[Federal Register Volume 61, Number 126 (Friday, June 28, 1996)]
[Rules and Regulations]
[Pages 33641-33644]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-16596]



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 Rules and Regulations
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  Federal Register / Vol. 61, No. 126 / Friday, June 28, 1996 / Rules 
and Regulations  

[[Page 33641]]



DEPARTMENT OF AGRICULTURE

Food and Consumer Service

7 CFR Parts 272 and 277

[Am. No. 368]
RIN 0584-AB92


Food Stamp Program: Automated Data Processing Equipment and 
Services; Reduction in Reporting Requirements

AGENCY: Food and Consumer Service, USDA.

ACTION: Final rule.

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SUMMARY: This rule: increases the cost thresholds above which prior 
written Federal approval is required for Federal financial 
participation in State automated data processing (ADP) equipment and 
services acquisitions; provides for State requests to be deemed to have 
provisionally met the prior approval requirement if the Food and 
Consumer Service (FCS) does not approve, disapprove, or request 
additional information about the request within 60 days of 
acknowledging receipt; and eliminates the requirement that State 
agencies submit a written summary pertaining to the State biennial 
system security reviews.

EFFECTIVE DATE: This rule is effective July 29, 1996.

FOR FURTHER INFORMATION CONTACT: John H. Knaus, Chief, Quality Control 
Branch, Program Accountability Division, Food Stamp Program, 3101 Park 
Center Drive, Room 904, Alexandria, Virginia 22302, (703) 305-2474.

SUPPLEMENTARY INFORMATION:

Executive Order 12866

    This 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 (FSP) is listed in the Catalog of Federal 
Domestic Assistance under 10.551 and information on State agency 
administrative matching grants for the FSP is listed under 10.561. For 
the reasons set forth in the final rule and related notice to 7 CFR 
part 3015, subpart v (48 FR 29115), the FSP 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 FSP 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); and (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 rulemaking 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, 5 U.S.C. 601-612). Ellen Haas, Under 
Secretary for Food, Nutrition, and Consumer Services, has certified 
that this rule does not have a significant economic impact on a 
substantial number of small entities. This rule will affect State 
agencies by reducing the reporting requirements applicable to them.

Paperwork Reduction Act

    We anticipate this rule could reduce the actual reporting burden by 
twenty percent or more. In accordance with the Paperwork Reduction Act 
of 1995 (44 U.S.C. 3507), FCS solicited comment through an April 1, 
1996 publication in the Federal Register (61 FR 14288) of a notice on 
the information collection requirements relating to automated data 
processing and information retrieval systems. The comment period closed 
May 31, 1996. There were no comments on the portion of the reporting 
burden that this rule concerns. The proposed collection will be 
submitted to OMB for review and at that time the Department will 
publish a notice which will provide an additional opportunity to 
comment.

Background

    On July 31, 1995, the Department of Agriculture (the Department) 
published in the Federal Register a Notice of Proposed Rulemaking which 
proposed changes to the Advance Planning Document (APD) process (60 FR 
38,972 (1995)). There was a sixty-day comment period, which ended 
September 29, 1995. The Department received six comment letters on the 
proposed rule. Commenters represented the States of California, 
Louisiana, North Carolina, Pennsylvania and Texas and the National 
Association of State Human Services Finance Officers. Commenters 
expressed agreement with the proposed rule's objective to reduce 
reporting requirements. Two commenters supported the rule changes with 
no additional comment. One commenter was positive about the changes but 
had technical questions about their application. The three remaining 
commenters, while positive about the direction of the rule changes, 
felt FCS should take further action to reduce the reporting 
requirements.

Increased APD Prior Approval Cost Thresholds - 7 CFR 277.18(c)

    The Department proposed to increase the cost thresholds for prior 
approval of APDs from $500,000 to $5 million or more in State and 
Federal costs for both competitive and noncompetitive acquisitions. 
Noncompetitive acquisitions from a non-governmental source that have 
total State and Federal acquisition costs of more than $1 million but 
no more than $5 million would need prior approval of the

