[Federal Register Volume 64, Number 181 (Monday, September 20, 1999)]
[Rules and Regulations]
[Pages 50735-50744]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-24297]



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  Federal Register / Vol. 64, No. 181 / Monday, September 20, 1999 / 
Rules and Regulations  

[[Page 50735]]


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DEPARTMENT OF AGRICULTURE

Food and Nutrition Service

7 CFR parts 210, 215, 220, 235 and 245

RIN 0584-AC01


School Nutrition Programs: Nondiscretionary Technical Amendments

AGENCY: Food and Nutrition Service, USDA.

ACTION: Final rule.

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

SUMMARY: This final rule makes a number of technical changes to the 
regulations governing the National School Lunch Program, the Special 
Milk Program for Children, the School Breakfast Program, State 
Administrative Expense Funds, Determining Eligibility for Free and 
Reduced Price Meals and Free Milk in Schools. A number of these changes 
are a direct result of statutory changes made under the Child Nutrition 
and WIC Reauthorization Act of 1989, the Healthy Meals for Healthy 
Americans Act of 1994, the Personal Responsibility and Work Opportunity 
Reconciliation Act of 1996, and the William F. Goodling Child Nutrition 
Reauthorization Act of 1998. This rule also removes and updates 
obsolete provisions in these regulations. These amendments are 
nondiscretionary and technical in nature and will conform these 
regulations to statutory requirements.

EFFECTIVE DATE: October 20, 1999.

FOR FURTHER INFORMATION CONTACT: Ms. Mary Jane Whitney, Section Chief, 
School Programs Section, Policy and Program Development Branch, Child 
Nutrition Division, Food and Nutrition Service at 703-305-2620.

SUPPLEMENTARY INFORMATION:

Background

    Four different public laws, Public Law (Pub. L.) 101-147 (the Child 
Nutrition and WIC Reauthorization Act of 1989), Pub. L. 103-448 (the 
Healthy Meals for Healthy Americans Act of 1994), Pub. L. 104-193 (the 
Personal Responsibility and Work Opportunity Reconciliation Act of 
1996), and Pub. L. 105-336 (the William F. Goodling Child Nutrition 
Reauthorization Act of 1998), made specific changes to the National 
School Lunch Act and the Child Nutrition Act of 1966, necessitating 
changes in the regulations that guide the National School Lunch 
Program, the School Breakfast Program, the Special Milk Program, State 
Administrative Expense Funds, and Determining Eligibility for Free and 
Reduced Price Meals and Free Milk in Schools.
    In section 201 of Pub. L. 101-147, the Child Nutrition and WIC 
Reauthorization Act of 1989, enacted on November 10, 1989, Congress 
amended the National School Lunch Act (NSLA) (42 U.S.C. 1751 et. seq.) 
to make changes in the way the National School Lunch Program (NSLP) and 
School Breakfast Program (SBP) operate. Specifically, section 201 
amended Section 8 of the NSLA by making permanent the agreements 
between the State agencies (SA) and school food authorities (SFA) for 
carrying out the school lunch program and school breakfast program.
    In section 112 of Pub. L. 103-448, the Healthy Meals for Healthy 
Americans Act of 1994, enacted on November 2, 1994, Congress amended 
the definition of School in section 12(d) of the NSLA to make child 
care centers in Puerto Rico ineligible to participate in the NSLP and 
SBP. Additionally, section 202 of Pub. L. 103-448 amended section 7(a) 
of the Child Nutrition Act of 1966 (CNA) (42 U.S.C. 1771 et seq.) to 
authorize the Secretary to withhold State Administrative Expense (SAE) 
funds when the Secretary determines that the SA's administration of the 
program is seriously deficient.
    Section 703 of Pub. L. 104-193, the Personal Responsibility and 
Work Opportunity Reconciliation Act of 1996, amended section 9(b)(2) of 
the NSLA. The amendment requires that after initial submission, an SFA 
would not be required to submit a new free and reduced price policy 
statement to a State educational agency unless there is a substantive 
change in the free and reduced price policy of the SFA. Section 707 of 
Pub. L. 104-193 amended section 14(e) of the NSLA by removing the 
requirement for States to have State food distribution advisory 
councils and adding in its place a requirement that SAs which receive 
food assistance payments for any school year must consult with schools 
regarding the selection and distribution of donated foods. Furthermore, 
section 723 of Pub. L. 104-193 removed section 4(f) of the CNA which 
dealt with breakfast outreach activities. Section 724(b) of Pub. L. 
104-193 amended section 7(e) of the CNA by removing the requirement 
that State administrative expense plans be submitted annually by State 
agencies for approval by FNS and revising the regulation to require 
that States only need submit substantive changes to approved plans. In 
section 726 of Pub. L. 104-193 Congress amended section 11(a) of the 
CNA by revising the prohibition regarding the imposition of any 
requirements with respect to teaching personnel, curriculum, 
instruction and methods and materials of instruction. Section 726 
removed references to State, thus directing the prohibition only to 
USDA.
    In section 102(c) of Pub. L. 105-336, the William F. Goodling Child 
Nutrition Reauthorization Act of 1998, Congress added section 9(h) to 
the NSLA to establish new requirements regarding annual food safety 
inspections for schools participating in the NSLP or SBP. Section 
102(d) added section 9(i) to the NSLA to require each SFA to submit a 
single agreement and a common claim form for programs administered by 
the SA. Section 104(b) amended section 12(g) of the NSLA to make 
changes in criminal penalties for attempting to defraud the program. 
Section 104(d) added section 12(n) to the NSLA to incorporate a 
provision to require that schools purchase, to the maximum extent 
practicable, domestic commodities or products. Finally, section 202(b) 
revised section 7(a)(6) of the CNA to eliminate the 10% transfer 
limitation for SAE funds.
    The following chart summarizes the statutory provisions:

[[Page 50736]]



------------------------------------------------------------------------
                                                      Regulatory section
             Statute                   Provision           affected
------------------------------------------------------------------------
Pub. L. 101-147:
    Section 201.................  Mandates permanent  Secs.  210.9,
                                   agreements.         215.7 and
                                                       220.7(e).
Pub. L. 103-448:
    Section 112.................  Revises definition  Secs.  210.2 and
                                   of ``school''.      220.2(u).
    Section 202.................  Authorizes USDA to  Sec.  235.4.
                                   withhold SAE
                                   funds when State
                                   agencies are
                                   deemed seriously
                                   deficient.
Pub. L. 104-193:
    Section 703.................  Mandates permanent  Sec.  245.10.
                                   Free and Reduced
                                   Price Policy
                                   Statement.
    Section 707.................  Removes             Sec.  210.28
                                   requirement for
                                   State Food
                                   Distribution
                                   Advisory Council.
    Section 723.................  Removes breakfast   Sec.  220.13(k).
                                   outreach
                                   activities.
    Section 724.................  Replaces annual     Sec.  235.5
                                   State
                                   Administrative
                                   Expense Plan with
                                   a permanent base
                                   plan updated for
                                   substantive
                                   changes.
    Section 726.................  Revises             Sec.  Sec.  210.27
                                   educational         and 220.17(a).
                                   prohibitions.
Pub. L. 105-336:
    Section 102(c)..............  Mandates food       Secs.  210.13(b),
                                   safety              220.7(a-2).
                                   inspections.
    Section 102(d)..............  Mandates single     Secs.  210.8(c),
                                   agreements and      210.9(b),
                                   common claim        215.7(d),
                                   forms for SFAs.     215.10(b),
                                                       220.7(e) and
                                                       220.11(b).
    Section 104(b)..............  Changes criminal    Secs.  210.26,
                                   penalties for       215.6(b),
                                   fraud.              220.6(b), 2356(g)
                                                       and 245.12.
    Section 104(d)..............  Mandates purchase   Secs.  210.21(d)
                                   of domestic         and 220.16d.
                                   commodities or
                                   products.
    Section 202(b)..............  Eliminates 10%      Sec.  235.6(a).
                                   transfer for SAD
                                   funds.
------------------------------------------------------------------------

    Additionally, the Department is taking the opportunity to remove 
obsolete provisions from and make technical corrections to 7 CFR parts 
210, 215, 220, 235 and 245. For example, the obsolete references to 
``handicapped'' children are removed, using instead the term ``children 
with disabilities''. The rule also incorporates technical conforming 
amendments to 7 CFR parts 210, 215, 220, 235 and 245. The remainder of 
this preamble discusses these amendments.

