[Federal Register Volume 63, Number 222 (Wednesday, November 18, 1998)]
[Rules and Regulations]
[Pages 63969-63975]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-30753]



 ========================================================================
 Rules and Regulations
                                                 Federal Register
 ________________________________________________________________________
 
 This section of the FEDERAL REGISTER contains regulatory documents 
 having general applicability and legal effect, most of which are keyed 
 to and codified in the Code of Federal Regulations, which is published 
 under 50 titles pursuant to 44 U.S.C. 1510.
 
 The Code of Federal Regulations is sold by the Superintendent of Documents. 
 Prices of new books are listed in the first FEDERAL REGISTER issue of each 
 week.
 
 ========================================================================
 

  Federal Register / Vol. 63, No. 222 / Wednesday, November 18, 1998 / 
Rules and Regulations  

[[Page 63969]]


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

DEPARTMENT OF AGRICULTURE

Food and Nutrition Service

7 CFR Part 246

RIN 0584-ACO2


Special Supplemental Nutrition Program for Women, Infants and 
Children (WIC): Implementation of WIC Mandates of Public Law 103-448, 
the Healthy Meals for Healthy Americans Act of 1994 and Public Law 103-
227, the Pro-Children Act of 1994

AGENCY: Food and Nutrition Service, USDA.

ACTION: Final rule.

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

SUMMARY: This final rule amends regulations governing the Special 
Supplemental Nutrition Program for Women, Infants and Children (WIC) to 
incorporate certain nondiscretionary provisions of the Healthy Meals 
for Healthy Americans Act of 1994, enacted on November 2,1994, the Pro-
Children Act of 1994, enacted on August 31, 1994, the Cash Management 
Improvement Act of 1990, enacted on October 24, 1990, and the Personal 
Work Responsibility and Reconciliation Act of 1996, enacted on August 
22, 1996. The provisions in this final rule include: prohibiting 
smoking in WIC facilities; increasing by one the family size of an 
otherwise income ineligible pregnant woman for purposes of determining 
WIC eligibility; allowing State agencies to deem income eligible 
pregnant women presumptively eligible (for a period not to exceed 60 
days) without a determination of nutritional risk; increasing the 
national breastfeeding promotion and support expenditure; and providing 
WIC services at more Community and Migrant Health Centers and Indian 
Health Service facilities. These provisions are intended to strengthen 
services to participants, increase State agency flexibility and promote 
good health practices.

DATES: This rule is effective January 19, 1999.

FOR FURTHER INFORMATION CONTACT: Barbara Hallman, Supplemental Food 
Programs Division, Food and Nutrition Service, USDA, 3101 Park Center 
Drive, Room 542, Alexandria, Virginia 22302, (703) 305-2730.

SUPPLEMENTARY INFORMATION:

Executive Order 12866

    This final rule has been determined to be significant and was 
reviewed by the Office of Management and Budget (OMB) under Executive 
Order 12866.

Regulatory Flexibility Act

    This final rule has been reviewed with regard to the requirements 
of the Regulatory Flexibility Act (5 U.S.C. 601-612). Pursuant to that 
review, Shirley R. Watkins, Under Secretary for Food, Nutrition and 
Consumer Services, has certified that this rule will not have a 
significant economic impact on a substantial number of small entities. 
This rule provides State and local agencies with greater flexibility: 
(1) in a certification process, (2) in the use of funds recovered as a 
result of violations in the food delivery system, and (3) the 
administration of their infant formula rebate contracts and management 
of their food funds. However, the economic impact on program operations 
will not be significant.

Paperwork Reduction Act

    This final rule imposes no new reporting or recordkeeping 
requirements that are subject to OMB for review in accordance with the 
Paperwork Reduction Act of 1995 (44 U.S.C. 3507). The information 
collection burden for this final rule was previously approved under OMB 
#0584-0043.

Executive Order 12372

    The Special Supplemental Nutrition Program for Women, Infants and 
Children (WIC) is listed in the Catalog of Federal Domestic Assistance 
Programs under 10.557 and is subject to Executive Order 12372, which 
requires intergovernmental consultation with State and local officials 
(7 CFR part 3015, subpart V, and 48 FR 29114 June 24, 1983).

Executive Order 12988

    This final rule has been reviewed under Executive Order 12988, 
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 DATES paragraph of this preamble. Prior to 
any judicial challenge to the application of the provisions of this 
rule, all applicable administrative procedures must be exhausted.

