[Federal Register Volume 64, Number 216 (Tuesday, November 9, 1999)]
[Proposed Rules]
[Pages 61034-61039]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-29212]


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 Proposed Rules
                                                 Federal Register
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 This section of the FEDERAL REGISTER contains notices to the public of 
 the proposed issuance of rules and regulations. The purpose of these 
 notices is to give interested persons an opportunity to participate in 
 the rule making prior to the adoption of the final rules.
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  Federal Register / Vol. 64, No. 216 / Tuesday, November 9, 1999 / 
Proposed Rules  

[[Page 61034]]


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DEPARTMENT OF AGRICULTURE

Office of the Secretary

7 CFR Part 785

Farm Service Agency

7 CFR Part 1946

RIN 0560-AE02


Certified Mediation Program

AGENCY: Farm Service Agency, USDA.

ACTION: Proposed rule.

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SUMMARY: The Farm Service Agency (FSA) proposes to amend its 
Agricultural Loan Mediation Program regulations to implement the 
requirements of the Federal Crop Insurance Reform and Department of 
Agriculture Reorganization Act of 1994 (the 1994 Act). The 1994 Act 
expands the scope of issues that may be mediated in State mediation 
programs certified by FSA. This regulation proposes to establish and 
modify requirements and procedures for certification and funding of 
State mediation programs. This action will also move the mediation 
provisions from the Rural Development chapter of the CFR to the FSA 
chapter.

DATES: Comments on this proposed rule must be received on or before 
January 10, 2000 to be assured of consideration. The comment period for 
information collections under the Paperwork Reduction Act of 1995 
continues through January 10, 2000.

ADDRESSES: Send comments in duplicate to Executive Director for State 
Operations, Farm Service Agency, U.S. Department of Agriculture, Room 
3090 S, STOP 0539, 1400 Independence Avenue, SW, Washington, DC 20250-
0539, or by fax to 202-690-3009. All written comments will be available 
for public inspection at the above address between 8 a.m. and 5 p.m., 
EST, Monday through Friday, except holidays.

FOR FURTHER INFORMATION CONTACT: Chester A. Bailey, Mediation 
Coordinator, FSA, at the above address, telephone 202-720-1471.

SUPPLEMENTARY INFORMATION:

Executive Order 12866

    This proposed 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 (OMB).

Federal Assistance Program

    The title and number of the Federal assistance program, as found in 
the Catalog of Federal Domestic Assistance, to which this rule applies, 
is the Certified Mediation Program-10.435.

Executive Order 12372

    This activity is not subject to the provisions of Executive Order 
12372, which requires intergovernmental consultation with State and 
local officials. See the notice related to 7 CFR part 3015, subpart V, 
published at 48 FR 29115 (June 24, 1983).

Environmental Evaluation

    It has been determined that this action will not have a significant 
impact on the quality of the human environment. Therefore, neither an 
Environmental Assessment nor an Environmental Impact Statement is 
needed under the National Environmental Policy Act of 1969.

Executive Order 12612

    This document has been reviewed in accordance with Executive Order 
12612, Federalism. The agency has determined that this action does not 
have significant Federalism implications.

Executive Order 12988

    This proposed rule has been reviewed in accordance with Executive 
Order 12988, Civil Justice Reform. If this proposed rule is adopted (1) 
all State and local laws and regulations that are in conflict with this 
rule will be preempted, (2) no retroactive effect will be given to this 
rule, and (3) administrative proceedings published at 7 CFR part 11 
must be exhausted before action for judicial review may be brought.

Regulatory Flexibility Act

    It has been determined that the Regulatory Flexibility Act is not 
applicable to this program. The administration certifies that this 
program will not have a significant impact on a substantial number of 
small entities. By statute this grant program applies only to States. 
These grants cannot be made to small entities or individuals. Small 
entities may participate in mediation, however, to the same extent as 
individual and other entities affected by adverse decisions covered by 
certified mediation programs.

Unfunded Mandates Reform Act

    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 
Agency generally must prepare a written statement, including a cost-
benefit analysis, for proposed and final rules with ``Federal 
mandates'' that may result in expenditures by State, local, or tribal 
governments, in the aggregate, or to the private sector, of $100 
million or more in any 1 year. When such a statement is needed for a 
rule, section 205 of the UMRA generally requires the Agency 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 objective 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. Thus, this rule is not subject to 
the requirements of sections 202 and 205 of the UMRA.