What Specific Revisions and Additions are Being Made to the 
Regulations?

    The changes being made fall under four categories. They are:
     Changes to definitions
     New, updated or removed requirements
     Removal of obsolete references
     Technical amendments

What Changes are Being Made to the Definition Sections?

Definition of Child

    The definition of the term Child in Secs. 210.2 and 220.2(c) and 
the definition of the term Children in Sec. 215.2(e-1) are amended to 
remove references to handicapped children, adding in their place the 
term disabled, thus conforming the definition to operating terminology.

Definition of Handicapped Student

    The definition of the term Handicapped student in Sec. 210.2 is 
removed, in order to remove references to handicapped children. A new 
definition, Student with disabilities, is used in its place.

Definition of School

    Section 112(a) of Pub. L. 103-448 amended the definition of School 
in section 12(d)(5) of the NSLA. This amendment removed child care 
centers in the Commonwealth of Puerto Rico from the definition of 
School, effective October 1, 1995. As of that date, child care centers 
in Puerto Rico were no longer eligible to participate in the NSLP and 
SBP. However, these child care centers could provide meals and snacks 
to children under the Child and Adult Care Food Program, 7 CFR part 
226, or milk under the Special Milk Program, the same as other child 
care centers in the contiguous United States. Affected child care 
centers were advised of their change in status. This rule codifies the 
provision by amending the definition of School in Secs. 210.2 and 
220.2(u) to remove child care centers in Puerto Rico from the 
definition of school to conform to this nondiscretionary statutory 
provision. Corresponding technical changes are made to the definition 
of School in Sec. 235.2(o) to reflect these amendments.

Definition of Financial Management Circulars

    The definition, 7 CFR part 3015, in Secs. 210.2, 215.2(x-1), 
220.2(x-1), and 235.2(q-1) is revised to remove obsolete references to 
A-124 and A-128, as well as the Single Audit Act of 1984 (31 U.S.C. 
7501 et seq.). New definitions, 7 CFR part 3017, 7 CFR part 3018, and 7 
CFR part 3052 are added to Secs. 210.2, 215.2, 220.2 and 235.2. Part 
3017 refers to the Department's Common Rule regarding Governmentwide 
Debarment and Suspension (Nonprocurement) and Governmentwide 
Requirements for Drug-Free Workplace (Grants). Part 3018 refers to the 
Department's Common Rule regarding New Restrictions on Lobbying. Part 
3052 refers to the Department's rule regarding Audits of States, Local 
Governments and Non-Profit Organizations.

Definition of State

    The definition of State (Secs. 210.2; 215.2(y); 220.2(y); 235.2(r)) 
is revised to accommodate the elimination of the territories under the 
Compact of Free Association and the block grant status of American 
Samoa and the Commonwealth of the Northern Marianas. Because both 
American Samoa and the Commonwealth may elect to forego the block grant 
and participate under part 210, 215, 220 and 235, they continue to be 
included in the definition of State agency, ``as applicable''.

What Requirements are Being Added, Updated or Removed?

Agreements/Claims

    Section 201 of Pub. L. 101-147 amended section 8 of the NSLA by 
making permanent the agreements between SAs and SFAs for carrying out 
the NSLP and SBP. On May 28, 1991, USDA issued a proposed rule which 
would have implemented the provision to make these agreements 
permanent, to be amended as necessary (56 FR 24033). Fifty comments 
were received on that proposed rule during the 60-day public comment 
period, which closed on July 29, 1991. Commenters represented 19 
different SAs, 22 SFAs, 4 State or local Departments of Human Services 
and 2

[[Page 50737]]

professional organizations. Only one commenter was opposed to having 
the agreement made permanent, stating that the agreement is a legal 
document that should have a beginning and ending date. All other 
commenters who addressed this provision viewed it as a paperwork 
reduction measure and supported the proposal. On May 12, 1991, USDA 
issued a memorandum implementing this provision. This memorandum stated 
that, because the Department did not anticipate any changes to the 
proposal for permanent agreements, the SAs would be able to accept 
current agreements as permanent, at their discretion. This was 
effective as of school year 1992--1993. This final rule codifies this 
provision in Sec. Sec. 210.9(b), 215.7(d) and 220.7(e).
    Section 102 (d) of Pub. L. 105-336 amended section 9 (c) of the 
NSLA by establishing two requirements with respect to SFAs which 
administer any combination of the Child Nutrition Programs under the 
same State administering agency. First, the SA must use a single State/
local agreement for all programs operated by the SFA under that SA. 
This also means that multiple SFA programs operated under an alternate 
SA must be combined into a single agreement. This rule makes the 
necessary changes to Secs. 210.9(b), 215.7(d), and 220.7(e).
    Second, an SFA must be able to use a common reimbursement form to 
claim meals under all of the programs. Previously, single agreements 
and common claim forms were permitted at SA option for SFAs 
administering multiple Child Nutrition Programs under a single SA. This 
rule makes the necessary changes to 7 CFR 210.8(c), 215.10(b), and 
220.11(b) to reflect the implementation of the statutory requirements.

Free and Reduced Price Policy Statement

    As noted above, on May 28, 1991, the Department had proposed to 
make the agreement between the SA and SFA a permanent document to be 
amended as necessary (56 FR 24033). Although Pub. L. 101-147 had not 
directed the Department to make the SFA's free and reduced price policy 
permanent, the Department used its discretionary authority to include 
the policy statement in the permanency provision, because the 
Department considers the policy statement part of the agreement. The 
Department had proposed in that rule to (1) Increase the number of 
provisions required in an SFA's policy statement and (2) remove the 
requirement for annual resubmission of the policy statement to the SA 
for approval, unless there was a substantive change to the SFA's free 
and reduced price policy. Of the 50 comments received on the proposal, 
only one commenter supported the increase in the required provisions to 
be included in the policy statement. Before the department could issue 
a final rule, section 703 of Pub. L. 104-193 amended section 9(b)(2) of 
the NSLA by making permanent the free and reduced price policy 
statement. Unless there is a substantive change made to the free and 
reduced price policy of the SFA, the policy statement need not be 
changed and resubmitted. Routine changes, such as an annual adjustment 
of the income eligibility guidelines, are not sufficient to require 
resubmission. This rule implements this provision by making the 
necessary amendments to Secs. 245.10 and 245.11.

Food Safety Inspections

    Section 102(c) of Pub. L. 105-336 amended section 9 of the NSLA by 
adding subsection (h) to require schools participating in the NSLP or 
the SBP to obtain food safety inspections conducted by a State or local 
government agency responsible for such inspections at least once a year 
if a State or local governmental agency does not otherwise require 
inspections. This provision does not apply to schools that must comply 
with State or local requirements for food safety inspections even if 
the time frames for these inspections are less frequent than annual. 
Moreover, if a State or local governmental agency responsible for food 
safety inspections conducts voluntary inspections in schools, these 
inspections may be counted toward meeting this requirement. This rule 
implements this provision by amending Secs. 210.13 and 220.7 by adding 
a new paragraph, Food safety inspections.