Public Law 104-4

    Title II of the Unfunded Mandates Reform Act of 1995 (UMRA), Pub.L. 
104-4, establishes requirements for Federal agencies to assess the 
effects of their regulatory actions on State, local, and tribal 
governments and the private sector. Under section 202 of the UMRA, the 
Food and Nutrition Service generally must prepare a written statement, 
including a cost-benefit analysis, for proposed and final rules with 
``Federal mandates'' that may result in expenditures to State, local, 
or tribal governments, in the aggregate, or to the private sector of 
$100 million or more in any one year. When such a statement is needed 
for a rule, section 205 of the UMRA generally requires the Food and 
Nutrition Service to identify and consider a reasonable number of 
regulatory alternatives and adopt the least costly, more cost-effective 
or least burdensome alternative that achieves the objectives of the 
rule.
    This rule contains no Federal mandates (under the regulatory 
provisions of Title II of the UMRA) for State, local, and tribal 
governments or the private sector of $100 million or more in any one 
year. Thus today's rule is not subject to the requirements of sections 
202 and 205 of the UMRA.

Background

    Section 204 of Public Law 103-448, the Healthy Meals for Healthy 
Americans Act of 1994, enacted on November 2, 1994, reauthorized the 
Special Supplemental Nutrition Program for Women, Infants and Children 
(WIC). The statutory authorities for a wide range of WIC Program 
functions in areas such as income eligibility determinations,

[[Page 63970]]

program outreach, referral and access, coordination, breastfeeding 
promotion, program operations, and cost containment were amended by 
section 204. In addition, section 1043 of Pub.L. 103-227, the Pro-
Children Act of 1994, enacted on August 31, 1994, prohibits smoking 
within any indoor facility owned or leased or contracted for by an 
entity that receives Federal funds for the provision of regular or 
routine health care or day care, or early childhood development (Head 
Start) services. WIC Program clinics are included among the services 
covered by this legislation. These provisions serve the interests of 
the President and Congress by improving coordination among programs, 
promoting positive pregnancy outcomes and healthy babies, and reducing 
administrative burdens for State and local agencies. In addition, 
section 724(e)(1)(B)(i) of Pub.L. 104-193, the Personal Responsibility 
and Work Opportunity Reconciliation Act of 1996, made a further 
amendment regarding coordination with other programs and section 4 of 
Pub.L. 101-453, the Cash Management Improvement Act of 1990, made a 
change requiring States to pay the United States interest on advances 
of Federal funds. These provisions are all nondiscretionary. Further, 
State agencies have already been informed that these provisions may be 
implemented prior to the issuance of amendments to the program 
regulations. For these reasons, the Under Secretary for Food, Nutrition 
and Consumer Services has determined that, in accordance with 5 U.S.C. 
553 prior notice and comment is unnecessary and contrary to the public 
interest. Since this rule merely codifies the cited statutory 
provisions, it also constitutes an interpretive rule for which notice 
and comment are not required by 5 U.S.C. 553.

1. Definition of Nutritional Risk--246.2

    Section 204(a) of Public Law 103-448 amended section 17(b)(8)(B) of 
the Child Nutrition Act of 1966 (42 U.S.C. 1786(b)(8)(B)) (CNA) to 
change the legislative categorization of alcoholism and drug abuse from 
predisposing nutritional risk conditions to conditions that directly 
affect the nutritional health of a person. This reclassification is 
consistent with new nutrition and health knowledge, and better 
represents the classification of these conditions currently used by 
States. As a result, homelessness and migrancy now become the only 
specific legislative examples of conditions that predispose persons to 
inadequate dietary patterns or nutritionally related medical conditions 
in the CNA. Accordingly, the definition of nutritional risk in Section 
246.2 has been revised to reflect these changes.

2. Prohibition on Smoking in WIC Clinics Provision--246.6(b)(4)

    Sections 1043 (b) and (d) of Pub. L. 103-227, the Pro-Children Act 
of 1994, require that after December 26, 1994, smoking shall not be 
permitted in any indoor facility, or portion thereof, that is owned, 
leased, or contracted for by any person that receives Federal funds for 
children's services funded under certain programs administered by the 
U.S. Department of Health and Human Services, the U.S. Department of 
Education, and the U.S. Department of Agriculture. Section 1042(2) of 
the Act defines ``children's services'' as: the provision on a routine 
or regular basis of health, day care, education, or library services; 
WIC clinics are specifically identified in the Act as ``children's 
services''. The definition of ``person'' includes State and local 
agencies as well as corporations and individuals. Additionally, fiscal 
year 1996, 1995 and 1994 appropriations acts for the WIC Program 
contained provisions prohibiting the use of appropriated funds to pay 
administrative expenses of WIC clinics that had no announced policy 
prohibiting smoking within the space used to carry out the Program. The 
no-smoking provision in Pub. L. 103-227 is intended to protect children 
under the age of 18 from exposure to environmental tobacco smoke while 
they are receiving education, library, day care, health care, and early 
childhood development services in indoor facilities. The 
Administration's goal in implementing this legislative requirement 
reflects a strong health protection policy regarding smoking and 
environmental tobacco smoke exposure.
    In response to the legislative provisions contained in Pub. L. 103-
227, section 246.6 is amended to require all local agency agreements to 
contain a provision prohibiting smoking in the space used to carry out 
the WIC Program during the time any aspect of WIC services are 
performed. The smoking prohibition applies to the portion of the 
facility used for WIC Program services. If that portion of the building 
is simultaneously used for other purposes, such as community activities 
or privately sponsored events, smoking must be prohibited at these 
other events as well. This change to the regulations merely formalizes 
the current policy directive, which all State agencies have been 
operating under since fiscal year 1994. That directive prohibits the 
allocation of nutrition service and administrative funds to any WIC 
clinic that does not prohibit smoking within the space used for WIC 
services during the time the services are being performed. This 
regulation therefore merely codifies the current policy, and places no 
additional burden on State or local agencies.

