[Federal Register Volume 59, Number 69 (Monday, April 11, 1994)]
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From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-8505]


  Federal Register / Vol. 59, No. 69 / Monday, April 11, 1994 /
  
[[Page Unknown]]

[Federal Register: April 11, 1994]


                                                    VOL. 59, NO. 69

                                             Monday, April 11, 1994

DEPARTMENT OF AGRICULTURE

Food and Nutrition Service

7 CFR Parts 250 and 251

 

Donation of Foods for Use in the United States, Its Territories 
and Possessions and Areas Under Its Jurisdiction (Soup Kitchens and 
Food Banks), and the Emergency Food Assistance Program

AGENCY: Food and Nutrition Service, USDA.

ACTION: Final rule.

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SUMMARY: This final rule amends the Food Distribution Program 
Regulations and the Emergency Food Assistance Program (TEFAP) 
Regulations to codify previously proposed food distribution provisions 
contained in the Hunger Prevention Act of 1988 and several 
nondiscretionary food distribution requirements contained in the Food, 
Agriculture, Conservation, and Trade Act of 1990, and the Food, 
Agriculture, Conservation, and Trade Act Amendments of 1991. The 
statutory requirements contained in this final rule address: 
Distribution of additional commodities to emergency feeding 
organizations, soup kitchens, and food banks; use of Emergency Food 
Assistance Program administrative funds; State and local maintenance-
of-effort requirements; priority in the distribution of commodities to 
existing networks and organizations under TEFAP; and explicit inclusion 
of hospitals and facilities caring for needy infants and children as 
charitable institutions. In addition to codifying provisions contained 
in the above laws, this final rule implements previously proposed 
discretionary changes initiated by the Department in order to reduce 
the administrative burden imposed upon State agencies and to make the 
Department's regulations more consistent.

EFFECTIVE DATE: This final rule is effective May 11, 1994.

FOR FURTHER INFORMATION CONTACT: Philip K. Cohen, Chief, Program 
Administration Branch, Food Distribution Division, 3101 Park Center 
Drive, room 502, Alexandria, Virginia 22302, telephone (703) 305-2662.

SUPPLEMENTARY INFORMATION:

Classification

Executive Order 12866

    This final rule has been determined to be not significant for 
purposes of Executive Order 12866 and, therefore, has not been reviewed 
by the Office of Management and Budget.

Regulatory Flexibility Act

    This action has been reviewed with regard to the requirements of 
the Regulatory Flexibility Act (5 U.S.C. 601-612). The Administrator of 
the Food and Nutrition Service (FNS) has certified that this final rule 
will not have a significant economic impact on a substantial number of 
small entities. Most of the new provisions in this rule affect State 
agencies. While some of the recipient agencies affected by this rule 
may be considered ``small entities,'' the cost of compliance with the 
changes in this rule will be minimal because the time and cost of 
preparing any paperwork relative to participation will be very limited.

Executive Order 12372

    These programs are listed in the Catalog of Federal Domestic 
Assistance under 10.550 and 10.568 and are subject to the provisions of 
Executive Order 12372, which requires intergovernmental consultation 
with State and local officials (7 CFR part 3015, subpart V and the 
final rule-related notices published at 48 FR 29114, June 24, 1983 and 
49 FR 22676, May 31, 1984).

Paperwork Reduction Act

    In accordance with the Paperwork Reduction Act of 1980 (44 U.S.C. 
3507), additional recordkeeping and reporting requirements contained in 
this final rule are subject to review and approval by the Office of 
Management and Budget. Current reporting and recordkeeping requirements 
were approved under Control Number 0584-0293.

Statutory Effective Dates

    The provisions of the Hunger Prevention Act of 1988, Public Law 
100-435, on the following subjects were effective September 19, 1988: 
(1) The distribution of additional commodities for use by emergency 
feeding organizations, soup kitchens and food banks; (2) the use of 
TEFAP administrative funds for the costs of providing recipients 
information on commodity storage and handling; (3) the distribution of 
commodities that have been donated by persons or entities other than 
USDA by emergency feeding organizations; (4) the increase in the amount 
of TEFAP administrative funds passed through by States to emergency 
feeding organizations from 20 percent to 40 percent; (5) the use of 
volunteer workers for the distribution of non-USDA commodities by State 
agencies and emergency feeding organizations; (6) State and local 
maintenance-of-effort requirements; and (7) the authority for States to 
give priority to existing networks and organizations that distribute 
food to low-income households when distributing commodities under TEFAP 
(as reflected in Secs. 250.3 (definitions of ``soup kitchen'' and 
``food bank''), 250.52, 251.3 (definition of ``formula''), 251.4 
(c)(3), (h) and (i), 251.6(a)(4), 251.7(a), 251.8(d), 251.10 (e)(7), 
(g) and (h) of this final rule).
    The provisions of the Food, Agriculture, Conservation, and Trade 
Act of 1990, Public Law 101-624, relating to the use of TEFAP 
administrative funds for repackaging and processing certain commodities 
and the specific inclusion of hospitals and facilities caring for needy 
infants and children in the definition of charitable institutions (as 
reflected in Secs. 251.8(d)(1)(i) and 250.3 (definition of ``charitable 
institution'') of this final rule) were effective November 28, 1990. 
The provision of the Food, Agriculture, Conservation, and Trade Act 
Amendments of 1991, Public Law 102-237, establishing a priority system 
for the distribution of commodities to soup kitchens and food banks (as 
reflected in Sec. 250.52(a) of this final rule) was effective February 
2, 1992. Affected parties should already be complying with the mandates 
of this legislation.

Good Cause Determinations

    This final rule incorporates several new statutory requirements 
which were not contained in a prior proposed rule: The nondiscretionary 
requirements of the Food, Agriculture, Conservation, and Trade Act of 
1990, Public Law 101-624, that address the specific inclusion of 
hospitals and facilities caring for needy infants and children in the 
definition of charitable institutions, and the allowable use of TEFAP 
administrative funds to pay costs incurred for the processing and 
repackaging of TEFAP commodities. It also incorporates the 
nondiscretionary requirements of the Food, Agriculture, Conservation, 
and Trade Act Amendments of 1991, Public Law 102-237, that establish a 
priority system for the distribution of section 110 commodities. In 
light of the nondiscretionary nature of these requirements and since 
the legislatively mandated effective dates of these requirements were 
November 28, 1990, and February 1, 1992, respectively, the 
Administrator of FNS 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 Secs. 250.3 (definition of ``charitable 
institution''), 250.52(a), and 251.8(d)(1)(i) without prior public 
notice and comment. This final rule also amends Sec. 251.10(e)(2)(ii) 
to revise the current requirement that monitoring visits of 
distribution sites must be conducted simultaneously with actual 
commodity distribution and/or eligibility determinations. It has come 
to the Department's attention that it is not always possible for 
reviews to be conducted in a manner that meets this requirement. 
Accordingly, this rule amends Sec. 251.10(e)(2)(ii) to require that 
reviews be conducted simultaneously with actual distribution and/or 
eligibility determinations only to the maximum extent feasible. Since 
this change serves to reduce the administrative burden currently 
imposed on State agencies, the Administrator 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. 251.10(e)(2)(ii) without prior 
public notice and comment.

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'' section 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. This includes any administrative procedures provided 
by State or local governments. For disputes involving procurements by 
distributing and recipient agencies, this includes any administrative 
appeal procedures to the extent required by 7 CFR Part 3016.

Background

    As stated above, this final rule incorporates into program 
regulations certain nondiscretionary requirements of the Food, 
Agriculture, Conservation and Trade Act of 1990 (the FACT Act), Public 
Law 101-624, and the Food, Agriculture, Conservation, and Trade Act 
Amendments of 1991 (the FACT Act Amendments), Public Law 102-237. With 
the exception of the provisions relating to the requirements of Public 
Law 101-624 and Public Law 102-237, and a modification to the 
monitoring requirement for distribution sites, all provisions of this 
final rule were published in a proposed rule on April 6, 1990 (55 FR 
12838). That proposal and the public comments submitted to the 
Department on discretionary provisions are discussed below.

Food, Agriculture, Conservation, and Trade Act of 1990

    The FACT Act was enacted on November 28, 1990. The major purposes 
of Title XVII of the FACT Act were to reauthorize and improve the Food 
Stamp Program and certain Food Distribution Programs. This rulemaking 
implements the nondiscretionary provisions contained in the FACT Act 
that relate to the domestic distribution of commodities. The provisions 
that affect the Food Stamp Program have been implemented through 
several separate rulemakings. In addition, separate rulemakings are 
being promulgated to incorporate the discretionary domestic commodity 
provisions included in the FACT Act into the Department's regulations.
    In accordance with the provisions of the FACT Act, this final rule 
amends current regulations to: (1) Delete the word ``Temporary'' from 
the title of the Emergency Food Assistance Program; (2) explicitly 
include hospitals and facilities caring for needy infants and children 
in the definition of charitable institutions; and (3) permit the use of 
TEFAP administrative funds to pay costs associated with the processing 
and repackaging of TEFAP commodities. Following is a detailed 
discussion of the regulatory changes being made in this final rule to 
reflect these provisions.

Change in Program Name (Part 251)

    Section 1772(a) of the FACT Act struck the word ``Temporary'' from 
the title of the authorizing legislation contained in Public Law 98-8 
and renamed the short title, ``Title II--Emergency Food Assistance Act 
of 1983.'' In order to avoid confusion during the following 
discussions, the incorporation of this change in the Department's 
references to the law, the program name, and the commonly-used acronym 
need to be clarified. Due to this change, the authorizing legislation 
will be referred to hereinafter as EFAA instead of TEFAA. In addition, 
the program's name has changed from the Temporary Emergency Food 
Assistance Program to the Emergency Food Assistance Program. In 
response to this legislative change, this final rule changes the title 
of 7 CFR Part 251 by deleting the word ``Temporary.'' However, the 
Department has decided to continue to use the program's original 
acronym, TEFAP, and now will refer to ``the Emergency Food Assistance 
Program'' whenever the acronym needs to be established.