State Agency Consultation With Schools

    Section 707 of Pub. L. 104-193 removed the requirement for the 
State to establish a food distribution advisory council and in its 
place required SAs that receive food assistance payments to consult 
with schools that receive commodities in order to make the best 
assessment of the specific needs of that school relating to the manner 
of selection and the distribution of commodity goods. This rule removes 
Sec. 210.28, State Food Distribution Advisory Council, and amends 
Sec. 210.19 (b) to implement this provision. To accommodate the 
changes, the definition of State Food Distribution Advisory Council is 
removed and sections are redesignated.

Buy American

    Section 104(d) of Pub. L. 105-336 amended section 12 of the NSLA to 
require SFAs participating in the NSLP and SBP in the contiguous United 
States (U.S.) to purchase for those programs, to the maximum extent 
practicable, domestic commodities or products. This requirement will 
help ensure that Federal funds dispensed to States support the U.S. 
agricultural economy to the extent feasible. For purposes of this 
provision, Pub. L. 105-336 defines the term ``domestic commodity or 
product'' to mean an agricultural commodity that is produced in the 
U.S. and a food product that is processed in the U.S. substantially 
using agricultural commodities that are produced in the U.S. The 
Conference Report accompanying Pub. L. 105-336 makes it clear that the 
term ``substantially'' means that over 51 percent of the processed food 
comes from American produced products. Pub. L. 105-336 also stipulates 
that an SFA in Hawaii is required to purchase commodities or products 
that are produced in Hawaii, to the extent that such products are in 
adequate supply for program purposes. This rule implements this 
provision by adding new paragraphs (d), Buy American to Secs. 210.21 
and 220.16.

Criminal Penalties

    Section 104(b) of Pub. L. 105-336 amended section 12(g) of the NSLA 
to increase from $10,000 to $25,000 the maximum fine for embezzling, 
willfully misapplying, stealing or obtaining by fraud any funds, assets 
or property acquired under the NSLA or CNA. This rule reflects this 
provision by amending Secs. 210.26, 215.6(b), 220.6(b), 235.6(g) and 
245.12(a).

Educational Prohibitions

    Prior to Pub. L. 104-193, section 12 of the NSLA prohibited SAs and 
USDA from imposing any educational requirements with respect to 
teaching personnel, curriculum, instruction, methods of instruction, 
and materials of instruction in any school. Section 726 of Pub. L. 104-
193, recognizing the educational responsibilities of the State 
education agencies, amended section 11 of the CNA by removing the 
reference to the State. This rule implements this provision by amending 
Secs. 210.27 and 220.17 to limit the prohibition to USDA.

Removal of School Breakfast Outreach Requirements

    Prior to Pub. L. 104-193, Section 4(f) of the CNA mandated that the 
Department and SAs initiate outreach and education on the benefits of 
the SBP. Section 723 of Pub. L. 104-193

[[Page 50738]]

removed the SBP outreach activities. This rule removes paragraph (k) of 
Sec. 220.13 to implement this provision.

Withholding State Administrative Expense Funds

    Section 202(a) of Pub. L. 103-448 amended section 7(a) of the CNA 
to stipulate that USDA may withhold SAE funds when SAs are seriously 
deficient in either their administration of the Child Nutrition 
Programs or their compliance with regulations issued to implement the 
Child Nutrition Programs, and that USDA may restore those withheld 
funds when performance improves. This rule adds a new paragraph (h) to 
Sec. 235.4 to implement this provision.

State Administrative Expense Plans

    Section 724(b) of Pub. L. 104-193 amended section 7(e) of the CNA 
by removing the requirement that SAE plans be submitted annually by 
State agencies for approval by FNS and revising the regulation to 
require that States only need submit substantive changes to approved 
plans. FNS notified State agencies of this change on June 5, 1997. The 
SAE plan used for fiscal year 1997 is the permanent plan document 
(i.e., the ``base year'' SAE plan). For SAs not participating in the 
Child Nutrition Programs in FY 1997, the first SAE plan submitted will 
be considered the base year plan. After submitting the base plan, the 
SA is only required to submit substantive changes, as defined in the 
June 5, 1997 guidance, for approval by FNS. When those substantive 
changes are submitted and the plan is amended, the fiscal year in which 
those changes are effective becomes the plan's base year. This rule 
implements this provision by amending Sec. 235.5.

Transfer of State Administrative Expense Funds

    Section 202(b) of Pub. L. 105-336 amended section 7(a)(6) of the 
CNA by eliminating the previous 10 percent limit on SAE funds that may 
be transferred from one child nutrition program to another. Now, SAs 
may transfer their SAE funds among the programs as they deem necessary 
for efficient administration of the programs. This rule implements the 
limitation by amending Sec. 235.6(a).

Which References are Being Removed as Obsolete?

    The Department is taking this opportunity to remove the obsolete 
Sec. 210.18a, Assessment, Improvement and Monitoring system, in its 
entirety and to make technical changes throughout 7 CFR part 210 and 
235 to reflect its removal. The Department is removing the Appendix to 
7 CFR part 215, which shows the apportionment of funds to States for 
the SMP for 1976. Finally, the Department is removing Sec. 245.13 in 
its entirety because the Department of Health, Education and Welfare 
Public School Civil Rights Survey no longer exists.

What Technical Amendments are Being Made?

Audit Requirements in Secs. 215.13 and 220.15

    The audit requirements contained in Secs. 215.13 and 220.15 are 
revised to match those set forth in Sec. 210.22. This revision will not 
result in changes in program operation.

Coordinated Review

    In Sec. 210.18, a technical error is corrected. The review 
threshold set forth for Performance Standard I at Sec. 210.18(i)(3)(B) 
is revised by revising the parenthetical phrase (but not less than 10 
lunches) to read (but not less than 100 lunches).

Correction of OMB Numbers

    The regulations governing the SAE funds (7 CFR part 235) are being 
revised to reflect corrected Office of Management and Budget 
information collection/ recordkeeping control numbers. This rule amends 
Sec. 235.12 to reflect this change.

Correction of an Incorrect Reference

    Section 245.5 requires SFAs to publicly announce the eligibility 
criteria for free and reduced price school meals and free milk. An 
announcement is not required for certain schools, including schools 
defined in Sec. 210.2 paragraph (c) of the definition of School. 
Section 245.5(a) currently makes an incorrect reference. This rule 
corrects that error.
    The following chart restates the changes affected in this 
regulation:

