictate terms and conditions under which subsequent nutrition education contacts could be provided in a group setting. The Department proposed to revise Sec. 246.11(e)(4) to comply with this legislative requirement by permitting local agencies to document nutrition education contacts, except for initial contacts, in a participant master file when such contacts are provided in a group setting. Further, proposed Sec. 246.11(e)(4) provided that should a participant miss (no-show or refusal) a nutrition education appointment, the local agency is required, for purposes of monitoring and further education efforts, to document this fact in the participant's file, or, at the local agency's discretion, in a master file, in the case of a second or subsequent missed contact where the nutrition education was offered in a group setting. The majority of comments approved this provision as proposed. They indicated that this provision would help to reduce and eliminate the current paperwork burden, thus allowing more time on actual nutrition education. Therefore, this final rule retains the provision, as proposed. With regard to this requirement, State agencies may not prohibit a local agency from exercising the option to document nutrition education in a master file, as permitted in these final regulations. First, as designated by Congress in Public Law 101-147, this is a paperwork reduction burden provision. Secondly, the legislative language specifically refers to ``Each local agency * * *'' when addressing the option to use a master file. For State agencies to prohibit local agencies from exercising this option would be in direct violation of the Congressional intent of this provision. One commenter recommended the Department suggest mechanisms for effective monitoring of the provision when implemented by local agencies. The Department will address this issue in guidance materials which will be issued to assist State agencies with this task. 10. Alternatives to Participant Pick-Up for Issuance of WIC Food Instruments (Secs. 246.7(f)(2)(iv), 246.7(h)(1)(ii) and 246.12(r)(8)) Section 213(a)(2)(A)(ii) of Public Law 101-147 adds a new section 17(f)(7)(B) to the CNA of 1966 allowing States to provide for the delivery of WIC food instruments ``to any participant who is not scheduled for nutrition education counseling or a recertification interview through means, such as mailing, that do not require the participant to travel to the local agency to obtain the food instruments.'' This section of the law also requires State agencies to describe any plans for issuance of vouchers by mail in its State Plan. Further, the law states that the Department may disapprove a State plan with respect to issuance of WIC vouchers by mail ``in any specified jurisdiction or part of a jurisdiction within a State only if the Secretary finds that such issuance would pose a significant threat to the integrity of the program * * *''. By including the alternative issuance provision in Public Law 101- 147, Congress intended to broaden the authority of State agencies to deliver food benefits to participants. Problems of convenience, transportation, and accessibility to the local agency can be addressed by use of alternative means of issuance of WIC food instruments. In addition, alternative means of issuance of WIC food instruments can significantly alleviate clinic congestion and keep participants as well as applicants from having to wait for long periods of time at local agencies. Local agency staffs would also be freed by use of other issuance alternatives to spend more time on certification and nutrition education activities, including high-risk contacts. As indicated above, however, Congress did impose certain restrictions on the issuance of food instruments through alternative means. First, the method may not, in the judgment of the Department, pose a significant threat to the integrity of the program. The concept of program integrity encompasses both the quality and coordination of the full range of program services--supplemental foods, nutrition education, and health care referrals--and fiscal accountability. Congress specifically stressed the former aspect of program integrity by stipulating that food instruments may not be mailed to participants who are scheduled for a certification interview or for a nutrition education contact. Applicants must be seen when they enter the program in order to provide referrals and to ensure integration into the health care system with which WIC is coordinated. Under current WIC regulations (Sec. 246.12(r)(8)(i)-(ii)) and in accordance with guidelines established by the State agency, local agencies have had the authority to mail food instruments on a case-by- case basis to individual participants in specific circumstances which make direct pick-up infeasible, e.g., illness or imminent childbirth. State agencies have also had the authority to permit the mailing of food instruments on a local agency-wide basis in response to specific temporary conditions, e.g., inclement weather or damage to a bridge that is a critical transportation link. In such circumstances, certification appointments and nutrition education have been rescheduled and food instruments mailed. The new legislation expands the authority of States to mail food instruments. Therefore, in order to comply with the legislative mandate, the Department proposed to revise Sec. 246.12(r)(8) to expand State agency authority to implement alternative issuance systems through means other than direct pick-up, such as mailing food instruments, provided that direct pick-up must be required of participants when scheduled for nutrition education or for an appointment to determine whether participants are eligible for a second or subsequent certification period. The Department further proposed that the State agency may provide the issuance of food instruments through means, such as mailing, to specified categories of participants in specified areas. However, as proposed and per the mandate of Public Law 101-147, State agencies would be required by the new Sec. 246.4(a)(21) (discussed in Section 4.d. of this preamble) to describe in their State plans any alternative food instrument distribution policies and systems. Further, for conformity, the reference to Sec. 246.12(r)(8)(i) and (ii) in Sec. 246.7(f)(2)(iv) was proposed to be changed to Sec. 246.12(r)(8). Use of an alternative means of issuance, such as mailing food instruments, in no way reduces the State and local agency's responsibility to ensure accountability for issuance and receipt of food instruments, as required by Sec. 246.12(l) of current regulations. Therefore, this was an issue which was addressed by the Department in the preamble to its proposed rulemaking. The Department indicated that State agencies which opted to distribute food instruments by mail would be expected to ensure that the food instruments do, in fact, reach the intended persons. In order to monitor non-participation, the State agency instead would need to trace food instruments not redeemed back to participant files. Therefore, the Department proposed to revise Sec. 246.7(h)(1)(ii) to specify that non-redemption of food instruments for a number of consecutive months would be a basis for disqualification. Mailing by certified mail, return receipt requested, was a method identified in the preamble to the proposed rule that should be considered by State agencies to ensure accountability for issuance and receipt of food instruments by participants. Commenters were asked, in response to the proposed rule, to suggest other means of ensuring accountability in alternate issuance systems which could be shared as guidance to State and local agencies in the preamble to the final rule. The majority of commenters overwhelmingly opposed the proposed provision in Sec. 246.7(h)(1)(ii) whereby participants could be disqualified for failure to redeem food instruments for a number of consecutive months if such instruments were provided by the State agency by means other than direct pick-up. Commenters viewed this requirement as creating an undue administrative burden on State and local agencies to track unredeemed food instruments in such cases. In addition, commenters indicated that such a requirement was not feasible given the timeframe which exists before data are available to State agencies on non-redemption. Commenters also indicated that the provision, as proposed, created a different requirement for WIC food instruments mailed versus those instruments picked up at the clinic. Several commenters noted that if a State agency can ensure delivery, there is no need to require the tracking of redemption data for such participants. With regard to the proposed revision to Sec. 246.12(r)(8), which provides State agencies with the option to implement alternative means of delivery of WIC food instruments other than by means of direct pick- up, the majority of commenters approved the provision but offered comments regarding their experiences with mailing of food instruments or recommendations on the method which should be used to mail the food instruments to participants. Those supporting the provision indicated that implementation of this option would reduce transportation and accessibility barriers to WIC services. Of those approving the provision but suggesting modifications, one commenter recommended that State agencies be given discretion in procedural implementation, and another commenter recommended the Department delete the reference to mailing food instruments to ``specified categories of participants in specified areas'' because this created limitations on a State agency's implementation of the provision. One commenter viewed the proposed preamble discussion as contradictory and recommended the Department clarify the relationship between this new provision and policy which has been in existence regarding the circumstances in which food instruments may be mailed. The majority of commenters responded to the request in the preamble to the proposed rule for suggestions of methods State agencies may want to consider in the mailing of food instruments to ensure accountability and receipt of the food instruments by participants. Several commenters recommended that food instruments should not be sent certified mail due to the expense. They recommended that food instruments mailed should be sent first class, but that the following phrase should be added on the envelope: ``Do Not Forward, Return to Sender'' or ``Do Not Forward, Address Correction Requested.'' One commenter recommended that for security purposes the name of the clinic should be deleted from the return address. The Department will provide State agencies with additional guidance in this area, using experience gained and effective techniques utilized by WIC State agencies which currently mail WIC food instruments in limited circumstances and the experience and knowledge gained by States in mailing food stamps in the Food Stamp Program. Based primarily on comments received on Sec. 246.12(r)(8) of the proposed rulemaking, the Department has made the following changes in this final rule. First, based on comments received on the Department's proposed revision to Sec. 246.7(h)(1)(ii) regarding mid-certification disqualification for failure of participants to redeem mailed food instruments for a specified number of consecutive months, the Department has modified this requirement in this final rule. The intent of the proposed revision was to establish a mid-certification disqualification policy for participants mailed food instruments which would be comparable to disqualification due to failure on the part of participants to pick up their WIC food instruments. Therefore, in this final rule, Sec. 246.7(h)(1)(ii) has been revised to state that a participant may be disqualified mid-certification for failure to obtain food instruments or supplemental foods for a number of consecutive months, as specified by the State agency, evidenced by indicators such as failure to pick up supplemental foods or food instruments, nonreceipt of food instruments as evidence by return of mailed instruments, or failure to have an electronic benefit transfer (EBT) card revalidated to authorize the purchase of supplemental foods. As set forth in this final rule, this requirement ensures similar treatment of all participants, regardless of the method in which they may receive or obtain authorization to purchase supplemental foods, including the mailing of food instruments or use of an EBT system as alternative issuance systems. Second, for clarification purposes, paragraph (r)(8) has been revised to include reference to an EBT system as an example of an alternative WIC food instrument issuance system. An EBT system has been pilot-tested by one WIC State agency, who is currently in the process of developing an expanded demonstration project. Other State agencies have also shown an interest in this type of issuance system. Third, as requested by commenters, a reference in the proposed rule to what appeared to be limitations on the mailing of food instruments to only ``specified categories of participants in specified areas'' has been deleted in this final rule. Therefore, this paragraph allows State agencies the option to provide for the issuance of food instruments through an alternative means, such as EBT or mailing to any participant, except when participants are scheduled for nutrition education or for an appointment to determine whether participants are eligible for a second or subsequent certification period, unless FNS determines that such action would jeopardize the integrity of program services or program accountability. Fourth, Sec. 246.12(r)(8) has been revised to specify that if a State agency opts to mail WIC food instruments, it must provide justification, as part of the description of its alternative issuance system in its State plan, as required in Sec. 246.4(a)(21) of this final rule, for mailing WIC food instruments to areas where food stamps are not mailed. In assessing the impact on program integrity and accountability, WIC State agencies and FNS will review Food Stamp Program experience in mailing food stamps. Some States do not mail food stamps either statewide or to certain areas due to the probability of or experienced high mail issuance losses. As of Fiscal Year 1992, approximately 11 States have chosen not to implement a mail issuance system for food stamps. Some States, however, that have implemented mail issuance systems may only mail food stamps to certain areas of the State. A decision by a State not to mail food stamps could be based on, for example, the probability of or experienced high mail issuance losses, the use of an EBT system in some areas, or other reasons which may be unrelated to mail issuance losses. WIC State agencies and FNS must review such decisions on the part of States in determining if it is appropriate to mail WIC food instruments to such areas. Close coordination on this issue with State Food Stamp Program staff will be necessary. For example, WIC State agencies will need to determine whether a State has chosen not to mail food stamps or to mail only to certain areas, the reason(s) why such decision(s) were made, and if food stamps are being mailed, the dollar value of current mail issuance losses in the State's Food Stamp Program. In approving a WIC State agency's plan to mail to areas where food stamps are not mailed, FNS will not approve a plan in which all WIC participants would be mailed food instruments in an area where food stamps are not mailed due to the probability of or experienced high mail issuance losses. However, FNS may approve, for example, a State agency's plan to mail WIC food instruments in an area where food stamps are not mailed due to reasons unrelated to mail issuance losses. Fifth, in this final rule, paragraph (r)(8) further provides that State agencies which opt to mail food instruments must establish and implement a system which ensures the return of food instruments to the State or local agency if the participant no longer resides or receives mail at the address to which the food instruments were mailed. Inclusion of this requirement is intended to reflect a balance between responding to commenters' concerns that the Department permit greater flexibility in the procedural implementation of this requirement and the Department's concern, that such procedures ensure program accountability for the issuance and receipt of mailed food instruments. While some commenters viewed the tracking of unredeemed mailed food instruments as an administrative burden, good program management dictates a reconciliation of food instruments, as required in Sec. 246.12(n)(1), which includes reconciling food instruments issued to food instruments