[Federal Register Volume 59, Number 224 (Tuesday, November 22, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-28831]


[[Page Unknown]]

[Federal Register: November 22, 1994]


                                                   VOL. 59, NO. 224

                                         Tuesday, November 22, 1994

DEPARTMENT OF AGRICULTURE

Food and Consumer Service

7 CFR Parts 272, 274, and 277

[Amdt. No. 361]
RIN 0584-AB66

 

Food Stamp Program; Payment of Certain Administrative Costs of 
State Agencies

AGENCY: Food and Consumer Service, USDA.

ACTION: Proposed rule.

-----------------------------------------------------------------------

SUMMARY: This proposed rule reduces the Federal reimbursement rate for 
certain costs of State agencies in administering the Food Stamp 
Program. These changes are mandated by the Mickey Leland Childhood 
Hunger Relief Act of 1993 (Leland Act). The Leland Act reduces the 
Federal rate of reimbursement for fraud control, automated data 
processing development, and Systematic Alien Verification for 
Entitlements costs. This rule proposes to amend Food Stamp Program 
regulations to comply with Leland Act mandates on these funding 
provisions. In addition, this rule proposes to limit the period that a 
State agency may retroactively claim Federal funding of administrative 
costs for Food Stamp Program activities and allows the costs of 
certifying Aid to Families with Dependent Children households for food 
stamps to be charged to the Food Stamp Program for Federal 
reimbursement purposes.

DATES: Comments must be received on or before January 23, 1995, in 
order to be assured of consideration.

ADDRESSES: Comments should be addressed to Cecilia Fitzgerald, Section 
Chief, State Management Section, Program Accountability Division, Food 
and Nutrition Service (FNS), 3101 Park Center Drive, Alexandria, 
Virginia 22302. All written comments will be open to public inspection 
during regular business hours (8:30 a.m. to 5 p.m., Monday through 
Friday) at 3101 Park Center Drive, Alexandria, Virginia, room 905.

FOR FURTHER INFORMATION CONTACT: Questions concerning this proposed 
rulemaking should be addressed to Ms. Fitzgerald at the above address 
or by telephone at (703) 305-2386.

SUPPLEMENTARY INFORMATION:

Classification

Executive Order 12866

    This proposed rulemaking has been determined to be significant and 
was reviewed by the Office of Management and Budget under Executive 
Order 12866.

Executive Order 12372

    The Food Stamp Program is listed in the Catalog of Federal Domestic 
Assistance under No. 10.551 and information on State agency 
administrative matching grants for the Food Stamp Program is listed 
under No. 10.561. For the reasons set forth in the final rule and 
related notice to 7 CFR 3015, subpart V (48 FR 29115), this Program is 
excluded from the scope of Executive Order 12372 which requires 
intergovernmental consultation with State and local officials.

Executive Order 12778

    This 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. In the Food Stamp Program the administrative 
procedures are as follows:
    (1) For program benefit recipients--State administrative procedures 
issued pursuant to 7 U.S.C. 2020(e)(10) and 7 CFR 273.15;
    (2) For State agencies--administrative procedures issued pursuant 
to 7 U.S.C. 2023 set out at 7 CFR 276.7 (for rules related to non-QC 
liabilities) or Part 283 (for rules related to QC liabilities);
    (3) For program retailers and wholesalers--administrative 
procedures issued pursuant to 7 U.S.C. 2023 set out at 7 CFR 278.8.

Regulatory Flexibility Act

    This action has been reviewed with regard to the requirements of 
the Regulatory Flexibility Act of 1980 (Pub. L. 96-354, 94 Stat. 1164, 
September 19, 1980). William Ludwig, Administrator of the Food and 
Nutrition Service, has certified that this rule does not have a 
significant economic impact on a substantial number of small entities. 
This rule will affect the State and local agencies which administer the 
Food Stamp Program, by modifying the recordkeeping and reporting 
requirements applicable to them, and modifying the rates of Federal 
funding reimbursement for certain Food Stamp Program activities.

Paperwork Reduction Act

    The requirement under the Leland Act to eliminate enhanced funding 
levels for certain Program activities, resulted in the need for the 
Department to revise forms FNS-366A, Budget Projection, and SF-269, 
Financial Status Report to include a column for reporting activities 
funded at the 50 percent funding rate. The SF-269 is a nationwide form 
required by OMB to be used by all government agencies to report 
financial status. The Department regulations at 7 CFR 3015.84 
implemented this mandatory use of SF-269. The revisions have been sent 
to the Office of Management and Budget (OMB) and have been approved 
under OMB No. 0584-0083 for the FNS-366A and 0505-0008 for the SF-269. 
OMB also requires the use of form SF-270 when an agency wants to adjust 
the Program's financial status when the letter-of-credit is not used. 
The Department regulations at 7 CFR 3015.84(b) implemented this 
mandatory use of SF-270. A specific reference to the use of form SF-270 
for Food Stamp Program purposes appears in Sec. 277.11 of this proposed 
action. While the form is approved for use by OMB under OMB No. 0505-
0008, the Department had inadvertently neglected to inform OMB of the 
burden hours associated with the use of this form for Food Stamp 
Program purposes. For Food Stamp Program purposes only, burden 
associated with SF-270 is estimated to average l hour per response. 
This estimated burden assumes that each respondent (53 State welfare 
agencies) would submit a SF-270 at least three times annually. Thus, 
burden associated with OMB No. 0505-0008 will increase an estimated 159 
hours annually. Pursuant to the Paperwork Reduction Act of 1980 (44 
U.S.C. 3507), the increased burden estimate will be forwarded to OMB 
for inclusion into the overall burden estimates approved under OMB No. 
0505-0008.
    The public reporting burden discussed in the previous paragraphs 
for OMB Nos. 0584-0083 and 0505-0008 includes the time for reviewing 
instructions, searching existing data sources, gathering and 
maintaining the data needed, and completing and reviewing the 
collection of information. Send comments regarding this burden estimate 
or any aspect of the information collection requirements, including 
suggestions for reducing the burden, to the State Management Section, 
Program Accountability Division (address above) and to the Office of 
Information and Regulatory Affairs, OMB, Room 10235, New Executive 
Office Building, Washington, D.C. 20503, Attn: Wendy Taylor, Desk 
Officer for FNS.
    The remaining provisions of this proposed rulemaking do not contain 
reporting or recordkeeping requirements subject to approval by OMB.