------------------------------------------------------------------------
                               Affected section of
          Provision                regulation         Reason for change
------------------------------------------------------------------------
Definition of ``child'' and   Secs.  210.2,         Updated to reflect
 ``children''.                 215.2(e-1) and        commonly accepted
                               220.2(c).             terminology.
Definition of ``handicapped   Sec.  210.2.........  Updated to reflect
 student''.                                          commonly accepted
                                                     terminology.
Definition of ``school''....  Secs.  210.2,         Excluding Puerto
                               220.2(u) and          Rico child care
                               235.2(o).             centers from
                                                     participation in
                                                     NSLP and SBP
                                                     because they may
                                                     now participate in
                                                     the CACFP
                                                     (Statutory
                                                     Provision).
Definition of Financial       Secs.  210.2, 215.2,  Updated to reflect
 Management Circulars.         220.2 and 235.2.      current
                                                     terminology.
Definition of ``State''.....  Secs.  210.2, 215.2   Accommodates the
                               (y), 220.2 (y),and    elimination of the
                               235.2(r).             territories under
                                                     the Compact of Free
                                                     Association and the
                                                     block grant status
                                                     of American Samoa
                                                     and the
                                                     Commonwealth of the
                                                     Northern Marianas.
Single Agreements/Claims....  Secs.  210.8(c),      Paperwork reduction
                               210.9(b), 215.7(d),   (Statutory
                               215.10(b), 220.7(e)   Provision).
                               and 220.11(b).
Permanent Free and Reduced    Secs.  245.10 and     Paperwork reduction
 Price Policy Statement.       245.11.               (Statutory
                                                     Provision).
Food safety inspections.....  Secs.  210.13 and     Raising health
                               220.7(a-2).           standards
                                                     (Statutory
                                                     Provision).
State agency consultation     Secs.  210.2,         Food distribution
 with schools.                 210.19(b) and         advisory council
                               210.28.               was eliminated
                                                     (Statutory
                                                     Provision).
Buy American................  Secs.  210.21 and     Supporting American
                               220.16.               farmers and
                                                     industries
                                                     (Statutory
                                                     Provision).
Criminal penalties..........  Secs.  210.26,        Updating penalties
                               215.6(b), 220.6(b)    for fraud
                               235.6(g) and          (Statutory
                               245.12(a).            Provision).

[[Page 50739]]

 
Educational prohibitions....  Secs.  210.27 and     Recognizing
                               220.17.               educational
                                                     responsibilities of
                                                     SAs (Statutory
                                                     Provision).
Removal of School Breakfast   Sec.  220.13(k).....  No longer required
 Outreach Requirements.                              by law (Statutory
                                                     Provision).
Withholding SAE funds.......  Sec.  235.4(h)......  Monitoring SA
                                                     performance
                                                     (Statutory
                                                     Provision).
Permanent State               Sec.  235.5.........  Paperwork reduction
 Administrative Expense                              (Statutory
 Plans.                                              Provision).
Transfer of SAE funds.......  Sec.  235.6(a)......  Greater efficiency
                                                     in program
                                                     administration
                                                     (Statutory
                                                     Provision).
Removal of Sec.  210.18a....  Technical changes     Obsolete reference.
                               throughout 210 and
                               235.
Removal of Appendix, Sec.     Sec.  215, Appendix.  The appendix is
 215.                                                obsolete.
Removal of Welfare Public     Sec.  245.13........  Obsolete reference
 School Civil Rights Survey.                         to a Department of
                                                     Health and Human
                                                     Services Civil
                                                     Rights survey that
                                                     no longer exists.
Audit requirements..........  Secs.  215.13 and     Intent to show
                               220.15.               continuity
                                                     throughout the
                                                     administration of
                                                     the programs.
Coordinated review..........  Sec.  210.18(i)(3)(B  Corrects technical
                               ).                    error.
OMB numbers.................  Sec.  235.12........  Reflect corrected
                                                     numbers.
Announcement of eligibility   Sec.  245.5(a)......  Corrects technical
 criteria.                                           error.
------------------------------------------------------------------------

Executive Order 12866

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

Public Law 104-4

    Title II of the Unfunded Mandates Reform Act of 1995 (UMRA), Public 
Law 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 (FNS) must generally 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 FNS to identify and consider a reasonable number of regulatory 
alternatives and adopt the least costly, most cost-effective or least 
burdensome alternative that achieves the objectives of the rule.
    This final rule contains no Federal mandates (under 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, this final rule is not subject to the requirements of 
Sections 202 and 205 of the UMRA.

Regulatory Flexibility Act

    This final rule has been reviewed with regard to the requirements 
of the Regulatory Flexibility Act (5 U.S.C. 601 through 612). The 
Administrator of the FNS has certified that this rule will not have a 
significant economic impact on a substantial number of small entities. 
Additionally, the Department of Agriculture (the Department or USDA) 
does not anticipate any adverse fiscal impact on local schools.

Executive Order 12372

    The National School Lunch Program, Special Milk Program for 
Children, School Breakfast Program, and State Administrative Expense 
Funds are listed in the Catalog of Federal Domestic Assistance under 
Nos. 10.555, 10.556, 10.553, and 10.560, respectively. They are subject 
to the provisions of Executive Order 12372, which requires 
intergovernmental consultation with State and local officials. (7 CFR 
part 3015, subpart V and final rule-related notice at 48 FR 29112. June 
24, 1983.)

Executive Order 12988

    This final rule has been reviewed under Executive Order 12988, 
Civil Justice Reform. This final 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 impede its full 
implementation. This final 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 
final rule, all applicable administrative procedures must be exhausted. 
In the National School Lunch Program, the Special Milk Program, and 
School Breakfast Program, the administrative procedures are set forth 
under the following regulations: (1) SFA appeals of SA fiscal action 
resulting from an administrative review must follow SA hearing 
procedures as established pursuant to 7 CFR 210.18(q); (2) SFA appeals 
of FNS fiscal action resulting from an administrative review must 
follow FNS hearing procedures as established pursuant to 7 CFR 
210.30(d)(3); (3) FNS claims against SAs must follow hearing procedures 
as established pursuant to 7 CFR 215.12(e); and (4) SA appeals of State 
Administrative Expense fund sanctions (7 CFR 235.11(b)) must follow the 
FNS administrative review process as established pursuant to 7 CFR 
235.11(f).

Paperwork Reduction Act

    This final rule does not contain reporting or recordkeeping 
requirements subject to approval by the Office of Management and Budget 
(OMB) under the Paperwork Reduction Act of 1995 (44 U.S.C. 3507).

Public Participation

    This action is being finalized without prior notice or public 
comment under authority of 5 U.S.C. 553(b)(3)(A) and (B). The 
amendments contained herein are nondiscretionary in nature and 
therefore not subject to change as a result of public comment. Thus, 
the Department has determined in accordance with 5 U.S.C. 553(b) that 
Notice of Proposed Rulemaking and Opportunity for Public Comments is 
unnecessary and contrary to the public interest and, in accordance with 
5 U.S.C. 553(d), that this action will be effective 30 days after the 
date of publication.

List of Subjects

7 CFR Part 210

    Food and Nutrition Service, Grant programs-education, Grant 
programs-health, Infants and children, Nutrition, Penalties, Reporting 
and recordkeeping requirements, School breakfast and lunch programs, 
Surplus agricultural commodities.

[[Page 50740]]

7 CFR Part 215

    Food and Nutrition Service, Food assistance programs, Grant 
programs-education, Grant programs-health, Infants and children, Milk, 
Reporting and recordkeeping requirements.

7 CFR Part 220

    Food and Nutrition Service, Grant programs-education, Grant 
programs-health, Infants and children, Nutrition, Reporting and 
recordkeeping requirements, School breakfast and lunch programs.

7 CFR Part 235

    Administrative practice and procedure, Food and Nutrition Service, 
Food assistance programs, Grant programs-education, Grant programs-
health, Infants and children, reporting and recordkeeping requirements, 
School breakfast and lunch programs.

7 CFR Part 245

    Civil rights, Food and Nutrition Service, Food assistance programs, 
Grant programs-education, Grant programs-health, Infants and children, 
Milk, Reporting and recordkeeping requirements, School breakfast and 
lunch programs.
    Accordingly, 7 CFR parts 210, 215, 220, 235, and 245 are amended as 
follows:

Part 210--NATIONAL SCHOOL LUNCH PROGRAM

    1. The authority citation for 7 CFR part 210 continues to read as 
follows:

    Authority: 42 U.S.C. 1751-1760, 1779.