3. Service to Pregnant Women Provisions--246.7(d)(1)(iv), 
246.7(d)(1)(v), 246.7(d)(2)(vii), 246.7(e)(1)(iii)

a. Family Size Provision

    Section 204(c)(1) of Pub. L. 103-448 amended Section 17(d) of the 
CNA to add a new subparagraph section 17(d)(2)(C), which extends WIC 
eligibility for certain pregnant women. The provision stipulates that 
an income-ineligible pregnant woman satisfies income guidelines if the 
guidelines would be met by increasing the number of individuals in her 
family by one individual. Although the law states that the family size 
of the pregnant woman is to be increased by ``one,'' we do not believe, 
in cases where the pregnant woman is expecting multiple births, that 
Congress intended to totally preclude counting such multiple births. As 
such, section 246.7(d)(2)(vii) is amended to allow the family size of a 
pregnant woman to be increased by the number of embryos or fetuses in 
utero. This provision allows the WIC Program to use the same definition 
of family size currently used by the Department of Health and Human 
Services' (DHHS) Medicaid Bureau, thereby improving coordination 
between the WIC and Medicaid Programs. It also results in certain women 
having access to the health benefits of WIC during pregnancy who 
previously would have had to wait for the birth of their babies to be 
eligible.
    The legislation does not specifically address whether the same 
income eligibility determination process can be used for the pregnant 
woman's other family members, who may also apply for WIC services. 
However, it is impractical and administratively burdensome to require 
two different income-screening procedures, based on categorical status, 
for one family. To do so forces a WIC local agency to activate the 
adjunctive eligibility process unnecessarily because the local agency 
would have to first refer the family members to the Medicaid Program 
for certification, and then ask the family members to return to the WIC 
Program so that they may be determined as adjunctively income eligible 
for WIC. Therefore, in situations where the family size has been 
increased for a

[[Page 63971]]

pregnant woman, the same increased family size may also be used for any 
of her categorically eligible family members.
    In rare instances, the consideration of unborn children in this 
manner may conflict with an applicant's cultural, personal, or 
religious beliefs. In recognition of these issues, the regulation 
requires State agencies to allow such applicants to waive the automatic 
increase in family size.

b. Certification Prior to Documentation of Nutritional Risk

    Program regulations permit categorically eligible applicants to be 
certified for WIC benefits only if, in addition to meeting residency 
and income requirements, they are determined to be at nutritional risk. 
In order to determine nutritional risk, height, weight, and bloodwork 
must be obtained. Many State agencies have expressed concerns regarding 
the availability of bloodwork data for pregnant women at the time of 
their application. In some cases, State or local agencies may not have 
the essential equipment or staff onsite to perform the bloodwork 
assessment. In these situations, the agencies usually have to contract 
out for that service, or refer the women to health centers and/or 
providers to obtain the necessary data. State agencies also reported 
that the bloodwork data requirement has resulted in barriers to 
participation for pregnant women. They also reported that this 
requirement could, in fact, be an impediment to enrollment of eligible 
pregnant women early in pregnancy. Early enrollment is an important 
program objective, as well as a legislative requirement.
    In response to concerns related to improved and expedited access to 
program benefits for pregnant women, section 204(c)(2) of Pub.L. 103-
448, amended section 17(d)(3)(B) of the CNA to allow State agencies to 
consider pregnant women who are income eligible for the WIC Program to 
be presumed to be nutritionally at risk and thus eligible to 
participate in the program. These women may be certified immediately 
without the results of a nutritional risk evaluation. The law requires 
that a nutritional risk evaluation be completed, however, not later 
than 60 days from the date the pregnant woman is certified for 
participation. The law stipulates that, if the subsequent assessment 
determines that the woman does not meet nutritional risk criteria, her 
certification terminate on the date of the determination. The joint 
statement of explanation accompanying S.1614 (Congressional Record, 
October 6, 1994, S14454) clarifies the positions of the Senate 
Committee on Agriculture, Nutrition and Forestry and the House 
Committee on Education and Labor on this provision concerning 
presumptive eligibility for pregnant women. The Committees expressed 
their view that the dietary risk assessment be performed before--or as 
soon as possible after--the presumptively eligible pregnant woman 
begins receiving WIC benefits. Local agencies thus should strive to 
complete the dietary assessment at certification. Ideally, local 
agencies should complete the full nutrition risk assessment at 
certification or at the earliest possible date thereafter. This allows 
the WIC staff to begin to offer appropriate counseling on program 
nutrition and diet, as well as complete, appropriate health care 
referrals at the earliest opportunity. This information also is 
invaluable in developing an appropriate food package.
    While the law uses the word ``terminate'' in connection with the 
necessary action when a pregnant woman is later found not to meet the 
nutritional risk criteria, what is really happening is that the 
pregnant woman is being found ineligible for the program. Accordingly, 
this action will be treated like an initial determination. That is, 
while the pregnant woman must be given an opportunity to appeal the 
action, as required under section 246.7(j)(5), there is no requirement 
of 15 days notice of the action as for suspensions and most 
disqualifications (under section 246.7(j)(6)) and for the expiration of 
certification periods (under section 246.7(j)(8)). Nor will the 
pregnant woman be able to receive benefits while awaiting the fair 
hearing decision. Section 246.9(g) will continue to require benefits 
pending resolution of the fair hearing only for those participants who 
timely appeal an action under section 246.7(j)(6).
    Further, if the nutritional risk evaluation is not completed within 
the 60-day timeframe, the pregnant woman's participation may not be 
extended beyond the initial 60-day certification period. However, as 
set forth in section 246.7(j)(8) for all cases of the expiration of a 
certification period, the pregnant woman must be notified not less than 
15 days before the expiration of the period that the certification 
period is about to expire. Similarly, pregnant women who appeal the 
expiration of their certification may not receive WIC benefits while 
awaiting the fair hearing decision. The regulations are amended at 
section 246.7(e)(1)(iii) to reflect these legislative provisions.