redeemed, unredeemed, lost, stolen and voided. Currently, while alternative means of issuance present certain advantages of convenience for participants and local agencies, these same advantages can be achieved through modifications of the participant pick-up system. Section 246.12(r)(7) of current regulations permits State agencies to give the participant up to a 3-month supply of food instruments at one time. Thus through this multiple-issuance strategy, States can reduce to two the number of times the participant must visit the WIC local agency during the standard 6-month certification period. The new statutory provision regarding alternative means of issuance would not change the number of personal appearances required per certification period. In any event, the Department would not recommend that State agencies reduce the participant's frequency of visits to the local agency merely for reasons of local agency convenience, independent of consideration for the quality of service to participants. In addition, a commenter requested clarification on the relationship of this new legislative provision to what has been permitted by the Department in the past in terms of mailing food instruments. In the past, mailing of food instruments was permitted only to meet specific needs on a case-by-case basis. The new provision would permit a State agency to continue their current policy of mailing food instruments on a case-by-case basis or expand its use of mailing food instruments. For example, a State agency could continue to permit a nutrition education or a certification appointment to be rescheduled if extenuating circumstances exist, e.g., illness, inclement weather, and authorize the mailing of that month's food instruments. A participant who may have been scheduled for a certification visit could be mailed food instruments due to inclement weather as long as the mailed food instruments represent no more than a one-month extension to the participant's certification period, as permitted by the current Sec. 246.7(f)(3) which is newly designated as Sec. 246.7(g)(3) in this final rule. The certification appointment (or nutrition education session) must be scheduled during the next issuance cycle and the participant must be required to pick up WIC food instruments at the time of her rescheduled visit. State agencies which decide to mail food instruments may want to consider which groups of participants (based either categories or on location) are most in need of this service and least in need of regular direct contact with WIC staff. For example, mailing might be appropriate for lower risk participants in a sparsely populated rural area where they must travel great distances to reach their WIC clinic, and for working families. Mailing might be less appropriate for pregnant women, for whom regular interface with clinic staff--and the health care system which may be on WIC clinic premises--can contribute significantly to positive pregnancy outcomes. In the final analysis, State agencies must weigh the benefits of participant convenience and reduced administrative burden against the benefit of frequent contact with participants and the goal of balanced, coordinated delivery of services, which is facilitated through such contact. Furthermore, the State agency will need to assess which local agency service area(s) are more appropriate locations for mailing of food instruments. It is not likely to be appropriate, given numerous factors which must be considered, including program integrity and accountability, for a State agency to establish a policy of mailing food instruments to all participants statewide. The Department will carefully scrutinize plans for alternative issuance of food instruments through the State plan review process and monitor the effects of implementation during management evaluations in order to ensure that alternative issuance systems do not jeopardize the quality of program services or fiscal accountability. As discussed in Section 4.d. of this preamble, State agencies opting to implement an alternative WIC food instrument issuance system must describe this system in its State plan, as required by Public Law 101-147 and addressed in Secs. 246.4(a)(21) and 246.12(r)(8) of this final rule. 11. Nutrition Services and Breastfeeding Promotion (Secs. 246.14(c)(1) and 246.16(b)(2)) This final rule revises Program regulations to incorporate certain non-discretionary funding requirements of Public Law 101-147, which are described below. Although not previously proposed, this final rule incorporates these non-discretionary changes in Secs. 246.14(c)(1) and 246.16(b)(2). Prior to the enactment of Public Law 101-147, section 17(h)(1) of the CNA of 1966 required that not less than one-sixth of the funds expended by each State agency for NSA costs be used for nutrition education activities, but there was no requirement that any portion of this amount be used specifically for promotion and support of breastfeeding among WIC mothers. Section 123(a)(6) of Public Law 101- 147 recognizes the importance of breastfeeding by creating a new section 17(h)(3)(A)(i)(II) of the CNA of 1966. This new section earmarks $8 million in State agency NSA grants for the promotion and support of breastfeeding among WIC mothers. The mandated utilization of this $8 million, and its relationship to the existing one-sixth NSA requirement are described below. The earmarked $8 million is the amount of NSA funds that, at a minimum, must be expended to support and promote breastfeeding. These funds are intended to be used to promote increases in the number of breastfeeding mothers and the length of time that these mothers breastfeed. As noted above in this preamble in section 2.f., breastfeeding aids are allowable administrative expenses, as set forth in Sec. 246.14(c)(10) of this final rule. In addition, this final rule revises Sec. 246.14(c)(1) to specify that in addition to the cost of nutrition education, the cost of breastfeeding promotion and support activities which meet the requirements of Sec. 246.11 are allowable nutrition services and administration costs. In addition, this final rule revises Sec. 246.14(c)(1) to specify that each State agency's target share of the $8 million expenditure requirement will be determined by the State agency's average monthly number of pregnant and breastfeeding WIC participants as a percentage of the average monthly number of pregnant and breastfeeding participants in the WIC Program in all State agencies. These targets will be announced at the same time that final grants for the fiscal year are announced. As discussed further in section 16 of this preamble, in this final rule, Sec. 246.16(b)(2) has been revised to indicate that the grant levels will be issued in a timely manner. As set forth in Sec. 246.14(c)(1) of this final rule, the $8 million expenditure target for breastfeeding promotion and support provided by section 123(a)(6) of Public Law 101-147 is an augmentation of the amount of funds State agencies must spend on nutrition education and related activities as specified in newly-amended section 17(h)(3)(A)(i) of the CNA of 1966. The total spending requirement for nutrition education, including breastfeeding promotion and support, is one-sixth of the amount of NSA funds allocated to the State agency for nutrition education in general, plus the State agency's proportionate share of the $8 million targeted specifically for breastfeeding promotion support. Of this aggregate amount, the targeted amount is the minimum which must be spent on breastfeeding promotion and support. However, total spending on breastfeeding promotion and support may exceed this minimum, since funds from the one-sixth allocation may be used for additional breastfeeding promotion and support, or for other nutrition education purposes. The following is a simplified example of how NSA funds, the one- sixth spending requirement for nutrition education and related services and targeted amounts for breastfeeding promotion and support are calculated for a particular State: Total NSA Expenditures.......................................... $600 Proportionate Share of $8 Million (targeted for breastfeeding promotion and support only).................................... 10 \1/6\ Nutrition Education Requirement (may include additional breastfeeding promotion and support)........................... 100 Aggregate sum of \1/6\ and Proportionate Share (total expenditure requirement for nutrition education and breastfeeding promotion and support)........................... 110 ------- Total remaining funds for other NSA......................... 490 As allowed by section 123(a)(6) of Public Law 101-147 and as set forth in Sec. 246.14(c)(1) of this final rule, State agencies are permitted, subject to approval by the Department, to spend less than their identified breastfeeding support and promotion target amount if: (a) The State agency so requests, and (b) the request is accompanied by documentation that other resources will be used to conduct nutrition education activities at a level commensurate with the level at which such activities would be conducted if the target share amount were expended. State agencies may also request permission to spend less than the amount earmarked for nutrition education if they can, similarly, document that other resources are being used to meet the requirement. These other resources include in-kind services provided by volunteer private organizations and professionals, or other State and local personnel. Section 246.14(c)(1) has also been modified to clarify that State agencies should submit documentation of other resources to be used in lieu of NSA funds to the appropriate WIC regional office for advance approval. If a State agency does not have such documentation approved, and its nutrition education and breastfeeding promotion and support expenditures are less than the required amount of expenditures, the Department will issue a claim for the difference. 12. Funding Authorizations--Secs. 246.16(a)(1) and 246.16(a)(6) Section 123(a)(5) of Public Law 101-147 amends section 17(g)(1) of the CNA of 1966 to change the funding authorization for the WIC Program to include a specific provision that allows appropriations 1 year in advance of the beginning of the fiscal year in which the funds become available for disbursement to the States. If appropriations are enacted for a year in advance, this would enable State agencies to know total grant funds for the current fiscal year and the next fiscal year. This provision previously existed for the WIC Program and appeared in section 3 of the National School Lunch Act. It has now been specifically referenced in the WIC authorizing legislation. Therefore, this final rule revises Sec. 246.16(a) to add a new paragraph (a)(1) to incorporate this provision. Section 123(a)(5)(D) of Public Law 101-147 amends section 17(g)(5) (as redesignated by section 123(a)(5)(B)) of the CNA of 1966 to expand funding for studies and demonstration projects. It permits the Secretary to use one-half of 1 percent (not to exceed $5 million) for evaluation and demonstration purposes, which is an increase from the previous statutory limit of $3 million. Section 246.16(b)(1) of the current regulations has been redesignated as Sec. 246.16(a)(6) in this final rule and revised to address the Secretary's authority to increase the amount of funds used for studies and demonstration projects. 13. Nutrition Services and Administration (NSA) Funding-- Sec. 246.16(c)(2) Administrative costs associated with the WIC Program were formerly referred to as administrative and program services costs. Public Law 101-147 has changed the name of these costs to ``nutrition services and administration (NSA) costs''. Therefore, the definition of ``Administrative and program services costs'' in Sec. 246.2 has been removed and replaced with a definition of ``Nutrition services and administration costs.'' In addition, all other references within part 246 to ``administrative and program services'' costs or funds have been revised accordingly. During the past few years, WIC Program participation has increased substantially in States that have implemented measures to lower WIC food costs. This increase in participation, as well as additional Program requirements in areas such as drug abuse education and referral, prevention and detection of vendor abuse, improved management information systems at the State and local level, improved program access for rural areas and the working poor, improved nutrition services and more effective Program coordination, had been increasingly difficult to accomplish within existing limits on funds set for NSA. Previously, section 17(h)(1) of the CNA of 1966 mandated that 20 percent of the funds appropriated for the WIC Program (less funds used for evaluation and demonstrations) be made available for State agency and local agency costs for NSA. There has been extensive discussion and research to determine whether the 20 percent funding limitation for NSA was an appropriate level to permit State and local programs to operate the WIC Program. As mandated in section 8(c) of the Commodity Distribution Reform Act and WIC Amendments of 1987 (Pub. L. 100-237), the Department submitted to Congress in March 1989, a report entitled Study of Funding for Nutrition Services and Program Administration in the WIC Program. The report concluded that the WIC Program faced a serious erosion of per participant administrative resources due to significant participation increases. Among the solutions proposed was the establishment of a base-level NSA grant per participant with an appropriate inflation index. Public Law 101-147 amends section 17(h)(1) of the CNA of 1966 to eliminate the 20 percent limitation for NSA funding and, in lieu thereof, adopts a national guaranteed average administrative grant per person to be used in determining the amount of total funds available for NSA. As described below in a simplified example, NSA funds will now be apportioned on a per-participant basis. The amount available for NSA will be determined by the Department based on the ratio of the national guaranteed average administrative grant per person to the total projected cost per person. This ratio is derived as follows. Once the national guaranteed average administrative grant per person is calculated, the projected per participant food cost is determined based on State agency reported food expenditure and participation data. The national guaranteed average administrative grant per person is then added to the projected food cost per participant to estimate the total projected cost per person. The ratio of the NSA cost per participant to the total cost per participant can then be derived. This ratio determines the amount available for NSA. In the following simplified example, 25 percent of the appropriation would go to NSA since the guaranteed average administrative grant per person represents 25 percent of the total projected cost per person. Projected Food Cost/Person................................. $30-75% Guaranteed Admin./Person................................... $10-25% ------------ Total Projected Cost/Person............................ $40-100% Section 123(a)(6) of Public Law 101-147 also amends section 17(h)(1)(B)(ii) of the CNA of 1966 to change the method for determining the inflation adjustment for NSA funding. Previously, the same inflation adjustments were applied to both food benefit funds and NSA funds. Many State agencies argued that inflationary increases in food costs did not track with inflationary increases in salary and wage costs. In the Study of Funding for Nutrition Services and Program Administration in the WIC Program, it was shown that from Fiscal Year 1981 through Fiscal Year 1987 the average administrative expenditure per person had risen by an average of 2.3 percent per year. This rate of increase has been much lower than the 7 percent rate of inflation for salaries during the same time period. Salaries constitute one of the largest NSA costs. Approximately 70 percent of all NSA expenditures are for salaries and related benefits. As State agencies can only expend the Federal WIC funds granted to them, their expenditures could not keep pace with inflation. In recognition of these NSA expenditure trends, Congress determined that separate inflation indices were needed for food and NSA funding, which are incorporated into revised Sec. 246.16(c)(2). a. National NSA Funding. Section 123(a)(6) of Public Law 101-147 amends section 17(h)(1) of the CNA of 1966 to guarantee funds sufficient to provide a national average per participant grant for NSA. As stipulated in such amendments, Sec. 246.16(c)(2) of this final rule specifies that the national average per participant grant shall be equal to the national average per participant grant for Fiscal Year 1987, adjusted to reflect annual inflation increases. The Fiscal Year 1987 figure is $8.24. Section 17(h)(1)(B)(ii) provides that the adjustment for inflation for a current fiscal year will be made by revising the national average per participant grant for NSA for Fiscal Year 1987 to reflect the percentage change from the base year level in the index for State and local government purchases. This index is calculated using the implicit price deflator, and is published by the Bureau of Economic Analysis of the Department of Commerce. It measures the price increase of State and local government purchases including compensation for employees and purchases of structures, durable goods (such as equipment), nondurable goods (such as food, paper goods, and clothing), and services. The base year for the index, as established in section 17(h)(l)(B)(ii)(I), is the 12-month period ending June 30, 1986. It has a value of 100. The inflation adjustment shall reflect the percentage change between this base year value and the most recent estimate that is available as of the start of a current fiscal year of the value of such index for the 12-month period ending June 30 of the previous fiscal year. The difference between the most recent estimate and the base index of 100 is multiplied by $8.24 to establish a current year's national average per participant grant. In any fiscal year, any remaining funds after funds for NSA have been identified will be made available for food benefits. These requirements are also incorporated into revised Sec. 246.16(c)(2). b. Allocations to state agencies. Section 123(a)(6) of Public Law 101-147 amends section 17(h)(2)(A) of the CNA of 1966 to require that the formula for allocating NSA funding must be designed to take into account the varying needs of each State, participation levels in each State, a minimum grant amount, and other factors which promote proper, efficient and effective program administration. Section 123(a)(6) of Public Law 101-147 also amends section 17(h)(2)(A) of the CNA of 1966 to require that the funding formula must provide each State agency with an estimate of participation and a per participant grant for NSA. The NSA funding formula outlined in Sec. 246.16(c)(2) of the WIC Program regulations as revised by this final rule reflects these requirements. The Department is currently evaluating the funding formula contained in Sec. 246.16 to ensure that the formula promotes proper, efficient and effective program administration, and may undertake a future rulemaking if modifications are necessary. Public Law 101-147 also amends section 17(h)(2)(B)(i) to specify that the total NSA grant level is the operational level for NSA costs that a State agency is authorized to spend for any given fiscal year. Section 246.16(c)(2)(iv) has been added to this final rule to reflect this, as described below. 14. Nutrition Services and Administration Performance Standard-- Secs. 246.16(c)(2)(ii) and 246.16(e) A new provision mandated by section 123(a)(6) of Public Law 101- 147, which amends section 17(h)(2)(B)(ii) of the CNA of 1966, provides that the Secretary may reduce a State agency's NSA operational level if its per participant expenditure for NSA is more than 15 percent higher than its per participant NSA grant, without good cause. This will only occur in those State agencies that fail to reach the Federally- projected participation level. Guidelines for determining the Federally-projected participation level are set forth in Sec. 246.16(c)(3)(ii)(B) of the current regulations and redesignated as Sec. 246.16(c)(2)(ii)(B) by this final rule. In order to carry out revised section 17(h)(2)(B)(ii), Sec. 246.16(e)(2)(ii) is revised to provide that if a State agency's per participant expenditure exceeds its per participant grant by more than 15 percent, the Secretary shall reduce the State agency's NSA operational level in the subsequent fiscal year. In accordance with section 17(h)(2)(B)(ii) however, a State agency may avoid a reduction to its NSA operational level in the subsequent fiscal year by showing good cause. Section 246.16(c)(2)(ii) is revised by this final rule to permit a State agency to submit in writing a ``good cause'' justification for exceeding the 15 percent limit. Circumstances that may meet the ``good cause'' criterion include, but are not limited to, dramatic and unforeseen increases in food costs which result in an inability to reach Federally-projected participation levels. Section 246.16(e)(2)(ii) further requires justification for exceeding the 15 percent limit to be submitted to the Department at the time the State agency submits its closeout report for the applicable fiscal year. It should be noted that section 123(a)(6) of Public Law 101-147 amends section 17(h)(2)(B) of the CNA of 1966 to require that each State agency's operational level for NSA be maintained, except when the State agency's administrative expenditure per person exceeds its administrative grant per person by more than 15 percent without good cause. This precludes NSA grant reductions in concert with food grant reductions pursuant to a State agency's failure to meet the 95 percent standard for food expenditures contained in Sec. 246.16(e)(2) of the current regulations. Therefore, this final rule amends Sec. 246.16(e)(2)(i) to no longer require that a corresponding level of NSA funds be deducted for failure to meet the 95 percent performance standard for food expenditures. 15. Local Agency Funding--Sec. 246.16(d) Section 123(a)(6) of Public Law 101-147 amends section 17(h)(6) of the CNA of 1966 to require that State agencies develop local agency NSA funding allocation standards taking into consideration factors such as local agency staffing needs, population density, participation and the availability of administrative support from other sources. Section 246.16(d)(2) of the current WIC Program regulations already includes these funding allocation standards for local agencies. Although no changes to this section have been made in this final rule, this section is republished for the convenience of the reader. However, section 123(a)(6) of Public Law 101-147 also amends subsection 17(h) of the CNA of 1966 by adding paragraph (7) which provides that State agencies are permitted to advance NSA funds to local agencies following approval of ``(A) a new local agency; (B) a new cost containment measure; or (C) a significant change in an existing cost containment measure.'' Therefore, Sec. 246.16(d)(3) of this final rule has been revised to incorporate this legislative provision. 16. Cost Containment Cash Flow Provisions (Secs. 246.16(a)(3), 246.16(a)(4), 246.16(b)(2), 246.16(b)(3), 246.16(b)(4), and 246.16(b)(5)) In the past, some State agencies that have implemented infant formula rebate systems have experienced cash flow problems. In some rebate systems, a State agency receives payments from manufacturers based on the number of units of the product purchased with WIC funds. Cash flow problems have resulted because of the delay between the time the State agency pays retail vendors for food instruments and the time the State agency receives rebate payments from manufacturers. To help alleviate these cash flow problems, new funding mechanisms have been set forth in Public Law 101-147 for those State agencies that have implemented an approved cost-containment measure. Section 17(i) of the CNA of 1966 has been amended by section 123(a)(7)(C) by adding a new paragraph (7) which authorizes State agencies with approved cost- containment measures (defined in Sec. 246.2 as competitive bidding, rebates, home delivery and direct distribution) to temporarily borrow current fiscal year first quarter cash to defray fourth quarter expenses from the prior fiscal year. Therefore, in this final rule Sec. 246.16(b)(4) is redesignated as (b)(5) and this legislative provision has been added in a new Sec. 246.16(b)(4). As further required by section 17(i)(7), section 246.16(b)(4) requires that these borrowed funds must be restored when the State agency receives the rebate funds or other reimbursement resulting from its cost containment measure. This provision is not an extension of the back-spending authority which is a permanent transfer of funds that allows the State agency to use current year food funds to pay prior year food expenditures which is contained in section 17(i)(3)(A)(i) of the CNA of 1966 and Sec. 246.16(b)(3)(i) of the current regulations. In addition, Sec. 246.16(b)(2) has been revised to specify that the Department will issue final grant levels to State agencies in a timely manner. In a further effort to reduce cash flow difficulties within a given fiscal year due to approved cost containment measures, section 123(a)(5)(C) of Public Law 101-147 amends section 17(g) of the CNA of 1966 to require the initial allocation of appropriated funds to include not less than \1/3\ of the appropriated funds and the second and third quarter allocations to include not less than \1/4\ of appropriated funds. This helps ensure that adequate cash is available in the early part of the fiscal year to make payments to vendors while waiting for rebate payments. Therefore, in this final rule a new Sec. 246.16(a)(3) has been added to incorporate this legislative provision. Further, section 123(a)(5)(C) of Public Law 101-147 amends section 17(g)(3)(C) of the CNA of 1966 to require that in the case of an appropriation of not more than 4 months, such as a continuing resolution, all appropriated amounts shall be allocated, except amounts reserved by the Secretary to carry out the provisions in section 17(g)(5) of the CNA of 1966 (as reflected in Sec. 246.16(a)(6) of this final rule). This exception provides that one-half of 1 percent, not to exceed $5 million per fiscal year, shall be available to the Secretary for program evaluation, technical assistance to State agencies administration of pilot projects, and other specified purposes. This requirement to fully allocate all other amounts not reserved to the Secretary for these purposes is incorporated in a new Sec. 246.16(a)(4) in this final rule. It should be noted that while these provisions are helpful, they do not solve all cash flow problems. State agencies with significant rebate savings should institute management controls to avoid cash flow problems and potentially disruptive funding shortfalls, particularly at the end of the Federal fiscal year. 17. Allocation Timelines (Secs. 246.16(a)(2), 246.16(a)(4), and 246.16(a)(5)) Public Law 101-147 sets forth explicit deadlines for the allocation of WIC Program funds. It is imperative that timely allocations are made to State agencies, especially reallocation of unspent funds, to ensure efficient and effective use of all program resources. Section 123(a)(5)(C) of Public Law 101-147 amends section 17(g)(2)(A)(i) of the CNA of 1966 to provide that the initial allocation of funds to State agencies must be made within 15 days of enactment of appropriating legislation. Therefore, a new Sec. 246.16(a)(2) has been added in this final rule to incorporate this provision. Subsequent allocations must be made by the beginning of each quarter. Newly added section 17(g)(2)(B) of the law further requires that unused funds from a prior fiscal year that are identified by the end of the first quarter of the current fiscal year (December 31) must be recovered and reallocated not later than the beginning of the second quarter of the fiscal year. That provision further states that unused funds from a prior fiscal year identified after the end of the first quarter must be reallocated on a timely basis. These provisions are set forth in a new Sec. 246.16(a)(5) in this final rule. 18. Conversion of Food Funds to Nutrition Services and Administration Funds (Secs. 246.16(b)(3), 246.16(f), and 246.16(h)) Under section 8 of the Commodity Distribution Reform Act and WIC Amendments of 1987 (Pub. L. 100-237), which amended section 17(h)(5) of the CNA of 1966, State agencies that implemented one of the four designated cost containment measures, specifically defined as competitive bidding, rebates, home delivery and direct distribution, were authorized to convert food funds to cover allowable nutrition services and administration expenditures related to increased participation attributable to the resulting cost savings. The purpose of conversion was to cover additional NSA expenses not funded by the Department's NSA funding formula. The conversion authority pursuant to Public Law 100-237 was exceedingly complicated and was focused on accommodating sudden decreases in food costs resulting from newly instituted cost containment measures. Public Law 101-147 has simplified the conversion process. Section 123(a)(6) of Public Law 101-147 further amends section 17(h)(5)(A) of the CNA of 1966 to provide that State agencies which, through acceptable measures, increase participation beyond Federally-projected participation levels can convert food funds to NSA funds necessary to maintain that year's per participant grant for NSA to the extent that such funds are needed to cover allowable NSA expenses. The Department points out that unlike the prior conversion provision, new section 17(h)(5)(A) is based on participation increases accomplished through ``acceptable measures,'' not just the four designated cost containment measures. Therefore, Sec. 246.16(f) of this final rule amends Sec. 246.16(f) to provide that in addition to the cost containment measures which were specified in Public Law 100-237 (i.e. competitive bidding, rebates, direct distribution, and home delivery), ``acceptable measures'' could include, but are not necessarily limited to, curtailment of vendor abuse and increased breastfeeding promotion. It is not possible to more fully specify in advance all acceptable measures utilized to increase participation as many unforeseen situations could occur. State agencies may not convert food funds if participation increases are achieved through measures that are not in the nutritional interests of participants or are not otherwise allowable under program regulations. An example of an unacceptable measure which increases participation is a reduction/modification in the food package not related to the nutritional needs of participants. The number of participants reported by the State agency will be monitored by the Department and any significant increases in participation must be satisfactorily explained by the State agency to insure that increases were achieved through acceptable measures in compliance with WIC Program regulations. The State agency does not have to request prior approval to convert funds from food to NSA funds but State agencies are strongly advised to seek guidance from the Department if in doubt concerning conversion authority. Additionally, State agencies are encouraged to plan expenditures and anticipate the number of participants early so as not to convert food funds needed to support anticipated caseload. Any State agency which has NSA expenditures that exceed the limits of its conversion authority shall have such excess expenditures disallowed. Section 246.16(h) of this final rule describes this disallowance. As the new procedure is a straight-forward mathematical process, State agencies do not need prior Departmental approval to convert. At the end of the fiscal year, the Department will reconcile the total reported NSA expenditures to the total authorized spending level (authorized NSA grant plus allowable conversions). Allowable conversions will be determined based on the difference between the Federally-projected participation for the year and the actual number of participants served. The participation difference multiplied by the per participant grant for NSA represents the allowable conversions. As specified by section 123(a)(6) of Public Law 101-147, which amends section 17(h)(5)(A)(ii) of the CNA of 1966, the maximum rate by which food funds may be converted to NSA funds is the current year's administrative per participant grant. This final rule revises Sec. 246.16(f) to specify that the conversion will be determined after the initial allocation (excluding partial year appropriations) by dividing the current year administrative grant (inclusive of regional discretionary funds) by the current year Federally-projected participation level. Section 123(a)(7) of Public Law 101-147 also amends the CNA of 1966 regarding spend forward of unspent funds. Previously, the term ``carry forward'' was used to describe this procedure. In order to be consistent with the CNA of 1966, we use the term ``spend forward'' in this rule. Substantive modifications to the spend forward provisions are explained below. It is recognized that the process of program expansion is a gradual one which must be