    2. In Sec. 210.2,
    a. The definition of Child is amended by removing the words 
``handicapped'' and ``handicaps'' wherever they appear and adding in 
their place the words ``disabled'' and ``disabilities'' respectively.
    b. The definition of Handicapped student is amended by removing the 
words ``Handicapped student'', adding in their place the words 
``Student with disabilities'', and redesignating the paragraph in 
alphabetical order.
    c. The definition of School is amended by adding the word ``or'' 
before paragraph (c) and by removing the words ``; or (d) with respect 
to the Commonwealth of Puerto Rico, nonprofit child care centers 
certified as such by the Governor of Puerto Rico''.
    d. The definition of 7 CFR part 3015 is revised, and the Note 
following the definition is removed.
    e. New definitions 7 CFR part 3017, 7 CFR part 3018 and 7 CFR part 
3052 are added.
    f. The definition of State is revised, and
    g. The definition of State food distribution advisory council is 
removed in its entirety.
    The additions and revisions read as follows:


Sec. 210.2  Definitions.

* * * * *
    7 CFR part 3015 means the Uniform Federal Assistance Regulations 
published by the Department to implement OMB Circulars A-21, A-87, A-
102, A-110, and A-122; and Executive Order 12372. (For availability of 
OMB Circulars referenced in this definition, see 5 CFR 1310.3.)
    7 CFR part 3017 means the Department's regulation to implement 
Executive Order 12549, covering governmentwide rules on suspension and 
debarment as well as The Drug Free Workplace Act of 1988.
    7 CFR part 3018 means the Department's Common Rule regarding 
Governmentwide New Restrictions on Lobbying. Part 3018 implements the 
requirements established by section 319 of the 1990 Appropriations Act 
for the Department of Interior and Related Agencies (Pub. L. 101-121).
    7 CFR part 3052 means the Department's regulations implementing OMB 
Circular A-133, ``Audits of State, Local Governments, and Non-Profit 
Organizations.'' (For availability of OMB Circulars referenced in this 
definition, see 5 CFR 1310.3.)
    State means any of the 50 States, District of Columbia, the 
Commonwealth of Puerto Rico, the Virgin Islands, Guam, and, as 
applicable, American Samoa and the Commonwealth of the Northern 
Marianas.
* * * * *
    3. In Sec. 210.8, a new sentence is added to the end of paragraph 
(c)(1) to read as follows:


Sec. 210.8  Claims for reimbursement.

* * * * *
    (c) * * *
    (1) * * * If a single State agency administers any combination of 
the Child Nutrition Programs, a school food authority shall be able to 
use a common claim form with respect to claims for reimbursement for 
meals served under those programs.
* * * * *
    4. In Sec. 210.9, the heading of paragraph (b) and the first two 
sentences of the introductory text are revised, and a new sentence is 
added after the second sentence.
    The addition and revisions read as follows:


Sec. 210.9  Agreement with State agency.

* * * * *
    (b) Agreement. Each school food authority approved to participate 
in the program shall enter into a written agreement with the State 
agency that may be amended as necessary. Nothing in the preceding 
sentence shall be construed to limit the ability of the State agency to 
suspend or terminate the agreement in accordance with Sec. 210.25. If a 
single State agency administers any combination of the Child Nutrition 
Programs, that State agency shall provide each school food authority 
with a single agreement with respect to the operation of those 
programs. * * *
* * * * *
    5. In Sec. 210.13, paragraph (b) is redesignated as paragraph (c), 
and a new paragraph (b) is added, to read as follows:


Sec. 210.13  Facilities management.

* * * * *
    (b) Food safety inspections.--(1) In general. Except as provided in 
paragraph (b)(2) of this section, schools shall, at least once during 
each school year, obtain a food safety inspection conducted by a State 
or local governmental agency responsible for food safety inspections.
    (2) Exception. Paragraph (b)(1) of this section shall not apply to 
a school if a food safety inspection of the school is required by a 
State or local governmental agency responsible for food safety 
inspections.
* * * * *


Sec. 210.18  [Amended]

    6. In Sec. 210.18,
    a. The third sentence of paragraph (a) is amended by removing the 
words ``, in lieu of implementing the provisions of Sec. 210.18a of 
this part for school year 1991/1992''.
    b. The fourth sentence of paragraph (a) is amended by removing the 
reference ``Sec. 210.30 of this part'' and adding in its place the 
reference ``Sec. 210.29''.
    c. The undesignated paragraph after paragraph (i)(3)(i)(B) is 
amended by removing the parenthetical phrase ``(but not less than 10 
lunches)'' and adding in its place the new parenthetical phrase ``(but 
not less than 100 lunches)''.
    d. The seventh sentence of paragraph (j) is amended by removing the 
reference ``Sec. 210.30 (d)(3)'' and adding in its place the reference 
``Sec. 210.29 (d)(3)''.
    e. The first sentence paragraph (q) is amended by removing the 
reference ``Sec. 210.30 (d)(2) of this part'' and adding in its place 
the reference ``Sec. 210.29 (d)(2)'', and

[[Page 50741]]

    f. The first sentence of paragraph (r) is amended by removing the 
reference ``Sec. 210.30 (d)(2) of this part'' and adding in its place 
the reference ``Sec. 210.29 (d)(2)''.


Sec. 210.18a  [Removed]

    7. Section 210.18a is removed in its entirety.
    8. In Sec. 210.19,
    a. The third sentence of paragraph (a)(6) is amended by removing 
the reference ``or Sec. 210.18a of the part''.
    b. Paragraph (b) is revised.
    c. The third sentence of paragraph (c)(2)(ii) is amended by 
removing the reference ``or Sec. 210.18a of this part''.
    The revision reads as follows:


Sec. 210.19  Additional responsibilities.

* * * * *
    (b) Donated food distribution information. Information on schools 
eligible to receive donated foods available under section 6 of the 
National School Lunch Act (42 U.S.C. 1755) shall be prepared each year 
by the State agency with accompanying information on the average daily 
number of lunches to be served in such schools. This information shall 
be prepared as early as practicable each school year and forwarded no 
later than September 1 to the Distributing agency. The State agency 
shall be responsible for promptly revising the information to reflect 
additions or deletions of eligible schools, and for providing such 
adjustments in participation as are determined necessary by the State 
agency. Schools shall be consulted by the Distributing agency with 
respect to the needs of such schools relating to the manner of 
selection and distribution of commodity assistance.
* * * * *


Sec. 210.20  [Amended]

    9. In Sec. 210.20,
    a. Paragraph (a)(7) is amended by removing the reference 
``Sec. 210.28 (d)'' adding in its place the reference ``Sec. 250.13(k) 
of this chapter''.
    b. Paragraph (b)(11) is amended by removing the reference 
``Sec. 210.28 (d)'' and adding in its place the reference 
``Sec. 250.13(k) of this chapter''.
    10. In Sec. 210.21, a new paragraph (d) is added to read as 
follows:


Sec. 210.21  Procurement.

* * * * *
    (d) Buy American.--(1) Definition of domestic commodity or product. 
In this paragraph (d), the term `domestic commodity or product' means--
    (i) An agricultural commodity that is produced in the United 
States; and
    (ii) A food product that is processed in the United States 
substantially using agricultural commodities that are produced in the 
United States.
    (2) Requirement. (i) In general. Subject to paragraph (d)(2)(ii) of 
this section, the Department shall require that a school food authority 
purchase, to the maximum extent practicable, domestic commodities or 
products.
    (ii) Limitations. Paragraph (d)(2)(i) of this section shall apply 
only to--
    (A) A school food authority located in the contiguous United 
States; and
    (B) A purchase of domestic commodity or product for the school 
lunch program under this part.
    (3) Applicability to Hawaii. Paragraph (d)(2)(i) of this section 
shall apply to a school food authority in Hawaii with respect to 
domestic commodities or products that are produced in Hawaii in 
sufficient quantities to meet the needs of meals provided under the 
school lunch program under this part.