4. Coordination of WIC and Medicaid Program Provisions--246.4(a)(8)

    Section 204(e) of Pub.L. 103-448 amended section 17(f)(1)(C)(iii) 
of the CNA to require coordination between the WIC Program and State 
Medicaid Programs, including Medicaid programs that use coordinated 
care providers under a contract entered into under section 1903(m) or a 
waiver granted under section 1915 (b) of the Social Security Act (42 
U.S.C. 1396 b(m) or 1396n(b)).
    Soon after enactment of Pub.L. 103-448, section 729(e)(1)(B)(i) of 
Pub.L. 104-193, the Personal Responsibility and Work Opportunity 
Reconciliation Act of 1996 (Pub.L. 104-193), amended section 
17(f)(1)(C)(iii) of the CNA to replace the listing of specific programs 
with which WIC must coordinate with a plan to coordinate WIC operations 
with other services or program that may benefit participants in, or 
applicants for, the program. As such, the State agency now determines 
which services or programs it will coordinate with to meet the specific 
needs of its participants and applicants. Section at 246.4(a)(8) is 
amended to reflect this later change. Although no longer required by 
law, the Department strongly encourages State agencies to continue to 
coordinate with Medicaid managed-care providers to ensure that WIC 
participants have access to medical benefits, thereby improving their 
health status.

5. WIC Services at Community and Migrant Health Centers--
246.4(a)(8) and 246.7(b)(3)

    Section 204(u) of Pub.L. 103-448 amended section 17(j) of the CNA 
to require that the Secretary of Agriculture and the Secretary of the 
Department of Health and Human Services establish and carry out an 
initiative to provide WIC services at substantially more community and 
migrant health centers. The legislation stipulates that the initiative 
shall include: (1) Activities to improve the coordination of WIC and 
health care services at facilities funded by the Indian Health Service 
(IHS); and (2) the development and implementation of strategies to 
ensure that, to the maximum extent feasible, new community and migrant 
health centers and other federally-supported health care facilities 
established in medically underserved areas provide WIC services. The 
law further stipulates that the initiative may also include: (1) 
Outreach and technical assistance for State and local agencies and the 
facilities named above; (2)

[[Page 63972]]