Paperwork Reduction Act

    In accordance with the Paperwork Reduction Act of 1995, FSA will 
submit an emergency information collection request (ICR) to OMB for the 
approval of the Certified Mediation Program reports as necessary for 
the proper functioning of the program.
    Title: Certified Mediation Program.
    OMB Control Number: 0560-0165.
    Type of Request: Reinstatement, with change, of previously approved 
collection for which approval has expired.
    Abstract: The information collected under OMB Control Number 0560-
0165, as identified above, is needed to enable

[[Page 61035]]

FSA to administer effectively the Certified Mediation Program.
    FSA requires some of the information it collects to be reported in 
a standard manner. Although other institutions, public and private, 
generally require and collect information similar to that requested by 
FSA, there is a wide diversity in reporting practices.
    The amendment contained in this information collection that 
requires clearance by OMB is ``Agricultural Mediation and Related 
Requirements including, State Certification and Grant Administration 
Provisions.'' The information to be collected includes an application 
for certification, reverification for subsequent annual approval, 
application for Federal Assistance, reporting requirements, and audit 
reports.
    The information requested is reported annually and is necessary for 
the FSA to determine eligibility, and to administer the mediation grant 
program in an equitable and cost-effective manner.
    Estimate of Burden: The public reporting burden for this 
information collection is estimated to average 34 hours per respondent.
    Respondents: State agencies.
    Estimated Number of Respondents: 24.
    Estimated Number of Responses per Respondents: 1.
    Estimated Total Annual Burden on Respondents: 816 hours.
    Topics for comments include: (a) Whether the proposed collection of 
information is necessary for the proper performance of the functions of 
the agency, including whether the information shall have practical 
utility; (b) the accuracy of the agency's estimate of the burden of the 
proposed collection of information; (c) ways to enhance the quality, 
utility, and clarity of the information to be collected; and (d) ways 
to minimize the burden of the collection of information on respondents, 
including through the use of automated collection techniques or other 
forms of information gathering technology. Comments should be sent to 
the Desk Officer for Agriculture, Office of Information and Regulatory 
Affairs, Office of Management and Budget, Washington, DC 20503 and to 
Chester A. Bailey, Mediation Coordinator, FSA, USDA, STOP 0539, 1400 
Independence Avenue, SW, Washington, DC 20250-0539, (202) 720-1471. 
Copies of the information collected may be obtained from Chester A. 
Bailey at the above address.
    OMB is required to make a decision concerning the collections of 
information contained in these proposed regulations between 30 and 60 
days after publication of this document in the Federal Register. 
Therefore, a comment to OMB is best assured of having full effect if 
OMB receives it within 30 days of publication. This does not affect the 
deadline for the public to comment to the Department of Agriculture 
(USDA) on the proposed regulation.

