[Federal Register Volume 70, Number 154 (Thursday, August 11, 2005)]
[Rules and Regulations]
[Pages 47052-47076]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 05-15778]



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Part IV





Department of Agriculture





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Food and Nutrition Service



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7 CFR Part 247



Commodity Supplemental Food Program--Plain Language, Program 
Accountability, and Program Flexibility; Final Rule

  Federal Register / Vol. 70, No. 154 / Thursday, August 11, 2005 / 
Rules and Regulations  

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DEPARTMENT OF AGRICULTURE

Food and Nutrition Service

7 CFR Part 247

RIN 0584-AC84


Commodity Supplemental Food Program--Plain Language, Program 
Accountability, and Program Flexibility

AGENCY: Food and Nutrition Service, USDA.

ACTION: Final rule.

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SUMMARY: This final rule rewrites the regulations for the Commodity 
Supplemental Food Program (CSFP) in ``plain language'' to help program 
operators and the general public better understand program 
requirements. It also reduces the time and paperwork burden for State 
and local agencies, increases their flexibility in program operations, 
and strengthens program accountability. Other changes have been made to 
incorporate legislative provisions and improve program service and 
caseload management. This final rule makes the CSFP easier to 
understand and administer, and more effective and efficient in 
providing benefits to eligible persons.

EFFECTIVE DATE: This final rule is effective September 12, 2005.

FOR FURTHER INFORMATION CONTACT: Lillie F. Ragan, Assistant Branch 
Chief, Household Programs Branch, Food Distribution Division, Food and 
Nutrition Service, U.S. Department of Agriculture, Room 500, 3101 Park 
Center Drive, Alexandria, Virginia 22303-1594, or telephone (703) 305-
2662.

SUPPLEMENTARY INFORMATION:

Executive Order 12866

    This rule has been determined to be significant and was reviewed by 
the Office of Management and Budget in conformance with Executive Order 
12866.

Regulatory Impact Analysis

Need for Action

    This action is needed in order to rewrite the regulations for the 
CSFP in a plain language format, while reflecting current program 
conditions. Furthermore, this action is needed in order to improve 
program accountability, increase flexibility in program administration, 
and reduce the paperwork burden on State and local agencies.

Benefits

    Rewriting the regulations in plain language helps program operators 
and the general public better understand program requirements. The 
plain language format includes a question-and-answer structure under 
each section, and removal of the legalistic style that is currently 
reflected in the regulations. The regulatory amendments set forth in 
this rule, such as the amendment making the State Plan permanent 
instead of annual, with amendments submitted as needed, will benefit 
State and local agencies by reducing the paperwork burden and 
increasing flexibility in program administration. The establishment of 
more rigorous performance measures will have a positive impact on the 
program as whole, facilitating the assignment of caseload slots to 
those State agencies most likely to use them. Changes that increase 
flexibility in program administration include the establishment of 
income eligibility guidelines, the consideration of average income over 
the previous year, and, for a pregnant woman, the counting of each 
fetus or embryo in utero as a household member when considering income 
eligibility. Other changes improve program accountability by increasing 
the penalties for program violations and requiring the initiation and 
pursuit of claims against participants who fraudulently obtain program 
benefits.

Costs

    The changes in this final rule will not result in appreciable 
adjustments in program participation or costs. Most of the changes in 
this final rule offer burden relief to State agencies and local program 
operators, and are generally insignificant to the costs of the overall 
operations of the program.

Regulatory Flexibility Act

    This rule has been reviewed with regard to the requirements of the 
Regulatory Flexibility Act (5 U.S.C. 601-612). The Under Secretary of 
Food, Nutrition, and Consumer Services, Eric M. Bost, has certified 
that this action will not have a significant impact on a substantial 
number of small entities. While program participants, State agencies 
and Indian Tribal Organizations that administer the program will be 
affected by this rulemaking, the economic effect will not be 
significant.

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

Executive Order 12372

    The CSFP is listed in the Catalog of Federal Domestic Assistance 
under No. 10.565. For the reasons set forth in the final rule in 7 CFR 
part 3015, Subpart V and related Notice (48 FR 29115, June 24, 1983), 
this program is included in the scope of Executive Order 12372, which 
requires intergovernmental consultation with State and local officials.

Federalism Summary Impact Statement

    Executive Order 13132 requires Federal agencies to consider the 
impact of their regulatory actions on State and local governments. 
Where such actions have federalism implications, agencies are directed 
to provide a statement for inclusion in the preamble to the regulations 
describing the agency's considerations in terms of the three categories 
called for under section (6)(b)(2)(B) of Executive Order 13132. FNS has 
considered the impact of this rule on State and local governments and 
has determined that this rule does not have Federalism implications. 
This rule does not impose substantial or direct compliance costs on 
State and local governments. Therefore, under Section 6(b) of the 
Executive Order, a federalism summary impact statement is not required.