demonstration projects in selected States or local areas; and (3) other 
activities as the Secretaries find appropriate.
    This mandate also reinforces opportunities for the WIC Program, 
community and migrant health centers and IHS facilities to further 
implement mutual objectives that are consistent with this legislation. 
The objectives are: (1) To increase coordination and co-location of WIC 
with Community and Migrant Health Centers and with IHS facilities; (2) 
to ensure that newly constructed, federally supported health facilities 
are coordinated with WIC State agencies to maximize service 
integration; improve access to health care for participants of all 
three programs, especially underserved, vulnerable, and hard-to-reach 
potential eligibles; and (3) to enlist the support of primary care 
personnel at health centers and IHS clinics and WIC personnel to 
reinforce health messages such as breastfeeding promotion, immunization 
screening and delivery, drug abuse education and referrals. The WIC 
Program will benefit from this initiative through improved access to 
health care for WIC participants as well as by expansion of 
opportunities for newly co-located clinic sites to accommodate rapidly 
increasing WIC participation levels. Projected participation levels are 
more likely to be met with increased facility infrastructure capacity 
for WIC. In addition, community and migrant health centers and IHS 
facilities may benefit from increased co-location and coordination with 
WIC by enhancing service utilization by clients seeking a one-stop, 
health care shopping opportunity. In compliance with this legislative 
provision, this rule amends section 246.7(b)(3) to require that, where 
feasible, State agencies provide WIC services at community and migrant 
health centers, Indian Health Services facilities, and other federally 
supported health care facilities established in medically underserved 
areas.
    These changes are intended to improve access to health care for WIC 
participants, and will make WIC more accessible to high-risk 
populations served at community and migrant health centers, IHS 
facilities and other federally supported health care facilities 
established in medically underserved areas provide supplemental foods 
and nutrition education under the special supplemental nutrition 
program. The Department will supplement these regulatory requirements 
with numerous other promotional activities designed to facilitate 
increased co-location and coordination between WIC and these service 
providers. These efforts include a cataloging of site locations, the 
development of a best practices guide, and continued provision of 
infrastructure and other funding and support that facilitate improved 
WIC access to eligible persons also being served in IHS facilities, 
community and migrant health centers, and other federally health care 
supported facilities established in medically underserved areas provide 
supplemental foods and nutrition education under the special 
supplemental nutrition program.

6. Income Eligibility Guidelines Provision Section--
246.7(d)(1)(iii)

    Section 204(g) of Pub.L. 103-448 amended Section 17(f)(18) of the 
CNA to allow State agencies to implement annual WIC income eligibility 
guidelines concurrently with the implementation of annual income 
eligibility guidelines under the Medicaid Program established under 
Title XIX of the Social Security Act (42 U.S.C. 1396 et seq.). Section 
17(f)(18) was subsequently redesignated as section 17(f)(17) by section 
729(e)(10) of Pub.L. 104-193. Congress' purpose in allowing this 
concurrent implementation is to facilitate closer coordination between 
the programs and ease Program access for applicants. Section 
246.7(d)(1)(iii) is amended accordingly. State agencies that choose not 
to coordinate implementation with the Medicaid guidelines must 
implement the amended WIC income eligibility guidelines not later than 
July 1 of each year.

7. Priority Consideration for Migrant Populations--
246.7(f)(2)(iii)(A)

    Section 204(f) of Pub.L. 103-448 amended section 17(f)(3) of the 
CNA to require State agencies to ensure local agencies provide priority 
consideration to serving migrant participants who are residing in the 
State for a limited period of time. Current WIC regulations already 
address this legislative change at section 246.7(f)(2)(iii)(A).

8. Breastfeeding Promotion and Support Activities--246.14(c)(1)

    Section 123(a)(6) of Pub.L. 101-147 amended section 17(h)(3) of the 
CNA to earmark $8 million annually in State agency Nutrition Services 
and Administration (NSA) grants for the promotion and support of 
breastfeeding among WIC mothers. Section 204(l) of Pub.L. 103-448 
further amended section 17(h)(3) to establish a new formula for 
determining the minimum national breastfeeding promotion and support 
expenditure. The new formula increased the national annual minimum 
expenditure from $8 million to an amount equal to $21 per pregnant and 
breastfeeding woman participating in the WIC Program nationwide, based 
on the average number of pregnant women and breastfeeding women 
participating during the last three months for which the Department has 
final data. Beginning on October 1, 1996, and each October 1 
thereafter, this per participant amount will be adjusted for inflation 
using the same index that is used for NSA funds. The Department 
applauds Congress' support for breastfeeding as the optimal method of 
infant feeding.
    To ease transition in fiscal year 1995, section 17(h)(3)(F) 
provided that State agencies could spend the same amount it expended 
for breastfeeding promotion and support expenditures in fiscal year 
1994, in lieu of meeting the $21 per pregnant and breastfeeding woman 
minimum. This provision allowed those State agencies that were unable 
to meet the $21 per pregnant and breastfeeding woman target immediately 
to gradually move in that direction.
    Section 17(h)(3)(G) provided a similar allowance for fiscal year 
1996, except that the State agency must expend more than the amount 
expended in fiscal year 1995 for breastfeeding promotion and support 
and must have the Secretary's approval. All State agencies were 
required to expend the minimum $21 per pregnant and breastfeeding woman 
for breastfeeding promotion and support expenditure beginning in fiscal 
year 1997. Because the transition period is now past and the new 
formula is mandatory, this final rule only reflects the new formula and 
not the transition period exceptions for fiscal years 1995 and 1996. 
This rule amends section 246.14(c)(1) to reflect the new formula.

9. Standards for the Collection of Breastfeeding Data--246.25(b)(3)

    Section 204(m) of Pub.L. 103-448 and section 729(g)(1)(A) of Pub.L. 
104-193 amended section 17(h)(4) of the CNA to require the development 
of standards for the collection of breastfeeding data. The legislation 
requires that not later than 1 year after the date of enactment, the 
Secretary must develop uniform requirements for collection of data 
regarding the incidence and duration of breastfeeding among 
participants in the program. The Department, after consulting with the 
National Association of WIC Directors, has developed the breastfeeding 
data specifications. This information will be collected as part of the 
biennial reporting in section 246.25(b)(3).