[[Page 33642]]

justification for the sole source purchase. The previous threshold for 
such acquisitions was $100,000. Three commenters thought the proposed 
increases were too small to reduce the reporting burden for their 
States. Two recommended that thresholds be scaled according to the 
total or client populations of a State. One commenter recommended that 
thresholds be raised to $25 million for larger States; another 
recommended an increase to $30 million. The theory behind these 
comments was that relatively minor projects in larger States, because 
of their costs, would receive disproportionate Federal attention and 
require continued reporting.
    The Department is attempting to achieve a reasonable balance 
between greater State flexibility and prudent oversight of Federal 
investments. The thresholds were increased ten-fold in the proposed 
rule. While automation projects costing from $5 million to $25 million 
or $30 million may not always be critical projects in larger States, 
they represent sizeable investments of Federal money. Introduction of a 
sliding scale for thresholds according to State population or caseload 
introduces an unnecessary complication to the APD process. At this time 
the Department believes a reasonable balance has been proposed. 
However, the Department will continue efforts to further streamline the 
APD process. After some experience with the new thresholds, further 
increases in or changes to the thresholds can be considered.
    One commenter suggested that the Department limit its review of 
State ADP acquisitions to new development and that standard upgrades of 
existing equipment, replacement of obsolete or depreciated equipment, 
and normal growth (equipment for new staff) be exempt from Federal 
review. This commenter asserted there was rarely doubt as to the 
eventual approval of most of these requests and this action would 
permit further Federal focus on new automation initiatives. The 
Department is responsible for overseeing Federal investments and 
ensuring Federal requirements are met. At this time the Department 
believes these acquisitions, when in excess of the proposed thresholds, 
should receive continued Federal oversight. However, this suggestion 
will be part of considerations in continuing efforts to streamline the 
APD process and provide reporting relief to State agencies.
    One commenter proposed that electronic benefit transfer (EBT) 
systems be subject to the higher APD thresholds. However, given the 
critical stage of development of a large number of EBT projects, the 
Department believes it is in the mutual interest of States and the 
Federal government to continue reviewing EBT projects under standards 
that are specific to them.
    Finally, one commenter wanted to know whether an APD would need to 
be submitted for a project if it unexpectedly exceeds the threshold at 
some point during its development or during its life cycle through 
enhancements. The proposed rule did not affect existing policy for 
underestimated projects. When State officials first realize that a 
project under development is likely to exceed the threshold, an APD 
should be submitted. After system implementation is complete, future 
enhancements during the system life cycle would need prior approval if 
their costs will exceed the threshold.

Reviews of Requests for Proposals (RFPs), Contracts and Contract 
Amendments--7 CFR 277.18(c)(2)(ii)

    The Department proposed to increase thresholds for prior approval 
of RFPs and Contracts to $5 million or more for competitive 
procurements and to more than $1 million for non-competitive 
procurements. The proposed rule also would increase the threshold for 
prior Federal approval for contract amendments to those involving cost 
increases greater than $1 million or contract time extensions of more 
than 120 days. FCS could review Requests for Proposals (RFPs), 
contracts and contract amendments under the threshold amounts on an 
exception basis or if the procurement was not adequately described in 
the APD.
    Two commenters recommended that RFPs, contracts and contract 
amendments no longer be subject to review. According to one commenter, 
Federal review of these documents causes delays, duplicates State 
processes and represents Federal micro-management of State projects. 
The other commenter recommended elimination of these reviews since RFPs 
and contracts would have been already justified by an approved APD. 
While the Department substantially increased the thresholds for 
submitting these documents, the approval of RFPs, contracts and 
contract amendments was not eliminated. The Department is responsible 
for ensuring that Federal requirements are met for ADP acquisitions. 
Although an approved APD may provide for the eventual release of an RFP 
and signing of a contract, these documents are not necessarily 
identical in content and legal significance. Prior approval for these 
documents will be retained in the final rule. However, the Department 
will reexamine these recommendations in upcoming efforts to further 
streamline the APD process and reduce State reporting requirements.
    Two commenters believe the proposed rule is unclear about when 
RFPs, contracts and contract amendments which fall under the thresholds 
for submitting these documents will need prior approval. These 
commenters thought the rule could require States to submit RFPs, 
contracts or contract amendments when the ADP equipment or services 
acquisition did not need prior approval of either an APD or the sole 
source justification. The proposed rule did not change FCS' ongoing 
policy of subjecting these documents to review only if prior approval 
of the ADP acquisition was required in accordance with 
Sec. 277.18(c)(1). As provided by Sec. 277.18(c)(2)(ii), FCS will 
require prior approval of RFPs, contracts and contract amendments only 
if prior approval of an APD or the justification for a sole source 
procurement was required. Prior approval for RFPs, contracts and 
contract amendments under the applicable thresholds would be reviewed 
on an exception basis (such as if innovative automation is used) or if 
the procurement strategy was not adequately described or justified in 
the APD. If approval of these documents is needed, and they are under 
the thresholds, FCS will notify States to submit them. No substantive 
changes are made to the provisions at Sec. 277.18(c)(2)(ii) (A), (B) or 
(C). However, wording in the provisions will be modified in the final 
rule to make the language more similar to language in DHHS' rule. The 
word ``justified'' is added to (A) and (B) and the word ``described'' 
is added to part (C).