Background

    The Leland Act (Pub. L. 103-66), signed on August 10, 1993, made a 
number of changes to the Food Stamp Act of 1977, as amended (the Food 
Stamp Act). This proposed rulemaking pertains to the administrative 
funding rate provisions established in Section 13961 of the Leland Act. 
These provisions are discussed in the following paragraphs.
    Most State agency food stamp administrative costs are reimbursed by 
the Department's Food and Nutrition Service (FNS) at the Federal 
reimbursement rate of 50 percent. However, certain State agency 
activities are reimbursed at higher or ``enhanced'' rates, including 
fraud control, automated data processing (ADP) system development, and 
Systematic Alien Verification for Entitlement (SAVE). Under the current 
rules in 7 CFR 277.4, 277.15, 277.18, and 277.19 of Food Stamp Program 
Regulations, the Federal reimbursement rates for these activities were, 
until April 1, 1994, 75 percent for fraud control, 75 or 63 percent for 
ADP development, and 100 percent for SAVE.
    Section 13961 of the Leland Act reduces the Federal reimbursement 
rate for fraud control, ADP development, and SAVE costs to the regular 
50 percent Federal reimbursement level. The new rate was effective 
April 1, 1994 and applies to costs incurred on or after April 1, 1994.
    Costs for a particular activity listed above for which a legal 
liability to pay existed at or before the close of business on March 
31, 1994 may be claimed at the enhanced rate in effect at that time for 
the particular activity. Costs satisfying this condition are direct 
costs of goods and other property delivered to and accepted by the 
State or local agency; direct costs of services rendered to the State 
or local agency by employees, contractors, subrecipients and other 
payees; and associated indirect costs. All costs incurred on or after 
April 1, 1994, including costs for which obligations (encumbrances) but 
not liabilities to pay had been created before April 1, 1994, shall be 
claimed at the regular 50 percent Federal reimbursement rate unless 
written approval is subsequently received from FNS delaying the 
effective date, under certain specified circumstances, as explained 
below. If FNS grants such approval after the April 1, 1994 effective 
date, an appropriate adjustment in Federal funding will be made.

Fraud Control Activity--Sections 277.4, 277.15, 272.2

    On August 10, 1979, the Department published a final rule at 44 FR 
47037 which allows enhanced Federal reimbursement at the 75 percent 
rate for food stamp investigations and prosecutions. Food Stamp Program 
regulations also refer to Federal reimbursement as Federal Financial 
Participation (FFP). The Department set out the procedures for State 
agencies to receive 75 percent FFP for fraud control activity in that 
rule.
    Section 13961 of the Leland Act amended Section 16 of the Food 
Stamp Act (7 U.S.C. 2025) to reduce the Federal reimbursement rate for 
fraud control activity from 75 percent to the regular 50 percent rate. 
The new rate is effective, by law, on April 1, 1994.
    The new rate applies to food stamp investigations, prosecutions, 
administrative disqualification hearings, claims collections, and other 
allowable fraud control activity. It applies to all such costs incurred 
on or after April 1, 1994.
    Under current rules at 7 CFR 277.15 of Food Stamp Program 
regulations, State agencies are required to submit a fraud control plan 
prior to receiving the enhanced funding. A plan is not currently 
required under the regulations for standard fraud funding. In Fiscal 
Year 1993, all State agencies submitted or extended their current fraud 
control plans and all State agencies received enhanced fraud funding. 
The Department is proposing to retain the requirement for a fraud 
control plan. The Department believes a fraud control plan is an 
important management tool in combatting fraud and an important 
component of the State agency's Plan of Operation. Further, because 
program benefits are fully funded by the Department, the Department has 
an interest in seeing that State agencies develop and implement an 
effective fraud control plan. However, the Department is proposing to 
drop the other specific requirements in Sec. 277.15 (e.g., job title of 
Investigator, separate claims units, etc.) that pertain solely to 
enhanced funding for fraud control activity. Fraud control activity 
performed either by investigators or certification workers would be 
eligible for 50 percent funding.
    The Department is also proposing to change the timing of the 
submission of the fraud control plan. Under current rules the Fraud 
Plan is submitted annually to FNS as an attachment to the FNS-366B, 
Program Activity Statement, 45 days after the end of the State's fiscal 
year. For most States which operate on a July 1 to June 30 fiscal year, 
this created an August 15 deadline for the fraud control plan. The 
Department is proposing a new Sec. 272.2(e)(10) which would create a 
uniform due date of August 15th for all State agencies, regardless of 
their State fiscal year. The change will ensure that the fraud control 
plan is submitted prior to the start of the Federal fiscal year to 
which it applies, and it links submission of the fraud control plan 
with the submission of the Budget Projection Statement which is also 
due August 15. The Department believes the planning and budgeting of 
program activity should be linked since significant changes in planned 
activity may also mean changes in Federal funding. The Department is 
proposing to make conforming amendments to Sec. 272.2(a), (c)(3), and 
(e)(3).
    The Department further proposes to remove Sec. 277.15 and 
incorporate the retained provisions elsewhere in the regulations. As 
noted above, the Department intends to retain the fraud control plan 
requirements in Sec. 277.15(c) by incorporating these requirements into 
the Plan of Operation requirements at 7 CFR 272.2(d). The Department is 
also proposing to make conforming amendments to Sec. 272.2(a)(2), 
(c)(3), and (d)(1), as appropriate, related to the due date of the plan 
and the relocation of the submission procedure from (c)(3) to (e)(10). 
The Department is not proposing to create new requirements for the 
fraud control plan but to extend the current requirements and change 
the due date for this plan. The Department is proposing to reserve 
section 277.15 for future use.
    Because the Department is proposing to move the fraud control plan 
submission requirement to Sec. 272.2(d)(1)(xi), the current submission 
requirement in Sec. 272.2(c)(3)(i) is being deleted. The deletion of 
paragraph (i) requires redesignating Sec. 272.2(c)(3)(ii) as 
Sec. 272.2(c)(3). Although the wording must be changed slightly to 
accomodate the restructuring of the paragraph, the requirements in the 
current Sec. 272.2(c)(3)(ii) for submission of certain interagency 
agreements are unchanged.
    The Department also intends to incorporate the provision regarding 
the funding rate for investigations of retail or wholesale food 
concerns currently found in Sec. 277.15(f)(2), with a slight 
modification for clarity, into a new paragraph (e) of Sec. 277.4.