Charitable Institution Definition (Sec. 250.3)

    Section 1771(b) of the FACT Act amended section 4(a) of the 
Agriculture and Consumer Protection Act of 1973 (Public Law 93-86; 7 
U.S.C. 612c note) and section 416(a)(3) of the Agricultural Act of 1949 
(7 U.S.C. 1431(a)(3)) to explicitly include hospitals and facilities 
caring for needy infants and children in the category of institutions 
eligible for commodity donations under these authorities. While these 
institutions are, by definition, eligible to receive donations as 
charitable institutions under current regulations, Sec. 250.3 of this 
final rule is nonetheless being amended to specifically identify these 
institutions in the definition of charitable institutions.

Repackaging and Processing Costs (Sec. 251.8(d)(1)(i))

    Section 1772(d) of the FACT Act amended section 204 of the EFAA to 
permit emergency feeding organizations to use TEFAP administrative 
funds to pay costs associated with the repackaging and processing of 
USDA commodities that are made available under the EFAA and section 110 
of the Hunger Prevention Act of 1988 (Hunger Prevention Act). This 
final rule revises Sec. 251.8(d)(1)(i) to incorporate this 
nondiscretionary legislative mandate. For further discussion of this 
provision, please refer to ``Restructuring of Administrative Cost 
Provisions'' later in this preamble.

Hunger Prevention Act of 1988

    In addition to certain nondiscretionary provisions in the FACT Act 
and the FACT Act Amendments, this final rule incorporates certain 
requirements contained in the Hunger Prevention Act. The major purposes 
of the Hunger Prevention Act are to require the Secretary to purchase 
additional commodities for distribution to low-income households, 
improve the Child Nutrition and Food Stamp Programs, and provide other 
hunger relief to needy households and the homeless. The commodity 
provisions contained in the Hunger Prevention Act were addressed in a 
proposed rule amending Parts 250 and 251 which was published in the 
Federal Register on April 6, 1990 (55 FR 12838). The proposed rule 
addressed the commodity provisions contained in the Hunger Prevention 
Act relative to: (1) The distribution of additional commodities for use 
by emergency feeding organizations, soup kitchens, and food banks; (2) 
the use of TEFAP administrative funds to pay for the costs of providing 
information on commodity storage and handling to recipients; (3) the 
distribution of commodities that have been donated by persons or 
entities other than USDA by emergency feeding organizations; (4) the 
increase in the amount of administrative funding to be passed through 
by States to emergency feeding organizations from 20 percent to 40 
percent; (5) the use of volunteer workers and distribution of non-USDA 
commodities by State agencies and emergency feeding organizations; (6) 
State and local maintenance-of-effort requirements; and (7) the 
authority for States to give priority to existing networks and 
organizations that distribute food to low-income households when 
distributing commodities under TEFAP.
    The proposed rule also addressed certain discretionary changes to 
provisions in part 251 which: (1) Reduced the required TEFAP monitoring 
by State agencies; (2) clarified the State matching requirements for 
TEFAP administrative funds; (3) included references to 7 CFR part 3016; 
and (4) changed reference to the form used to report State and local 
TEFAP costs. The proposed rule afforded the general public 60 days in 
which to comment.
    A total of 37 comment letters were received on the proposed rule. 
Respondents represented 14 State agencies, 2 cities, 2 counties and 19 
interested groups. Despite general support of the proposed rule, the 
following issues were raised by some commenters: Limitations on the 
distribution of section 110 soup kitchen/food bank commodities 
resulting from the Hunger Prevention Act's definition of food banks and 
soup kitchens; the organization of regulations pertaining to the 
administration and distribution of soup kitchen/food bank commodities 
obtained under section 110 of the Hunger Prevention Act; authorization 
for the Secretary to establish procedures which allow non-USDA 
commodities to be used to supplement USDA commodities; and the decrease 
in the monitoring for emergency feeding organizations.
    The remainder of this preamble discusses the provisions contained 
in the proposed rule, the comments received in response to that rule, 
and the Department's response to the comments on discretionary 
provisions as implemented through this final rule. For a more 
comprehensive understanding of the provisions contained in this final 
rule, the reader should refer to the preamble of the proposed rule.

Additional Commodities

Additional TEFAP Commodities (Sec. 251.4(h))

    Section 104 of the Hunger Prevention Act amended the EFAA to add 
sections 213 and 214. Section 214 required the Secretary to spend $120 
million to purchase, process and distribute additional commodities 
during each of Fiscal Years 1989 and 1990. Paragraph (a) of section 213 
mandated that these commodities be provided to States for distribution 
to emergency feeding organizations. Section 1772 of the FACT Act 
extended the Secretary's authority to purchase additional commodities 
for distribution through TEFAP through Fiscal Year 1995.
    In order to clarify the eligibility of emergency feeding 
organizations to receive these commodities, a new paragraph (h) was 
added to Sec. 251.4 in the proposed rule. Commenters did not oppose 
this provision. Since section 1772(g) of the FACT Act, enacted 
subsequent to the proposed rule, extended the Secretary's purchase 
authority through Fiscal Year 1995, the provisions contained in 
paragraph (h) of Sec. 251.4 of the proposed rule relative to the types 
of additional TEFAP commodities emergency feeding organizations are 
eligible to receive have been retained in this final rule.
    In addition, section 105(c) of the Hunger Prevention Act amended 
section 203B(a) of the EFAA to grant States the option, when allocating 
TEFAP commodities within the State, to give priority to existing food 
bank networks and other organizations whose ongoing primary function is 
to facilitate the distribution of food to low-income households. This 
provision was included in Sec. 251.4(h) of the proposed rule, and is 
retained this final rule.