[[Page 63973]]

10. Use of Recovered Program Funds in Year Collected--246.14(e)

    Section 246.14(e) of the WIC regulations allows the State agency to 
retain funds collected through (a) the recovery of claims assessed 
against food vendors or (b) funds not paid to food vendors as a result 
of reviews of food instruments prior to payment. However, Federal 
guidelines on refunds limited State agencies in their use and retention 
of vendor collections (Title 7, section 5.4.B.1., of the General 
Accounting Office's Manual for the Guidance of Federal Agencies). This 
guidance provides that ``unless otherwise authorized by law, refunds 
should be deposited to the credit of the appropriation account 
initially charged with the overpayment.'' This prohibition from using 
vendor collections to offset food costs in a year other than the year 
of the initial obligation was problematic. State agencies reported that 
they frequently did not receive funds collected from vendors until 
after closeout of the year in which the initial obligation of funds 
occurred. As a result, they were required to remit most of their vendor 
collections to FNS for reallocation rather than receiving the 
opportunity to use these funds to offset their own WIC Program's food 
costs. Section 204(h) of Pub.L. 103-448 amended section 17(f) of the 
CNA of 1966 to provide that ``a State agency may use funds recovered as 
a result of violations in the food delivery system in the year in which 
the funds are collected for the purpose of carrying out the program.'' 
This legislative provision overrides the General Accounting Office's 
guidance, and permits State agencies to use vendor collections received 
after the source fiscal year is closed out to offset program 
expenditures from the year in which collected. In addition, the 
legislation expands the purposes for which vendor collections may be 
used to include any program cost, rather than being restricted to food 
costs. Regulations at 246.14(e) are amended to reflect these 
legislative changes.

11. Prohibition on Interest Liability to Federal Government on 
Rebate Funds--246.15(a)

    Section 4 of the Cash Management Improvement Act of 1990 (CMIA) 
(Pub.L. 101-453) amended 31 U.S.C. 6503(c) to require States to pay the 
United States interest on advances of Federal funds. This change became 
effective November 1992. Section 6503(d) of Title 31 of the U.S. Code 
and implementing regulations at 31 CFR Part 205 require an annual 
reconciliation of interest earned by States on advances of Federal 
funds and interest lost to States as a result of being forced to use 
their own funds in anticipation of receiving Federal funds. Congress, 
through Pub.L. 103-448, has provided an exception to this requirement, 
however, for receipts earned by WIC State agencies for rebates from 
infant formula and other foods. Section 204(p) of Pub.L. 103-448 
amended section 17(h)(8)(J) of the CNA to stipulate that State agencies 
shall not incur any interest liability to the Federal government on 
rebate funds from infant formula and other foods, provided that all 
interest earned by the State is used for program purposes. Section 
246.15(a) is revised to conform with the applicable provisions of the 
CMIA, and the specific WIC exemptions of the Pub.L. 103-448.

12. Funds for Technical Assistance and Research Evaluation 
Projects--246.16(a)(6)

    Section 17(g)(5) of the CNA, as reflected at section 246.16(a)(6) 
of the WIC regulations, states that up to one-half of 1 percent of the 
sums appropriated for each fiscal year, not to exceed $5,000,000, shall 
be available to the Secretary for evaluating program performance, 
evaluating health benefits, providing technical assistance to improve 
State agency administrative systems, preparing the biennial 
Participation Report to Congress described in section 246.25(b)(3), and 
administering pilot projects, including projects designed to meet the 
special needs of migrants, Indians, and rural populations. Section 
204(k) of Pub.L. 103-448 amended 17(g)(5) of the CNA to expand the 
purposes to include technical assistance and research projects of the 
programs under section 17. The effect of adding the reference to 
``programs under this section'' was to extend the permissible use of 
these funds to listed activities as they relate to the WIC Farmers' 
Market Nutrition Program authorized under section 17(m) of the CNA. 
Section 246.16(a)(6) is amended accordingly to reflect this legislative 
change.

13. Spendback Funds--246.16(b)(3)(i)

    Section 246.16(b)(3)(i) of the WIC regulations reflects the 
provision in section 17(i)(3)(A)(i) of the CNA that not more than 1 
percent of the funds allocated to a State agency for food costs 
incurred in any fiscal year may be expended by the State agency for 
food costs incurred in the preceding fiscal year. Section 204(s) of 
Pub.L. 103-448 amended sections 17(i)(3)(A)(i) and 17(i)(3)(H) of the 
CNA to increase the maximum spendback authority from 1 percent of the 
total food funds to 3 percent of the total food funds, with the 
Secretary's approval. A State agency may be permitted to expend not 
more than 3 percent of the amount of funds allocated to a State for 
supplemental foods for a fiscal year for expenses incurred for 
supplemental foods during the preceding fiscal year, if the Secretary 
determines that there was a significant reduction in the State's infant 
formula cost containment savings that resulted in the State not being 
able to at least maintain its level of participation. Section 
246.16(b)(3)(i) is amended to reflect the increase in the percentage of 
spendback authority as per this provision.