ADP Development--Sections 277.18, 274.12

    On June 11, 1982, the Department published a rule at 47 FR 25496 to 
implement section 129 of Public Law 96-249, which allowed enhanced FFP 
at the 75 percent level for costs associated with the planning, design, 
development, acquisition, or installation of ADP systems. On January 
19, 1994, the Department published another final rule at 59 FR 2725 
which reduced the Federal reimbursement rate to the 63 percent level 
effective October 1, 1991 for system proposals which were approved on 
or after November 28, 1990 unless the State had an approved Advance 
Planning Document and had submitted an Implementation Advance Planning 
Document with all the paperwork required for approval prior to November 
28, 1990. The requirements and procedures for State agencies for system 
development at both the enhanced and standard rates of funding were 
codified in 7 CFR 277.18 of Food Stamp Program Rules.
    Section 13961 of the Leland Act amends Section 16 of the Food Stamp 
Act to reduce the rate of Federal funding for system development to the 
regular 50 percent rate. The change in rates is effective, by law, on 
April 1, 1994.
    The new rate applies to costs associated with the planning, design, 
development, acquisition, or installation of ADP systems. The change in 
the funding rate applies to new proposals as well as proposals approved 
prior to April 1, 1994 at the enhanced rate of either 75 or 63 percent. 
Previously approved projects will continue to be reimbursed at the 
enhanced rate for costs incurred, as defined in the Background section 
of this preamble, only through March 31, 1994. The Federal 
reimbursement rate will then drop to the regular 50 percent rate for 
the time remaining in the approval period. Modifications on or after 
April 1, 1994 to existing systems will be reimbursed at the regular 50 
percent rate. All new systems developed on or after April 1, 1994 will 
be reimbursed at the regular 50 percent rate.
    Under current rules at 7 CFR 277.18(c), the State agency is 
required to obtain prior written approval from FNS when it plans to 
acquire ADP equipment or services with enhanced Federal funding, 
regardless of the cost, or at the regular funding rate if total 
acquisition costs meet or exceed $500,000 in Federal and State funds. 
By dropping enhanced funding, the dollar threshold before FNS approval 
is required for all ADP systems would be the standard $500,000 
threshold applicable to the regular funding requirements at 
Sec. 277.18(c). As a result of this change, modifications or revisions 
to systems and services previously approved at the enhanced funding 
rate described at Sec. 273.18(c) but which the total cost of the system 
does not meet or exceed $500,000 would no longer be subject to prior 
FNS approval beginning April 1, 1994, as long as the total cost of the 
system remains under $500,000.
    Accordingly, the Department will retain most of the requirements of 
Sec. 277.18, but is proposing modifications to that section. The 
proposed modifications include the elimination of requirements that 
pertain solely to enhanced funding and retention of the baseline 
requirements and dollar thresholds for FNS funding systems under the 
standard funding at Sec. 277.18(b), (c)(1)-(c)(2), (d)(1)-(d)(2), 
(e)(1) and (p)(5). In addition, the Department proposes to retain 
certain conditions set forth in Sec. 277.18(g)(1) and (g)(2) that are 
currently tied to receipt of enhanced funding since the Leland Act 
amendments made these conditions applicable to receipt of funding at 
the standard funding rate. Therefore, the Department is proposing that 
as a condition of receiving approval for funding at the 50 percent 
standard funding rate, the proposed ADP system must: (1) Assist the 
State agency in meeting the requirements of the Food Stamp Act; (2) 
meet the Model Plan requirements specified in Sec. 272.10 of this part; 
(3) provide for more efficient and effective administration of the 
program; and (4) be compatible with other such systems used in the 
administration of State agency plans under the Aid to Families with 
Dependent Children (AFDC) program. Accordingly, the Department proposes 
to amend Sec. 277.18(g)(1) and (g)(2) to set out these conditions and 
to revise the heading of the section to read ``Conditions for Receiving 
FFP.'' The Department is further proposing to extend the requirements 
at Sec. 277.18(g)(3) to all ADP systems. That section currently 
requires that the proposed ADP systems receiving enhanced funding be 
Statewide and integrated with AFDC, unless the State agency can 
demonstrate that a local, dedicated or single function system will 
provide for more efficient and effective administration of the program. 
The Department is proposing to modify this requirement so it applies to 
all ADP systems regardless of funding level.
    The Department is also proposing to make conforming amendments to 
Sec. 274.12(k) to reflect the elimination of enhanced funding for the 
development of electronic benefit transfer (EBT) systems which are 
components of complete ADP systems to be developed in accordance with 
Sec. 277.18(g).

SAVE--Section 277.19

    On October 7, 1988 at 53 FR 39433, the Department published a rule 
which authorized 100 percent Federal funding for State and local agency 
costs incurred in the verification of the documented alien status of 
Food Stamp Program applicants through the SAVE program. The 
requirements to receive the enhanced funding are at Sec. 277.19.
    Section 13961 of Leland Act amends Section 16 of the Act (7 U.S.C. 
2025) to reduce Federal funding for SAVE activity from the 100 percent 
reimbursement rate to the regular 50 percent rate. The change in rates 
is effective, by law, on April 1, 1994.
    The new rate applies to State and local agency costs incurred in 
the verification of the documented alien status of Food Stamp Program 
applicants through the SAVE program. The current rule at Sec. 272.11(e) 
requires State agencies to submit a SAVE plan as an attachment to the 
State agency's Plan of Operation prior to receiving funding. The 
current rule at Sec. 277.19 sets forth the required conditions for 
obtaining 100 percent FFP for SAVE. The Department is proposing to 
retain the current requirement for a SAVE plan at Sec. 272.11 but is 
proposing to delete Sec. 277.19.
    The current rule at 7 CFR 277.19 requires FNS approval prior to 
acquisition of any ADP equipment for SAVE. The proposal to eliminate 7 
CFR 277.19 modifies this requirement so that ADP equipment for SAVE 
would require prior approval by FNS only if the cost is above the cost 
thresholds in Sec. 277.18. Under current rules in Sec. 277.19, non-ADP 
equipment for SAVE having a net unit cost of $25,000 or more must 
receive prior FNS approval. However, with the elimination of 
Sec. 277.19, the net acquisition cost threshold in Section (B)(3) of 
Appendix A to 7 CFR Part 277 would apply. This provision provides that 
prior FNS approval would be required for the acquisition of equipment 
having a useful life of more than one year and a net acquisition cost 
of more than $5,000 per unit after allocation to FNS as projected for 
one year after purchase.