preceded by adequate planning and staffing adjustments, and must take place in a controlled manner consistent with sound program management. Consequently, State agencies may not be able to utilize all of the savings resulting from their food cost containment measures as fast as such savings accrue. Recognizing these factors, section 3(b) of Public Law 100-356 amended section 17(i)(3) of the CNA of 1966 to permit a State agency implementing one of the four cost containment measures identified in section 17(h)(5)(A) to spend forward into the first fiscal year following the implementation of a cost containment measure up to 5 percent of its food grant. This provision was intended to allow State agencies the time to add additional participants when a substantial amount of savings is involved. Therefore, any cost containment measure in which savings exceeded 5 percent of the State agency's food grant authorized the State agency to spend forward up to 5 percent of its food grant. In the second fiscal year following the implementation of its cost containment system, the State agency was required to request permission from the Department in order to spend forward food funds, up to a maximum of 5 percent of its food grant. The actual amount of funds spent forward-up to this 5 percent limit was negotiable and ultimately depended on Departmental discretion. In accordance with section 123(a)(7)(B) of Public Law 101-147, amending section 17(i)(3)(D) of the CNA of 1966, the 5 percent cap on the amount of food funds that may be spent forward into the second fiscal year following implementation of an approved cost containment system has been reduced to a maximum of 3 percent beginning with Fiscal Year 1989 grants. However, State agencies no longer have to request the permission of the Department to spend forward these funds. This change allows State agencies to know in advance the amount of food funds that can be spent forward which will, in turn, facilitate better planning of expenditures for the following year. The spend forward provision and the 3 percent cap requirement are set forth in revised Sec. 246.16(b)(3) of this final rule. Section 3(a) of Public Law 100-356 added subparagraph (D) to section 17(h)(5) of the CNA of 1966 to protect a State's administrative grant per participant from declining more than 2 percent per year due to increases in participation achieved through cost containment measures. Section 123(a)(6) of Public Law 101-147 eliminates the 2 percent conversion protection. Since the basis for determining the total amount of NSA funds is now directly related to expected participation levels, it is no longer necessary to protect a State agency from a sharp decrease in NSA funds related to unexpected participation increases. Therefore, reference in Sec. 246.16(h) of the current WIC regulations to the 2 percent conversion protection has been deleted in this final rule. 19. Local Agency Review Requirement (Sec. 246.19(b)(3)) Section 213(a)(2)(B) of Public Law 101-147 adds a new section 17(f)(21) to the CNA of 1966 mandating that ``each State agency shall conduct monitoring reviews of each local agency at least biennially.'' Prior to this final rule, Sec. 246.19(b)(3) of the regulations has required State agencies to review all of its local agencies annually. As explained in the July 9, 1990 proposed rule, the Department believes it is appropriate to amend Sec. 246.19(b)(3) to reduce the frequency required of local agency reviews. As proposed, the State agency would be required to review each local agency under its jurisdiction not less frequently than every other year. The State agency would continue to be required to review the greater of 20 percent of the clinics in each local agency or one clinic for each local agency it reviews. In addition, the State agency would continue to have the authority to conduct more frequent reviews. The majority of commenters supported the proposed change and were pleased with the flexibility afforded by this provision. One State agency indicated it would continue yearly reviews of those local agencies which may show marginal performance, but perform biennial reviews on the majority of agencies. Two State agencies recommended a revision to the regulatory text which permits State agencies to conduct additional on-site reviews. They recommended that more frequent reviews should be based on a State agency's determination that such reviews were necessary in the interest of the efficiency and effectiveness of the program instead of ``as it finds necessary.'' Therefore, based on these comments and the legislative mandate that State agencies conduct such reviews at least biennially, the Department has retained, in Sec. 246.19(b)(3) of this final rule, the provision as proposed, except that the last sentence regarding authority to conduct more frequent reviews has been revised as recommended by commenters. As reflected in the legislative mandate and as set forth in the regulatory text, State agencies have the authority to conduct on-site monitoring reviews of local agencies more frequently than biennially. As set forth in this final rule, the State agency may conduct additional on-site reviews as the State agency determines to be necessary in the interest of the efficiency and effectiveness of the program. 20. Reference to Departmental Rule on Debarment and Suspension, Drug- Free Workplace, and Lobbying Restrictions (Sections 246.2, 246.3(b) and (c)(2), 246.4(a), 246.6(b), 246.24(a)) a. Nonprocurement debarment and suspension. Executive Order (E.O.) 12549, signed by the President on February 18, 1986, stipulated the establishment of debarment and suspension procedures to protect the integrity of nonprocurement programs funded by the Federal Government and procurement contracts that equal or exceed $25,000 at the grantee and sub-grantee levels. This action was taken to parallel the debarment and suspension system already in place for Federal procurement activities. In response to E.O. 12549, a final rule creating 7 CFR part 3017 was published in the Federal Register on January 30, 1989 (54 FR 4722). The Department proposed in its rulemaking to add to the definition section a reference to ``7 CFR part 3017'' which indicates that it is the Department's common rule regarding Governmentwide Debarment and Suspension (Nonprocurement). As proposed, Sec. 246.24(a), ``Procurement and property management,'' was also amended to require compliance with the mandates of 7 CFR part 3017. The majority of commenters approved these provisions as proposed. Because these provisions merely reference compliance with a pre- existing regulatory mandate, the Department is retaining the provisions as proposed in this final rule, except several clarifications. As proposed, a new Sec. 246.4(a)(22) has been added to require the State to include in its State Plan an assurance that, as clarified in this final rule, each local agency and any subgrantees of the State agency and/or local agencies are in compliance with the nonprocurement debarment/suspension requirements of 7 CFR part 3017. In addition, this final rule revises Sec. 246.6(b)(1), as proposed, to require as part of the local agency agreement with the State agency, assurance that the local agency complies with the debarment/suspension requirement of 7 CFR part 3017. In order to comply with these requirements, it is incumbent on State and local agencies when contracting with, for example, banks, consultants, and infant formula manufacturing companies that they seek certifications from such entities attesting to the fact that they have not been debarred or suspended. These requirements are to be incorporated into any new contracts entered into with such entities or any renewal of current awards. Such provisions would not be required to be incorporated into any current contract or agreements because, in some cases, such revisions could potentially render the conditions set forth in the contracts null and void. Finally, the proposed revision to Sec. 246.24(a) has been changed in this final rule to clarify that State and local agencies in procuring supplies, equipment, and other services shall ensure that their subgrantees comply with the debarment and suspension requirements in 7 CFR part 3017. b. Drug-free workplace requirements. A final rule expanding 7 CFR part 3017 was published in the Federal Register on May 25, 1990 (55 FR 21679), addressing the Governmentwide Drug-Free Workplace Requirements of the Drug-Free Workplace Act of 1988, Public Law 100-690, enacted on November 18, 1988. The governmentwide drug-free workplace mandates in 7 CFR part 3017 require Federal grantees to certify that they will provide and maintain drug-free workplaces as a condition of receiving Federal grant assistance. These requirements apply only to direct Federal grant agreements, i.e., to the State WIC agencies. The Department's regulation, 7 CFR part 3017, implements the requirements of Public Law 100-690, which became effective March 18, 1989. It states that a Federal agency may not enter into a new grant agreement or renew an existing agreement unless a drug-free workplace certification is obtained from the grantee. The proposed rule preamble stated that Federal/State WIC agreement forms were being revised to include such an assurance, and that State agencies should sign the certification as an addendum to their current Federal/State WIC agreement. Since publication of the proposed rule, Federal/State WIC agreement forms have been revised to include such an assurance. The forms contain two check-off boxes. By checking off one box the grantee verifies that a certification form is on file with the Department. If no certification form has been submitted or if any changes have occurred since the previous certification form was submitted, then a second box must be checked and a certification form attached to the Federal/State agreement. By signing the certification, the State agency agrees to provide and maintain a drug-free workplace. The Department, in its proposed rulemaking, incorporated this legislative mandate in the WIC regulations by adding a new Sec. 246.4(a)(23), which requires WIC State agencies to provide in their State plans an assurance of compliance with the requirements of 7 CFR part 3017 regarding a drug-free workplace, including a description of how they will provide and maintain such a workplace. No comments were received on this specific provision. Because the assurance is now included in the Federal/State agreement, this final rule revises Sec. 246.4(a)(23) to delete the assurance portion of the requirement from the State plan, but has maintained the requirement for a description of the State agency's plans to provide and maintain such a workplace. The assurance requirement is moved by this final rule to Sec. 246.3(c)(2), which provides the requirements for the Federal/State agreement. c. Lobbying restrictions. Section 319 of the 1990 Appropriations Act (31 U.S.C. 1352) of the Department of Interior and Related Agencies (Pub. L. 101-121), enacted October 23, 1989, contains provisions which prohibit the use of federal funds for lobbying for specific federal awards and requires recipients of any federal grants, contracts, loans, and cooperative agreements to disclose expenditures made with their own funds for such purposes. Section 319 of that act also required the Office of Management and Budget (OMB) to issue governmentwide guidance for agency implementation of, and compliance with, these restrictions. OMB's interim final governmentwide guidance published in the Federal Register on December 20, 1989, became effective December 23, 1989. The Department's final rule 7 CFR part 3018, implementing new restrictions on lobbying, was published in the Federal Register on February 26, 1990 at 55 FR 6736. The OMB subsequently issued guidance on the common rule in a June 12, 1990 memorandum to federal agencies which was published as a Notice in the Federal Register on June 15, 1990 at 55 FR 24540. Public Law 101-121 and 7 CFR part 3018 apply to WIC State and local agencies and any entities the State or local agency contracts with, including infant formula manufacturing companies, as long as each covered action exceeds $100,000. According to 7 CFR part 3018, Indian tribes or tribal organizations (Sec. 3018.105(l)) and any individual Federal actions $100,000 or under (Sec. 3018.110) are excluded from the lobbying restriction requirements. For grants, the $100,000 limit applies to each fiscal year award, or the period of the grant if other than the federal fiscal year. For contracts, the $100,000 limit applies to each contract. Section 3018.105(b) defines as ``covered actions,'' grants, loans, cooperative agreements, or Federal contracts. Of these covered Federal actions, only grants or contracts are likely to arise in the WIC Program context. Although the Department's proposed rule did not address the legislative lobbying restrictions, reference to this nondiscretionary requirement has been added in this final rule. A definition has been added in this final rule for ``7 CFR part 3018,'' the Department's Common Rule regarding Governmentwide Lobbying Restrictions, and other appropriate references have been added which require compliance with 7 CFR part 3018. 21. Revision of References to OMB Circular A-90 OMB Circular A-90, which primarily addressed the Federal responsibilities for oversight of grantee information systems, was superseded by OMB Circular A-130 in 1986. Accordingly, the Department had proposed to delete a reference to OMB Circular A-90 in Sec. 246.24(a). However, OMB Circular A-130 continues to reference requirements on state information systems. Therefore, references to the new circular must be included in the WIC regulations and all references to OMB Circular A-90 in Part 246 have been revised to reference OMB Circular A-130 by this final rule. 22. Corrections to Program Information (Section 246.27) and Updating of Information in Sec. 246.7(d)(2)(iv)(C) As proposed, this final rule makes technical revisions to Sec. 246.27 of the WIC Program regulations to reflect address changes or corrections for the Northeast, Mid-Atlantic, Southeast, and Midwest Regional Offices of the Food and Nutrition Service. In addition, this final rule updates the non-inclusive list of payments or benefits provided under other federal programs or acts which are specifically excluded as income for WIC purposes and moves the list to Sec. 246.7(d)(2)(iv)(C). It was formerly found in Sec. 246.7(c)(2)(v). List of Subjects in 7 CFR Part 246 Food assistance programs, Food donations, Grant programs--social programs, Indians, Infants and children, Maternal and child health, Nutrition, Nutrition education, Public assistance programs, WIC, Women. For the reasons set forth in the preamble, 7 CFR part 246 is amended to read as follows: PART 246--SPECIAL SUPPLEMENTAL FOOD PROGRAM FOR WOMEN, INFANTS, AND CHILDREN 1. The authority citation for part 246 continues to read as follows: Authority: 42 U.S.C. 1786. 2. In part 246, all references to ``7 CFR part 3015'' are revised to read ``7 CFR part 3016''. 3. In part 246, all references to ``OMB Circular A-90'' are revised to read ``OMB Circular A-130''. 4. In part 246, all references to ``administrative and program services'' are revised to read ``nutrition services and administration''. 5. In Sec. 246.2: a. Definitions of ``Breastfeeding'', ``7 CFR part 3017'', ``7 CFR part 3018'', and ``Nutrition Services and Administration (NSA) Costs'' are added in alphabetical order; and, b. The definition of ``Administrative and Program Services Costs'' is removed. The additions read as follows: Sec. 246.2 Definitions. * * * * * Breastfeeding means the practice of feeding a mother's breastmilk to her infant(s) on the average of at least once a day. * * * * * Nutrition Services and Administration (NSA) Costs means those direct and indirect costs, exclusive of food costs, as defined in Sec. 246.14(c), which State and local agencies determine to be necessary to support Program operations. Costs include, but are not limited to, the costs of Program administration, start-up, monitoring, auditing, the development of and accountability for food delivery systems, nutrition education and breastfeeding promotion and support, outreach, certification, and developing and printing food instruments. * * * * * 7 CFR part 3017 means the Department's Common Rule regarding Governmentwide Debarment and Suspension (Non-procurement) and Governmentwide Requirements for Drug-Free Workplace. Part 3017 implements the requirements established by Executive Order 12549 (February 18, 1986) and sections 5151-5160 of the Drug-Free Workplace Act of 1988 (Pub. L. 100-690). 