Section 110 Commodities for Soup Kitchens/Food Banks

    Section 110(c) of the Hunger Prevention Act required the Secretary 
to purchase, process, and distribute additional commodities to States. 
The Hunger Prevention Act authorized the distribution of these 
commodities to soup kitchens and food banks in addition to the 
commodities otherwise made available to these organizations. Section 
1774(a) of the FACT Act amended section 110 to extend the Secretary's 
authority to purchase additional commodities for distribution to these 
organizations, and provided that there are authorized to be 
appropriated $40 million for each of Fiscal Years 1992 through 1995. 
However, only $32 million was appropriated for Fiscal Years 1992 and 
1993. The specific provisions relative to the distribution of these 
commodities as they were proposed and the comments received are 
discussed in detail below.
Organization of Regulations
    A few comments were received concerning the proposed placement of 
the provisions regarding the distribution of the section 110 
commodities in both parts 250 and 251. Commenters expressed concern 
that the separation of regulations led to confusion and unnecessary 
delays in administering the program in cases where the State agency 
responsible for distributions to charitable institutions was not also 
the State agency administering TEFAP. Two commenters recommended the 
consolidation of all regulations regarding section 110 commodities in 
the TEFAP regulations (part 251).
    It should be noted that section 110 of the Hunger Prevention Act 
did not amend the EFAA; thus, the distribution of commodities under 
this section is not directly a part of TEFAP. Therefore the Department 
decided, in implementing the legislation, to treat food banks and soup 
kitchens that serve the needy with section 110 commodities as recipient 
agencies under the Food Distribution Program regulations (part 250). 
Conversely, authorization for the receipt of TEFAP administrative funds 
by institutions receiving section 110 commodities is contained in 
section 204(a)(1) of the EFAA. Thus, for administrative funding 
purposes, these institutions are considered emergency feeding 
organizations and are governed by TEFAP regulations (part 251).
    In addition, part 251 contains certain requirements which are not 
appropriate for soup kitchens and food banks receiving section 110 
commodities. Such provisions in part 251 include requiring individual 
certification of recipients and certain recordkeeping and reporting 
requirements. Rather than include all regulations regarding section 110 
commodities in part 251 along with a host of exceptions to existing 
regulations that do not apply, the Department will continue to address 
the section 110 provisions as appropriate through both parts 250 and 
251.
    Since implementation of the provisions of the Hunger Prevention Act 
of 1988, it has been brought to the Department's attention that there 
is considerable confusion relating to the structure of the proposed 
regulations resulting from the fact that many soup kitchens and food 
banks receive commodities through both the Department's donations to 
charitable institutions and through section 110. As indicated above, 
the Department will continue to address provisions for outlets 
receiving section 110 commodities through both parts 250 and 251. 
However, for the purpose of clarification, this final rule has been 
restructured to move all of the provisions for the receipt of section 
110 commodities from Sec. 250.41 to new Sec. 250.52. For commodities 
received through the Department's donations to charitable institutions, 
soup kitchens and food banks must continue to comply with the 
provisions of Sec. 250.41; for section 110 commodities, the provisions 
of the new Sec. 250.52 will apply. Requirements relating to soup 
kitchens and food banks receiving TEFAP administrative funds will 
continue to be addressed in part 251. The specific provisions contained 
in Sec. 250.52 are discussed in further detail below.
Definition of Eligible Institutions (Secs. 250.3 and 250.52(a))
    The Hunger Prevention Act specifically defines the types of food 
banks and soup kitchens that are eligible to receive commodities 
purchased under section 110. In section 110(b)(3), the Hunger 
Prevention Act defines ``food bank'' as ``public and charitable 
institutions that maintain an established operation involving the 
provision of food or edible commodities, or the products thereof, to 
food pantries, soup kitchens, hunger relief centers, or other food or 
feeding centers that provide meals or food to needy persons on a 
regular basis as an integral part of their normal activities.'' In 
section 110(b)(6), the Hunger Prevention Act defines ``soup kitchen'' 
as ``public and charitable institutions that maintain an established 
feeding operation to provide food to needy homeless persons on a 
regular basis as an integral part of their normal activities.'' Section 
110(e)(2)(A) of the Hunger Prevention Act further specifies that in 
determining the amount of commodities that will be accepted by soup 
kitchens and food banks, States shall give priority to institutions 
that provide ``meals'' to homeless individuals.
    The proposed rule incorporated the definitions of ``soup kitchen'' 
and ``food bank'' and the procedures for distributing section 110 
commodities to these organizations in Sec. 250.41(d).
    While the Hunger Prevention Act clearly defines ``food bank'' and 
``soup kitchen'' and stipulates that section 110 commodities are to be 
directed to the needy and homeless, several commenters opposed the 
Department's proposed implementation of its provisions. Three 
commenters rejected the regulatory proposal that commodities be 
distributed only to soup kitchens and food banks as defined by the 
Hunger Prevention Act. Their principal concern was that many rural 
areas do not have access to food bank networks or soup kitchens and 
thus would be excluded from receiving the additional commodities 
authorized under section 110. One commenter recommended that ``food 
pantries'' be eligible to receive commodities in areas where soup 
kitchens and food bank warehouses do not exist. Another suggested that 
alcohol treatment centers and domestic violence shelters should be 
considered eligible for section 110 commodities on the basis that 
without the services of these agencies, their clients could potentially 
be homeless. Only two commenters supported the limitation of 
distribution of section 110 commodities to soup kitchens and food banks 
that provide meals to homeless individuals.
    Subsequent to the publication of the proposed rule, Congress passed 
the FACT Act. Section 1774(a)(2)(B) defines ``food pantry'' as ``a 
public or private nonprofit organization that distributes food to low-
income and unemployed households, including food from sources other 
than the Department of Agriculture, to relieve situations of emergency 
and distress.'' Section 1774(a)(3) of the FACT Act addressed the 
unintended exclusion of some States which have food pantries rather 
than food banks by allowing distribution to food pantries in some 
instances. Since the Department intends to exercise some discretion in 
implementing this provision, the distribution of section 110 
commodities to food pantries will be addressed in a separate proposed 
rule. However, since section 1774(a) became effective on February 1, 
1992, affected State distributing agencies should already be complying 
with this statutory requirement.
    On December 13, 1991, Congress passed the FACT Act Amendments, 
Public Law 102-237. Section 922(a)(2) of Public Law 102-237 amended 
section 110 of the Hunger Prevention Act to establish a priority system 
for the distribution of these commodities, which at least partially 
addresses the above comments. As discussed below, this final rule 
reflects the priority distribution system set forth in Public Law 102-
237. The remaining commodity provisions contained in Public Law 102-237 
will be addressed through a separate proposed rulemaking.
    The priority system for the distribution of section 110 commodities 
presented in this final rule increases the number and types of 
institutions eligible to receive and distribute these commodities. 
However, as required by statute, Sec. 250.52(a)(1) of this final rule 
continues to mandate that distributing agencies give first priority in 
the distribution of these commodities to soup kitchens, as defined in 
Sec. 250.3, and other like organizations that serve meals to homeless 
persons, and to food banks for distribution to such organizations. If 
distributing agencies determine that they will not likely exhaust their 
allocation of section 110 commodities through distribution to this 
first priority group, the distributing agency must make the remaining 
commodities available to food banks for distribution to the second 
priority group, institutions that distribute commodities to the needy. 
Eligibility to receive the commodities for household consumption from 
such institutions must be established through a means test as 
determined appropriate by the distributing agency. If a food bank 
determines that it will not likely exhaust its allocation of section 
110 commodities through distribution to this second priority group, it 
may distribute the remaining commodities to institutions that serve 
meals to needy individuals but whose programs do not use a means test 
as part of their eligibility criteria, provided that such organizations 
have documented, to the satisfaction of the food bank, that they do, in 
fact, serve predominantly needy persons. Examples of this third 
priority group include domestic violence shelters, child care centers 
and alcohol rehabilitation centers.
    Section 250.52(a) of this final rule is revised to provide for the 
distribution of section 110 commodities in accordance with the priority 
system described above. In addition, the definitions of ``food bank'' 
and ``soup kitchen'' have been deleted from this section and 
incorporated in Sec. 250.3, ``Definitions,'' for the purpose of 
consistency.
Tax-Exempt Status (Sec. 250.52(b))
    Sections 250.41(d)(2)(ii) and 250.41(d)(3)(ii) of the proposed rule 
required that soup kitchens and food banks must have obtained 
recognition of tax-exempt status, or have applied for, and be moving 
toward, obtaining recognition of their tax-exempt status by the 
Internal Revenue Service, or be currently operating a Federal program 
requiring nonprofit status. The proposed rule would allow them 12 
months to receive recognition of Federal tax-exempt status. No comments 
were received opposing this provision. Thus, it is retained in 
Sec. 250.52(b) of this final rule with minor revisions emphasizing 
recognition of tax-exempt status by the Internal Revenue Service and 
clarifying that the 12-month grace period runs from the effective date 
of the organization's approval for participation, not from the date of 
filing with the Internal Revenue Service, and that documentation of 
recognition of tax-exempt status must be not only obtained, but also 
forwarded to the State distributing agency, within that period. So as 
not to penalize soup kitchens or food banks for delays which are beyond 
their control, when a soup kitchen or food bank has not received a 
decision on its application for tax-exempt status in the required 12-
month period, Sec. 250.52(b) of this final rule also permits such an 
organization to continue participation in the program if the 
distributing agency determines that it has provided sufficient 
documentation of compliance with all IRS requirements and provided 
information to IRS in a timely manner.
Participation Data and Household Distribution (Sec. 250.52(c)(2))
    The proposed rule recognized that soup kitchens, unlike certain 
other types of charitable institutions, have been established for the 
specific purpose of providing assistance to the indigent. Thus, the 
Department believes that it is reasonable to assume that individuals 
seeking a meal at a soup kitchen are needy. Based on this premise, 
Sec. 250.41(d)(2)(iii) of the proposed rule provided for the 
distribution of section 110 commodities on the basis of the number of 
meals expected to be served daily, as submitted by the soup kitchen or 
food bank that has an agreement with the State and approved or adjusted 
by the distributing agency, rather than using the detailed formula 
required for other charitable institutions.
    Sections 250.41(d)(3)(iii) (A) and (B) of the proposed rule also 
provided that distributing agencies must base the distribution of 
commodities to food banks on: (1) The number of meals to be served 
daily in a congregate meal setting by institutions receiving 
commodities from the food bank; and (2) the number of needy households 
that meet the State's eligibility criteria for participation in TEFAP 
that will be provided food for home consumption by such institutions.
    Given that commenters did not oppose these provisions, the 
provision concerning the number of congregate meals projected to be 
served is retained in Sec. 250.52(c)(2)(i) of this final rule as 
proposed, with certain technical changes to clarify that projections 
must contain the number of days that meals will be served during the 
agreement period. The provision concerning household distribution is 
contained in Sec. 250.52(c)(2)(ii) of this final rule with a change to 
the eligibility determination. In instances in which section 110 
commodities are made available for distribution to households, 
Sec. 250.41(d)(3)(iii)(C) of the proposed rule required food banks to 
ensure that organizations receiving the commodities distribute them 
only to households which meet the eligibility criteria established by 
the State pursuant to Sec. 251.5(b) of the TEFAP regulations. However, 
section 922(a) of Public Law 102-237 amended section 110(j)(2) of the 
Hunger Prevention Act to authorize institutions that distribute 
commodities to the needy for home consumption to determine eligibility 
through a means test that has been determined appropriate by the 
distributing agency. Thus, the State need not require the same 
eligibility criteria it has established for TEFAP. Sections 250.52 
(c)(2)(ii) and (c)(6)(ii) of this final rule have been revised to 
reflect this current legislative provision.
    Section 250.41(d)(3)(iii) of the proposed rule also required that 
food banks ensure that organizations distributing section 110 
commodities to households comply with the provisions contained in 
Sec. 251.10(f) concerning the limitation on unrelated activities (e.g., 
recipients cannot be required to register to vote as a condition for 
receiving USDA commodities). Since commenters did not oppose this 
provision, it has been retained in Sec. 250.52(c)(6)(i) of this final 
rule.