Discussion of Proposed Rule

    Title V of the Agricultural Credit Act of 1987 (7 U.S.C. 5106 et 
seq.) (1987 Act) authorized the Secretary of Agriculture to qualify 
States as certified to develop State mediation programs that mediate 
agricultural loan disputes. The Secretary delegated this authority at 
that time to the Administrator of the Farmers Home Administration 
(FmHA). In addition, the 1987 Act required FmHA to participate in 
mediation in certified States.
    To be certified under the 1987 Act, a State was required to: (1) 
Provide mediation services to producers and their creditors that, if 
decisions are reached, result in mediated, mutually agreeable decisions 
between parties under an agricultural loan mediation program; (2) be 
authorized or administered by an agency of the State government or by 
the Governor of the State; (3) provide for the training of mediators; 
(4) provide that the mediation sessions be confidential; and (5) ensure 
that all lenders and borrowers of agricultural loans receive adequate 
notification of the mediation program.
    The 1987 Act authorized funding of $7.5 million a year for each of 
the fiscal years 1988 through 1991, with matching grants to the States 
limited to $500,000 or 50 percent of the cost of a State's program, 
whichever is less. The Food, Agriculture, Conservation, and Trade Act 
of 1990 extended this authority through 1995, and the Agricultural 
Credit Improvement Act of 1992 increased the maximum percentage of the 
grant to 70 percent. The 1994 Act extended the program through 2000.
    Sections 275 and 282 of the 1994 Act establish the role of 
mediation in the administrative appeals process, expand the range of 
issues that can be mediated by certified State mediation programs, and 
explain the procedures and criteria under which a State, upon its 
application, can be certified by the Secretary of Agriculture as a 
qualifying State. The 1994 Act requires that, if mediation is available 
as a part of the USDA agency's informal appeals process, the appeal 
participant in a qualifying State will be offered the opportunity to 
mediate. As part of USDA's reorganization, the Secretary re-delegated 
the responsibility for State certification and administration of the 
grant program to the Administrator, FSA.
    The 1994 Act restates the requirements for certification of a 
State's mediation program contained in the 1987 Act. Additional 
requirements are that the State mediation program ensure, in the case 
of issues other than agricultural loans covered by the mediation 
program, that persons directly affected by actions of the USDA receive 
adequate notification of the mediation program. The 1994 Act re-
emphasizes the importance of qualifying States adequately training 
mediators to address all issues covered by their mediation programs.
    For the administration of the matching grant program in qualifying 
States, FSA will continue to use the uniform standards prescribed in 7 
CFR part 3015, ``Uniform Federal Assistance Regulations,'' and 7 CFR 
part 3016, ``Uniform Administrative Requirements for Grants and 
Cooperative Agreements to State and Local Governments.'' These 
generally applicable rules are sufficiently well known to the States to 
permit an informed comment on these proposed rules.
    This rule also continues the practice of making the grant year for 
all qualifying States run concurrently with the Federal fiscal year, 
which commences on October 1.
    The significant changes to the mediation regulations contained 
herein are: (1) All references to ``agricultural loan mediation'' are 
replaced with ``certified mediation''; (2) issues that may be mediated 
by a State mediation program are expanded to include certain issues 
specified in the 1994 Act and non-specified issues the Secretary deems 
appropriate; (3) USDA agencies will participate in good faith in 
mediation under the same terms and conditions applicable to 
agricultural producers, creditors, if applicable, and other persons 
directly affected by actions of the USDA; (4) participants may be 
offered the opportunity to choose mediation as part of an agency's 
informal appeal process; (5) certified State mediation programs are 
required to train mediators adequately to address all issues covered by 
the program; (6) added is a condition that a certified mediation 
program must ensure, for issues other than agricultural loans covered 
by the mediation program, that persons directly affected by actions of 
USDA receive adequate notification of the mediation program; (7) the 
confidentiality provisions of the Administrative Dispute Resolution Act 
of 1996 apply to the certified mediation

[[Page 61036]]

program, but this regulation clarifies that this does not alter the 
State's responsibility to provide the Government access to its records 
as required by 7 CFR 3015.24; (8) more specific information concerning 
the State's mediation program is required as a certification condition; 
(9) procedures are clarified to eliminate confusion about 
administration of mediation grants; (10) the mission of State-certified 
mediation programs is specified to provide mediation services to 
agricultural producers, their creditors and other persons directly 
affected by actions of the USDA; (11) provisions for audit and 
penalties for non-compliance are amended to remove internal 
administrative procedures and for clarity; (12) the basis on which 
grant funds will be allocated to certified State mediation programs is 
clarified and described; (13) ``mediation'' is defined; and (14) the 
method of payment of grant funds has been changed to permit advances of 
funds earlier in the fiscal year of appropriation. The advance payment 
will expedite receipt of grant funds by the State programs, so as to 
assist the State's need to budget, obligate and spend the funds in a 
timely and efficient manner and enhance operation of the program. At 
the same time, State programs are required to obligate, spend, and 
account for grant funds and for the State's matching fund obligation in 
accordance with USDA grant regulations. In addition carryover of 
unspent funds is specifically allowed. Carryover balances must be 
obligated and liquidated by the State program during the subsequent 
fiscal year.