7 CFR part 3018 means the Department's Common Rule regarding Governmentwide New Restrictions on Lobbying. Part 3018 implements the requirements established by section 319 of the 1990 Appropriations Act for the Department of Interior and Related Agencies (Pub. L. 101-121). * * * * * 6. In Sec. 246.3: a. The first sentence of paragraph (b) is revised. b. The text of paragraph (c) is redesignated as paragraph (c)(1) and is revised; c. A new paragraph (c)(2) is added; d. Paragraph (e)(4) is redesignated as paragraph (e)(5); and, e. A new paragraph (e)(4) is added. The revisions and additions read as follows: Sec. 246.3 Administration. * * * * * (b) Delegation to State agency. The State agency is responsible for the effective and efficient administration of the Program in accordance with the requirements of this part; the Department's regulations governing nondiscrimination (7 CFR parts 15, 15a and 15b); governing administration of grants (7 CFR part 3016); governing nonprocurement debarment/suspension and drug-free workplace (7 CFR part 3017); and governing restrictions on lobbying (7 CFR part 3018); FNS guidelines; and, instructions issued under the FNS Directives Management System. * * * (c) Agreement and State Plan. (1) Each State agency desiring to administer the Program shall annually submit a State Plan and enter into a written agreement with the Department for administration of the Program in the jurisdiction of the State agency in accordance with the provisions of this part. (2) The written agreement shall include a certification/assurance regarding drug-free workplace as required by 7 CFR part 3017, and, if applicable, a certification regarding lobbying and a disclosure of lobbying activities as required by 7 CFR part 3018. * * * * * (e) * * * (4) A designated breastfeeding promotion coordinator, to coordinate breastfeeding promotion efforts identified in the State plan in accordance with the requirement of Sec. 246.4(a)(9) of this part. The person to whom the State agency assigns this responsibility may perform other duties as well. * * * * * 7. In Sec. 246.4: a. In paragraph (a)(2) and (a)(13), reference to ``administrative funds'' is revised to read ``nutrition services and administration funds''; b. The first sentence of paragraph (a)(7) is revised; c. Paragraphs (a)(8) and (a)(9) are revised; d. In paragraph (a)(10), reference to ``Sec. 246.7(c)(2)(vi)'' is revised to read ``Sec. 246.7(d)(2)(vii)''; e. In paragraph (a)(11)(i), reference to ``Sec. 246.7(d)(4)'' is revised to read ``Sec. 246.7(e)(4)''; f. In paragraph (a)(19), an incorrect reference to ``Sec. 246.7(m)(1)(i)'' is revised to read ``Sec. 246.7(n)(1)(i)''; and, g. New paragraphs (a)(20)-(a)(23) are added. The revisions and additions read as follows: Sec. 246.4 State plan. (a) * * * (7) The State agency's plans, to be conducted in cooperation with local agencies, for informing eligible persons of the availability of Program benefits, including the eligibility criteria for participation, the location of local agencies operating the Program, and the institutional conditions of Sec. 246.7(n)(1)(i) of this part, with emphasis on reaching and enrolling eligible women in the early months of pregnancy and migrants. * * * (8) A description of how the State agency plans to coordinate program operations with special counseling services and other programs, including, but not limited to, the Expanded Food and Nutrition Education Program (7 U.S.C. 343(d) and 3175), the Food Stamp Program (7 U.S.C. 2011 et seq.), the Early and Periodic Screening, Diagnosis, and Treatment Program (Title XIX of the Social Security Act), the Aid to Families with Dependent Children (AFDC) Program (42 U.S.C. 601-615), the Maternal and Child Health (MCH) Program (42 U.S.C. 701-709), the Medicaid Program (42 U.S.C. 1396 et seq.), family planning, immunization, prenatal care, well-child care, drug and other harmful substance abuse counseling, treatment and education programs, child abuse counseling, and local programs for breastfeeding promotion. (9) The State agency's nutrition education goals and action plans, including a description of the methods that will be used to provide drug and other harmful substance abuse information, promote breastfeeding, and to meet the special nutrition education needs of migrant farmworkers and their families, Indians, and homeless persons. * * * * * (20) A plan to provide program benefits to unserved infants and children under the care of foster parents, protective services, or child welfare authorities, including infants exposed to drugs perinatally. (21) A plan to improve access to the program for participants and prospective applicants who are employed or who reside in rural areas, by addressing their special needs through the adoption or revision of procedures and practices to minimize the time participants and applicants must spend away from work and the distances participants and applicants must travel. This shall include at least one of the following procedures: appointment scheduling, adjustment of clinic hours and/or locations, or the mailing of food instruments, provided, however, that all State agencies shall include appointment scheduling for employed adult individuals applying or reapplying for themselves or on behalf of others if such appointments are not currently provided. The State agency shall also describe any plans for issuance of food instruments to employed or rural participants, or to any other segment of the participant population, through means other than direct participant pick-up, pursuant to Sec. 246.12(r)(8). Such description shall also include measures to ensure the integrity of program services and fiscal accountability. (22) Assurance that each local agency and any subgrantees of the State agency and/or local agencies are in compliance with the requirements of 7 CFR part 3017 regarding nonprocurement debarment/ suspension. (23) A description of the State agency's plans to provide and maintain a drug-free workplace. * * * * * 8. In Sec. 246.6: a. Paragraph (b)(1) is revised; b. A new paragraph (f) is added. The revision and addition read as follows: Sec. 246.6 Agreements with local agencies. * * * * * (b) * * * (1) Complies with all the fiscal and operational requirements prescribed by the State agency pursuant to this part, 7 CFR part 3016, the debarment and suspension requirements of 7 CFR part 3017, if applicable, the lobbying restrictions of 7 CFR part 3018, and FNS guidelines and instructions, and provides on a timely basis to the State agency all required information regarding fiscal and Program information; * * * * * (f) Outreach/Certification In Hospitals. The State agency shall ensure that each local agency operating the program within a hospital and/or that has a cooperative arrangement with a hospital: (1) Advises potentially eligible individuals that receive inpatient or outpatient prenatal, maternity, or postpartum services, or that accompany a child under the age of 5 who receives well-child services, of the availability of program services; and (2) To the extent feasible, provides an opportunity for individuals who may be eligible to be certified within the hospital for participation in the WIC Program. 9. In Sec. 246.7: a. Paragraphs (b)-(n) are redesignated as paragraphs (c)-(o) and all references to these paragraphs within Sec. 246.7 are redesignated accordingly. b. A new paragraph (b) is added; c. Newly redesignated paragraph (d) is revised; d. In newly redesignated paragraph (f)(2)(iv), an incorrect reference to ``Sec. 246.12(s)(8) (i) and (ii)'' is revised to read Sec. 246.12(r)(8)''; e. The introductory text of newly redesignated paragraph (h)(1) is revised; f. Newly redesignated paragraph (h)(1)(ii) is revised; g. The first sentence of newly redesignated paragraph (j)(6) is revised; and h. A new paragraph (j)(9) is added. The additions and revisions read as follows: Sec. 246.7 Certification of participants. * * * * * (b) Program referral and access. State and local agencies shall provide WIC Program applicants and participants or their designated proxies with information on other health-related and public assistance programs, and when appropriate, shall refer applicants and participants to such programs. (1) The State agency shall ensure that written information concerning the Food Stamp Program, the program for Aid to Families with Dependent Children under Title IV-A of the Social Security Act (AFDC), and the Child Support Enforcement Program under Title IV-D of the Social Security Act, is provided on at least one occasion to adult participants and adult individuals applying for the WIC Program for themselves or on behalf of others. (2) The State agency shall provide each local WIC agency with materials showing the maximum income limits, according to family size, applicable to pregnant women, infants, and children up to age 5 under the medical assistance program established under Title XIX of the Social Security Act (in this section, referred to as the ``Medicaid Program''). The local agency shall, in turn, provide to adult individuals applying or reapplying for the WIC Program for themselves or on behalf of others, written information about the Medicaid Program. If such individuals are not currently participating in Medicaid but appear to have family income below the applicable maximum income limits for the program, the local agency shall also refer these individuals to Medicaid, including the referral of infants and children to the appropriate entity in the area authorized to determine eligibility for early and periodic screening, diagnostic, and treatment (EPSDT) services, and, the referral of pregnant women to the appropriate entity in the area authorized to determine presumptive eligibility for the Medicaid Program, if such determinations are being offered by the State. (3) Local agencies shall provide information about other potential sources of food assistance in the local area to adult individuals applying or reapplying in person for the WIC Program for themselves or on behalf of others, when such applicants cannot be served because the Program is operating at capacity in the local area. (4) Each local agency that does not routinely schedule appointments shall schedule appointments for employed adult individuals seeking to apply or reapply for participation in the WIC Program for themselves or on behalf of others so as to minimize the time such individuals are absent from the workplace due to such application. (5) Each local agency shall attempt to contact each pregnant woman who misses her first appointment to apply for participation in the Program in order to reschedule the appointment. At the time of initial contact, the local agency shall request an address and telephone number where the pregnant woman can be reached. * * * * * (d) Income criteria and income eligibility determinations. The State agency shall establish, and provide local agencies with, income guidelines, definitions, and procedures to be used in determining an applicant's income eligibility for the Program. (1) Income eligibility guidelines. The State agency may prescribe income guidelines either equaling the income guidelines established under section 9 of the National School Lunch Act for reduced-price school meals or identical to State or local guidelines for free or reduced-price health care. However, in conforming Program income guidelines to health care guidelines, the State agency shall not establish Program guidelines which exceed the guidelines for reduced- price school meals or are less than 100 percent of the revised poverty income guidelines issued annually by the Department of Health and Human Services. Program applicants who meet the requirements established by paragraph (d)(2)(vi)(A) of this section shall not be subject to the income limits established by State agencies under this paragraph. (i) Local agency income eligibility guidelines. Different guidelines may be prescribed for different local agencies within the State provided that the guidelines are the ones used by the local agencies for determining eligibility for free or reduced-price health care. (ii) Annual adjustments in the income guidelines. On or before June 1 each year, FNS will announce adjustments in the income guidelines for reduced-price meals under section 9 of the National School Lunch Act, based on annual adjustments in the revised poverty income guidelines issued by the Department of Health and Human Services. (iii) Implementation of the income guidelines. On or before July 1 each year, each State agency shall announce and transmit to each local agency the State agency's family size income guidelines unless changes in the poverty income guidelines issued by the Department of Health and Human Services do not necessitate changes in the State or local agency's income guidelines. The State agency shall ensure that conforming adjustments are made, if necessary, in local agency income guidelines. The local agency shall implement (revised) guidelines effective July 1 of each year for which such guidelines are issued by the State. (2) Income eligibility determinations. The State agency shall ensure that local agencies determine income through the use of a clear and simple application form provided or approved by the State agency. (i) Timeframes for determining income. In determining the income eligibility of an applicant, the State agency may instruct local agencies to consider the income of the family during the past 12 months and the family's current rate of income to determine which indicator more accurately reflects the family's status. However, persons from families with adult members who are unemployed shall be eligible based on income during the period of unemployment if the loss of income causes the current rate of income to be less than the State or local agency's income guidelines for Program eligibility. (ii) Definition of ``Income''. If the State agency uses the National School Lunch reduced-priced meal income guidelines, as specified in paragraph (d)(1) of this section, it shall use the following definition of income: Income for the purposes of this part means gross cash income before deductions for income taxes, employees' social security taxes, insurance premiums, bonds, etc. Income includes the following-- (A) Monetary compensation for services, including wages, salary, commissions, or fees; (B) Net income from farm and non-farm self-employment; (C) Social Security benefits; (D) Dividends or interest on savings or bonds, income from estates or trusts, or net rental income; (E) Public assistance or welfare payments; (F) Unemployment compensation; (G) Government civilian employee or military retirement or pensions or veterans' payments; (H) Private pensions or annuities; (I) Alimony or child support payments; (J) Regular contributions from persons not living in the household; (K) Net royalties; and (L) Other cash income. Other cash income includes, but is not limited to, cash amounts received or withdrawn from any source including savings, investments, trust accounts and other resources which are readily available to the family. (iii) Use of a State or local health care definition of ``Income''. If the State agency uses State or local free or reduced-price health care income guidelines, as it is authorized to do in paragraph (d)(1) of this section, it may use the State or local definition or definitions of income used for the health care eligibility determinations. The State agency shall ensure, however, that the State or local agency's definition of income does not count the value of in- kind housing and other in-kind benefits and payments or benefits listed in paragraph (d)(2)(iv) of this section as income for Program purposes, and that families with gross income, as defined in paragraph (d)(2)(ii) of this section, in excess of 185 percent of the Federal guidelines specified under paragraph (d)(1) of this section are not rendered eligible for Program benefits, except that persons who meet the requirements of paragraph (d)(2)(vi) of this section shall not be subject to limitations established under this paragraph. (iv) Income exclusions. (A) In determining income eligibility, the State agency may exclude from consideration as income any basic allowance for quarters received by military services personnel residing off military installations. State agencies which choose to exercise this option shall implement it uniformly with respect to all Program applicants from military families. (B) The value of inkind housing and other inkind benefits, shall be excluded from consideration as income in determining an applicant's eligibility for the program. (C) Payments or benefits provided under certain Federal programs or acts are excluded from consideration as income by legislative prohibition. The payments or benefits which must be excluded from consideration as income include, but are not limited to: (1) Reimbursements