State Agency Implementation

    To implement this provision as of April 1, 1994 with minimum 
disruption to the Program, State agencies may wish to begin taking 
appropriate steps early. State agencies may wish to obtain the 
additional State funding from their State legislatures to offset the 
reduction in the Federal rate of reimbursement, cut back total 
administrative expenses prior to Federal cost sharing as of April 1, 
1994, reallocate resources to or realign functions to maintain current 
levels of effort and to ensure the efficiency and effectiveness of 
overall operations.

Delaying the Effective Date

    Section 13971 of the Leland Act allows the April 1, 1994 effective 
date for the change in the Federal reimbursement rates to be delayed by 
the Secretary of Agriculture in the case where a State's legislature 
meets biennially and is not scheduled to meet in calendar year 1994. A 
delay may be obtained for such a State only if the State demonstrates 
to the satisfaction of the Secretary that there is no mechanism for 
appropriating additional State funds prior to the next legislative 
session.
    It is the Department's intent that State agencies submit their 
requests to delay the effective date early, and not wait for the 
completion of the rulemaking process. It is in the State agency's 
interest to apply early for a delay in the effective date so a decision 
on the State agency's request may be made promptly. To allow adequate 
time for the review of these requests prior to the effective date, FNS 
instructed its regional offices to notify State agencies that they 
would need to submit their requests to FNS by December 31, 1993. State 
agencies were informed of this deadline in letters which were issued by 
FNS regional offices during the last week of October 1993 and the first 
week of November. The Department will, however, consider requests 
submitted after the deadline.
    A final rule will not be published prior to the April 1, 1994 
effective date in the Leland Act. The Department has made decisions on 
requests for a delay of the effective date based on the policy set out 
in the previous notifications to the States and reflected in the 
following paragraphs of this section of the preamble. Comments on the 
proposed policy are welcomed.
    As stated in the previous paragraph, a State agency which believes 
it meets the above criteria for a delay of the effective date was 
instructed to submit its request to FNS by December 31, 1993 to allow 
for adequate time for FNS to review the request prior to the April 1, 
1994 effective date. The Department required that the request contain 
the following:
    (1) Documentation showing that the State legislature meets only 
biennially;
    (2) Documentation showing that the State legislature does not meet 
in calendar year 1994;
    (3) Certification by the State's chief legal officer, along with 
any supporting documentation, that there is no mechanism under the 
State constitution and laws for appropriating funding prior to the next 
regular legislative session;
    (4) Information as to when the next regular legislative session is 
scheduled to start and, if available, is expected to end.
    The issue of whether a State's laws permit the appropriation of 
funds prior to the next regular legislative session is a legal 
question. State agencies must provide supporting documentation where 
appropriate such as specific provisions of law dealing with when the 
State legislature is scheduled to meet in a regular session, and with 
the appropriation process. The wording of the Leland Act essentially 
requires State agencies to provide proof that something does not 
exist--that no mechanism for appropriating funds prior to the next 
regular legislative session exists under the State's constitution and 
laws. However, it would be too burdensome for FNS to require that a 
State agency provide FNS a complete set of its laws as proof that no 
such mechanism exists.
    However, in all cases, FNS needs some assurance that a thorough and 
accurate review of State law has been made. Accordingly, the Department 
proposes that a signed statement from the State's chief legal officer--
the Attorney General or equivalent official--certifying that no such 
mechanism exists with brief supporting documentation, if any, should 
suffice in most cases. The Department believes it is appropriate and 
necessary for State agencies to provide such a certification regarding 
the State's laws.
    It should be noted here that the Leland Act specifies that there be 
no mechanism for appropriating funding prior to the next regular 
legislative session in order to qualify for a delay of the effective 
date. The language in the Act refers to an appropriating mechanism. If 
the State legislature fails to appropriate the additional State funds 
in a regular session, no delay in the effective date will be granted. 
Also, the Leland Act does not authorize a delay in the effective date 
if a State legislature is scheduled to meet in regular session in 
calendar year 1994, but sometime after April 1, 1994.
    For some State agencies, the State legislature may not be scheduled 
to meet in regular session during calendar year 1994, but the State's 
laws allow the State legislature to be called into special session or 
provide other means (other than a special session) by which the State 
may appropriate additional funds. A request for a delay of the 
effective date should be submitted if a State with a biennial 
legislature which does not meet in calendar year 1994 has no mechanism 
to appropriate the additional State funds under State law other than to 
call a special legislative session to appropriate the additional State 
funds. For purposes of deciding whether or not to grant a request for a 
delay in the effective date, the Department is proposing to define 
``special legislative session'' to mean a legislative session that is 
not scheduled to occur on a regularly scheduled basis. Thus, a 
regularly scheduled short legislative session in even number years to 
consider necessary or emergency bills would be considered a regular 
legislative session. Legislative sessions that are not scheduled on a 
standing regular basis and must be called under State law for a 
specific purpose would be considered a special legislative session.
    The Department is taking this proposed position because it 
recognizes that in many cases a special legislative session could cost 
a State more than the additional State administrative funding that 
would be involved for the Food Stamp Program. In addition, this 
position conforms with AFDC's policy and procedures for implementing 
Section 13741 of the Leland Act which makes a similar change in Federal 
reimbursement rates for the AFDC Program. State agencies should note 
that this position treats State agencies with biennial legislatures the 
same regardless of whether or not the State has called a special 
session in calendar year 1994 for some specific purpose or has chosen 
not to call a special session.
    The Department has also considered how it would interpret the 
criteria in Section 13971 of the Leland Act that a State have ``no 
mechanism, under the constitution and laws of the State, for 
appropriating the additional funds required * * * before the next such 
regular legislative session * * *'' The Act is not clear as to what 
kind of appropriating mechanism would meet the test. Webster's Third 
New International Dictionary defines an appropriation as a sum of money 
set aside or allotted by official or formal action for a specific use. 
Accordingly, State appropriation mechanisms could be interpreted to 
include the process by which the State legislature or other entities in 
the State appropriate funds as well as State procedures to set aside 
funds from discretionary or emergency accounts for specific purposes.
    In general, State constitutions and laws provide for appropriation 
by the State's legislature. However, some State laws also provide other 
funding mechanisms such as voter initiatives to appropriate funds, 
procedures allowing State officials or emergency commissions to 
authorize the spending of funds from the State treasury, another 
program's revenue account, or an emergency account, and procedures by 
which funds previously appropriated for one program may be transferred 
to another program. The Department recognizes that while these 
mechanisms may exist under State law, they may not be useable by the 
State for several reasons. Voter initiatives to amend the constitution 
or law to provide State funding require months just to raise the issue 
to a sufficient number of voters and schedule an election and are 
beyond the control of the State. Regarding the spending of 
discretionary or emergency funds, State officials would be reluctant to 
declare an emergency in order to utilize emergency procedures to 
transfer funds from the State Treasury or other accounts to the State's 
Food Stamp Program for a non-emergency purpose. Further, the 
interpretation of what is a State appropriation under State law as 
opposed to emergency funds transfer mechanisms varies by State. The 
Department believes that State legal officers are in the best position 
to determine what are the appropriation mechanisms that are readily 
available and useable under the State law. Accordingly, the Department 
is proposing to interpret the law to cover only mechanisms by which the 
State legislature appropriates funding and not to cover voter 
initiative mechanisms and State transfer mechanisms from discretionary 
or emergency accounts.
    In March 1994, the Department approved enhanced funding extension 
requests from four State agencies using this policy. The Department 
acted on these requests prior to the rulemaking so the State agencies 
affected would know their Federal funding status prior to the April 1, 
1994 effective date mandated in the law.
    If a decision by FNS to grant a delay is made after April 1, 1994, 
an adjustment will be made so an affected State agency can receive 
enhanced Federal funding retroactive to April 1, 1994 for eligible 
costs.
    If approval is granted to delay the effective date, Section 13971 
of the Leland Act provides that the delayed effective date would be the 
first day of the first calendar quarter which begins after the close of 
the State's regular legislative session. In such a case, State agencies 
would be required to promptly advise FNS in writing as to the actual 
date the next regular session of the State legislature is completed 
once such session is completed so the delayed effective date can be 
determined.