Sec. 210.23  [Amended]

    11. In Sec. 210.23, the first sentence of paragraph (b) is amended 
by removing the word ``handicap'' and adding in its place the word 
``disability''.


Sec. 210.26  [Amended]

    12. In Sec. 210.26, the first sentence of the paragraph is amended 
by removing the word ``$10,000'' and adding in its place the word 
``$25,000''.


Sec. 210.27  [Amended]

    13. In Sec. 210.27, the paragraph is amended by removing the words 
``neither the Department nor the State agency shall'' and adding the 
words ``the Department shall not''.


Sec. 210.28  [Removed]

    14. Sec. 210.28 is removed in its entirety.


Secs. 210.29, 210.30, 210.31, and 210.32  [Redesignated as 
Secs. 210.28, 210.29, 210.30 and 210.31]

    15. Sections 210.29, 210.30, 210.31, and 210.32 are redesignated as 
210.28, 210.29, 210.30, and 210.31, respectively.

Part 215--SPECIAL MILK PROGRAM FOR CHILDREN

    1. The authority citation for 7 CFR part 215 continues to read as 
follows:

    Authority: 42 U.S.C. 1772, 1779.
    2. In Sec. 215.2,
    a. Paragraph (e-1) is amended by removing the word ``handicapped'' 
wherever it appears and adding in its place the word ``disabled''.
    b. Paragraph (x-1) is revised, and the Note following the 
definition is removed.
    c. Paragraph (x-2) is redesignated as paragraph (x-5).
    d. New paragraphs (x-2), (x-3) and (x-4) are added, and
    e. Paragraph (y) is revised.
    The additions and revisions read as follows:


Sec. 215.2  Definitions.

* * * * *
    (x-1) 7 CFR part 3015 means the Uniform Federal Assistance 
Regulations published by the Department to implement OMB Circulars A-
21, A-87, A-102, A-110, and A-122; and Executive Order 12372. (For 
availability of OMB Circulars referenced in this definition, see 5 CFR 
1310.3.)
    (x-2) 7 CFR part 3017 means the Department's regulation to 
implement Executive Order 12549, covering governmentwide rules on 
suspension and debarment as well as The Drug Free Workplace Act of 
1988.
    (x-3) 7 CFR part 3018 means the Department's Common Rule regarding 
Governmentwide New Restrictions on Lobbying. Part 3018 implements the 
requirements established by section 319 of the 1990 Appropriations Act 
for the Department of Interior and Related Agencies (Pub. L. 101-121).
    (x-4) 7 CFR part 3052 means the Department's regulations 
implementing OMB Circular A-133, ``Audits of State, Local Governments, 
and Non-Profit Organizations.'' (For availability of OMB Circulars 
referenced in this definition, see 5 CFR 1310.3.)
* * * * *
    (y) State means any of the 50 States, District of Columbia, the 
Commonwealth of Puerto Rico, the Virgin Islands, Guam, and, as 
applicable, American Samoa and the Commonwealth of the Northern 
Marianas.
* * * * *


Sec. 215.6  [Amended]

    3. In Sec. 215.6, paragraph (b) is amended by removing ``$10,000'' 
and adding in its place ``$25,000''.
    4. In Sec. 215.7,
    a. The second sentence of paragraph (b) introductory text is 
amended by removing the words ``and thereafter at least annually'', and
    b. The first sentence of paragraph (d) introductory text is removed 
and three sentences are added in its place to read as follows:


Sec. 215.7  Requirements for participation.

* * * * *
    (d) Each school food authority or child care institution approved 
to participate in the program shall enter into a written agreement with 
the State agency or FNSRO, as applicable, that may be amended as 
necessary. Nothing in the preceding sentence shall be construed to 
limit the ability of the State

[[Page 50742]]

agency to suspend or terminate the agreement in accordance with 
Sec. 215.15. If a single State agency administers any combination of 
the Child Nutrition Programs, that State agency shall provide each SFA 
with a single agreement with respect to the operation of those 
programs. * * *
* * * * *
    5. In Sec. 215.10, paragraph (b) is amended by adding a new 
sentence between the second and third sentences to read as follows:


Sec. 215.10  Reimbursement procedures.

* * * * *
    (b) * * * If a single State agency administers any combination of 
the Child Nutrition Programs, the SFA shall be able to use a common 
claim form with respect to claims for reimbursement for meals served 
under those programs. * * *
* * * * *
    6. In Sec. 215.13,
    a. Paragraphs (a) through (c) are removed.
    b. Paragraphs (d) and (e) are redesignated as (c) and (d), 
respectively, and
    c. New paragraphs (a) and (b) are added to read as follows:


Sec. 215.13  Management evaluations and audits.

    (a) State agencies and school food authorities shall comply with 
the requirements of part 3015 of this title concerning the audit 
requirements for recipients and subrecipients of the Department's 
financial assistance.
    (b) These requirements call for organization-wide financial and 
compliance audits to ascertain whether financial operations are 
conducted properly; financial statements are presented fairly; 
recipients and subrecipients comply with the laws and regulations that 
affect the expenditures of Federal funds; recipients and subrecipients 
have established procedures to meet the objectives of federally 
assisted programs; and recipients and subrecipients are providing 
accurate and reliable information concerning grant funds. States and 
school food authorities shall use their own procedures to arrange for 
and prescribe the scope of independent audits, provided that such 
audits comply with the requirements set forth in part 3015 of this 
title.
* * * * *

Appendix to Part 215 [Removed]

    7. In part 215, the Appendix is removed in its entirety.

PART 220--SCHOOL BREAKFAST PROGRAM

    1. The authority citation for 7 CFR part 220 continues to read as 
follows:

    Authority: 42 U.S.C. 1773, 1779, unless otherwise noted.

    2. In Sec. 220.2,
    a. Paragraph (c) is amended by removing the word ``handicapped'' 
wherever it appears and adding in its place the word ``disabled''.
    b. Paragraph (u) is amended by adding the word ``or'' before 
paragraph (u)(3), and by removing the words ``; or (4) with respect to 
the Commonwealth of Puerto Rico, nonprofit child care centers certified 
as such by the Governor of Puerto Rico''.
    c. Paragraph (x-1) is revised, and the Note following the 
definition is removed.
    d. New paragraphs (x-2), (x-3) and (x-4) are added, and
    e. Paragraph (y) is revised.
    The additions and revisions read as follows:


Sec. 220.2  Definitions.