Executive Order 12988

    This rule has been reviewed under Executive Order 12988, Civil 
Justice Reform. The rule is intended to have preemptive effect with 
respect to any

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State or local laws, regulations, or policies which conflict with its 
provisions or which would otherwise impede its full implementation. 
This rule is not intended to have retroactive effect. Prior to any 
judicial action challenging the provisions of this rule or the 
application of its provisions, all applicable administrative remedies, 
as set out in Sec.  247.33 of this final rule, must be exhausted. 
Unless otherwise indicated, all regulation citations set out in this 
preamble and final rule may be found, or will be codified, in Title 7, 
Part 247 of the Code of Federal Regulations.

Civil Rights Impact Analysis

    FNS has reviewed this rule in accordance with the Department 
Regulation 4300-4, ``Civil Rights Impact Analysis,'' to identify and 
address any major civil rights impacts the rule might have on 
minorities, women, and persons with disabilities. After a careful 
review of the rule's intent and provisions, FNS has determined that it 
will not in any way limit or reduce the ability of participants to 
receive program benefits on the basis of an individual's race, color, 
national origin, age, gender, or disability. The rule applies equally 
to all participants in the CSFP who are eligible to receive program 
benefits. All data available to FNS indicates that protected 
individuals have the same opportunity to participate in the CSFP as 
non-protected individuals, subject to the program eligibility 
requirements. Program civil rights requirements are detailed in Sec.  
247.37 of this final rule.
    Discrimination by State and local agencies in any aspect of program 
administration is prohibited by this final rule, Title VI of the Civil 
Rights Act of 1964 (42 U.S.C. 2000d et seq.), Title IX of the Education 
Amendments of 1972 (20 U.S.C. 1681 et seq.), Section 504 of the 
Rehabilitation Act of 1973 (29 U.S.C. 794 et seq.), the Age 
Discrimination Act of 1975 (42 U.S.C. 6101 et seq.), and Titles II and 
III of the Americans with Disabilities Act of 1990 (42 U.S.C. 12101 et 
seq.). State and local agencies must also comply with 7 CFR Parts 15, 
15a, and 15b of this title, and with the provisions of FNS Instruction 
113-2. Enforcement action may be brought under any applicable Federal 
law.

Paperwork Reduction Act

    The Paperwork Reduction Act of 1995 (44 U.S.C. Chap. 35; see 5 CFR 
1320) requires that the Office of Management and Budget (OMB) approve 
all collections of information by a Federal agency from the public 
before they can be implemented. Respondents are not required to respond 
to any collection of information unless it displays a current valid OMB 
control number. Implementation of the data collection elements of the 
rule is contingent upon OMB approval under the Paperwork Reduction Act. 
Information collections in this final rule have been previously 
approved under OMB 0584-0293. Although FNS sought public 
comments specific to the estimated reporting and recordkeeping burden 
detailed in the proposed rule, no comments were received. Thus, the 
provisions contained in this final rule do not differ with regard to 
information collection burden requirements from those set forth in the 
proposed rule.

Government Paperwork Elimination Act

    FNS is committed to compliance with the Government Paperwork 
Elimination Act (GPEA), which requires Government agencies to provide 
the public the option of submitting information or transacting business 
electronically to the maximum extent possible. The FNS-153, Monthly 
Report of the Commodity Supplemental Food Program and Quarterly 
Administrative Financial Status Report, is available online at the FNS 
Web site and may be downloaded electronically by State and local 
agencies. The SF-269A, Financial Status Report, is currently available 
online at the OMB Web site and may be downloaded electronically as 
well. FNS is willing to provide electronic copies of this form to State 
agencies upon request. FNS is also exploring the possible development 
and use of an automated inventory system that would positively impact 
the efficiency of FNS-153 reporting by streamlining this process at the 
State and local levels. Finally, FNS will replace the current reporting 
system, the Special Nutrition Programs Integrated Information System, 
or SNPIIS, with the Web-based Food Programs Reporting System, or FPRS. 
FPRS should offer increased program efficiency.

Background

    On October 31, 2003, the Department published a proposed rule in 
the Federal Register (68 FR 62164) that would have rewritten the 
regulations for the CSFP in ``plain language'' to help program 
operators and the general public better understand program 
requirements. The rule also proposed changes that would have reduced 
the time and paperwork burden for State and local agencies, increased 
their flexibility in program operations, established more rigorous 
performance measures for State agencies, and strengthened program 
accountability. Other proposed changes would have incorporated current 
legislative provisions and improved program service and caseload 
management. The specific changes made by this final rule were discussed 
in detail in the preamble to the proposed rule, which provided a 60-day 
comment period.