Allocation of Additional Commodities by the Department

    Section 214 of the EFAA and section 110 of the Hunger Prevention 
Act require the Secretary to allocate, on an annual basis, the 
additional TEFAP and soup kitchen/food bank commodities to States based 
on a formula that takes into account each State's population of low-
income and unemployed persons as percentages of the national totals. 
Each State's share of commodities must be based 60 percent on the 
number of households within the State which have incomes below the 
poverty line and 40 percent on the average monthly number of unemployed 
persons within the State. These sections also require that such 
additional commodities be allocated among States on the basis of value.
Soup Kitchen/Food Bank Commodities (Sec. 250.52(d)(1))
    In accordance with the legislative provisions described above, 
Sec. 250.41(d)(4)(i) of the proposed rule incorporated the allocation 
formula and provided for the annual allocation, based on value, of 
section 110 commodities by the Department.
TEFAP Commodities (Secs. 251.3 and 251.7(a))
    The definition of ``formula'' was revised in Sec. 251.3 of the 
proposed rule to more closely follow the wording relative to the 60/40 
formula contained in section 214 of the EFAA and to clarify that 
surplus commodities made available for distribution through TEFAP will 
continue to be allocated based on the amount of commodities in pounds 
while the purchased commodities will be allocated based on value. In 
addition, Sec. 251.7(a) of the proposed rule was revised to provide for 
the allocation formula of the purchased commodities to be adjusted once 
a year.
    Comments in response to the provisions contained in the proposed 
rule relative to the Department's allocation of section 110 and TEFAP 
commodities addressed the use of the 60/40 formula. Two commenters 
supported the use of the 60/40 formula, whereas one commenter expressed 
concern that current allocations are based on 1980 poverty statistics 
and stated that more up-to-date information should be utilized when 
making allocations. Although the Census is conducted once every 10 
years, it represents the best available source of national data on low-
income persons. Since no better data base is available, the Department 
must accept the limitations resulting from the relative infrequency of 
the Census. It should be noted, however, that the program allocation 
data base has been updated based on the results of the 1990 Census.
    Until such time as the Department identifies the existence of data 
more appropriate for use in allocating TEFAP and section 110 
commodities, the allocation formula described in Secs. 251.3, 251.7(a) 
and 250.52(d)(1) of this final rule will continue to be used.
Allocation of Section 110 Commodities by States (Sec. 250.52(d)(3))
    Section 250.41(d)(4)(iii) of the proposed rule required State 
distributing agencies to use the data reported in the agreement by soup 
kitchens and food banks to allocate section 110 commodities. This 
section of the proposed rule also required that section 110 commodities 
be allocated in a manner that ensures that commodities will not be made 
available in quantities that are in excess of anticipated use or the 
ability of the organization to accept and store the commodities. Since 
no comments were received concerning this provision, it is retained in 
Sec. 250.52(d)(3) of this final rule with language clarifying that the 
distributing agency may critically review and adjust the estimates as 
appropriate.
Reallocation of Additional Commodities (Secs. 250.52(d)(4) and 251.3)
    When a State determines that it will not accept all of its share of 
the additional TEFAP commodities, section 214(g) of the EFAA, as added 
by section 104 of the Hunger Prevention Act, requires the Department to 
reallocate these commodities on the basis of the same 60/40 formula 
that is used for the initial allocation. Section 251.3 of the proposed 
rule expanded the definition of ``formula'' to include the reallocation 
requirement. This final rule retains the definition as proposed.
    When a State determines that it will not accept all of its share of 
section 110 commodities, section 110(e) of the Hunger Prevention Act 
requires the Department to reallocate these commodities in a fair and 
equitable manner among States that have already accepted the full 
amount of their allocation and have requested additional amounts. This 
procedure for reallocating section 110 commodities was included in 
Sec. 250.41(d)(4)(iv) of the proposed rule.
    One commenter suggested that the Department set aside a particular 
month of the year to make reallocations to afford each soup kitchen/
food bank the opportunity to plan ahead accordingly. Unfortunately, 
this recommendation is not feasible. Often the commodities have been 
purchased for the proximate shipping period, forcing the Department to 
reallocate commodities turned back by States immediately. Thus, the 
proposed reallocation formula is retained without modification in 
Sec. 250.52(d)(4) of this final rule. The Department will continue to 
review its procurement methods so that reallocations can be as 
responsive to State planning needs as possible.
Notification of Acceptance of Additional Commodities (Secs.  
250.52(d)(2) and 251.4(c)(3))
    Section 214(g) of the EFAA and section 110(e) of the Hunger 
Prevention Act require that each State promptly notify the Secretary 
when it has determined that it will not accept any or all of its 
allocation of the additional TEFAP or section 110 commodities. So that 
reallocations can be made and deliveries can be arranged in a timely 
manner, Secs. 250.41(d)(4)(ii) and 251.4(c)(3) of the proposed rule 
required State agencies to notify the Department at least 30 days prior 
to the shipping period of the amount of the commodities which they will 
accept. Since no comments were received in response to these 
provisions, they are retained in Secs. 250.52(d)(2) and 251.4(c)(3) of 
this final rule as proposed, with clarification that the requirement 
for notification applies to the beginning of the shipping period.
State Maintenance-of-Effort Requirement (Secs. 250.52(f) and 251.10(h))
    Section 214(i) of the EFAA, as added by section 104 of the Hunger 
Prevention Act, prohibits a State which uses its own funds to provide 
commodities or services to organizations receiving funds or services 
under that section from diminishing the level of support it provides to 
such organizations or from reducing the amount of funds available for 
other nutrition programs in the State in each fiscal year. This 
provision was incorporated in Sec. 251.10(h) of the proposed rule, and 
is retained in the final rule.
    The proposed rule also incorporated the requirement in section 
110(h)(3) of the Hunger Prevention Act that local agencies receiving 
section 110 commodities provide assurance to the State that donations 
of food from other sources will not be diminished as a result of the 
receipt of the section 110 commodities. To implement this provision, 
Sec. 250.41(d)(6) of the proposed rule required that distributing 
agencies obtain this assurance from each institution prior to making 
commodities available. The proposed rule mandated that this assurance 
be provided in writing and maintained on file by the distributing 
agency. Commenters did not oppose this method for ensuring compliance 
with the Hunger Prevention Act. Thus, the provision is retained in 
Sec. 250.52(f) of this final rule.