* * * * *
    (x-1) 7 CFR part 3015 means the Uniform Federal Assistance 
Regulations published by the Department to implement OMB Circulars A-
21, A-87, A-102, A-110, and A-122; and Executive Order 12372. (For 
availability of OMB Circulars referenced in this definition, see 5 CFR 
1310.3.)
    (x-2) 7 CFR part 3017 means the Department's regulation to 
implement Executive Order 12549, covering governmentwide rules on 
suspension and debarment as well as The Drug Free Workplace Act of 
1988.
    (x-3) 7 CFR part 3018 means the Department's Common Rule regarding 
Governmentwide New Restrictions on Lobbying. Part 3018 implements the 
requirements established by section 319 of the 1990 Appropriations Act 
for the Department of Interior and Related Agencies (Pub. L. 101-121).
    (x-4) 7 CFR part 3052 means the Department's regulations 
implementing A-133, ``Audits of State, Local Governments, and Non-
Profit Organizations.'' (For availability of OMB Circulars referenced 
in this definition, see 5 CFR 1310.3.)
    (y) State means any of the 50 States, District of Columbia, the 
Commonwealth of Puerto Rico, the Virgin Islands, Guam, and, as 
applicable, American Samoa and the Commonwealth of the Northern 
Marianas.
* * * * *


Sec. 220.6  [Amended]

    3. In Sec. 220.6, paragraph (b)(1) is amended by removing 
``$10,000'' and adding in its place ``$25,000''.
    4. In Sec. 220.7, a.
    a. New paragraph (a-2) is added, and
    b. The first sentence of paragraph (e) introductory text is removed 
and three new sentences are added in its place.
    The additions read as follows:


Sec. 220.7  Requirements for participation.

* * * * *
    (a-2) Schools shall, at least once during each school year, obtain 
a food safety inspection conducted by a State or local governmental 
agency responsible for food safety inspections. However, this 
requirement shall not apply to a school if a food safety inspection of 
the school is required by a State or local governmental agency 
responsible for food safety inspections.
* * * * *
    (e) Each school food authority approved to participate in the 
program shall enter into a written agreement with the State agency or 
the Department through the FNSRO, as applicable, that may be amended as 
necessary. Nothing in the preceding sentence shall be construed to 
limit the ability of the State agency or the FNSRO to suspend or 
terminate the agreement in accordance with Sec. 220.18. If a single 
State agency administers any combination of the Child Nutrition 
Programs, that State agency shall provide each SFA with a single 
agreement with respect to the operation of those programs.* * *
* * * * *
    5. In Sec. 220.11, paragraph (b) is amended by adding a new 
sentence between the second and third sentences to read as follows:


Sec. 220.11  Reimbursement procedures.

* * * * *
    (b) * * * If a single State agency administers any combination of 
the Child Nutrition Programs, the SFA shall be able to use a common 
claim form with respect to claims for reimbursement for meals served 
under those programs. * * *
* * * * *


Sec. 220.13  [Amended]

    6. In Sec. 220.13, paragraph (k) is removed in its entirety.
    7. In Sec. 220.15,
    a. Paragraphs (a), (b), (c), and (d) are removed and paragraphs (e) 
and (f) are redesignated as paragraphs (c) and (d), respectively, and
    b. New paragraphs (a) and (b) are added.
    The additions read as follows:

[[Page 50743]]

Sec. 220.15  Management evaluations and audits.

    (a) State agencies and school food authorities shall comply with 
the requirements of part 3015 of this title concerning the audit 
requirements for recipients and subrecipients of the Department's 
financial assistance.
    (b) These requirements call for organization-wide financial and 
compliance audits to ascertain whether financial operations are 
conducted properly; financial statements are presented fairly; 
recipients and subrecipients comply with the laws and regulations that 
affect the expenditures of Federal funds; recipients and subrecipients 
have established procedures to meet the objectives of federally 
assisted programs; and recipients and subrecipients are providing 
accurate and reliable information concerning grant funds. States and 
school food authorities shall use their own procedures to arrange for 
and prescribe the scope of independent audits, provided that such 
audits comply with the requirements set forth in part 3016 of this 
title.
* * * * *
    8. In Sec. 220.16, a new paragraph (d) is added to read as follows:


Sec. 220.16  Procurement standards.

* * * * *
    (d) Buy American.--(1) Definition of domestic commodity or product. 
In this paragraph (d), the term ``domestic commodity or product'' 
means--
    (i) An agricultural commodity that is produced in the United 
States; and
    (ii) A food product that is processed in the United States 
substantially using agricultural commodities that are produced in the 
United States.
    (2) Requirement.--(i) In general. Subject to paragraph (d)(2)(ii) 
of this section, the Department shall require that a school food 
authority purchase, to the maximum extent practicable, domestic 
commodities or products.
    (ii) Limitations. Paragraph (d)(2)(i) of this section shall apply 
only to--
    (A) A school food authority located in the contiguous United 
States; and
    (B) A purchase of domestic commodity or product for the school 
breakfast program under this part.
    (3) Applicability to Hawaii. Paragraph (d)(2)(i) of this section 
shall apply to a school food authority in Hawaii with respect to 
domestic commodities or products that are produced in Hawaii in 
sufficient quantities to meet the needs of meals provided under the 
school breakfast program under this part.


Sec. 220.17  [Amended]

    9. In Sec. 220.17, paragraph (a) is amended by removing the words 
``neither the Department nor the State shall'' and adding the words 
``the Department shall not''.

Part 235--STATE ADMINISTRATIVE EXPENSE FUNDS

    1. The authority citation for 7 CFR part 235 continues to read as 
follows:

    Authority: Secs. 7 and 10 of the Child Nutrition Act of 1966, 80 
Stat. 888, 889, as amended (42 U.S.C. 1776, 1779).

    2. In Sec. 235.2,
    a. Paragraph (o) is revised.
    b. Paragraph (q-1) is revised, and the Note following the 
definition is removed.
    c. New paragraphs (q-2), (q-3) and (q-4) are added, and
    d. Paragraph (r) is revised.
    The additions and revisions read as follows:


Sec. 235.2  Definitions.

* * * * *
    (o) School means the term as defined in sections 210.2, 215.2(v), 
220.2(u), and 226.2 of this chapter, as applicable.
* * * * *
    (q-1) 7 CFR part 3015 means the Uniform Federal Assistance 
Regulations published by the Department to implement OMB Circulars A-
21, A-87, A-102, A-110, and A-122; and Executive Order 12372. (For 
availability of OMB Circulars referenced in this definition, see 5 CFR 
1310.3.)
    (q-2) 7 CFR part 3017 means the Department's regulation to 
implement Executive Order 12549, covering governmentwide rules on 
suspension and debarment as well as The Drug Free Workplace Act of 
1988.
    (q-3) 7 CFR part 3018 means the Department's Common Rule regarding 
Governmentwide New Restrictions on Lobbying. Part 3018 implements the 
requirements established by section 319 of the 1990 Appropriations Act 
for the Department of Interior and Related Agencies (Pub. L. 101-121).
    (q-4) 7 CFR part 3052 means the Department's regulations 
implementing OMB Circular A-133, ``Audits of State, Local Governments, 
and Non-Profit Organizations.'' (For availability of OMB Circulars 
referenced in this definition, see 5 CFR 1310.3.)
    (r) State means any of the 50 States, District of Columbia, the 
Commonwealth of Puerto Rico, the Virgin Islands, Guam, and, as 
applicable, American Samoa and the Commonwealth of the Northern 
Marianas.
* * * * *
    3. In Sec. 235.4,
    a. Paragraph (b) is amended by removing the words ``or Sec. 210.18a 
of this title'' wherever they appear; and
    b. A new paragraph (h) is added to read as follows.


Sec. 235.4  Allocation of funds to States.

* * * * *
    (h) Withholding SAE funds. The Secretary may withhold some or all 
of the funds allocated to the State agency under this section if the 
Secretary determines that the State agency is seriously deficient in 
the administration of any program for which State administrative 
expense funds are provided under this part or in the compliance of any 
regulation issued pursuant to those programs. On a subsequent 
determination by the Secretary that State agency administration of the 
programs or compliance with regulations is no longer seriously 
deficient and is operated in an acceptable manner, the Secretary may 
allocate some or all of the funds withheld.
    4. In Sec. 235.5,
    a. The third sentence of paragraph (a) introductory text is amended 
by removing the words ``for the fiscal year'',
    b. The fifth sentence of paragraph (a) is amended by removing the 
word ``fiscal'' and adding in its place the word ``base'',
    c. Paragraphs (b) and (c) are revised, and
    d. The fourth sentence of paragraph (d) is revised.
    The revisions read as follows:


Sec. 235.5  Payments to States.