Request for Comment

    FSA encourages interested persons to comment on this proposed 
regulation, and particularly solicits comments on the following 
specific matters:
    1. Training and reporting. FSA asks for comment on the request for 
information on training programs implemented by States under the recent 
statutory amendments, and on the requirement for reporting quarterly on 
the certified State program.
    2. Issues available for mediation. The 1994 Act expanded the issues 
available for mediation. Many State programs have made mediation 
available for the new issues. FSA is interested in learning whether 
States offer mediation in the new issues, and the experience of State 
programs in mediating these issues.
    3. Mediation not involving USDA agencies and programs. Certified 
State mediation programs may offer mediation services on issues that do 
not affect USDA agencies and programs. Costs of such services which are 
inconsistent with the statutory purposes of the program, however, will 
not be considered part of the costs for operating the program in 
determining the amount of the grant.
    4. Grant determination; reserve. An important change from the prior 
regulation is the change in the manner of determining the amount of 
grant funds available to certified States. Previously, certified States 
were awarded grants based on their requests, subject to the statutory 
limitations. Where total requests exceeded the appropriation, funds 
were allocated, pro-rata, based on the ratio of one State's request to 
all States' requests. In other words, the award was mathematical, 
without consideration of other factors. This regulation provides that 
awards should be made based on factors contained this proposed rule.
    In addition, the proposed regulation creates a reserve of 10 
percent of each grant award that will be obligated later in the fiscal 
year, to newly-qualified States, or reallocated to States to meet 
excess demand for mediation services, and then to requesting States. 
The reserve mechanism is intended to enable the program to fund a 
mediation program in a State that becomes newly-qualified in the first 
half of the fiscal year. Under the current regulation, a newly-
certified State program must await award of grant funds until the 
following fiscal year. The proposed regulation will enable the program 
to respond to increased demand for mediation services in a more timely 
manner, and to adjust a small percentage of funds to meet excess 
demand. Ultimately, the reserve, net of any such adjustment, will be 
allocated to States to which it had been awarded initially, in time to 
be used toward States' cash flow needs with respect to the mediation 
program. States receiving a grant of less than $50,000 are exempt from 
this reserve requirement.
    5. The proposed regulation makes clear that financial advisory and 
counseling services are permitted to be funded by the program only in 
those limited circumstances where a financial needs test is met, 
provided the work product of such services is available to all parties, 
and the services are assigned and provided under the control of a 
mediator. USDA views the mediation process as a viable and desirable 
means of resolving disputes. To the extent these services can be shown 
to serve this objective in specific instances, USDA supports them under 
this program. Generally, however, FSA views the use of grant funds to 
provide financial advisory or other services in an advocacy context to 
be inconsistent with the premise of a mediation program, to provide a 
neutral forum for resolution of disputes. FSA seeks comment on this 
clarification.

List of Subjects in 7 CFR Parts 785 and 1946

    Agriculture, Federal-State relations, Grant programs--
Intergovernmental relations, Mediation.

    Accordingly, 7 CFR chapters VII and XVIII are proposed to be 
amended, as follows:
    1. Part 785 is added to read as follows:

PART 785--CERTIFIED MEDIATION

Sec.  
785.1  General.
785.2  Definitions.
785.3  Process for certification.
785.4  Grants.
785.5  Penalty for non-compliance.
785.6  Nondiscrimination.
785.7  OMB control number.

    Authority: 5 U.S.C. 301; 7 U.S.C. 1989; and 7 U.S.C. 5104.

Sec. 785.1  General.

    (a) This part provides procedures for a State to be certified by 
the Farm Service Agency (FSA) as a qualifying State that provides 
mediation services for issues affecting USDA agencies and programs. A 
certified State may receive Federal grant funds for operation and 
administration of the State's certified agricultural mediation program.
    (b) USDA agencies will participate in good faith in mediation 
conducted pursuant to a State's certified mediation program, and will 
cooperate in good faith with requests for information or analysis of 
information made in the course of mediation under a certified program 
and, if applicable, present and explore debt restructuring proposals 
advanced in the course of such mediation.
    (c) Where mediation is available as part of a USDA agency's 
informal appeal process, the participant will be offered the 
opportunity to mediate under a State's certified mediation program, in 
accordance with regulations applicable to such appeal process.


Sec. 785.2  Definitions.