Prompt Action on Requests for Prior Approval--7 CFR 277.18(c)(5)

    Two commenters asked about the meaning of provisional approval, 
whether this approval could be withdrawn, and under what circumstances. 
One commenter wanted to know whether interest would be charged if a 
project was denied funding after it was begun. Provisional approval 
permits States to go forward with their automation projects after the 
Federal time-limit expires without penalty for not receiving prior 
Federal approval. Under previous policy, a project could be denied full 
funding if it was begun before Federal approval was received. However, 
provisional approval is distinct from formal approval and does not 
waive Federal requirements for these acquisitions. FCS' practice has

[[Page 33643]]

been not to establish claims if a State has acted in good faith. In the 
event FCS determines that the actions taken by the State are not 
approvable, notification in writing is provided, and funding approval 
is suspended pending corrective action. The State would be at financial 
risk if the State continues to draw funds for these charges after this 
notification. A claim would be established for funds drawn after the 
suspension and the State would again be notified in writing of the 
disallowance for all funds improperly drawn and any interest accrued on 
those funds. These charges would not be eligible for reimbursement by 
FCS. If FCS determines that the planned project does not meet the 
requirements for approval, no further funding would be approved and all 
approval action would be terminated.
    One commenter was concerned that the date starting the count of the 
sixty-day Federal time-limit for responding to State requests is the 
date of the Department's acknowledgement letter. This commenter 
suggested the Department could delay State projects by delaying the 
mailing of the acknowledgement letter. The Department intends to 
acknowledge State requests promptly. If State agencies believe 
acknowledgement of their requests have been purposely delayed, a 
complaint should be filed with the appropriate FCS Regional 
Administrator.

APD Update (APDU)--7 CFR 277.18(e)

    The Department proposed to raise the reporting threshold for 
submitting an annual APD Update (APDU) from $1 million to $5 million. 
The threshold for submittal of an APDU as needed was proposed for 
increases of $1 million or more. The previous threshold was $300,000 or 
10 percent of the project cost, whichever is less.
    According to two commenters, the threshold for annual APD updates 
is still too low to give their States reporting relief. These 
commenters recommended increases to $25 million and $30 million 
respectively. One commenter thought this increase was necessary since 
EBT projects will increase the amount of annual APD reporting required. 
In addition, one commenter thought the threshold for as needed APDUs 
should be raised from $1 million or more to $2.5 million or 10 percent, 
whichever is more. The Department believes a reasonable threshold 
increase for submittal of annual APDUs and the as needed APDUs is 
embodied in the proposed regulation. Since the thresholds for APDUs do 
not apply to EBT systems, these provisions will not affect annual 
reporting for EBT systems. The thresholds for submitting APDUs will 
become final as proposed. However, APDU requirements will be reexamined 
in upcoming streamlining efforts.

Biennial System Security Reviews--7 CFR 277.18(p)(3)

    The proposed rule eliminated the requirement that States submit 
summary information about the biennial ADP system security review to 
FCS. Instead, States are to retain copies of these reports and other 
pertinent supporting documentation for Federal on-site review. One 
commenter asked how long the biennial security review report should be 
kept by the State, who would be conducting reviews of these materials 
and how often they would be reviewed. States should keep a copy of 
their latest biennial security review report and pertinent supporting 
documentation (such as a summary of findings regarding compliance with 
security requirements and the corrective action plan with dated 
milestones) on file for Federal review. State record retention 
requirements would apply to these documents. FCS or agents acting on 
FCS' behalf will examine State security review reports on a periodic 
basis, as needed.

Miscellaneous

    The Department is making a minor technical change to the section 
heading of Sec. 277.18 by replacing the word ``Automatic'' with the 
word ``Automated.'' This change is being made to make word usage in the 
section heading consistent with word usage in the rule's text.

Implementation--272.1(g)

    All provisions in this final rule become effective July 29, 1996.