Emergency Food Assistance Program Administrative Funds

Allowable Costs

Administrative Costs for Additional Commodities (Secs. 250.52(e), 
251.6(a)(4), 251.8(d) (1) and (2), and 251.10(e)(7))
    Section 204(a)(1) of the EFAA, as amended by section 105 of the 
Hunger Prevention Act, authorizes States and emergency feeding 
organizations to use TEFAP administrative funds to pay costs associated 
with the distribution of commodities provided under section 214 of the 
EFAA and section 110 of the Hunger Prevention Act.
    Section 250.41(d)(5) of the proposed rule included this provision 
and required that soup kitchens and food banks receiving foods under 
section 110 enter into a TEFAP agreement in order to receive TEFAP 
administrative funds for costs associated with the distribution of 
section 110 commodities. Commenters did not oppose this requirement. 
The Department believes that this arrangement will ensure 
accountability by applying the same requirements for the use of all 
TEFAP administrative funds, whether used by traditional TEFAP emergency 
feeding organizations or soup kitchens/food banks. In addition, this 
will mean that funds provided to soup kitchens and food banks may be 
counted toward the amount of TEFAP funds a State agency is required to 
pass through to emergency feeding organizations in accordance with the 
provisions contained in Sec. 251.8(d)(3)(i). This requirement is 
retained in Sec. 250.52(e) of this final rule with minor revisions.
    The provision allowing the use of TEFAP funds to cover the costs 
associated with the distribution of section 110 commodities was also 
included in Sec. 251.8(d)(1) of the proposed rule. As stated in the 
proposed rule, the Department will continue to make all TEFAP 
administrative funds available only to the TEFAP State agencies. When 
it is determined that TEFAP administrative funds will be made available 
to pay costs associated with the distribution of section 110 
commodities and the State agency responsible for TEFAP is not also 
responsible for the distribution of section 110 commodities, 
Sec. 251.8(d)(1) of the proposed rule required the TEFAP State agency 
to enter into an agreement with the entity which will receive and, if 
applicable, allocate the TEFAP funds in connection with section 110 
commodities. This agreement would be with either: (1) The soup kitchens 
or food banks; or (2) the distributing agency responsible for the 
distribution of section 110 commodities, which would in turn enter into 
a TEFAP agreement with each soup kitchen and food bank. The proposed 
rule provided for the agreement to be in the form of the TEFAP 
agreement currently being used for emergency feeding organizations or 
an amended charitable institution agreement which requires compliance 
with Sec. 251.8, which governs the use of TEFAP administrative funds, 
and Secs. 251.10 (a) (records) and (e) (State monitoring).
    The administration of TEFAP funds allotted to a State becomes more 
complicated when the State agency responsible for TEFAP is not the 
agency responsible for the distribution of section 110 commodities. As 
stated in the proposed rule, when TEFAP funds will be made available to 
pay costs associated with the distribution of section 110 commodities, 
it will be the responsibility of the two State agencies to determine 
how to allocate TEFAP administrative funds between the State agencies 
and among the emergency feeding organizations, including any soup 
kitchens/food banks with TEFAP agreements. To ensure proper monitoring 
of the distribution of TEFAP funds within the State, Sec. 251.6(a)(4) 
of the proposed rule required TEFAP State agencies to describe in the 
State plan how these funds will be allocated between State agencies and 
among emergency feeding organizations, including soup kitchens and food 
banks. In addition, Sec. 251.10(e)(7) of the proposed rule required 
TEFAP State agencies to ensure that emergency feeding organizations 
receiving funds for the distribution of section 110 commodities are 
reviewed to ensure compliance with the provisions contained in 
Sec. 251.8.
    Most commenters supported the proposed regulations on the payment 
of funds for storage and distribution costs, and the need for States to 
enter into agreements with organizations receiving section 110 
commodities and to describe the allocation of funds in their plan. 
Thus, the requirements described above are retained, as proposed, in 
Secs. 251.6(a)(4), 251.8(d)(2) and 251.10(e)(7) of this final rule with 
minor clarifying changes.
    Due to commenter concern about the difficulty of administering one 
program through two State agencies, the Department would like to 
emphasize that States have the authority to structure the 
administration and distribution of section 110 commodities in the 
fashion they deem most efficient and accountable. The Department 
recognizes that there may be some dissension among State agencies 
regarding the allocation of funds. As stated in the preamble to the 
proposed rule, when the allocation of these funds cannot be mutually 
agreed upon by the State agencies, the Department anticipates that the 
necessary decisions will be made by the Governor's office.
Administrative Costs for Non-USDA Commodities (Secs. 251.8(d) (1)(ii) 
and (2)(ii))
    Section 102 of the Hunger Prevention Act added a new section 
203D(b) to the EFAA, which authorizes States and emergency feeding 
organizations to use funds made available under the EFAA to pay costs 
incurred for the storage, handling and distribution of commodities 
which have been donated by persons or entities other than USDA. Section 
251.8(d)(1) of the proposed rule incorporated this provision, and is 
retained in Secs. 251.8(d) (1)(ii) and (2)(ii) of this final rule with 
certain clarifying changes which are described below.
Costs of Providing Information to Recipients (Sec. 251.8(d)(1)(i))
    Section 109(c) of the Hunger Prevention Act amended section 
204(a)(2) of the EFAA to permit emergency feeding organizations to use 
TEFAP funds to cover the costs of providing information on the 
appropriate storage and preparation of USDA commodities to persons 
participating in TEFAP. This provision was included in Sec. 251.8(d)(3) 
of the proposed rule, and is retained in the final rule, although it 
has been moved to Sec. 251.8(d)(1)(i). This provision is discussed in 
more detail below.
Restructuring of Administrative Cost Provisions (Secs. 251.3 
(Definition of ``Storage and Distribution Costs'') and 251.8(d))
    Currently, the allowable uses of TEFAP administrative funds are set 
forth in Sec. 251.3(f) in the definition of ``storage and distribution 
costs.'' Now that TEFAP administrative funds may be used not only in 
connection with TEFAP commodities, but also in connection with both 
section 110 commodities and other commodities under varying 
circumstances, a single definition setting forth the allowable uses of 
these funds has become awkward. In order to clarify the administrative 
costs for which TEFAP administrative funds may be used, the definition 
of ``storage and distribution costs'' has been removed from this final 
rule, and Sec. 251.8(d) has been restructured to perform the now more 
complex function previously served by the definition.
    The EFAA does not explicitly authorize the use of TEFAP 
administrative funds to pay administrative costs associated with USDA 
commodities other than those provided under TEFAP and section 110. A 
requirement that reimbursable administrative costs associated with 
TEFAP and section 110 commodities be separated from costs generated in 
the management of USDA commodities received from other sources would 
impose a burden on many local program operators which they could not 
reasonably be expected to meet. This burden would make commodity 
distribution more difficult without any compensatory increase in either 
the quality of service to participants or program accountability.
    Typically, local organizations receive commodities from several 
sources. For example, a soup kitchen receiving commodities under 
section 110 may also get commodities as a charitable institution, as 
well as donations from non-USDA sources. Some USDA commodities received 
under different authorities are identical in type and package size, and 
thus cannot be distinguished from each other unless segregated upon 
receipt so as to be able to identify storage costs by commodity source. 
Furthermore, it would be burdensome for local organizations to record 
the staff time spent handling USDA commodities received under different 
legislative authorities so as to assure that only time devoted to TEFAP 
and section 110 commodities is reimbursed with TEFAP administrative 
funds. Therefore, permitting local organizations to use such funding to 
handle section 110 commodities, but not the USDA commodities they 
receive as charitable institutions, would be unreasonable. It would 
also be illogical to permit the use of TEFAP administrative funds for 
the storage, handling, and distribution of non-USDA commodities, as the 
EFAA clearly does, while prohibiting the use of funds for the same 
costs associated with USDA commodities not provided under TEFAP or 
section 110.
    By allowing those costs associated with the storage, handling, and 
distribution of non-USDA commodities, as well as TEFAP and section 110 
commodities, we believe the EFAA intended to streamline commodity 
management at the local level. Therefore, the Department believes that 
it is fully within the intent of Congress, as well as prudent from a 
management perspective, to allow TEFAP administrative funds to be used 
for the same categories of costs for all USDA commodities received by 
organizations participating in TEFAP or receiving section 110 
commodities. This policy would include the costs of processing and 
repackaging all USDA commodities, regardless of the authority under 
which they are provided.
    Thus, Sec. 251.8(d)(1)(i) of the final rule consolidates the 
allowable uses of TEFAP administrative funds in connection with the 
distribution of USDA commodities. This section contains the allowable 
uses previously contained in the definition of ``storage and 
distribution costs,'' incorporates the addition of repackaging and 
processing costs as allowable administrative costs in connection with 
all USDA commodities received by organizations which get commodities 
under TEFAP or section 110, and includes the provision from 
Sec. 251.8(d)(3) of the proposed rule authorizing emergency feeding 
organizations to use TEFAP administrative funds to pay costs incurred 
for providing information to recipients relative to the appropriate 
storage and preparation of USDA commodities.
    Section 251.8(d)(1)(ii) of the final rule provides that TEFAP 
administrative funds may also be used for the direct costs associated 
with the intrastate distribution of non-USDA commodities. This section 
further makes clear that such costs are limited to the costs of 
storing, handling and distributing these commodities and that State-
level expenditures are allowable only for costs associated with 
commodities which are ultimately distributed by emergency feeding 
organizations or soup kitchens/food banks receiving TEFAP 
administrative funds. These restrictions are necessary to comply with 
the limitations in section 203D(b) of the EFAA, which authorizes the 
use of TEFAP administrative funds in connection with non-USDA 
commodities. A related provision in Sec. 251.8(d)(2)(i) of the final 
rule requires local organizations to have entered into an agreement 
pursuant to Sec. 251.2(c) (for the receipt of TEFAP commodities) or 
Sec. 251.8(d)(2)(ii) (for the receipt of administrative funds in 
connection with the distribution of section 110 commodities) in order 
to be eligible to receive TEFAP funds for non-USDA commodities.
    Finally, the provisions from proposed Sec. 251.8(d)(1) regarding 
the agreements necessary for soup kitchens/food banks to receive TEFAP 
administrative funds for section 110 commodity distribution are moved 
to Sec. 251.8(d)(2), and references to ``storage and distribution 
costs'' throughout the regulation have been changed to ``administrative 
costs'' to reflect the broader uses of TEFAP administrative funds now 
permitted.
Distribution Charges (Sec. 251.8(d)(3)(ii))
    One commenter was concerned that proposed Sec. 251.8(d)(2)(ii) 
would prohibit States with commercial distribution systems from 
charging a fee to soup kitchens for the storage and handling of section 
110 commodities. The Department appreciates the commenter's request for 
clarification. Proposed Sec. 251.8(d)(2)(ii) prohibited State agencies 
from charging for commodities made available to emergency feeding 
organizations. However, this prohibition does not apply to instances in 
which State agencies provide section 110 commodities to soup kitchens 
and food banks. Confusion regarding this regulation stems from the 
``dual identity'' soup kitchens and food banks have when they receive 
section 110 commodities: For purposes of eligibility to receive TEFAP 
administrative funding, they are considered to be emergency feeding 
organizations; for all other purposes, they are classified as recipient 
agencies. Thus, State agencies may charge soup kitchens and food banks 
for costs incurred at the State level for intrastate transportation and 
storage of section 110 commodities as long as State agencies comply 
with the provisions in Sec. 250.15(a)(2) governing fees for recipient 
agencies. Section 251.8(d)(3)(ii) of this final rule makes clear that 
the prohibition on fees applies only to commodities made available 
under Part 251.
Local Support (Sec. 251.8(d)(3)(i))
    Section 103(b) of the Hunger Prevention Act amended Sec. 204(a)(2) 
of the EFAA to increase the percentage of Federal TEFAP administrative 
funds which must be made available to, or expended on behalf of, 
emergency feeding organizations from 20 percent to 40 percent.
    Section 251.8(d)(3) of this final rule also clarifies that the 40 
percent pass-through should not be applied to the amount of funds 
provided to each State agency; rather, the requirement applies to the 
total TEFAP grant of the State. When TEFAP administrative funds are 
made available to pay costs associated with the distribution of section 
110 commodities, and the State agency administering TEFAP is not the 
agency responsible for the distribution of section 110 commodities, the 
TEFAP State agency is responsible for ensuring that the 40-percent 
requirement is met. If the TEFAP State agency makes funds available to 
the State agency responsible for section 110 commodities, only the 
amount of funds ultimately provided to emergency feeding organizations, 
or used to pay costs on their behalf, may count toward the State's 40-
percent requirement. Any funds retained by the distributing agency to 
pay State-level administrative costs associated with the distribution 
of section 110 commodities must be matched in accordance with the 
provisions contained in Sec. 251.9(a).
    For the purpose of clarification, Sec. 251.8(d)(2)(i) of the 
proposed rule was also amended to reference ``Federal Temporary 
Emergency Food Assistance Program administrative funds'' in lieu of 
``State funds.'' No comments were received in response to this change, 
which more accurately describes the funds in question. Since this 
clarification will help to ensure that 40 percent of the ``Federal'' 
grant is passed on to emergency feeding organizations or expended on 
their behalf, the term ``Federal Emergency Food Assistance Program 
administrative funds'' is retained in Sec. 251.8(d)(3)(i) of this final 
rule with the following changes: (1) Deletion of the word 
``Temporary,'' (2) use of the term ``administrative costs'' rather than 
``storage and distribution costs,'' and (3) restructuring of the 
paragraph for the sake of clarity.
State Matching Requirement (Secs. 251.9(a) and 251.9(c))
    The proposed rule amended Sec. 251.9(a) to clarify that the portion 
of the TEFAP grant the State is required to match is that portion which 
is retained by the State agency to pay State-level storage and 
distribution costs. No comments were received concerning the clarifying 
language. Thus, Sec. 251.9(a) of this final rule is retained as 
proposed with a change in terminology from ``storage and distribution 
costs'' to ``administrative costs.''
    An area of concern during development of the proposed rule involved 
a limitation on the types of State expenditures which meet the matching 
requirements for TEFAP. Section 204(a)(4) of the EFAA requires States 
to match the portion of Federal TEFAP funds which is retained by the 
State to pay State-level administrative costs. This section also 
prohibits States from passing the cost of the matching requirements on 
to emergency feeding organizations. In Sec. 251.9(c) of the current 
regulations, the Department limits the types of contributions which may 
count toward the match to contributions (cash or in-kind) for costs 
which could otherwise be allowable as State-level administrative costs. 
It was pointed out that this provision prohibited States from counting 
two types of State expenditures toward meeting the match: (1) State-
appropriated funds which were used to pay local-level costs associated 
with the distribution of commodities; and (2) any in-kind contributions 
made by the State agency to an emergency feeding organization.
    The Department re-evaluated this provision together with 
Department-wide rules describing allowable contributions toward 
matching requirements. The proposed rule eliminated the restriction in 
Sec. 251.9(c) that any contributions to the matching requirement be 
limited to State-level storage and distribution costs. Two commenters 
supported this revision; none opposed it. Thus, as proposed, 
Sec. 251.9(c) of this final rule allows the following contributions to 
be counted toward meeting the match: Any cash outlay of the State 
agency specifically identifiable as an allowable State- or local-level 
administrative cost, including the outlay of money contributed to the 
State agency by other public agencies and institutions, and private 
organizations and individuals; in-kind contributions by the State 
agency or third parties identifiable as being used to defray State-
level administrative costs; and State agency in-kind contributions 
toward a local-level administrative cost. However, the prohibition 
against passing on the costs of the matching requirement to emergency 
feeding organizations remains. Therefore, only those emergency feeding 
organization cash or in-kind contributions which can be specifically 
identified as addressing State-level administrative costs may be 
counted toward the match.
    As set forth in current regulations, in order for a third-party in-
kind contribution to be classified as an allowable cost for the 
purposes of meeting the State's matching requirement, the cost must be 
specifically identified as addressing State-level storage and 
distribution costs. For purposes of clarification, Sec. 251.9(c) of 
this final rule also includes the following criteria which must be met 
in order for a third-party in-kind contribution to qualify as a State-
level storage and distribution cost for purposes of meeting the match: 
(1) In its administration of food assistance programs, the State has 
performed this type of function over a sustained period of time in the 
past; (2) the function was not previously performed by the State on 
behalf of emergency feeding organizations; and (3) the State would 
normally perform the function as part of its responsibility in 
administering TEFAP or related food assistance programs if it were not 
provided as an in-kind contribution.