Enhanced Funding for Low Payment Error Rates

    Under Section 16(c) of the Food Stamp Act and the current rules at 
Sec. 277.4(b), the Federal share of administrative costs specified in 
section 16(a) of the Food Stamp Act may be enhanced from the regular 50 
percent rate to a maximum of 60 percent after the end of the Federal 
fiscal year if the State agency qualifies by achieving a low payment 
error rate. Costs which were eligible for greater enhanced funding 
rates under section 16 (a), (g), and (j) of the Act (fraud control 
costs, ADP development, and SAVE) were ineligible for the 60 percent 
enhancement. With the drop in the funding rate to 50 percent, these 
three activities now become eligible along with other costs funded at 
the 50 percent rate for the increased Federal reimbursement rate of up 
to 60 percent if the State agency meets the low payment error rate 
specified in Sec. 277.4. The enhanced funding may only be paid on costs 
shared at the 50 percent level to State agencies who qualify. The 
Department proposes to amend Sec. 277.4, to allow these three new 
activities to become eligible for the 60 percent enhanced funding by 
removing Sec. 277.4 (b)(1), (b)(10), (b)(11) and (b)(12), redesignating 
the remaining provisions, and by revising newly designated paragraph 
(b)(7).

Deadline for Filing Claims for Retroactive Funding--Section 277.11

    Current rules at Sec. 277.11 do not limit State agencies from 
making claims for prior year administrative costs. The one exception is 
that the provision at Sec. 277.15(b) limits 75 percent funding for 
fraud control activities to prior year costs incurred in the Federal 
fiscal year during which a State agency initially applied for 75 
percent funding. However, State agencies may make claims for prior year 
fraud control activities at the 50 percent Federal reimbursement rate 
with no time limit.
    State agencies are currently required at Sec. 277.11 to submit a 
Form SF-269, Financial Status Report, on a quarterly basis to report 
program costs and to support the claims made for Federal funding. Final 
reports are due December 30 for the preceeding Federal fiscal year 
which runs from October 1 through September 30. In addition, after the 
fiscal year is over, State agencies may request retroactive funding for 
past years or pay back FNS for inadvertent overclaims by submitting an 
SF-270, Request for Advance or Reimbursement. It is the SF-270 
adjustments which, under current rules potentially may go on without 
end. In Fiscal Years (FY) 1991 through 1993, FNS received SF-270 
requests for retroactive funding from State agencies going back as far 
as FY 1981 and SF-270 payments from State agencies to FNS going back to 
FY 1979 and prior years for the Food Stamp Program.
    The Department proposes to amend Sec. 277.11 to add a new paragraph 
(d)(1) which would limit the time period during which State agencies 
may file a request for retroactive funding. The intended effect of this 
proposal is to limit State agency and FNS resources toward the present 
operation of the program. The Department believes State agencies have a 
responsibility to properly claim Federal funding on a timely basis.
    Other Federal programs currently have claim limitations in place. 
The U.S. Department of Health and Human Services (DHHS) has claim 
limits on grants to State agencies for the Aid to Families with 
Dependent Children and Medicaid Programs. For example, in those 
programs, DHHS will reimburse a State agency only if the State agency 
files a claim for an expenditure within two years after the calendar 
quarter in which the State agency made the expenditure. In this rule, 
the Department is proposing a similar limitation for the Food Stamp 
Program.
    The Department proposes in new Sec. 277.11(d)(3) to provide, that 
subject to the availability of funds, FNS would reimburse a State 
agency for an allowable expenditure at the appropriate Federal 
reimbursement rate only if the State agency files a claim with FNS for 
that expenditure within two years after the calendar quarter in which 
the State agency obligated the funds. In the case of 75 percent funding 
for fraud control activity, the same two-year limit would apply to 
claims for retroactive 75 percent fraud funding but there would be an 
additional limit in that the retroactive funding would not be available 
prior to the year in which the State agency applied for 75 percent 
funding.
    Further, the Department proposes in new Sec. 277.11(d)(2) to 
provide that subject to the availability of funds and any required FNS 
approval related to the Advance Planning Document under 7 CFR 
277.18(c), FNS would reimburse State agencies for the purchase of 
automated data processing (ADP) equipment and services at the 
appropriate reimbursement rate in effect at the time the equipment or 
service was received only if the State agency files a claim with FNS 
for that expenditure within two years after the calendar quarter in 
which the State agency obligated the funds. This proposed time limit 
applies to ADP expenditures approved for funding at the enhanced rate 
and at the regular rate.
    The Department's proposal in new Sec. 277.11(d)(4) would provide 
for certain exceptions to the two-year limit. State agencies may 
request a waiver of the time limit in writing in advance of the 
deadline. In order to be granted by FNS, the request must include 
supporting explanation, justification and documentation. In addition, 
as set forth in proposed Sec. 277.11(d)(5) the time limit would not 
apply to audit exceptions, or where FNS determines there was good cause 
resulting from circumstances beyond the State agency's control for 
filing a late claim. An audit exception means a proposed adjustment by 
the Department to any expenditure claimed by a State agency by virtue 
of an audit. Finally, the Department's proposal would limit the time 
period for the use of the SF-270 to repay FNS for an overclaim to three 
years from the end of the Federal fiscal year unless litigation, an 
audit, or a claim is pending at the end of the three-year period. FNS 
reserves the right to assert a claim against State agencies for amounts 
due when an SF-270 is not submitted by the State agency to repay any 
money due FNS.
    Note that under the current program rules at Sec. 277.12, State 
agencies are required to maintain all financial records for three years 
unless there is pending litigation, or an unresolved audit or claim. If 
any litigation, claim, or audit is started before the expiration of the 
three-year period, the applicable records shall be retained until these 
have been resolved. The Department is not proposing any changes to 
these record retention requirements in this rule.