* * * * *
    (b) Administrative plan. (1) Each State agency shall submit, 
subject to FNS approval, an initial State Administrative Expense plan 
based upon guidance provided by FNS. This base year plan shall include:
    (i) The staffing pattern for State level personnel;
    (ii) A budget for the forthcoming fiscal year showing projected 
amounts (combined SAE and State funds) by cost category;
    (iii) The total amount of budgeted funds to be provided from State 
sources;
    (iv) The total amount of budgeted funds to be provided under this 
part;
    (v) The State agency's estimate of the total amount of budgeted 
funds (combined SAE and State funds) attributable to administration of 
the School Nutrition Programs (National School Lunch, School Breakfast 
and Special Milk Programs), Child and Adult Care Food Program, and/or 
Food

[[Page 50744]]

Distribution Program in schools and child and adult care institutions 
and to each of the major activity areas of the State agency; and
    (vi) The State agency's estimate of the total Child and Adult Care 
Food Program audit funds to be used for the forthcoming fiscal year.
    (2) These activity areas shall be defined and described by the 
State agency in accordance with guidance issued by FNS and may include 
such activities as program monitoring, technical assistance, Federal 
reporting/claims processing, policy implementation, and allocation of 
foods to recipient agencies.
    (3) Except in specific instances where determined necessary by FNS, 
State agencies shall not be required to maintain expenditure records by 
activity area or program. State agencies shall refer to Office of 
Management and Budget Circular A-87, Attachment B, to establish cost 
categories.
    (4) FNS shall approve a State agency's plan, or any amendment to 
such plan under paragraph (c) of this section, if it determines that 
the plan or amendment is consistent with program administrative needs 
and SAE requirements under this part.
    (5) To the extent practicable, State agencies shall implement their 
approved plans (as amended). FNS shall monitor State agency 
implementation of the plans through management evaluations, State 
agency reports submitted under this part, audits, and through other 
available means.
    (6) FNS may expand plan requirements for individual State agencies 
in order to address specific administrative deficiencies which affect 
compliance with program requirements and which have been identified by 
FNS through its monitoring activities.
    (c) Amendments to the administrative plan. A State agency may amend 
its plan at any time to reflect changes in funding or activities, 
except that, if such changes are substantive as defined in the June 5, 
1997 guidance, and any amendments or updates to this guidance, the 
State agency shall amend its plan in accordance with guidance provided 
by FNS. Plan amendments shall provide information in a format 
consistent with that provided in the State agency's plan, but shall 
only require FNS approval if it results in a substantive change as 
defined by FNS.
    (d) * * * Reallocated funds shall be made available for payment to 
a State agency upon approval by FNS of the State agency's amendment to 
the base year plan which covers the reallocated funds, if applicable. * 
* *
* * * * *


Sec. 235.6  [Amended]

    5. In Sec. 235.6,
    a. The second sentence of paragraph (a) is amended by removing the 
words ``up to ten percent of the'',
    b. Paragraph (a-2) is amended by removing the reference ``or 
Sec. 210.18a of this title'', and
    c. Paragraph (g)(1) is amended by removing ``$10,000'' and adding 
in its place ``$25,000''.


Sec. 235.11  [Amended]

    6. In Sec. 235.11, paragraph (b)(2) is amended by removing the 
references ``or Sec. 210.18a of this title'', ``or Sec. 210.18a'' and 
``, Sec. 210.18a,'' wherever they appear.
    7. Section 235.12 is revised to read as follows:


Sec. 235.12  Information collection/recordkeeping-OMB assigned control 
numbers.

------------------------------------------------------------------------
                                                            Current OMB
     7 CFR section where requirements are described       control number
------------------------------------------------------------------------
235.3(b)0584-0067.......................................
235.4(d), (e)...........................................       0584-0067
235.7(a)................................................       0584-0067
235.7(b)................................................       0584-0067
235.7(c)................................................       0584-0067
235.8(a), (b)...........................................       0584-0067
235.9(c), (d)...........................................       0584-0067
235.11(b)(2)............................................       0584-0067
235.11(b)(5)(ii)........................................       0584-0067
235.11(f)...............................................       0584-0067
------------------------------------------------------------------------

PART 245--DETERMINING ELIGIBILITY FOR FREE AND REDUCED PRICE MEALS 
AND FREE MILK IN SCHOOLS

    1. The authority citation for 7 CFR part 245 continues to read as 
follows:

    Authority: Secs. 3, 4, and 10 of the Child Nutrition Act of 
1966, 80 Stat. 885, 886, 889, as amended (42 U.S.C. 1772, 1773, 
1779); secs. 2-12, 60 Stat. 230, as amended (42 U.S.C. 1751-1760).


Sec. 245.5  [Amended]

    2. In Sec. 245.5,
    a. The first sentence of paragraph (a) introductory text, is 
amended by removing the reference ``(o)(2) of part 210''; and
    b. Paragraph (a)(1)(x) is amended by removing the word ``handicap'' 
and adding in its place the word ``disability''.


Sec. 245.6a  [Amended]

    3. In Sec. 245.6a, paragraph (d) is amended by removing the word 
``handicap'' and adding in its place the word ``disability''.
    4. In Sec. 245.10,
    a. Paragraph (a) introductory text is amended by adding a sentence 
between the first and second sentences.
    b. Paragraph (a)(2) is revised, and
    c. Paragraph (c) is amended by adding two new sentences to the 
beginning of the paragraph.
    The revision and additions read as follows:


Sec. 245.10  Action by School Food Authorities.

    (a) * * * Once approved, the policy statement shall be a permanent 
document which may be amended as necessary, except as specified in 
paragraph (c) of this section. * * *
* * * * *
    (2) An assurance that for children who are not categorically 
eligible for free and reduced price benefits the school food authority 
will determine eligibility for free and reduced price meals or free 
milk in accordance with the current Income Eligibility Guidelines.
* * * * *
    (c) Each school food authority shall amend its permanent free and 
reduced price policy statement to reflect substantive changes. Any 
amendment to a policy shall be approved by the State agency prior to 
implementation, or as provided in paragraph (e) of this section. * * *
* * * * *
    5. In Sec. 245.11, the first sentence of paragraph (a)(1) revised 
to read as follows:


Sec. 245.11  Action by State agencies and FNSRO's.

    (a) * * *
    (1) As necessary, each State agency or FNSRO, as applicable, shall 
issue a prototype free and reduced price policy statement and any other 
instructions to ensure that each school food authority is fully 
informed of the provisions of this part. * * *
* * * * *


Sec. 245.12  [Amended]

    6. In Sec. 245.12, paragraph (a)(1) is amended by removing 
``$10,000'' and adding in its place ``$25,000''.


Sec. 245.13  [Removed]

    7. Section 245.13 is removed in its entirety.


Sec. 245.14  [Redesignated as Sec. 245.13]

    8. Section 245.14 is redesignated as Sec. 245.13.

    Dated: September 10, 1999.
Samuel Chambers, Jr.,
Administrator, Food and Nutrition Service.
[FR Doc. 99-24297 Filed 9-17-99; 8:45 am]
BILLING CODE 3410-30-U