Procedures for the Distribution of Non-USDA Commodities 
(Sec. 251.4(i))

    Section 203D(b) of the EFAA, as added by section 102 of the Hunger 
Prevention Act, also requires that the Secretary establish procedures 
for the distribution of commodities which have been donated by persons 
or entities other than USDA. The Department responded to this 
legislative provision by proposing in Sec. 251.4(i) that emergency 
feeding organizations be permitted to distribute such commodities 
either in conjunction with or separate from the distribution of USDA 
commodities.
    Two commenters stressed that this legislative requirement should be 
clarified. They suggested that any procedures which are developed 
should (1) apply only to combined distributions of USDA commodities and 
non-USDA commodities, and (2) neither hinder current effective 
practices, nor conflict with the donation-handling procedures as 
outlined by the Internal Revenue Service in section 170(e)(3) of the 
Internal Revenue Code. The Department agrees that State agencies and 
emergency feeding organizations should have maximum flexibility in 
distributing these non-USDA commodities; thus, no additional regulatory 
requirements were imposed. Accordingly, this provision is retained in 
Sec. 251.4(i) of this final rule as proposed.

References to 7 CFR Part 3016 (Sec. 251.9(c) and 251.10(a)(2))

    The proposed rule amended Secs. 251.9(c) and 251.10(a)(2) to 
correct references to the Department's Uniform Federal Assistance 
Regulations. As stated in the proposed rule, previously all grant 
programs were governed by regulations at 7 CFR part 3015. However, on 
March 11, 1988, new regulations were published at 7 CFR part 3016 which 
cover all USDA grants except open-ended entitlements. The references to 
part 3015 in the matching and recordkeeping sections of this final rule 
have been changed to part 3016, and the language describing these 
provisions has been revised as proposed.

Report of Administrative Costs--Form FNS-667 (Sec. 251.10(d)(1))

    Section 251.10(d)(1) of the proposed rule was revised to require 
that Form FNS-667, Report of Storage and Distribution Costs (TEFAP), be 
used for reporting TEFAP administrative cost data. Since it has been 
determined that the revised Standard Form (SF) 269, Financial Status 
Report, is inappropriate for use in TEFAP because it does not 
separately identify the State- and local- level components of total 
program costs, comments on the proposed rule supported use of Form FNS-
667. Therefore, Sec. 251.10(d)(1) of this final rule retains the 
requirement that Form FNS-667 be used for reporting TEFAP cost data. As 
stated in the preamble to the proposed rule, FNS has obtained Office of 
Management and Budget approval for the use of this form in accordance 
with procedures established under the Paperwork Reduction Act of 1980. 
As discussed above, the title of the form has been changed from 
``Report of Storage and Distribution Costs (TEFAP)'' to ``Report of 
Administrative Costs (TEFAP).''

State Monitoring Requirement (Sec. 251.10(e))

    The Department has been asked by States and emergency feeding 
organizations to eliminate the current requirement for annual State 
agency reviews of all emergency feeding organizations. The Department 
agrees that the reduction in the volume of available USDA commodities 
justifies a reduction in the monitoring burden imposed upon State 
agencies and emergency feeding organizations. Therefore, proposed 
Sec. 251.10(e)(2)(i) reduced the required State agency reviews of 
emergency feeding organizations by requiring an annual review of at 
least 25 percent of all emergency feeding organizations and a review of 
all such emergency feeding organizations not less frequently than once 
every four years.
    Ten commenters supported this reduction. Three commenters, however, 
asserted that monitoring requirements should be strengthened rather 
than weakened. One commenter wondered what procedure should be followed 
if the State agency contract requires an annual evaluation.
    The reduction in the monitoring burden is retained in 
Sec. 251.10(e)(2)(i) of this final rule. In addition to the support 
received from commenters, the Department is committed to reducing the 
administrative burden currently imposed on States while ensuring 
accountability. It should be emphasized, however, that the 25-percent-
per-year requirement comprises the minimum monitoring requirement. If a 
State agency sees the need to implement more stringent monitoring 
standards, it is encouraged to do so.
    In addition to comments addressing the proposed amendment of the 
annual requirement for reviews of emergency feeding organizations, the 
Department received comments relative to the review requirements for 
distribution sites. Section 251.10(e)(2)(ii) of the current regulations 
mandates an annual review of one-third or 50, whichever is fewer, of 
all distribution sites within the State. The regulations further 
require that the reviews be conducted simultaneously with actual 
distribution and/or eligibility determinations. The Department has been 
made aware, through comments made in response to the proposed rule and 
consultation with State agencies, that in some instances, e.g., when 
distributions are conducted Statewide on the same day, it is not 
possible for reviews to be conducted simultaneously with actual 
distribution and/or eligibility determinations. Since the Department is 
in agreement with the concerns expressed and seeks to reduce the 
administrative burden currently imposed on States, 
Sec. 250.10(e)(2)(ii) of this final rule is revised to require that, to 
the maximum extent feasible, reviews be conducted simultaneously with 
actual distribution and/or eligibility determinations.
    Besides reducing the monitoring requirement, the proposed rule 
revised Sec. 251.10(e)(7) to require that soup kitchens and food banks 
which receive TEFAP funds for the storage, handling and distribution of 
commodities obtained under section 110 of the Hunger Prevention Act be 
included in the TEFAP State agency's monitoring system to ensure 
compliance with the provisions contained in Sec. 251.8. The proposed 
rule permitted the delegation of this responsibility to the 
distributing agency which administers distributions to charitable 
institutions. However, under the proposed rule, the TEFAP State agency 
retained the ultimate responsibility for ensuring that the review 
requirements are met. Commenters did not object to this provision; thus 
it is retained in Sec. 251.10(e)(7) of this final rule.

Volunteer Workers (Sec. 251.10(g))

    Section 203D(c) of the EFAA, added by section 102 of the Hunger 
Prevention Act, requires States and emergency feeding organizations to 
continue to use, to the maximum extent practicable, volunteer workers, 
as well as commodities and other foodstuffs donated by charitable and 
other organizations, in the operation of TEFAP. This requirement was 
included in Sec. 251.10(g) of the proposed rule. This requirement is 
retained, as proposed, in Sec. 251.10(g) of this final rule.

Food Bank Demonstration Projects

    Section 1773(e) of the FACT Act amended section 4 of the Commodity 
Distribution Reform Act and WIC Amendments of 1987, Public Law 100-237, 
to authorize, on a permanent basis, the distribution of USDA 
commodities to needy individuals and families through community food 
banks. Since the provisions governing the demonstration projects were 
never included in regulations, this legislative revision is referenced 
in this preamble to advise the general public that this provision is 
now permanent but will not be included in the Code of Federal 
Regulations. No additional sites will be accepted for participation as 
community food banks under Public Law 100-237.

Deletion of Obsolete Provision

    As discussed in the preamble to the proposed rule, section 202A of 
the EFAA, which authorized the distribution of additional quantities of 
flour, cornmeal, and cheese, has expired. The proposed rule deleted 
reference to the obsolete provision in Sec. 251.4(d)(3) of the TEFAP 
regulations. This deletion is also made in the final rule. The 
reference to this provision in Sec. 251.4(h) of the proposed rule has 
also been deleted in this final rule.
    In addition to the changes described above, a few nonsubstantive 
revisions which simply serve to clarify the regulatory wording have 
been made in this final rule.

List of Subjects

7 CFR Part 250

    Aged, Agricultural commodities, Business and industry, Food 
assistance programs, Food donations, Food processing, Grant programs-
social programs, Indians, Infants and children, Price support programs, 
Reporting and recordkeeping requirements, School breakfast and lunch 
programs, Surplus agricultural commodities.

7 CFR Part 251

    Aged, Agricultural commodities, Business and industry, Food 
assistance programs, Food donations, Grant programs-social programs, 
Indians, Infants and children, Price support programs, Reporting and 
recordkeeping requirements, School breakfast and lunch programs, 
Surplus agricultural commodities.
    Accordingly, 7 CFR parts 250 and 251 are amended as follows:

PART 250--DONATION OF FOODS FOR USE IN THE UNITED STATES, ITS 
TERRITORIES AND POSSESSIONS AND AREAS UNDER ITS JURISDICTION

    1. The authority citation for part 250 is revised to read as 
follows:

    Authority: 5 U.S.C. 301; 7 U.S.C. 612c, 612c note, 1431, 1431b, 
1431e, 1431 note, 1446a-1, 1859; 15 U.S.C. 713c; 22 U.S.C. 1922; 42 
U.S.C. 1751, 1755, 1758, 1760, 1761, 1762a, 1766, 3030a, 5179, 5180.


    2. Section 250.3 is amended as follows:
    a. The definition of Charitable institutions is amended by adding 
the words ``, including hospitals and facilities caring for needy 
infants and children,'' after the word ``institution'' in the first 
sentence of paragraph (c); and
    b. definitions of Food bank and Soup kitchen are added in 
alphabetical order to read as follows:


Sec. 250.3  Definitions.