AFDC/Food Stamp Certification Costs--Section 277.9

    The Department is also proposing amendments to current regulations 
to correspond to current practice related to the charging of certain 
food stamp certification costs to the Food Stamp Program.
    The current regulations at Sec. 277.9 provide that any cost related 
to determining the Food Stamp Program eligibility of Aid to Families 
with Dependent Children (AFDC) cases is to be included as part of the 
AFDC determination costs and claims and not as an allowable cost for 
FNS reimbursement. However, beginning October 1, 1983, as a result of a 
Memorandum of Understanding between the Department and DHHS, the 
Department changed this policy, but not the regulatory provision, so 
that the incremental cost of certifying AFDC households for Food Stamp 
Program benefits shall be charged to FNS, not to the Office for Family 
Assistance, DHHS. State agencies were notified by FNS regional offices 
of this change in August 1983. Beginning October 1, 1983, State 
agencies have been allowed to charge such costs to FNS.
    The Department is proposing that this longstanding practice be 
codified in the Food Stamp Program Regulations. The Department proposes 
to amend Sec. 277.9(b) to provide that the incremental cost of 
certifying AFDC cases for food stamp benefits would be an allowable 
cost for FNS reimbursement at the standard Federal reimbursement rate. 
This proposed provision modifies program regulations so that they 
conform to current policy and practice.

Effective Dates and Implementation Requirements

    The Department is proposing that all the provisions in Sec. 277.11 
regarding time limits for State agencies to file claims to amend a 
prior expenditure report to request retroactive funding for costs 
previously incurred will be effective the first day of the first 
calendar quarter occurring not less than 60 days following publication 
of the final rule.
    The Department proposes that the provision at Sec. 277.9(b) on the 
charging of food stamp certifications of AFDC households become 
effective 30 days following publication of the final rule since it does 
not require any special implementation efforts on the part of State 
agencies since the change merely conforms the regulations to current 
practice.
    Pursuant to Section 13971 of the Leland Act, the reduction in FFP 
rates mandated by Section 13961 of the Leland Act was effective on 
April 1, 1994, unless the Department grants a delay in certain limited 
circumstances, as specified in this proposed rule.
    In the last week of October and the first week of November 1993, 
the Department briefed State agencies administering the Food Stamp 
Program on how to implement the new Federal funding rates for FNS-366A, 
Budget Projection, and SF-269, Financial Status Report, actual cost 
reporting and payment purposes effective April 1, 1994. The prompt 
implementation was necessary prior to rulemaking to comply timely with 
the Leland Act's mandate to reduce the Department's share of State 
agency administrative costs to the mandated rate as of April 1, 1994, 
and to minimize the need for revised reporting by State agencies 
related to budget projections for FY 1994 and actual cost reporting on 
or after April 1, 1994. It also gave lead time to State agencies opting 
to seek from their State legislatures additional State funds to offset 
the reduction in the rate of Federal funding. State agency budget 
projections for FY 1994 should take into account the new funding rate 
as of April 1, 1994. Beginning April 1, 1994, State agencies began 
drawing down Federal funds for expenditures based on the new funding 
rate for these activities. Effective with the third quarter Fiscal Year 
1994 SF-269 report, State agencies will begin reporting costs using the 
new funding rate for these activities.
    Costs incurred by the State or local agency on or after April 1, 
1994 will be claimed at the regular 50 percent Federal reimbursement 
rate. State agencies currently report the amount of Federal funds 
requested on the FNS-366A, Budget Projection, and actual costs on the 
SF-269, Financial Status Report. For reporting purposes, the Department 
is proposing to require State agencies to begin reporting budget and 
cost information using the new lower Federal reimbursement rate for 
costs incurred for periods beginning on or after April 1, 1994.
    Section 13961 of the Leland Act, which reduces the enhanced funding 
for fraud control, ADP development, and SAVE costs, applies, by its 
terms, to costs incurred on or after April 1, 1994. The deadline for 
submitting a request to delay the effective date for the reduction in 
enhanced funding is December 31, 1993 as specified in letters sent by 
FNS regional offices to State agencies in the last week of October and 
the first week of November 1993. However, the Department will consider 
requests submitted after that date.
    The conforming amendments to Food Stamp Program regulations in 
Secs. 272.2, 272.11, 272.13, 274.12, 277.4, 277.15, 277.18, and 277.19 
will be effective 30 days following publication of the final rule.

Public Comments

    This rule proposes to bring the regulations into conformity with 
the Leland Act. Publication of the rule does not change the 
implementation guidance which was issued by the Department beginning in 
late October 1993. The Department is merely proposing to incorporate 
the new Federal reimbursement rate for these activities into the 
regulations. Although the Department has taken action to ensure prompt 
implementation of the new reimbursement rate effective April 1, 1994, 
this rulemaking is still necessary in order to conform the regulations 
to the new rate.
    The Department requests public comments because they may be 
beneficial to the rulemaking. However, commenters should note that the 
new Federal reimbursement rate and the implementation date for the 
reduction in the Federal reimbursement rate were mandated in the Act 
and are not items involving Departmental discretion. Only the decision 
of whether a State agency has demonstrated that it meets the criteria 
for a delay of the effective date involves some degree of Departmental 
discretion. Any comments received by the deadline stated above for 
comments will be considered prior to publication of a final rulemaking.