from the Uniform Relocation Assistance and Real Property Acquisition Policies Act of 1970 (Pub. L. 91-646, sec. 216, 42 U.S.C. 4636); (2) Any payment to volunteers under Title I (VISTA and others) and Title II (RSVP, foster grandparents, and others) of the Domestic Volunteer Service Act of 1973 (Pub. L. 93-113, sec. 404(g), 42 U.S.C. 5044(g)) to the extent excluded by that Act; (3) Payment to volunteers under section 8(b)(1)(B) of the Small Business Act (SCORE and ACE) (Pub. L. 95-510, sec. 101, 15 U.S.C. 637(b)(1)(D)); (4) Income derived from certain submarginal land of the United States which is held in trust for certain Indian tribes (Pub. L. 94- 114, sec. 6, 25 U.S.C. 459e); (5) Payments received under the Job Training Partnership Act (Pub. L. 97-300, sec. 142(b), 29 U.S.C. 1552(b)); (6) Income derived from the disposition of funds to the Grand River Band of Ottawa Indians (Pub. L. 94-540, sec. 6); (7) Payments received under the Alaska Native Claims Settlement Act (Pub. L. 100-241, sec. 15, 43 U.S.C. sec. 1626(c)); (8) The value of assistance to children or their families under the National School Lunch Act, as amended (Pub. L. 94-105, sec. 9(d), 42 U.S.C. sec. 1760(e)), the Child Nutrition Act of 1966 (Pub. L. 89-642, sec. 11(b), 42 U.S.C. sec. 1780(b)), and the Food Stamp Act of 1977 (Pub. L. 95-113, sec. 1301, 7 U.S.C. sec. 2017(b)); (9) Payments by the Indian Claims Commission to the Confederated Tribes and Bands of the Yakima Indian Nation or the Apache Tribe of the Mescalero Reservation (Pub. L. 95-433, sec. 2, 25 U.S.C. 609c-1); (10) Payments to the Passamaquoddy Tribe and the Penobscot Nation or any of their members received pursuant to the Maine Indian Claims Settlement Act of 1980 (Pub. L. 96-420, sec. 6, 9(c), 25 U.S.C. 1725(i), 1728(c)); (11) Payments under the Low-income Home Energy Assistance Act, as amended (Pub. L. 99-125, sec. 504(c), 42 U.S.C. sec. 8624(f)); (12) Student financial assistance received from any program funded in whole or part under Title IV of the Higher Education Act of 1965, including the Pell Grant, Supplemental Educational Opportunity Grant, State Student Incentive Grants, National Direct Student Loan, PLUS, College Work Study, and Byrd Honor Scholarship programs, which is used for costs described in section 472 (1) and (2) of that Act (Pub. L. 99- 498, section 479B, 20 U.S.C. 1087uu). The specified costs set forth in section 472 (1) and (2) of the Higher Education Act are tuition and fees normally assessed a student carrying the same academic workload as determined by the institution, and including the costs for rental or purchase of any equipment, materials, or supplies required of all students in the same course of study; and an allowance for books, supplies, transportation, and miscellaneous personal expenses for a student attending the institution on at least a half-time basis, as determined by the institution. The specified costs set forth in section 472 (1) and (2) of the Act are those costs which are related to the costs of attendance at the educational institution and do not include room and board and dependent care expenses; (13) Payments under the Disaster Relief Act of 1974, as amended by the Disaster Relief and Emergency Assistance Amendments of 1989 (Pub. L. 100-707, sec. 105(i), 42 U.S.C. sec. 5155(d)); (14) Effective July 1, 1991, payments received under the Carl D. Perkins Vocational Education Act, as amended by the Carl D. Perkins Vocational and Applied Technology Education Act Amendments of 1990 (Pub. L. 101-392, sec. 501, 20 U.S.C. sec. 2466d); (15) Payments pursuant to the Agent Orange Compensation Exclusion Act (Pub. L. 101-201, sec. 1); (16) Payments received for Wartime Relocation of Civilians under the Civil Liberties Act of 1988 (Pub. L. 100-383, sec. 105(f)(2), 50 App. U.S.C. sec. 1989b-4(f)(2)); (17) Value of any child care payments made under section 402(g)(1)(E) of the Social Security Act, as amended by the Family Support Act (Pub. L. 100-485, sec. 301, 42 U.S.C. sec. 602 (g)(1)(E)); (18) Value of any ``at-risk'' block grant child care payments made under section 5081 of Pub. L. 101-508, which amended section 402(i) of the Social Security Act; (19) Value of any child care provided or paid for under the Child Care and Development Block Grant Act, as amended (Pub. L. 102-586, Sec. 8(b)), 42 U.S.C. 9858q); (20) Mandatory salary reduction amount for military service personnel which is used to fund the Veteran's Educational Assistance Act of 1984 (GI Bill), as amended (Pub. L. 99-576, sec. 303(a)(1), 38 U.S.C. sec. 1411 (b)); (21) Payments received under the Old Age Assistance Claims Settlement Act, except for per capita shares in excess of $2,000 (Pub. L. 98-500, sec. 8, 25 U.S.C. sec. 2307); (22) Payments received under the Cranston-Gonzales National Affordable Housing Act, unless the income of the family equals or exceeds 80 percent of the median income of the area (Pub. L. 101-625, sec. 522(i)(4), 42 U.S.C. sec. 1437f nt); (23) Payments received under the Housing and Community Development Act of 1987, unless the income of the family increases at any time to not less than 50 percent of the median income of the area (Pub. L. 100- 242, sec. 126(c)(5)(A), 25 U.S.C. sec. 2307); (24) Payments received under the Sac and Fox Indian claims agreement (Pub. L. 94-189, sec. 6); (25) Payments received under the Judgment Award Authorization Act, as amended (Pub. L. 97-458, sec. 4, 25 U.S.C. sec. 1407 and Pub. L. 98- 64, sec. 2(b), 25 U.S.C. sec. 117b(b)); (26) Payments for the relocation assistance of members of Navajo and Hopi Tribes (Pub. L. 93-531, sec. 22, 22 U.S.C. sec. 640d-21); (27) Payments to the Turtle Mountain Band of Chippewas, Arizona (Pub. L. 97-403, sec. 9); (28) Payments to the Blackfeet, Grosventre, and Assiniboine tribes (Montana) and the Papago (Arizona) (Pub. L. 97-408, sec. 8(d)); (29) Payments to the Assiniboine Tribe of the Fort Belknap Indian community and the Assiniboine Tribe of the Fort Peck Indian Reservation (Montana) (Pub. L. 98-124, sec. 5); (30) Payments to the Red Lake Band of Chippewas (Pub. L. 98-123, sec. 3); (31) Payments received under the Saginaw Chippewa Indian Tribe of Michigan Distribution of Judgment Funds Act (Pub. L. 99-346, sec. 6(b)(2)); and (32) Payments to the Chippewas of Mississippi (Pub. L. 99-377, sec. 4(b)). (v) Verification of information. A State or local agency may require verification of information which it determines necessary to confirm income eligibility for Program benefits. (vi) Adjunct or automatic income eligibility. (A) The State agency shall accept as income-eligible for the Program any applicant who documents that he/she is: (1) Certified as fully eligible to receive food stamps under the Food Stamp Act of 1977, or certified as fully eligible, or presumptively eligible pending completion of the eligibility determination process, to receive Aid to Families with Dependent Children (AFDC) under Part A of Title IV of the Social Security Act or Medical Assistance (i.e., Medicaid) under Title XIX of the Social Security Act; or (2) A member of a family that is certified eligible to receive assistance under AFDC, or a member of a family in which a pregnant woman or an infant is certified eligible to receive assistance under Medicaid. (B) The State agency may accept, as evidence of income within Program guidelines, documentation of the applicant's participation in State-administered programs not specified in this paragraph that routinely require documentation of income, provided that those programs have income eligibility guidelines at or below the State agency's Program income guidelines. (C) Persons who are adjunctively income eligible, as set forth in paragraphs (d)(2)(vi)(A) of this section, shall not be subject to the income limits established under paragraph (d)(1) of this section. (vii) Income eligibility of Indian applicants. If an Indian State agency (or a non-Indian State agency which acts on behalf of a local agency operated by an Indian organization or the Indian Health Service) submits census data or other reliable documentation demonstrating to FNS that the majority of the Indian households in a local agency's service area have incomes at or below the State agency's income eligibility guidelines, FNS may authorize the State agency to approve the use of an income certification system under which the local Indian agency shall inform each Indian applicant household of the maximum family income allowed for that applicant's family size. The local agency shall ensure that the applicant, or the applicant's parent or caretaker, signs a statement that the applicant's family income does not exceed the maximum. The local agency may verify the income eligibility of any Indian applicant. (viii) Income eligibility of instream migrant farmworkers and their family members. Instream migrant farmworkers and their family members with expired Verification of Certification cards shall be declared to satisfy the State agency's income standard; Provided, however, that the income of that instream migrant farmworker family is determined at least once every 12 months. Any determination that members of an instream migrant farmworker family have met the income standard, either in the migrant's home base area before the migrant has entered the stream for a particular agricultural season, or in an instream area during the agricultural season, shall satisfy the income criteria in any State for any subsequent certification while the migrant is instream during the 12-month period following the determination. * * * * * (h) * * * (1) The State agency shall ensure that local agencies disqualify an individual during a certification period if, on the basis of a reassessment of Program eligibility status, the individual is determined ineligible; provided, however, that an individual determined adjunctively income eligible under paragraph (d)(2)(vi)(A) (1) or (2) of this section or income eligible under paragraph (d)(2)(vi)(B) of this section is not disqualified solely on the basis of a determination they no longer participate in AFDC, Medicaid, Food Stamps, or another qualified State-administered program or are no longer a member of a family which contains an AFDC recipient or a pregnant woman or an infant receiving Medicaid. The State agency shall ensure that local agencies disqualify such an individual during a certification period, if on the basis of a reassessment of Program eligibility, the individual is no longer deemed income eligible under paragraph (d)(2)(vi) (A) or (B) of this section and does not meet the income eligibility requirements of paragraph (d)(1) of this section. The State agency may authorize local agencies to disqualify an individual during the certification period for the following reasons: * * * * * (ii) Failure to obtain food instruments or supplemental foods for a number of consecutive months, as specified by the State agency, evidenced by indicators such as failure to pick up supplemental foods or food instruments, nonreceipt of food instruments as evidenced by return of mailed instruments, or failure to have an electronic benefit transfer card revalidated to authorize the purchase of supplemental foods. * * * * * (j) * * * (6) A person who is about to be suspended or disqualified from program participation at any time during the certification period shall be advised in writing not less than 15 days before the suspension or disqualification. * * * * * * * * (9) If a State agency must suspend or terminate benefits to any participant during the participant's certification period due to a shortage of funds for the Program, it shall issue a notice to such participant in advance, as stipulated in paragraph (j)(6) of this section. Such notice shall also include the categories of participants whose benefits are being suspended or terminated due to such shortage. * * * * * Sec. 246.9 [Amended] 10. In Sec. 246.9(g), reference to ``Sec. 246.7(i)(6)'' is revised to read ``Sec. 246.7(j)(6)''. 11. In Sec. 246.11: a. A new sentence is added at the end of paragraph (c)(2); b. Paragraphs (c)(3), (c)(5), and (c)(6) are revised; c. A new paragraph (c)(8) is added; and d. Paragraph (e)(4) is revised. The additions and revisions read as follows: Sec. 246.11 Nutrition education. * * * * * (c) * * * (2) * * * The State agency shall also provide training on the promotion and management of breastfeeding to staff at local agencies who will provide information and assistance on this subject to participants. (3) Identify or develop resources and educational materials for use in local agencies, including breastfeeding promotion and instruction materials, taking reasonable steps to include materials in languages other than English in areas where a significant number or proportion of the population needs the information in a language other than English, considering the size and concentration of such population and, where possible, the reading level of participants. * * * * * (5) Annually perform and document evaluations of nutrition education and breastfeeding promotion and support activities. The evaluations shall include an assessment of participants' views concerning the effectiveness of the nutrition education and breastfeeding promotion and support they received. (6) Monitor local agency activities to ensure compliance with provisions set forth in paragraphs (c)(8), (d), and (e) of this section. * * * * * (8) Establish standards for breastfeeding promotion and support which include, at a minimum, the following: (i) A policy that creates a positive clinic environment which endorses breastfeeding as the preferred method of infant feeding; (ii) A requirement that each local agency designate a staff person to coordinate breastfeeding promotion and support activities; (iii) A requirement that each local agency incorporate task- appropriate breastfeeding promotion and support training into orientation programs for new staff involved in direct contact with WIC clients; and (iv) A plan to ensure that women have access to breastfeeding promotion and support activities during the prenatal and postpartum periods. * * * * * (e) * * * (4) The local agency shall document in each participant's certification file that nutrition education has been given to the participant in accordance with State agency standards, except that the second or any subsequent nutrition education contact during a certification period that is provided to a participant in a group setting may be documented in a masterfile. Should a participant miss a nutrition education appointment, the local agency shall, for purposes of monitoring and further education efforts, document this fact in the participant's file, or, at the local agency's discretion, in the case of a second or subsequent missed contact where the nutrition education was offered in a group setting, document this fact in a master file. * * * * * 12. In Sec. 246.12: a. In paragraph (o), reference to ``paragraph (s)(8)'' is revised to read ``paragraph (r)(8)''; b. In paragraph (r)(2) (ii) and (iii), all references to ``paragraph (s)(2)(i)'' are revised to read ``paragraph (r)(2)(i)''; and, c. Paragraph (r)(8) is revised. The revision reads as follows: Sec. 246.12 Food delivery systems. * * * * * (r) * * * (8) Participants or their authorized proxies shall personally pick up food instruments when scheduled for nutrition education or for an appointment to determine whether participants are eligible for a second or subsequent certification period. However, in all other circumstances the State agency may provide for issuance of food instruments through an alternative means, such as electronic benefit transfer (EBT) or mailing, unless FNS determines that such action would jeopardize the integrity of program services or program accountability. If a State agency opts to mail WIC food instruments, it must provide justification, as part of the description of its alternative issuance system in its State plan, as required in Sec. 246.4(a)(21), for mailing WIC food instruments to areas where food stamps are not mailed. State agencies which opt to mail food instruments must establish and implement a system which ensures the return of food instruments to the State or local agency if the participant no longer resides or receives mail at the address to which the food instruments were mailed. * * * * * 13. In Sec. 246.14: a. The heading and introductory text of paragraph (c) and paragraph (c)(l) are revised; b. A new paragraph (c)(10) is added. The revision and addition read as follows: Sec. 246.14 Program costs. * * * * * (c) Specified allowable nutrition services and administration costs. Allowable nutrition services and administration (NSA) costs include the following: (1) The cost of nutrition education and breastfeeding promotion and support which meets the requirements of Sec. 246.11. During