* * * * *
    Food bank means a public or charitable institution that maintains 
an established operation involving the provision of food or edible 
commodities, or the products thereof, to food pantries, soup kitchens, 
hunger relief centers, or other food or feeding centers that provide 
meals or food to needy persons on a regular basis as an integral part 
of its normal activities.
* * * * *
    Soup kitchen means a public or charitable institution that 
maintains an established feeding operation to provide food to needy 
homeless persons on a regular basis as an integral part of its normal 
activities.
* * * * *
    3. In Sec. 250.41, the first sentence of paragraph (a)(1) is 
revised to read as follows:


Sec. 250.41  Charitable institutions.

    (a) Distribution. (1) With the exception of section 110 
commodities, which are to be distributed in accordance with the 
provisions of Sec. 250.52, the distributing agency shall distribute 
donated food only to those charitable institutions which have entered 
into a written agreement for participation in the program with the 
distributing agency in accordance with Sec. 250.12(b). * * *
* * * * *
    4. A new Sec. 250.52 is added to read as follows:


Sec. 250.52  Section 110 commodities.

    (a) Donations. Distributing agencies shall make commodities donated 
to the State under section 110 of the Hunger Prevention Act of 1988 
available to soup kitchens and food banks, as defined in Sec. 250.3. 
Such distributions shall be made on the following priority basis:
    (1) Soup kitchens. The distributing agency shall offer, or 
otherwise make available, its full allocation of commodities to soup 
kitchens and other like organizations that prepare meals for the 
homeless and to food banks for distribution to such organizations.
    (2) Institutions that serve only low-income recipients. If the 
distributing agency determines that it is not likely to exhaust its 
allocation of commodities under this section through distribution to 
institutions referred to in paragraph (a)(1) of this section, it shall 
make the remaining commodities available to food banks for distribution 
to institutions that exclusively serve the needy. When such 
institutions distribute commodities to individuals for home 
consumption, eligibility for such commodities shall be established 
through a means test as determined appropriate by the distributing 
agency.
    (3) Other institutions. If a food bank determines that it is not 
likely to exhaust its allocation of commodities through distribution to 
institutions referred to in paragraphs (a)(1) and (a)(2) of this 
section, it may make the remaining commodities available to 
institutions that:
    (i) Document, to the satisfaction of the food bank, that they serve 
meals predominantly to needy persons; and
    (ii) Do not employ a means test to determine eligibility for such 
meals.
    (b) Tax-exempt status. Prior to making section 110 donated food 
available, the distributing agency shall ensure that the soup kitchen/
food bank has obtained recognition of tax-exempt status under the 
Internal Revenue Code, has made application for recognition of such 
status and is moving toward compliance with the requirements for 
recognition of tax-exempt status, or is currently operating another 
Federal program requiring such tax-exempt status. If the Internal 
Revenue Service (IRS) denies a participating organization's application 
for recognition of tax-exempt status, the organization shall 
immediately notify the distributing agency of such denial, and the 
distributing agency shall terminate the organization's agreement and 
participation immediately upon receipt of such notification. If 
documentation of IRS recognition of tax-exempt status has not been 
obtained and forwarded to the distributing agency within 12 months of 
the effective date of the organization's approval for participation, 
the distributing agency shall terminate the organization's agreement 
and participation until such time as documentation of IRS recognition 
of tax-exempt status is obtained, unless the organization documents to 
the distributing agency's satisfaction that it has made good faith 
efforts to obtain recognition of its tax-exempt status and that such 
recognition has not been provided due to no fault of the organization. 
It shall be the responsibility of the soup kitchen/food bank to 
document that it has complied with all IRS requirements and has 
provided all information requested by IRS in a timely manner.
    (c) Agreements. The distributing agency shall distribute section 
110 commodities only to those soup kitchens and food banks which have 
entered into an agreement for participation in the program with the 
distributing agency in accordance with Sec. 250.12(b). In addition to 
the terms and conditions set forth in Sec. 250.12(b), written 
agreements shall, at a minimum, include:
    (1) The name and location of the organization;
    (2) Total number of meals expected to be served or commodities 
provided to households for home consumption during the agreement 
period, to be determined as follows:
    (i) The total number of meals to be served in a congregate meal 
setting shall be determined by projecting the average number of meals 
to be served daily and the number of days meals will be served during 
the agreement period; and
    (ii) The number of needy households to be provided food for home 
consumption shall be determined by projecting the number of households 
to be served during the agreement period (in accordance with the method 
set by the distributing agency) which meet the eligibility criteria 
which the distributing agency has determined appropriate pursuant to 
paragraph (a)(2) of this section;
    (3) For congregate meal service, indication of whether the 
organization will employ the services of a food service management 
company to conduct its food service operations;
    (4) Assurance that proper inventory controls will be maintained;
    (5) Assurance that all reports will be submitted as required by the 
distributing agency; and
    (6) In instances in which the donated food will be made available 
to an institution for household distribution, assurance that the food 
bank will ensure that the institution distributing the commodities 
will:
    (i) Comply with the limitation on unrelated activities established 
under Sec. 251.10(f) of this chapter; and
    (ii) Limit distribution of the donated food to those households 
which meet the eligibility criteria as determined appropriate by the 
distributing agency pursuant to paragraph (a)(2) of this section.
    (d) Quantities of donated foods. (1) Donated food purchased under 
section 110 of the Hunger Prevention Act of 1988 will be allocated to 
States by the Department on the basis of a formula that compares each 
State's population of low-income and unemployed persons to the national 
statistics. Each State's share of commodities, as measured by their 
value, shall be based 60 percent on the number of persons in households 
within the State having incomes below the poverty level and 40 percent 
on the number of unemployed persons within the State. The Department 
will notify each State of the types and amounts of such commodities 
allotted to the State under the formula when funds have been 
appropriated for the purchase of such commodities. The Department will 
make annual adjustments to the commodity allocations for each State, 
based on updated unemployment statistics, which will be effective for 
the entire fiscal year, except that such allocations shall be subject 
to reallocation or transfer in accordance with paragraph (d)(4) of this 
section and Sec. 250.13(a).
    (2) The distributing agency shall notify the appropriate FNSRO of 
the amount of the donated food it will accept no later than 30 days 
prior to the beginning of the shipping period.
    (3) The distributing agency shall accept or adjust the data 
reported in the agreement by soup kitchens and food banks to determine 
the number of meals to be served to needy persons and the number of 
needy households to be served in order to allocate the donated food in 
an equitable manner that ensures that commodities will not be made 
available in quantities in excess of anticipated use or the ability of 
the organization to accept and store the commodities.
    (4) In instances in which a State determines that it will not 
accept its full allocation, the Department will reallocate these 
commodities in a fair and equitable manner among those States that 
accept the full amount of their allocations and request additional 
amounts.
    (e) Funding. Soup kitchens and food banks receiving section 110 
commodities shall be eligible to receive Emergency Food Assistance 
Program administrative funds for use in accordance with the provisions 
set forth in Sec. 251.8(d)(1)(ii) of this chapter, provided that they 
have entered into an agreement in accordance with Sec. 251.8(d)(2) of 
this chapter.
    (f) Maintenance of effort. Prior to making donated food available, 
the distributing agency shall obtain written assurance from the soup 
kitchen or food bank that food donations from other sources will not be 
diminished as a result of donated foods being made available under 
section 110 of the Hunger Prevention Act of 1988. This assurance 
statement shall be maintained on file by the distributing agency.
    (g) Food service management companies. Institutions preparing 
congregate meals with section 110 commodities may employ food service 
management companies to conduct food service operations in accordance 
with Sec. 250.12(c).

PART 251--THE EMERGENCY FOOD ASSISTANCE PROGRAM

    1. The authority citation for Part 251 continues to read as 
follows:

    Authority: Pub. L. 98-8, as amended (7 U.S.C. 612c note).

    2. The Part heading is revised as set forth above.
    3. In Sec. 251.2, paragraph (c) is amended by removing the words 
``storage and distribution costs'' in the first sentence and adding in 
their place the words ``administrative costs''.
    4. In Sec. 251.3, paragraph (d) is revised to read as follows, 
paragraph (f) is removed, and paragraph (g) is redesignated as 
paragraph (f).


Sec. 251.3   Definitions.

* * * * *
    (d) Formula means the formula used by the Department to allocate 
among States the commodities and funding available under this part. The 
amount of such commodities and funds to be provided to each State will 
be based on each State's population of low-income and unemployed 
persons, as compared to national statistics. Each State's share of 
commodities and funds shall be based 60 percent on the number of 
persons in households within the State having incomes below the poverty 
level and 40 percent on the number of unemployed persons within the 
State. The surplus commodities will be allocated to States on the basis 
of their weight (pounds), and the commodities purchased under section 
214 of the Emergency Food Assistance Act of 1983 will be allocated on 
the basis of their value (dollars). In instances in which a State 
determines that it will not accept the full amount of its allocation of 
commodities purchased under section 214 of the Emergency Food 
Assistance Act of 1983, the Department will reallocate the commodities 
to other States on the basis of the same formula used for the initial 
allocation.
* * * * *
    5. In Sec. 251.4:
    a. A new paragraph (c)(3) is added;
    b. paragraph (d)(3) is revised, and the concluding text beginning 
with the word `Cheese' is removed;
    c. paragraphs (h), (i) and (j) are redesignated as paragraphs (j), 
(k) and (l), and new paragraphs (h) and (i) are added; and
    d. the references to ``paragraph (j)(4)'' in newly redesignated 
paragraph (l) are removed, and references to ``paragraph (l)(4)'' are 
added in their place.
    The revision and additions read as follows:


Sec. 251.4  Availability of commodities.

* * * * *
    (c) Allocations. * * *
    (3) State agencies shall notify the appropriate FNSRO of the amount 
of the commodities they will accept not later than 30 days prior to the 
beginning of the shipping period.
    (d) Quantities requested. * * *
    (3) Establish distribution rates, based on household size, to be 
used by emergency feeding organizations which provide commodities to 
needy persons in households.
* * * * *
    (h) Distribution to emergency feeding organizations. Emergency 
feeding organizations shall be eligible to receive commodities which 
are made available under sections 202 and 214 of the Emergency Food 
Assistance Act of 1983. State agencies may give priority in the 
distribution of these commodities to existing food bank networks and 
other organizations whose ongoing primary function is to facilitate the 
distribution of food to low-income households, including food from 
sources other than the Department.
    (i) Distribution of non-USDA foods. Emergency feeding organizations 
may incorporate the distribution of foods which have been donated by 
charitable organizations or other entities with the distribution of 
USDA-donated commodities or distribute them separately.
* * * * *
    6. In Sec. 251.6, paragraph (a)(4) is revised to read as follows:


Sec. 251.6  Distribution plan.