List of Subjects

7 CFR Part 272

    Alaska, Civil rights, Food stamps, 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 and 277 are amended as follows:
    1. The authority citation for parts 272 and 277 continues to read 
as follows:

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

PART 272--REQUIREMENTS FOR PARTICIPATING STATE AGENCIES

    2. In Sec. 272.1, a new paragraph (g)(146) is added to read as 
follows:


272.1  General terms and conditions.

* * * * *
    (g) Implementation. * * *
    (146) Amendment No. 368. The provisions of Amendment No. 368 are 
effective on July 29, 1996.

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

    3. In Sec. 277.18,
    a. The section heading is amended by removing the word 
``Automatic'' and adding in its place the word ``Automated'';
    b. Paragraph (c)(1) is revised;
    c. The second sentence in paragraph (c)(2)(ii)(A) is removed and 
two sentences are added in its place;
    d. The second sentence in paragraph (c)(2)(ii)(B) is removed and 
two sentences are added in its place;
    e. The second sentence in paragraph (c)(2)(ii)(C) is removed and 
two sentences are added in its place;
    f. Paragraph (c)(5) is added;
    g. Paragraph (e)(1) is amended by removing the words ``$1 million'' 
and adding in their place the words ``$5 million'';
    h. Paragraph (e)(3)(i) is amended by removing the words ``($300,000 
or 10 percent, whichever is less)'' and adding in their place the words 
``($1 million or more)'';
    i. The third and fourth sentences of paragraph (p)(3) are removed 
and one sentence is added in their place. The revision and additions 
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 
FCS approval. A State agency shall obtain prior written approval from 
FCS as specified in paragraph (c)(2) of this section when it plans to 
acquire ADP equipment or services with proposed FFP that it anticipates 
will have total acquisition costs of $5 million or more in Federal and 
State funds. This applies to both competitively bid and sole source 
acquisitions. A State agency shall also obtain prior written approval 
from FCS of its justification for a sole source acquisition when it 
plans to acquire ADP equipment or services non-competitively from a 
nongovernmental source which has a total State and Federal acquisition 
cost of more than $1

[[Page 33644]]

million but no more than $5 million. The State agency shall request 
prior FCS approval by submitting the Planning APD, the Implementation 
APD or the justification for the sole source acquisition signed by the 
appropriate State official to the FCS Regional Office. However, a State 
agency shall obtain prior written approval from FCS for the acquisition 
of ADP equipment or services to be utilized in an EBT system regardless 
of the cost of the acquisition.
    (2) Specific prior approval requirements. * * *
    (ii) * * *
    (A) * * * However, RFPs costing up to $5 million for competitive 
procurements and up to $1 million for noncompetitive acquisitions from 
non-governmental sources and which are an integral part of the approved 
APD need not be submitted to FCS. States will be required to submit 
RFPs under this threshold amount on an exception basis or if the 
procurement strategy is not adequately described and justified in an 
APD. * * *
    (B) * *  * However, contracts costing up to $5 million for 
competitive procurements and up to $1 million for noncompetitive 
acquisitions from nongovernmental sources, and which are an integral 
part of the approved APD need not be submitted to FCS. States will be 
required to submit contracts under this threshold amount on an 
exception basis or if the procurement strategy is not adequately 
described and justified in an APD. * * *
    (C) * * * However, contract amendments involving cost increases of 
up to $1 million or time extensions of up to 120 days, and which are an 
integral part of the approved APD need not be submitted to FCS. States 
will be required to submit contract amendments under these threshold 
amounts on an exception basis or if the contract amendment is not 
adequately described and justified in an APD. * * *
* * * * *
    (5) Prompt action on requests for prior approval. FCS will reply 
promptly to State requests for prior approval. If FCS has not provided 
written approval, disapproval or a request for additional information 
within 60 days of FCS' letter acknowledging receipt of the State's 
request, the request will be deemed to have provisionally met the prior 
approval requirement in paragraph (c) of this section. However, 
provisional approval will not exempt a State from having to meet all 
other Federal requirements which pertain to the acquisition of ADP 
equipment and services. Such requirements remain subject to Federal 
audit and review.
* * * * *
    (p) * * *
    (3) * * * State agencies shall maintain reports of their biennial 
ADP system security reviews, together with pertinent supporting 
documentation, for Federal on-site review.
* * * * *
    Dated: June 24, 1996.
Ellen Haas,
Under Secretary, Food, Nutrition, and Consumer Services.
[FR Doc. 96-16596 Filed 6-27-96; 8:45 am]
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