each fiscal year, each State agency shall expend for nutrition education activities and breastfeeding promotion and support activities, an aggregate amount that is not less than the sum of one-sixth of the amount expended by the State agency for costs of NSA, and an amount equal to a proportionate share of $8 million targeted specifically for breastfeeding promotion and support activities. Each State agency's share of the $8 million shall be determined on the basis of the average monthly number of pregnant and breastfeeding women served by a WIC State agency as a percentage of the average monthly number of pregnant and breastfeeding women served by all WIC State agencies. The amount to be spent on nutrition education shall be computed by taking one-sixth of the total fiscal year NSA expenditures. The amount spent by a State agency on breastfeeding promotion and support activities shall be at least an amount that is equal to its proportionate share of the $8 million as specified in this paragraph. If the State agency's total reported nutrition education and breastfeeding promotion and support expenditures are less than the required amount of expenditures, the Department will issue a claim for the difference. The State agency may also request prior written permission from the Department to spend less than the required portions of its NSA grant for either nutrition education or for breastfeeding promotion and support activities. The Department may grant such permission if the State agency has documented that other resources, including in-kind resources, will be used to conduct these activities at a level commensurate with the requirements of this paragraph. Such requests should be submitted to the appropriate FNS regional office for approval. Nutrition education costs are limited to activities which are distinct and separate efforts to help participants understand the importance of nutrition to health. The cost of dietary assessments for the purpose of certification, the cost of prescribing and issuing supplemental foods, the cost of screening for drug and other harmful substance use and making referrals to drug and other harmful substance abuse services, and the cost of other health- related screening shall not be applied to the expenditure requirement for nutrition education and breastfeeding promotion and support activities. The Department shall advise State agencies regarding methods for minimizing documentation of the nutrition education and breastfeeding promotion and support expenditure requirement. Costs to be applied to the one-sixth minimum amount required to be spent on nutrition education and the target share of funds required to be spent on breastfeeding promotion and support include, but need not be limited to-- (i) Salary and other costs for time spent on nutrition education and breastfeeding promotion and support consultations whether with an individual or group; (ii) The cost of procuring and producing nutrition education and breastfeeding promotion and support materials including handouts, flip charts, filmstrips, projectors, food models or other teaching aids, and the cost of mailing nutrition education or breastfeeding promotion and support materials to participants; (iii) The cost of training nutrition or breastfeeding promotion and support educators, including costs related to conducting training sessions and purchasing and producing training materials; (iv) The cost of conducting evaluations of nutrition education or breastfeeding promotion and support activities, including evaluations conducted by contractors; (v) Salary and other costs incurred in developing the nutrition education and breastfeeding promotion and support portion of the State Plan and local agency nutrition education and breastfeeding promotion and support plans; and (vi) The cost of monitoring nutrition education and breastfeeding promotion and support activities. * * * * * (10) The cost of breastfeeding aids which directly support the initiation and continuation of breastfeeding. * * * * * 14. In Sec. 246.16: a. Paragraphs (a) through (i) are revised and paragraphs (j) through (k) are removed; b. Paragraphs (l) through (q) are redesignated as paragraphs (j) through (o); and, c. In newly redesignated paragraphs (k)(2) (ii) and (iii), all references to ``administrative'' are revised to read ``nutrition services and administration''. The revisions read as follows: Sec. 246.16 Distribution of funds. (a) General. This paragraph describes the timeframes for distribution of appropriated funds by the Department to participating State agencies and the authority for the Secretary to use appropriated funds for evaluation studies and demonstration projects. (1) Authorized appropriations to carry out the provisions of this section may be made not more than 1 year in advance of the beginning of the fiscal year in which the funds shall become available for disbursement to the State agencies. The funds shall remain available for the purposes for which appropriated until expended. (2) In the case of appropriations legislation providing funds through the end of a fiscal year, the Secretary shall issue to State agencies an initial allocation of funds provided under such legislation not later than the expiration of the 15-day period beginning on the date of the enactment and subsequent allocation of funds shall be issued not later than the beginning of each of the second, third and fourth quarters of the fiscal year. (3) Allocations of funds pursuant to paragraph (a)(2) of this section shall be made as follows: The initial allocation of funds to State agencies shall include not less than \1/3\ of the appropriated amounts for the fiscal year. The allocation of funds to be made not later than the beginning of the second and third quarters shall each include not less than \1/4\ of the appropriated amounts for the fiscal year. (4) In the case of legislation providing funds for a period that ends prior to the end of a fiscal year, the Secretary shall issue to State agencies an initial allocation of funds not later than the expiration of the 10-day period beginning on the date of enactment. In the case of legislation providing appropriations for a period of not more than 4 months, all funds must be allocated to State agencies except those reserved by the Secretary to carry out paragraph (a)(6) of this section. (5) In any fiscal year unused amounts from a prior fiscal year that are identified by the end of the first quarter of the fiscal year shall be recovered and reallocated not later than the beginning of the second quarter of the fiscal year. Unused amounts from a prior fiscal year that are identified after the end of the first quarter of the fiscal year shall be recovered and reallocated on a timely basis. (6) Up to one-half of one percent of the sums appropriated for each fiscal year, not to exceed $5,000,000, shall be available to the Secretary for the purpose of evaluating program performance, evaluating health benefits, providing technical assistance to improve State agency administrative systems preparing the biennial Participation Report to Congress described in Sec. 246.25(b)(3) of this part, and administering pilot projects, including projects designed to meet the special needs of migrants, Indians, and rural populations. (b) Distribution and application of grant funds to State agencies. Notwithstanding any other provision of law, funds made available to the State agencies for the Program in any fiscal year will be managed and distributed as follows: (1) The State agency shall ensure that all Program funds are used only for Program purposes. As a prerequisite to the receipt of funds, the State agency shall have executed an agreement with the Department and shall have received approval of its State Plan. (2) Notwithstanding any other provision of law, all funds not made available to the Secretary in accordance with paragraph (a)(6) of this section shall be distributed to State agencies on the basis of funding formulas which allocate funds to all State agencies for food costs and NSA costs incurred during the fiscal year for which the funds had been made available to the Department. Final State agency grant levels as determined by the funding formula and State agency breastfeeding promotion and support expenditure targets will be issued in a timely manner. (3) A State agency may transfer funds allocated to it for one fiscal year to another fiscal year under the following conditions: (i) Not more than 1 percent of the funds allocated to a State agency for food costs incurred in any fiscal year may be expended by the State agency for food costs incurred in the preceding fiscal year; (ii) Not more than 1 percent of the total funds allocated to a State agency for food costs and for NSA costs in any fiscal year may be spent forward and expended by the State agency for such costs incurred in the subsequent fiscal year, except that State agencies which converted food funds to NSA funds under paragraph (f) of this section during a fiscal year shall not spend NSA funds forward into the following fiscal year. (iii) The total amount of funds transferred from any fiscal year under paragraphs (b)(3)(i) and (b)(3)(ii) of this section shall not exceed 1 percent of the funds allocated to a State agency for the fiscal year. (iv) A State agency which has implemented an acceptable cost containment measure(s) resulting in increased annual food cost savings of more than 5 percent of its food grant, may spend forward into the fiscal year following the fiscal year of implementation a maximum of 5 percent of the funds allocated to the State agency for food costs for the fiscal year of implementation of such system, less any food funds backspent into the prior fiscal year under paragraph (b)(3)(i) of this section and any food and NSA funds spent forward into the succeeding fiscal year under paragraph (b)(3)(ii) of this section. (v) Any State agency entering the second fiscal year following the fiscal year of implementation of, or a significant change to, any cost containment measure may, at its discretion, spend forward up to 3 percent of the funds allocated to such State agency for food costs for such fiscal year, less any food funds backspent under paragraph (b)(3)(i) of this section and any food and NSA funds spent forward from the fiscal year under paragraph (b)(3)(ii) of this section. (vi) The State agency shall specify in writing to the Department the amount of funds it intends to backspend under paragraph (b)(3)(i) of this section and to spend forward under paragraphs (b)(3) (ii), (iv) and (v) of this section not later than March 1 of the fiscal year following the fiscal year from which funds are to be transferred. (vii) Food funds transferred by the State agency from one fiscal year to another shall be used by the State agency only for food costs in the subsequent fiscal year and, in accordance with Sec. 246.14(a)(2) of this part, shall not be used to cover NSA costs. Any funds spent forward by the State agency for expenditure in the subsequent fiscal year shall not affect the amount of funds allocated to such State agency for the subsequent fiscal year. The Department shall presume that any funds spent forward are the first funds expended by such State agency for costs incurred in the subsequent fiscal year. (4) Any State agency using an approved cost containment measure as defined in Sec. 246.2 of this part (rebates, competitive bidding, home delivery and direct distribution), may temporarily borrow amounts made available to the State agency for the first quarter of a fiscal year to defray expenses for costs incurred during the final quarter of the preceding fiscal year. Any State agency that uses this authority shall restore or reimburse such borrowed amounts when the State agency receives payment as a result of its cost containment measures for such expenses. (5) Each State agency's funds will be provided by means of a Letter of Credit unless another funding method is specified by the Department. State agencies shall use funds to cover those allowable and documented Program costs, as defined in Sec. 246.14, which are incurred by the State agency and participating local agencies within their jurisdictions. (c) Allocation formula. State agencies shall receive grant allocations according to the formulas described in this paragraph. To accomplish the distribution of funds under the allocation formulas, State agencies shall furnish the Department with any necessary financial and Program data. (1) Use of participation data in the formula. Wherever the formulas set forth in paragraphs (c)(2) and (c)(3) of this section require the use of participation data, the Department shall use participation data reported by State agencies according to Sec. 246.25(b) of this part; Provided, however, that prior to using such participation data in any such formula the Department shall adjust such data as necessary to impute the number of persons in each participant category that are in each nutritional risk priority group; Provided, further, that the Department shall use data reflecting participation supported by the aggregate of Federal and State funds for any State agency whose State has budgeted funds from State sources for the Program, if such State agency requests the Department to do so in accordance with a deadline prescribed by the Department. (2) Allocation for nutrition services and administration. The funds available for allocation to State agencies for NSA for each fiscal year shall be an amount sufficient to guarantee a national average per participant grant, as adjusted for inflation. The amount of the national average per participant grant for NSA for any fiscal year will be $8.24, the amount of the national average per participant grant for NSA allocated for Fiscal Year 1987, annually adjusted for inflation. This inflation adjustment will be made by revising the $8.24 to reflect the percentage change in the value of the index for State and local government purchases, calculated using the implicit price deflator, as published by the Bureau of Economic Analysis of the Department of Commerce. The percentage change shall be calculated based upon the change between (x) the base year, and (y) the most recent estimate that is available as of the start of the current fiscal year of the value of such index for the 12-month period ending June 30 of the previous fiscal year. The base year is the value of such index for the 12-month period ending June 1986. Funds for NSA costs will be allocated according to the following procedure: (i) Allocation of stability funds. To the extent funds are available, and subject to the provisions of paragraph (c)(2)(iii) of this section, each State agency shall, at a minimum, receive an amount equal to the final amount of funds received for NSA in the preceding fiscal year. (ii) Allocation of residual funds. Subject to the provisions of paragraph (c)(2)(iii) of this section, any funds remaining available for allocation for NSA after the stability allocation required by paragraph (c)(2)(i) of this section has been completed shall be allocated as residual funds. (A) The Department shall allocate residual funds to each State agency according to a method that determines the higher of an amount equalling the stability funds which are allocated in accordance with paragraph (c)(2)(i) of this section plus an amount commensurate with the projected increase in participation from the preceding year as determined by the Department or the amount of funds generated by the formula set forth in paragraph (c)(2)(ii)(B) of this section. (B) The formula shall calculate the amount of funds each State agency would receive if all available NSA funds were allocated on the basis of the average monthly participation levels, as projected by the Department. Each State agency's projected participation level shall be adjusted to account for the higher (per participant) costs associated with small participation levels, differential salary levels relative to a national average salary level, and service to Priority I participants relative to the national average service to Priority I participants. The formula shall be adjusted to account for these costs factors in the following manner: 80 percent of available funds shall provide compensation based on rates which are proportionately higher for the first 15,000 or fewer participants, as projected by the Department, and 20 percent of available funds shall provide compensation based on differential salary levels and service to Priority I participants, as determined by the Department. (iii) Discretionary funds. Each State agency's final NSA grant shall be reduced by 10 percent, and these funds shall be aggregated for all State agencies within each FNS region to form a discretionary fund. The