List of Subjects in 7 CFR Part 246

    Administrative practice and procedure, Civil rights, Food 
assistance programs, Food donations, Grant programs--health, Grant 
programs--social programs, Indians, Infants and children, Maternal and 
child health, Nutrition, Nutrition education, Penalties, Public 
assistance programs, Reporting and recordkeeping requirements, WIC, 
Women.

    For reasons set forth in the preamble, 7 CFR part 246 is amended as 
follows:

PART 246--SPECIAL SUPPLEMENTAL NUTRITION PROGRAM FOR WOMEN, 
INFANTS, AND CHILDREN

    1. The authority citation for Part 246 continues to read as 
follows:

    Authority: 42 U.S.C. 1786.

    2. In Sec. 246.2, the definition of Nutritional risk is revised to 
read as follows:


Sec. 246.2  Definitions.

* * * * *
    Nutritional risk means:
    (a) Detrimental or abnormal nutritional conditions detectable by 
biochemical or anthropometric measurements;
    (b) Other documented nutritionally related medical conditions;
    (c) Dietary deficiencies that impair or endanger health;
    (d) Conditions that directly affect the nutritional health of a 
person, including alcoholism or drug abuse; or
    (e) Conditions that predispose persons to inadequate nutritional 
patterns or nutritionally related medical conditions, including, but 
not limited to, homelessness and migrancy.
* * * * *
    3. In Sec. 246.4, paragraph (a)(8) is revised to read as follows:


Sec. 246.4  State Plan.

    (a) * * *

[[Page 63974]]

    (8) A description of how the State agency plans to coordinate 
program operations with other services or programs that may benefit 
participants in, or applicants for, the program.
* * * * *
    4. In Sec. 246.6, paragraphs (b)(4) through (b)(9) are redesignated 
as (b)(5) through (b)(10). A new paragraph (b)(4) is added to read as 
follows:


Sec. 246.6  Agreements with local agencies.

* * * * *
    (b) * * *
    (4) Prohibits smoking in the space used to carry out the WIC 
Program during the time any aspect of WIC services are performed.
* * * * *
    5. In Sec. 246.7:
    a. Paragraphs (b)(3) through (b)(5) are redesignated as paragraphs 
(b)(4) through (b)(6), and a new paragraph (b)(3) is added;
    b. Paragraph (d)(1)(iii) is revised;
    c. Paragraphs (d)(2)(vii) and (d)(2)(viii) are redesignated as 
paragraphs (d)(2)(viii) and (d)(2)(ix), and a new paragraph (d)(2)(vii) 
is added;
    d. Paragraph (e)(1)(iii) is redesignated as paragraph (e)(1)(iv), 
and a new paragraph (e)(1)(iii) is added.
    The revisions and additions read as follows:


Sec. 246.7  Certification of participants.

* * * * *
    (b) * * *
    (3) State agencies shall provide WIC services at community and 
migrant health centers, Indian Health Services facilities, and other 
federally health care supported facilities established in medically 
underserved areas to the extent feasible.
* * * * *
    (d) * * *
    (1) * * *
    (iii) Implementation of the income guidelines. On or before July 1 
each year, each State agency shall announce and transmit to each local 
agency the State agency's family size income guidelines, unless changes 
in the poverty income guidelines issued by the Department of Health and 
Human Services do not necessitate changes in the State or local 
agency's income guidelines. The State agency may implement revised 
guidelines concurrently with the implementation of income guidelines 
under the Medicaid program established under Title XIX of the Social 
Security Act (42 U.S.C. 1396 of et seq.). The State agency shall ensure 
that conforming adjustments are made, if necessary, in local agency 
income guidelines. The local agency shall implement (revised) 
guidelines not later than July 1 of each year for which such guidelines 
are issued by the State.
    (2) * * *
    (vii) Income eligibility of pregnant women. A pregnant woman who is 
ineligible for participation in the program because she does not meet 
income guidelines shall be considered to have satisfied the income 
guidelines if the guidelines would be met by increasing the number of 
individuals in her family by the number of embryos or fetuses in utero. 
The same increased family size may also be used for any of the pregnant 
woman's categorically eligible family members. The State agency shall 
allow applicants to waive this increase in family size.
* * * * *
    (e) * * *
    (1) * * *
    (iii) A pregnant woman who meets income eligibility standards may 
be considered presumptively eligible to participate in the program, and 
may be certified immediately without an evaluation of nutritional risk 
for a period up to 60 days. A nutritional risk evaluation of such woman 
shall be completed not later than 60 days after the woman is certified 
for participation. Under this subsequent determination process, if the 
woman does not meet nutritional risk criteria, the woman shall be 
determined ineligible and may not participate in the program after the 
date of the determination. Notification of the ineligibility 
determination shall be given in accordance with paragraph (j)(5) of 
this section. In addition, if the nutritional risk evaluation is not 
completed within the 60 day timeframe, the woman's participation shall 
end when her initial certification period expires. As set forth in 
paragraph (j)(8) of this section, notification must be given prior to 
any expiration of the certification period.
* * * * *
    6. In Sec. 246.14:
    a. The second through the fifth sentences of the introductory text 
of paragraph (c)(1) are revised, the sixth through the ninth sentences 
are removed, and a new sixth sentence is added;
    b. Paragraph (e) is revised.
    The revisions read as follows:


Sec. 246.14  Program costs.

* * * * *
    (c) * * *
    (1) * * * During each fiscal year, each State agency shall expend, 
for nutrition education activities and breastfeeding promotion and 
support activities, an aggregate amount that is not less than the sum 
of one-sixth of the amount expended by the State agency for costs of 
NSA and an amount equal to its proportionate share of the national 
minimum expenditure for breastfeeding promotion and support activities. 
The amount to be spent on nutrition education shall be computed by 
taking one-sixth of the total fiscal year NSA expenditures. The amount 
to be spent by a State agency on breastfeeding promotion and support 
activities shall be an amount that is equal to at least its 
proportionate share of the national minimum breastfeeding promotion 
expenditure as specified in paragraph (c)(1) of this section. The 
national minimum expenditure for breastfeeding promotion and support 
activities shall be equal to $21 multiplied by the number of pregnant 
and breastfeeding women in the Program, based on the average of the 
last three months for which the Department has final data. On October 
1, 1996 and each October 1 thereafter, the $21 will be adjusted 
annually using the same inflation percentage used to determine the 
national administrative grant per person. * * *
* * * * *
    (e) Recovery of vendor claims. The State agency may retain funds 
collected through the recovery of claims assessed against food vendors 
or funds not paid to food vendors as a result of reviews of food 
instruments prior to payment. The State agency may use funds recovered 
from vendors for food and/or nutrition services and administration 
costs. Funds recovered as a result of violations in the food delivery 
system of the program may be used for costs incurred in the year in 
which the funds are collected, or in the year in which the initial 
obligation of funds incurred. The State agency shall not credit any 
vendor recoveries until after the vendor has had full opportunity to 
correct or justify the error or apparent overcharge in accordance with 
Sec. 246.12(r)(5)(iii). The State agency shall report vendor 
collections to FNS through routine reporting procedures. The State 
agency shall maintain documentation to support the amount and use of 
funds retained under this paragraph by the State agency.
    7. In Sec. 246.15, paragraph (a) is revised to read as follows:


Sec. 246.15  Program income other than grants.

    (a) Interest earned on advances. Interest earned on advances of 
Program funds at the State and local levels shall be treated in 
accordance with the provisions of 31 CFR Part 205, which

[[Page 63975]]

implement the requirements of the Cash Management Improvement Act of 
1990. However, State agencies will not incur an interest liability to 
the Federal government on rebate funds for infant formula or other 
foods, provided that all interest earned on such funds is used for 
program purposes.
* * * * *
    8. In Sec. 246.16, paragraphs (a)(6) and (b)(3)(i) are revised to 
read as follows:


Sec. 246.16  Distribution of funds.

    (a) * * *
    (6) Up to one-half of 1 percent of the sums appropriated for each 
fiscal year, not to exceed $5,000,000 shall be available to the 
Secretary for the purpose of evaluating program performance, evaluating 
health benefits, providing technical assistance to improve State agency 
administrative systems preparing the biennial Participation Report to 
Congress described in Sec. 246.25(b)(3), and administering pilot 
projects, including projects designed to meet the special needs of 
migrants, Indians, rural populations, and to carry out technical 
assistance and research evaluation projects of this program and the WIC 
Farmers' Market Nutrition Program.
    (b) * * *
    (3) * * *
    (i) Not more than 1 percent of the amount of funds allocated to a 
State agency for supplemental foods for a fiscal year may be expended 
by the State agency for food costs incurred in the preceding fiscal 
year. FNS may authorize a State agency to expend not more than 3 
percent of the amount of funds allocated to the State agency for 
supplemental foods for a fiscal year for expenses incurred for 
supplemental foods during the preceding fiscal year, if FNS determines 
that there has been a significant reduction in infant formula cost 
containment savings that affected the State agency's ability to at 
least maintain its participation level;
* * * * *
    Dated: November 14, 1998.
Shirley R. Watkins,
Under Secretary for Food, Nutrition, and Consumer Services.
[FR Doc. 98-30753 Filed 11-17-98; 8:45 am]
BILLING CODE 3410-30-U