    (a) Contents of the plan. * * *
    (4) A description of the State's formula for allocating 
administrative funds among State agencies and emergency feeding 
organizations, including, if applicable, soup kitchens and food banks 
receiving administrative funds in connection with commodities which are 
made available under section 110 of the Hunger Prevention Act of 1988 
in accordance with Sec. 251.8(d)(1); and
* * * * *
    7. In Sec. 251.7, paragraph (a) is revised to read as follows:


Sec. 251.7  Formula adjustments.

    (a) Commodity adjustments. The Department will make adjustments to 
the commodity allocation formula for each State, based on updated 
unemployment statistics, as follows:
    (1) Surplus commodities. Adjustments will be made semi-annually 
effective on January 1 and July 1 of each fiscal year; and
    (2) Purchased commodities. Adjustments will be made annually and 
will be effective for the entire fiscal year, subject to reallocation 
or transfer in accordance with this part.
* * * * *
    8. Section 251.8 is amended by revising the section heading and 
paragraph (d) to read as follows:


Sec. 251.8  Payment of funds for administrative costs.

* * * * *
    (d) Use of funds--(1) Allowable administrative costs. Funds made 
available under this part shall be used by State agencies or emergency 
feeding organizations only for the following administrative costs:
    (i) USDA commodities. Funds may be used for the direct costs 
associated with the intrastate distribution of commodities donated 
under this part and under section 110 of the Hunger Prevention Act of 
1988 by emergency feeding organizations. In addition, emergency feeding 
organizations that also receive commodities under part 250 of this 
chapter may use the funds provided under this part for direct costs 
associated with the distribution of such commodities. These costs 
include the costs paid by an emergency feeding organization or paid by 
a State agency on behalf of an emergency feeding organization for:
    (A) Transporting, storing, handling, repackaging, processing, and 
distributing commodities incurred after they are received by the 
organization;
    (B) Costs associated with determinations of eligibility, 
verification, and documentation;
    (C) Costs of providing information to persons receiving USDA 
commodities concerning the appropriate storage and preparation of such 
commodities;
    (D) Costs involved in publishing announcements of times and 
locations of distribution; and
    (E) Costs of recordkeeping, auditing, and other administrative 
procedures required for program participation.
    (ii) Non-USDA commodities. Funds may also be used by emergency 
feeding organizations for the direct costs associated with the 
intrastate distribution of commodities donated by persons or entities 
other than USDA, provided, however, that these costs shall be limited 
to the costs of storing, handling and distributing such commodities. 
State-level costs shall be allowable only to the extent that the 
commodities are ultimately distributed by emergency feeding 
organizations which have entered into agreements with the State agency 
in accordance with paragraph (d)(2) of this section.
    (2) Agreements. (i) In order to be eligible for funds under 
paragraph (d)(1) of this section, emergency feeding organizations shall 
have entered into an agreement pursuant to Sec. 251.2(c) for the 
receipt of donated foods under this part or an agreement pursuant to 
paragraph (d)(2)(ii) of this section for the receipt of funds in 
connection with section 110 commodities.
    (ii) In instances in which administrative funds are made available 
in connection with section 110 commodities and the State agency 
responsible for the distribution of TEFAP commodities and funds is not 
also responsible for the distribution of section 110 commodities, the 
State agency responsible for the administration of TEFAP shall enter 
into an agreement with the soup kitchens/food banks (as described in 
Sec. 250.52(c) of this chapter) requesting the funds, or with the State 
agency responsible for the distribution of section 110 commodities, 
which will then enter into agreements with those soup kitchens and food 
banks. The agreement with the soup kitchen or food bank shall require 
compliance with the provisions of this section and Sec. 251.10(a) and 
(e).
    (3) Local support. (i) Not less than 40 percent of the Federal 
Emergency Food Assistance Program administrative funds allocated to the 
State in accordance with paragraph (a) of this section shall be:
    (A) Provided by the State agency to emergency feeding organizations 
as either reimbursement or advance payment for administrative costs 
incurred by emergency feeding organizations in accordance with 
paragraph (d)(1) of this section, except that emergency feeding 
organizations may retain advance payments only to the extent that they 
actually incur such costs; or
    (B) Directly expended by the State agency to cover administrative 
costs incurred by, or on behalf of, emergency feeding organizations in 
accordance with paragraph (d)(1) of this section.
    (ii) State agencies shall not charge for commodities made available 
under this part to emergency feeding organizations.
* * * * *
    9. Section 251.9 is amended by revising paragraphs (a) and (c) to 
read as follows:


Sec. 251.9  Matching of funds.

    (a) State matching requirement. The State shall provide a cash or 
in-kind contribution equal to the amount of the Federal Emergency Food 
Assistance Program administrative funds received under Sec. 251.8 and 
retained by the State agency for State-level costs. Any portion of the 
Federal grant passed through for administrative costs incurred at the 
local level or directly expended by the State agency for such local-
level costs (in accordance with Sec. 251.8(d)(3)) shall be exempt from 
the State match requirement.
* * * * *
    (c) Applicable contributions. States shall meet the requirements of 
paragraph (a) of this section through cash or in-kind contributions 
from sources other than Federal funds which are prohibited by law from 
being used to meet a Federally mandated State matching requirement. 
Such contributions shall meet the requirements set forth in 7 CFR 
3016.24. In accordance with 7 CFR 3016.24(b)(1), the matching 
requirement shall not be met by contributions for costs supported by 
another Federal grant, except as provided by Federal statute. Allowable 
contributions are only those contributions for costs which would 
otherwise be allowable as State or local-level administrative costs.
    (1) Cash. An allowable cash contribution is any cash outlay of the 
State agency for a specifically identifiable allowable State- or local-
level administrative cost, including the outlay of money contributed to 
the State agency by other public agencies and institutions, and private 
organizations and individuals. Examples of cash contributions include, 
but are not limited to, expenditures for office supplies, storage 
space, transportation, loading facilities and equipment, employees' 
salaries, and other goods and services specifically identifiable as 
State- or local-level administrative costs for which there has been a 
cash outlay by the State agency.
    (2) In-kind. (i) Allowable in-kind contributions are any 
contributions, which are non-cash outlays, of real property and non-
expendable personal property and the value of goods and services 
specifically identifiable with allowable State administrative costs or, 
when contributed by the State agency to an emergency feeding 
organization, allowable local-level administrative costs. Examples of 
in-kind contributions include, but are not limited to, the donation of 
office supplies, storage space, vehicles to transport the commodities, 
loading facilities and equipment such as pallets and forklifts, and 
other non-cash goods or services specifically identifiable with 
allowable State-level administrative costs or, when contributed by the 
State agency to an emergency feeding organization, allowable local-
level administrative costs. In-kind contributions shall be valued in 
accordance with 7 CFR 3016.24(c) through 3016.24(f).
    (ii) In order for a third-party in-kind contribution to qualify as 
a State-level administrative cost for purposes of meeting the match, 
all of the following criteria shall be met:
    (A) In its administration of food assistance programs, the State 
has performed this type of function over a sustained period of time in 
the past;
    (B) The function was not previously performed by the State on 
behalf of emergency feeding organizations; and
    (C) The State would normally perform the function as part of its 
responsibility in administering TEFAP or related food assistance 
programs if it were not provided as an in-kind contribution.
* * * * *
    8. In Sec. 251.10:
    a. Paragraph (a)(2) is amended by removing reference to ``3015'' 
and adding a reference to ``3016'' in its place;
    b. the third sentence of paragraph (d)(1) is revised;
    c. paragraph (e)(2) is revised; and
    d. new paragraphs (e)(7), (g) and (h) are added.
    The revisions and additions read as follows:


Sec. 251.10  Miscellaneous provisions.

* * * * *
    (d) Reports. (1) * * * The data shall be identified on Form FNS-
667, Report of Administrative Costs (TEFAP), and shall be submitted to 
the appropriate FNS Regional Office on a quarterly basis. * * *
* * * * *
    (e) State monitoring system. * * *
    (2) Unless specific exceptions are approved in writing by the FNS 
Regional Office, the State monitoring system shall include:
    (i) An annual review of at least 25 percent of all emergency 
feeding organizations and a review of all such organizations not less 
frequently than once every four years; and
    (ii) An annual review of one-third or 50, whichever is fewer, of 
all distribution sites within the State, to be conducted, to the 
maximum extent feasible, simultaneously with actual distribution and/or 
eligibility determinations.
* * * * *
    (7) State agencies shall ensure that emergency feeding 
organizations which receive administrative funds in connection with 
commodities made available under section 110 of the Hunger Prevention 
Act of 1988 are reviewed at the frequency stipulated in paragraph 
(e)(2)(i) of this section to ensure compliance with the provisions 
contained in Sec. 251.8.
* * * * *
    (g) Use of volunteer workers and non-USDA commodities. In the 
operation of the Emergency Food Assistance Program, State agencies and 
emergency feeding organizations shall, to the maximum extent 
practicable, use volunteer workers and foods which have been donated by 
charitable and other types of organizations.
    (h) Maintenance of effort. If the State uses its own funds to 
provide commodities or services to organizations receiving funds or 
services under section 214 of the Emergency Food Assistance Act of 
1983, the State shall not diminish the level of support it provides to 
such organizations or reduce the amount of funds available for other 
nutrition programs in the State in each fiscal year.

    Dated: April 3, 1994.
William E. Ludwig,
Administrator.
[FR Doc. 94-8505 Filed 4-8-94; 8:45 am]
BILLING CODE 3410-30-U