    Certified mediation program means a program for the resolution of 
disputes through mediation, authorized or administered by a State, that 
meets the requirements for certification contained in Sec. 785.3.
    Confidentiality means the mediator shall not disclose any 
confidential communication divulged during the mediation process except 
as required by Sec. 3015.24 of this title in relation to an

[[Page 61037]]

audit or evaluation of mediation services funded in whole or in part by 
USDA.
    Fiscal year means the period of time beginning October 1 of one 
year and ending September 30 of the next year and designated by the 
year in which it ends.
    FSA means the Farm Service Agency of USDA, or a successor agency.
    Mediation means a process in which a trained, neutral person 
assists disputing parties in voluntarily reaching their own settlement 
of issues but has no authoritative decision-making power.
    Qualifying State means a State with a certified mediation program 
that has not expired or been withdrawn under Sec. 785.5(b).
    USDA means the United States Department of Agriculture.


Sec. 785.3  Process for certification.

    (a) Deadline for request. (1) On or before August 1 of each year, 
the Governor of a State or head of a State agency designated by the 
Governor of a State may submit a written request to FSA to be certified 
as a qualifying State. The State must be certified in order to be 
eligible for a USDA grant for the fiscal year commencing October 1 of 
that same year.
    (2) Requests for certification will be accepted after August 1 of 
each year; however, the State will only be considered in order of date 
received for reserve grant funds available under Sec. 785.4(c).
    (b) Contents of request. The request for certification must 
include:
    (1) Documents and information in support of the request concerning 
the program, including:
    (i) A description of the program;
    (ii) Identification of issues available for mediation;
    (iii) Management of the program;
    (iv) Services offered by the program;
    (v) Budget;
    (vi) Source and amount of State funding;
    (vii) Costs (fixed and variable);
    (viii) Staffing level;
    (ix) Amount of contract labor;
    (x) Relevant State statutes and regulations in effect; and
    (xi) Any other information requested by FSA;
    (2) A description of the State program's education and training 
requirements for mediators including:
    (i) Training in mediation skills and in USDA programs; and
    (ii) Identification and compliance with any State law requirements.
    (3) A certification by the Governor, or head of a State agency 
designated by the Governor, that the State's mediation program:
    (i) Provides mediation services to producers, their creditors, and 
other persons directly affected by actions of the USDA, that, if 
decisions are reached, result in mediated, mutually agreeable decisions 
between the parties under the program;
    (ii) Provides mediation services for disputes involving 
agricultural loans (includes both loan making and loan servicing 
issues), or agricultural loans and one or more of the following issues 
under the jurisdiction of USDA:
    (A) Wetlands determinations;
    (B) Compliance with farm programs, including conservation programs;
    (C) Rural water loan programs;
    (D) Grazing on National Forest System lands;
    (E) Pesticides; or
    (F) Such other issues as the Secretary considers appropriate;
    (iii) Is authorized or administered by an agency of the State 
government or by the Governor of the State;
    (iv) Provides for training of mediators in mediation skills and in 
all issues covered by the State's mediation program;
    (v) Provides that the mediation sessions, and records relating to 
mediation sessions, shall be confidential;
    (vi) Ensures that all lenders and borrowers of agricultural loans 
receive adequate notification of the mediation program; and
    (vii) Ensures, for issues other than agricultural loans covered by 
the State's mediation program, that persons directly affected by an 
adverse decision of an officer, employee, or committee of a USDA agency 
receive adequate notification of the mediation program.
    (viii) Prohibits discrimination in its programs on the basis of 
race, color, national origin, sex, religion, age, disability, political 
beliefs, and marital or familial status.
    (4) If a grant is requested in accordance with Sec. 785.4, the 
request for certification also must include the information required by 
parts 3015 and 3016 of this title and Sec. 785.4(a)(2) and (b).
    (c) Request by qualifying State. If the State is a qualifying State 
at the time the request is made, the written request need only describe 
the changes to the program since the previous year's request, together 
with such documents and information as are necessary concerning such 
changes, and a certification that the remaining elements of the program 
will continue as described in the previous application.
    (d) Address. The request for certification should be mailed to: 
Administrator, Farm Service Agency, U.S. Department of Agriculture, 
STOP 0501, 1400 Independence Avenue, SW, Washington, DC 20013-0570.


Sec. 785.4  Grants.

