[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