List of Subjects

7 CFR Part 272

    Alaska, Civil rights, Food stamps, Grant programs--social programs, 
Reporting and recordkeeping requirements.

7 CFR Part 274

    Administrative practice and procedure, Food stamps, Fraud, Grant 
Programs--social programs, Reporting and recordkeeping requirements.

7 CFR Part 277

    Food stamps, Government procedure, Grant programs--social programs, 
Investigations, Records, Reporting and recordkeeping requirements.

    Accordingly, 7 CFR Parts 272, 274 and 277 are proposed to be 
amended as follows:

    1. The authority citation for Parts 272, 274 and 277 continues to 
read as follows:

    Authority: 7 U.S.C. 2011-2032.

PART 272--REQUIREMENTS FOR PARTICIPATING STATE AGENCIES

    2. In Sec. 272.2:
    a. The last sentence of paragraph (a)(2) is amended by adding the 
words ``and the fraud control plan'' to the end of the sentence;
    b. Paragraph (c)(3) is revised;
    c. New paragraphs (d)(1)(xi) and (d)(3) are added;
    d. The first sentence of paragragh (e)(3) is amended by removing 
the reference ``Sec. 272.2(c)(3)(ii)'' and adding in its place the 
reference ``Sec. 272.2(c)(3)'' and the second sentence is removed; and
    e. New paragragh (e)(10) is added.
    The addition and revisions read as follows:


Sec. 272.2  Plan of Operation.

* * * * *
    (c) Budget Projection Statement and Program Activity Statement. * * 
*
    (3) Additional Attachments. Attached for informational purposes 
(not subject to approval as part of the plan submission procedures) to 
the Program Activity Statement and submitted as required in 
Sec. 272.2(e)(3) shall be the agreements between the State agency and 
the United States Postal Service for coupon issuance, and between the 
State agency and the Social Security Administration for supplemental 
security income/food stamp joint application processing and for routine 
user status.
    (d) Planning Documents.
    (1) * * *
    (xi) A plan for fraud control as specified in paragraph (d)(3) of 
this section.
* * * * *
    (3) Fraud Control Plan. State agencies shall develop and use a 
fraud control plan to assure that food stamp investigations and 
prosecutions are conducted as appropriate. The fraud control plan shall 
contain the identification of the organizational units involved 
including units outside the State agency, with a brief description of 
the intentional Program violation investigation, disqualification 
hearing, or prosecution function assigned; a copy of the statutes or 
court decisions under which intentional Program violation cases are 
prosecuted; a detailed description of the coordination between the 
investigative units and the prosecuting units, and the process by which 
prosecuting officials present indictments regarding intentional Program 
violation cases; an agreement that investigative reports, prepared by 
the investigation or prosecution units, and other related records will 
be made available to USDA upon request; and assurance that the 
administrative disqualification hearing activity is conducted in 
accordance with Sec. 273.16.
    (e) Submittal Requirements. * * *
    (10) The Fraud Control Plan shall be signed by the head of the 
State agency and submitted to FNS annually no later than August 15.
* * * * *


Sec. 272.11  [Amended]

    3. In Sec. 272.11:
    a. Paragraph (d)(1)(iii) is amended by removing the reference to 
``Sec. 277.19'' and adding in its place a reference to ``Sec. 277.18 
and Appendix A''.
    b. Paragraph (e)(2) is amended by removing from the first sentence 
the words ``, as outlined in Sec. 277.19(e)''.

PART 274--ISSUANCE AND USE OF COUPONS


Sec. 274.12  [Amended]

    4. In Sec. 274.12, paragraphs (k)(2) and (k)(3) are removed and 
paragraphs (k)(4) through (k)(6) are redesignated as paragraphs (k)(2) 
through (k)(4) respectively.

PART 277--PAYMENT OF CERTAIN ADMINISTRATIVE COSTS OF STATE AGENCIES

    5. In Sec. 277.4:
    a. Paragraphs (b)(1), (b)(10), (b)(11), and (b)(12) are removed;
    b. Paragraphs (b)(2) through (b)(9) are designated as paragraphs 
(b)(1) through (b)(8) respectively;
    c. The second sentence in newly redesignated paragraph (b)(7) is 
revised; and
    d. New paragraph (g) is added.
    The revision and addition reads as follows:


Sec. 277.4  Funding.

* * * * *
    (b) Federal Reimbursement Rate * * *
    (7) * * * The rates of Federal funding for the activities 
identified in paragraphs (b)(2) and (b)(3) of this section shall not be 
reduced based upon the agency's payment error rate.
* * * * *
    (g) Investigations of authorized retail or wholesale food concerns 
when performed in coordination with the USDA Office of Inspector 
General and FNS shall be funded at the 50 percent Federal reimbursement 
rate.
* * * * *
    6. In Sec. 277.9, paragraph (b) is revised to read as follows:


Sec. 277.9  Administrative Costs Principles.

* * * * *
    (b) The incremental cost of certifying AFDC households for Food 
Stamp Program benefits are allowable costs for FNS reimbursement.
* * * * *
    7. In Sec. 277.11, a new paragraph (d) is added to read as follows:


Sec. 277.11  Financial Reporting Requirements.