    (a) Eligibility criteria for grant. To be eligible to receive a 
grant, a State must:
    (1) Have a certified mediation program in accordance with 
Sec. 785.5(b) , which certification has not been withdrawn; and
     (2) Provide detailed estimates of the cost of operating and 
administering the State's mediation program;
    (b) Application. A State requesting a grant will submit to the 
Administrator:
    (1) The standard form for Federal assistance which can be obtained 
from any FSA State office;
    (2) Detailed estimates of the cost of operation and administration 
of the program;
    (3) Information pertaining to the factors contained in paragraphs 
(c)(1) through (5) of this section;
    (4) Any additional information requested by FSA.
    (c) Distribution criteria. Grants will fund mediation activities 
within the State programs that are consistent with the statutory 
purposes of the certified mediation program and paragraph (g) of this 
section. Costs of services that are not consistent with such purposes 
are not considered part of the cost of operation and administration of 
the mediation program for the purpose of determining the amount of the 
grant. The factors used to determine the amount of a grant to a 
certified State include:
    (1) Demand for and use of mediation services (historical and 
anticipated);
    (2) Issues available for mediation;
    (3) Demonstrated success of the program, such as:
    (i) Number of inquiries;
    (ii) Number of requests for and use of mediation services;
    (iii) Number of resolutions;
    (iv) Timeliness of mediation services; and
    (v) Activities promoting awareness and use of mediation;
    (4) Use of program funds (budget and actual); and
    (5) Material changes in the State program.
    (d) Maximum grant amount; distribution. (1) A grant payment shall 
not exceed 70 percent of the eligible cost of operation and 
administration of the certified mediation program within the State 
consistent with the purposes of this program. In no case will the total 
amount of a grant to any State exceed $500,000 per fiscal year.
    (2) Grant funds will be paid in advance, in installments throughout 
the

[[Page 61038]]

Federal fiscal year as requested by a certified program and approved by 
FSA. The initial payment shall represent at least one-fourth of the 
State's grant award. The initial payment will be made as soon as 
practicable after certification, or recertification, and after funds 
are appropriated and available.
    (3) Payment of grant funds will be by electronic wire transfer to 
the designated account of each certified State program, as approved by 
FSA. The certified program shall submit to FSA the wire transfer 
information upon notice of certification, or recertification, and keep 
current such information.
    (e) Reserve. FSA will reserve distribution to States of 10 percent 
of the grant allocated to each State. This reserve requirement does not 
apply to any State allocated a grant in the amount of $50,000 or less.
    (1) As determined by the FSA Administrator and consistent with the 
limitations in paragraph (d) of this section, the reserve will be 
allocated and used to fund:
    (i) Grants to qualifying States that apply for certification after 
August 1; and
    (ii) Excess demand for mediation services in certified States.
    (2) The reserve will be allocated to certified States as initially 
determined, except to the extent reduced, pro-rata, for amounts 
allocated under paragraph (e)(1) of this section.
    (3) FSA will consider any State request for reallocation of grant 
funds, appropriated by Congress for the current year, based on excess 
demand made by any State and submitted on or before March 1 of the 
fiscal year.
    (4) Reserve funds obligated under this part will be made available 
by March 31.
    (f) Administration of grants. (1) FSA will administer the program 
in accordance with the requirements of parts 3015 and 3016 of this 
title. Any State requesting and receiving a grant must comply with the 
provisions of those regulations.
    (2) A State program is encouraged to obligate its award funds 
within the Federal fiscal year of the award. Any funds remaining 
unobligated by the State program at the end of the fiscal year of 
award, however, may be carried forward for use in the next fiscal year 
for costs resulting from obligations of the subsequent funding period. 
Any carryover balances plus any additional obligated fiscal year grant 
will not exceed the lesser of 70 percent of the State's administrative 
cost for the subsequent fiscal year, or $500,000. Carryover balances 
must be obligated and liquidated by the State program in the subsequent 
fiscal year.
    (3) Grant funds not spent in accordance with this subpart will be 
subject to de-obligation and must be returned to USDA.
    (g) Grant purposes. Grants made under this part will be used to pay 
for the eligible costs of operation and administration of the State's 
mediation program, consistent with the statutory purposes of this 
program. Authorized uses of grant funds include only the following:
    (1) Eligible costs are limited to those allowable under 
Sec. 3016.22 of this title that are reasonable and necessary to carry 
out the State's certified mediation program in providing mediation 
services for agricultural producers and their creditors, and other 
persons directly affected by actions of the USDA within the State, in 
accordance with the certified mediation grant program. Eligible costs 
are:
    (i) Staff salaries;
    (ii) Reasonable fees and costs of mediators;
    (iii) Office rent and expenses, such as utilities and equipment 
rental;
    (iv) Office supplies;
    (v) Administrative costs, such as workers' compensation, liability 
insurance, employer's share of Social Security, and travel that is 
necessary to provide mediation services;
    (vi) Education and training of mediators involved in mediation;
    (vii) Security systems necessary to assure confidentiality of 
mediation sessions and records of mediation sessions;
    (viii) Costs associated with publicity and promotion of the 
program; and
    (ix) Financial advisory and counseling services: Provided, That:
    (A) They are incidental to a pending mediation case;
    (B) A financial need is demonstrated and approved under guidelines 
established by the State mediation program and reported to FSA;
    (C) The work product of such services is available to all parties 
to the mediation;
    (D) Services are provided under control of the mediator; and
    (E) They are determined by the mediator in advance to be reasonable 
and necessary in the circumstances, and consistent with the goal and 
purpose of mediation in a particular case.
    (2) Grant funds may not be used for:
    (i) Purchase of capital assets, real estate, or vehicles and repair 
or maintenance of privately-owned property;
    (ii) Political activities;
    (iii) Routine administrative activities not allowable under OMB 
Cost Principles found in part 3015, subpart T, of this title and OMB 
Circular No. A-87; and
    (iv) Services provided by a State program that are not consistent 
with the statutory purposes of the certified mediation program, 
including advocacy services on behalf of a mediation participant, such 
as representation before an administrative appeals entity of USDA or 
other Federal Government department.
    (h) Reporting requirements. (1) Qualifying States receiving grants 
must provide to the FSA Administrator by October 31 following the 
fiscal year of the grant, an annual report on:
    (i) The performance and effectiveness of the State's certified 
mediation program;
    (ii) Recommendations for improving the delivery of mediation 
services to producers;
    (iii) The savings to the State as a result of having a certified 
mediation program; and
    (iv) Such other matters relating to the program as the State elects 
to report, or as FSA may require.
    (2) In addition to the auditing requirements of part 3015, subpart 
I and Sec. 3016.26 of this title, the qualifying State receiving a 
grant must submit an audit report to the FSA Administrator in 
accordance with OMB Circular A-128.
    (i) Access to records. Notwithstanding the confidentiality of 
mediation sessions, the State must provide the Government access to its 
records in accordance with Sec. 3015.24 of this title. State mediators 
will notify all participants in writing at the beginning of the 
mediation session that USDA, the Comptroller General of the United 
States, the FSA Administrator, or any of their representatives will 
have access to mediation records to conduct an audit or evaluation of 
mediation services funded in whole or in part by USDA. The notice will 
be signed and dated by all participants and placed in the mediation 
file.