Department shall distribute these funds according to guidelines which shall be established nationally each year and which shall consider the varying needs of State agencies within the region. (iv) Operational level. The sum of each State agency's stability, residual and discretionary funds shall constitute the State agency's operational level. This operational level shall remain unchanged for such year even if the number of Federally-supported participants in the program at such State agency is lower than the Federally-projected participation level. However, if the provisions of paragraph (e)(2)(ii) of this section are applicable, a State agency will have its operational level for NSA reduced in the immediately succeeding fiscal year. (3) Allocation for food costs. In any fiscal year, any amounts remaining from amounts appropriated for such fiscal year and amounts appropriated for the preceding fiscal year after making any allocations under paragraph (a)(6) of this section and allocations for NSA as required by paragraph (c)(2) of this section shall be made available for food costs. Allocations to State agencies for food costs will be determined according to the following procedure: (i) Allocation of stability funds. Each State agency shall receive for food costs a base amount of stability funds equal to the sum of all funds allocated to such State agency for all food costs during the preceding fiscal year minus fifty (50) percent of any food funds voluntarily returned by such State agency prior to July 16 of the preceding fiscal year. This base amount shall be adjusted by the cumulative effect of the following operations. (A) Inflation adjustment. The base amount shall be increased by an inflation factor. The inflation factor shall be obtained by dividing the State agency's imputed participation in Priorities I, II and III by its total participation and multiplying the resulting quotient by the anticipated rate of inflation as determined by FNS. Provided, however, that the sum of the stability funds and residual funds allocated to any Indian State agency for food costs shall not be less than such State agency's base amount increased by the anticipated rate of inflation. (B) Migrant set-aside. Each State agency's base amount, as adjusted for inflation, shall be further adjusted in order to make funds available for services to eligible members of migrant populations. The national aggregate amount of funds made available for this purpose shall not be less than nine-tenths of one percent of the sums appropriated for the applicable fiscal year. To the extent that this amount exceeds the amount required to maintain each State agency's existing level of service to migrants, as determined by the Department, funds shall be deducted on a proportional basis from every State agency's base amount as adjusted for inflation. The funds made available thereby shall be added to the amounts awarded to those State agencies that had served migrant populations in the immediately preceding fiscal year. The basis for determining each such State agency's share of these funds shall be its proportionate share of the anticipated cost, as determined by the Department, of supplemental foods to be provided to eligible migrants in the applicable fiscal year. (ii) Allocation of residual funds. Any funds remaining available for allocation for food costs after the allocation of stability food funds required by paragraph (c)(3)(i) of this section has been completed shall be allocated as follows. (A) Fifty (50) percent of such food funds shall be allocated on the basis of the State agency's imputed participation in Priority I. Of the funds available for allocation on this basis, the percent allocated to each State agency shall be the percent such State agency's imputed Priority I participation is of the national aggregate imputed Priority I participation. (B) Fifty (50) percent of such food funds shall be allocated on the basis of the extent to which the total amount of funds each State agency receives through the allocations required by paragraphs (c)(3)(i) and (c)(3)(ii)(A) of this section falls short of the amount such State agency would receive for food costs if all funds available for food were allocated solely on the basis of each State agency's proportionate share of the national aggregate population of persons potentially eligible to participate in the Program. Each State agency's population of potentially eligible persons shall be determined through poverty and health indicators selected by FNS. If the CSFP also operates in the State, the number of persons in such State participating in the CSFP but otherwise eligible to participate in the Program, as determined by FNS, shall be deducted from such State agency's population of potentially eligible persons. For purposes of this allocation, the respective amounts of food funds that would be allocated to Alaska, the Virgin Islands, Hawaii, Guam, and any Indian State agencies located within the borders of these States, on the basis of their respective shares of the potentially eligible population, shall be adjusted on the basis of appropriate Thrifty Food Plan amounts used in the Food Stamp Program. The adjusting factor for each such State agency shall be the quotient obtained by dividing the Thrifty Food Plan amount used in the applicable State by the Thrifty Food Plan amount used in the 48 contiguous States and the District of Columbia; Provided, however, that the ``Urban Alaska'' Thrifty Food Plan amount shall be used to determine the adjusting factor for the Alaska State Agency; and the adjusting factor for any Indian State agency located within the State of Alaska shall be determined from whichever ``Rural Alaska'' Thrifty Food Plan amount is used in the locality served by such Indian State agency. (4) Adjustment for new State agencies. Whenever a State agency that had not previously administered the program enters into an agreement with the Department to do so during a fiscal year, the Department shall make any adjustments to the requirements of this section that are deemed necessary to establish an appropriate initial funding level for such State agency. (d) Distribution of funds to local agencies. The State agency shall provide to local agencies all funds made available by the Department, except those funds necessary for allowable State agency NSA costs and food costs paid directly by the State agency. The State agency shall distribute the funds based on claims submitted at least monthly by the local agency. Where the State agency advances funds to local agencies, the State agency shall ensure that each local agency has funds to cover immediate disbursement needs, and the State agency shall offset the advances made against incoming claims each month to ensure that funding levels reflect the actual expenditures reported by the local agency. Upon receipt of Program funds from the Department, the State agency shall take the following actions: (1) Distribute funds to cover expected food cost expenditures and/ or distribute caseload targets to each local agency which are used to project food cost expenditures. (2) Allocate funds to cover expected local agency NSA costs in a manner which takes into consideration each local agency's needs. For the allocation of NSA funds, the State agency shall develop an NSA funding procedure, in cooperation with representative local agencies, which takes into account the varying needs of the local agencies. The State agency shall consider the views of local agencies, but the final decision as to the funding procedure remains with the State agency. The State agency shall take into account factors it deems appropriate to further proper, efficient and effective administration of the program, such as local agency staffing needs, density of population, number of persons served, and availability of administrative support from other sources. (3) The State agency may provide in advance to any local agency any amount of funds for NSA deemed necessary for the successful commencement or significant expansion of program operations during a reasonable period following approval of a new local agency, a new cost containment measure, or a significant change in an existing cost containment measure. (e) Recovery and reallocation of funds. (1) Funds may be recovered from a State agency at any time the Department determines, based on State agency reports of expenditures and operations, that the State agency is not expending funds at a rate commensurate with the amount of funds distributed or provided for expenditures under the Program. Recovery of funds may be either voluntary or involuntary in nature. Such funds shall be reallocated by the Department through application of appropriate formulas set forth in paragraph (c) of this section. (2) Performance standards. The following standards shall govern expenditure performance. (i) 95 Percent standard. The amount allocated to any State agency for food benefits in any fiscal year shall be reduced if such State agency's food expenditures for the preceding fiscal year were less than 95 percent of the amount allocated to such State agency for such benefits. Such reduction shall equal the difference between the State agency's preceding year food expenditures and 95 percent of the amount allocated to the State agency for such benefits. If a State agency has incurred a food funds recovery, the 95 percent standard will be calculated based on the amount of its grant prior to the recovery. For purposes of determining the amount of such reduction, the amount allocated to the State agency for food benefits for the preceding fiscal year shall not include food funds expended for food costs incurred in the second preceding fiscal year in accordance with paragraph (b)(3)(i) of this section, food funds spent forward from the preceding fiscal year in accordance with paragraph (b)(3)(ii) of this section, or allowable adjustments related to rebate savings or funds conversions discussed in paragraph (f) of this section. The Department shall recover the amount of food funds by which the amount allocated to any State agency is reduced pursuant to this paragraph. Temporary waivers of this 95 percent performance standard may be granted at the discretion of the Department. (ii) Reduction of NSA operational level. If a State agency's per participant expenditure for NSA is more than 15 percent higher than its per participant grant for NSA without good cause, the Secretary shall reduce such State agency's operational level for costs of NSA in the next fiscal year. Circumstances that may meet the good cause criterion include, but are not limited to, dramatic and unforeseen increase in food costs, which result in the inability to reach Federally-projected participation levels. To avoid a reduction, the State agency must submit to and receive approval from the Department, justification for exceeding the 15 percent limit on excess NSA expenditures under the ``good cause'' allowance. The justification must be submitted at the time it submits its closeout report for the applicable fiscal year. (iii) Spend forward funds. If any State agency notifies the Department of its intent to spend forward a specific amount of funds for expenditure in the subsequent fiscal year, in accordance with paragraph (b)(3)(ii) of this section, such funds shall not be subject to recovery by the Department. (f) Conversion of food funds. In any fiscal year that a State agency achieves, through use of acceptable measures (including, but not limited to, use of cost containment measures, curtailment of vendor abuse, and breastfeeding promotional activities), increased Federal participation that exceeds its current year Federally-projected participation level as determined by the allocation in the second quarter, such State agency may convert food funds to NSA funds. The conversion rate (per participant administrative grant) will be determined after the initial allocation (excluding partial year appropriations) by dividing the current year's administrative grant, inclusive of regional discretionary funds, by the current year's Federally-projected participation level. This conversion is allowable to the extent that the funds are necessary to cover allowable NSA expenditures in such fiscal year and the State agency does not exceed the per participant grant for NSA established by the funding procedure in paragraph (c)(2) in this section. If a State agency increases its participation level through measures that are not in the nutritional interests of participants or not otherwise allowable under program regulations (such as reducing the quantities of foods provided for reasons not related to nutritional need), the State agency may not convert amounts allocated for food benefits to defray costs of NSA and the expenditure of such funds for NSA purposes will be disallowed in accordance with paragraph (h) of this section. (g) Expenditure of converted food funds. The State agency may convert food funds to NSA funds under paragraph (f) of this section only to the extent necessary to cover allowable NSA costs which exceed the State agency's NSA grant for the current fiscal year and any NSA funds which the State agency has spent forward into the current fiscal year. (h) Limits on converted food funds. At the end of the fiscal year, the Department will determine the amount of food funds which the State agency was entitled to convert to NSA funds under paragraph (f) of this section. In the event that the State agency has converted more than the permitted amount of funds, the Department will disallow the amount of excess conversion. (i) Converted funds in relation to grants. For purposes of establishing a State agency's stability food grant and stability NSA grant under paragraphs (c)(2)(i) and (c)(3)(i) of this section, respectively, amounts converted from food funds to NSA funds under paragraph (f) of this section and Sec. 246.14(e) of this part during the preceding fiscal year shall be treated as though no conversion had taken place. * * * * * 15. In Sec. 246.19, paragraph (b)(3) is revised to read as follows: Sec. 246.19 Management evaluation and reviews. * * * * * (b) * * * (3) The State agency shall conduct monitoring reviews of each local agency at least once every two years. Such reviews shall include on- site reviews of a minimum of 20 percent of the clinics in each local agency or one clinic, whichever is greater. The State agency may conduct such additional on-site reviews as the State agency determines to be necessary in the interest of the efficiency and effectiveness of the program. * * * * * 16. In Sec. 246.24, paragraph (a) is revised to read as follows: Sec. 246.24 Procurement and property management. (a) Requirements. State and local agencies shall ensure that subgrantees comply with the requirements of 7 CFR part 3016, the nonprocurement debarment/suspension requirements of 7 CFR part 3017, and if applicable, the lobbying restrictions as required in 7 CFR part 3018 concerning the procurement and allowability of food in bulk lots, supplies, equipment and other services with Program funds. These requirements are adopted to ensure that such materials and services are obtained for the Program in an effective manner and in compliance with the provisions of applicable law and executive orders. * * * * * Sec. 246.25 [Amended] 17. In Sec. 246.25(b)(2), reference to ``Sec. 246.7(d)(4)'' is revised to read ``Sec. 246.7(e)(4)''. 18. In Sec. 246.27, paragraphs (a)-(d) and (f) are revised to read as follows: Sec. 246.27 Program Information. * * * * * (a) Connecticut, Maine, Massachusetts, New Hampshire, New York, Rhode Island, Vermont: U.S. Department of Agriculture, FNS, Northeast Region, 10 Causeway Street, room 501, Boston, Massachusetts 02222-1066. (b) Delaware, District of Columbia, Maryland, New Jersey, Pennsylvania, Puerto Rico, Virginia, Virgin Islands, West Virginia: U.S. Department of Agriculture, FNS, Mid-Atlantic Region, Mercer Corporate Park, 300 Corporate Boulevard, Robbinsville, New Jersey 08691-1598. (c) Alabama, Florida, Georgia, Kentucky, Mississippi, North Carolina, South Carolina, Tennessee: U.S. Department of Agriculture, FNS, Southeast Region, 77 Forsyth Street, SW., suite 112, Atlanta, Georgia 30303. (d) Illinois, Indiana, Michigan, Minnesota, Ohio, Wisconsin: U.S. Department of Agriculture, FNS, Midwest Region, 77 West Jackson Boulevard--20th Floor, Chicago, Illinois 60604-3507. * * * * * (f) Colorado, Iowa, Kansas, Missouri, Montana, Nebraska, North Dakota, South Dakota, Utah, Wyoming: U.S. Department of Agriculture, FNS, Mountain Plains Region, 1244 Speer Boulevard, suite 903, Denver, Colorado 80204. * * * * * Dated: March 2, 1994. William E. Ludwig, Administrator, Food and Nutrition Service. [FR Doc. 94-5569 Filed 3-10-94; 8:45 am] BILLING CODE 3410-30-U