* * * * *
    (d) Time Limit for State Agencies to File Claims.
    (1) After the deadline in paragraph (c)(4) of this section for the 
final Form SF-269 report, State agencies shall use the Form SF-270, 
Request for Advance or Reimbursement, as needed within three years of 
the end of the Federal fiscal year to amend a prior expenditure report 
pertaining to such Federal fiscal year. The three-year reporting 
deadline may be extended by FNS if litigation, an audit, or a claim is 
unresolved at the end of the three-year period. The SF-270 shall be 
used to amend prior expenditure reports, and to request reimbursement 
for any additional funding due or to pay back to FNS any inadvertent 
prior overclaim. Requests for reimbursement will only be honored if the 
claim is filed within the timeframe in paragraph (d)(2) of this 
section. FNS reserves the right to bill State agencies for amounts due 
FNS due to an overclaim even if no SF-270 has been submitted.
    (2) Subject to the availability of funds from the appropriation for 
the year in which the expenditure was incurred, FNS may reimburse State 
agencies for an allowable expenditure only if the State agency files a 
claim with FNS for that expenditure within two years after the calendar 
quarter in which the State agency obligated the funds. FNS will 
consider non-cash expenditures such as depreciation to have been made 
in the quarter the expenditure was recorded in the accounting records 
of the State agency in accordance with generally accepted accounting 
principles.
    (3) For Automated Data Processing (ADP) expenditures approved under 
Sec. 277.18(c), subject to the availability of funds and required FNS 
approval related to the Advance Planning Document, FNS may reimburse 
State agencies for allowable expenditures at the appropriate rate in 
effect at the time the equipment or service was received only if the 
State agency files for a claim with FNS within two years after the 
calendar quarter in which the funds were obligated. FNS will consider 
non-cash expenditures such as depreciation to have been made in the 
quarter the expenditure was recorded in the accounting records of the 
State agency in accordance with generally accepted accounting 
principles.
    (4) Waiver requests for an extension of the deadline in paragraphs 
(d)(2) and (d)(3) of this section may be granted by FNS only if the 
request was submitted in writing to FNS prior to the applicable 
deadline. The State agency's request for a waiver must include a 
specific explanation, justification, and documentation of why the claim 
will be late and when the claim will be filed.
    (5) The time limits in paragraphs (d)(2) and (d)(3) of this section 
will not apply to any of the following:
    (i) Any claim for an adjustment to prior year costs previously 
claimed under an interim rate concept;
    (ii) Any claim resulting from an audit exception;
    (iii) Any claim resulting from a court-ordered retroactive payment. 
However, this provision does not bind FNS to a State or Federal 
decision when FNS was not a party to the action;
    (iv) Any claim for which FNS determines there was good cause for 
the State agency's not filing it within the time limit. Good cause is 
lateness due to circumstances beyond the State agency's control such as 
Acts of God or documented action or inaction of the Federal Government. 
It does not include neglect or administrative inadequacy on the part of 
the State, State agency, legislature, or any of their offices or 
employees.


Sec. 277.15  [Removed and Reserved]

    8. Section 277.15 is removed and reserved.
    9. In Sec. 277.18:
    a. In paragraph (b), the definition of ``Enhanced funding or 
enhanced FFP rate'' is removed and the definition of ``Regular funding 
or regular FFP rate'' is amended by removing the words ``except for the 
75 percent funding rate for State agency planning, design, development 
or installation of computerized systems, as specified at 
Sec. 277.4(b)(1)(ii)'';
    b. Paragraph (c)(1) is revised and paragraphs (c)(2)(ii)(A) and 
(c)(2)(ii)(B) are amended by removing the words ``at the regular 
funding rate or $100,000 at the enhanced funding rate,'';
    c. The introductory text of paragraphs (d)(1) and (d)(2) are 
amended by removing the words ``at the regular or enhanced funding 
rate'';
    d. Paragraph (d)(1)(ii) is amended by removing the last sentence;
    e. The third sentence of paragraph (d)(1)(v) is amended by removing 
the words ``thresholds of Sec. 277.18(c)(1) are met'' and adding the 
words ``threshold of Sec. 277.18(c)(1) is met'' is their place;
    f. The first sentence of paragraph (e)(1) is revised;
    g. The heading of paragraph (g) is revised;
    h. Paragraphs (g)(1) and (g)(2) are revised and paragraphs (g)(3) 
through (g)(8) are removed; and
    i. Paragraph (p)(5) is revised.
    The revisions read as follows:


Sec. 277.18  Establishment of an Automated Data Processing (ADP) and 
Information Retrieval System.

* * * * *
    (c) General acquisition requirements.--(1) Requirement for prior 
FNS approval. A State agency shall obtain prior written approval from 
FNS as specified in paragraph (c)(2) of this section when it plans to 
acquire ADP equipment or services which it anticipates will have total 
acquisition costs of $500,000 or more in Federal and State funds. 
However, a State agency shall obtain prior written approval from FNS 
for the acquisition of ADP equipment or services to be utilized in an 
EBT system regardless of the cost of acquisition. A State agency shall 
also obtain prior written approval from FNS when it plans to 
noncompetitively acquire ADP equipment or services from a 
nongovernmental source which cost more than $100,000 in Federal and 
State funds. The State agency shall request prior FNS approval by 
submitting the Planning APD or Implementation APD signed by the 
appropriate State official to the FNS Regional Office.
* * * * *
    (e) APD Update.--(1) General sub- mission requirements. The State 
agency shall submit an APD Update for FNS approval for all approved 
Planning and Implementation APD's when total acquisition costs exceed 
$1 million. * * *
* * * * *
    (g) Conditions for Receiving FFP.--(1) A State agency may receive 
FFP at the 50 percent reimbursement rate for the costs of planning, 
design, development or installation of ADP and information retrieval 
systems if the proposed system will:
    (i) Assist the State agency in meeting the requirements of the Food 
Stamp Act;
    (ii) Meet the program standards specified in Sec. 272.10(b)(1), 
(b)(2) and (b)(3) of this chapter, except for the requirements in 
Sec. 272.10 (b)(2)(vi), (b)(2)(vii) and (b)(3)(ix) of this chapter to 
eventually transmit data directly to FNS;
    (iii) Be likely to provide more efficient and effective 
administration of the program; and
    (iv) Be compatible with other such systems utilized in the 
administration of State agency plans under the program of Aid to 
Families with Dependent Children (AFDC).
    (2) State agencies seeking FFP for the planning, design, 
development or installation of automated data processing and 
information retrieval systems shall develop Statewide systems which are 
integrated with AFDC. In cases where a State agency can demonstrate 
that a local, dedicated, or single function (issuance or certification 
only) system will provide for more efficient and effective 
administration of the program, FNS may grant an exception to the 
Statewide integrated requirement. These exceptions will be based on an 
assessment of the proposed system's ability to meet the State agency's 
need for automation. Systems funded as exceptions to this rule, 
however, should be capable to the extent necessary, of an automated 
data exchange with the State agency system used to administer AFDC. In 
no circumstances will funding be available for systems which duplicate 
other State agency systems, whether presently operational or planned 
for future development.
* * * * *
    (p) * * *
    (5) Costs. Costs incurred for complying with the provisions of 
paragraphs (p)(1) through (p)(3) of this section are considered regular 
administrative costs which are funded at the regular FFP level.


Sec. 277.19  [Removed]

    10. Section 277.19 is removed.

    Dated: November 15, 1994.
Ellen Haas,
Under Secretary, Food, Nutrition, and Consumer Services.
[FR Doc. 94-28831 Filed 11-21-94; 8:45 am]
BILLING CODE 3410-30-U