Sec. 785.5  Penalty for non-compliance.

    (a) The Administrator is authorized to withdraw certification of 
the program, terminate or suspend the grant, and impose any other 
penalties or sanctions authorized by law if the Administrator 
determines that:
    (1) A State's certified mediation program, at any time, does not 
meet the requirements contained in Sec. 785.3 for certification;
    (2) Grant funds are not being used as required;
    (3) The certified program is not being operated in accordance with 
the statutory purpose of the grant program,

[[Page 61039]]

the regulations, the grant agreement and the representations and 
information provided by the State; or
    (4) The certified program fails to grant access to mediation 
records in accordance with Sec. 785.4.
    (b) In the event that any penalty or withdrawal of certification 
for non-compliance is enforced, USDA agencies will cease to participate 
in mediation conducted by the State certified mediation program.


Sec. 785.6  Nondiscrimination.

    The provisions of parts 15, 15b and 1901, subpart E, of this title 
and part 90 of title 45 apply to activities financed by grants made 
under this part.


Sec. 785.7  OMB Control Number.

    The information collection requirements in this regulation have 
been approved by the Office of Management and Budget and assigned OMB 
control number 0560-0165.

PART 1946--[REMOVED AND RESERVED]

    2. Part 1946 is removed and reserved.

    Signed at Washington, DC, on October 29, 1999.
August Schumacher, Jr.,
Under Secretary for Farm and Foreign Agricultural Services.
[FR Doc. 99-29212 Filed 11-8-99; 8:45 am]
BILLING CODE 3410-05-P