Analysis of Comments Received

    The Department received a total of eleven comment letters. However, 
two of the comment letters were not received within the specified 
comment period and, therefore, were not considered in the comment 
analysis. Four State CSFP agencies, two CSFP local agencies, the 
National CSFP Association, one State association, and one non-CSFP 
State government organization submitted comment letters. Of those nine 
commenters, five were generally supportive of the proposed rule in its 
entirety, with a limited number of suggested revisions. The generally 
supportive comments from those five commenters are not included in the 
discussion of specific provisions contained in the preamble to this 
final rule. Most of the proposed rule provisions proved to be non-
controversial, either receiving few or no comments, or receiving very 
few comments in opposition. Provisions contained in the proposed rule 
that are being amended in this final rule in response to these comments 
are discussed in detail below. For a complete understanding of the 
provisions contained in this final rule, the reader should refer to the 
preamble of the proposed rule, as well as the preamble to this final 
rule.

Definitions, Section 247.1

    Section 247.1, as proposed, would have addressed definitions 
associated with the administration of the program. As discussed in the 
proposed rule, definitions of ``certification period,'' 
``commodities,'' ``CSFP,'' ``7 CFR Part 250,'' ``7 CFR Part 3016,'' ``7 
CFR Part 3019,'' and ``7 CFR Part 3052'' are not found in current 
regulations. As no comments were received referencing the additions of 
these definitions, these seven definitions have been retained in Sec.  
247.1 of this final rule as proposed. In addition to these seven 
definitions, it has been brought to our attention that the inclusion of 
definitions of ``applicant,'' ``disqualification,'' and ``proxy'' would 
serve to help readers and program administrators better understand the 
administration of the program. Therefore, definitions of these terms 
have been included in Sec.  247.1 of this final rule.

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    While the meaning of ``applicant'' is self-explanatory, it has been 
included for the sake of clarity. The term ``disqualification'' is 
defined to ensure that readers are better aware of the penalties for 
certain program violations. The definition of ``proxy'' makes clear to 
the reader those individuals who are qualified to obtain food packages 
for eligible participants. These added definitions do not in any way 
alter regulatory requirements.

The Purpose and Scope of CSFP, Section 247.2

    As discussed in Sec.  247.2 of the proposed rule, the purpose of 
CSFP is to distribute nutritious foods, and provide nutrition education 
to low-income pregnant, postpartum, and breastfeeding women, infants, 
children ages 1 through 5, and the elderly. One commenter suggested 
that instead of referring to children as those individuals ``ages 1 
through 5,'' that we refer to this applicant or participant group as 
``children ages 1 up to the 6th birthday.'' For the sake of clarity, we 
have amended the language in Sec.  247.2 to read ``children who are at 
least one year of age but have not reached their sixth birthday.'' 
Furthermore, in order to clarify the difference between ``infants'' and 
``children'' for the purposes of the CSFP, we have amended language 
pertaining to infants in Sec.  247.2 to read ``infants under one year 
of age.'' Since no other comments were received relative to the 
provisions contained in Sec.  247.2, all other provisions are retained 
in this final rule as proposed.

Administering Agencies, Section 247.3

    A description of responsible administering agencies and the Federal 
requirements that apply to administration of the program was included 
in Sec.  247.3 of the proposed rule.
    Since no comments were received relative to the proposed provisions 
contained in Sec.  247.3, they are retained in this final rule as 
proposed.

Agreements, Section 247.4

    Section 247.4, as proposed, addressed the requirements associated 
with the duration and contents of agreements between agencies 
administering the program. Section 247.4(b), as proposed, would have 
required that all agreements, with the exception of the Federal-State 
agreement (which is a standard form), contain a statement that the 
agreement may be terminated by either party upon 30 days' written 
notice.
    Two commenters expressed concerns over the proposed requirement. 
The commenters questioned whether a 30-day timeframe is adequate notice 
for termination, particularly for the distributing agency. The 
commenters cited the challenges associated with locating and procuring 
alternate providers within the service area, the potential difficulties 
in shifting commodity inventories to other sites within the 30-day 
timeframe, and, finally, the difficulties in notifying participants of 
schedule and food package pick-up location changes within the 30-day 
timeframe. Both commenters recommended that agreements establish the 
30-day notice as a regulatory minimum, with State agencies authorized 
to extend this minimum if circumstances warrant. We agree with the 
commenters' suggestion, and have amended Sec.  247.4(b)(6) to specify 
that the 30-day notice requirement is a regulatory minimum.
    In addition to requiring those elements listed in Sec.  
247.4(b)(6), Sec.  247.4(c) of the proposed rule would have required 
agreements between State and local agencies to include certain 
assurances and information. No comments were received relative to the 
provisions contained in Sec.  247.4(c) of the proposed rule. However, 
in order to make clear the civil rights requirements of the Department, 
a nondiscrimination assurance has been added to the required contents 
of agreements between State and local agencies. Section 247.4(d) of the 
proposed rule would have established the duration requirements for 
agreements between administering agencies. One commenter supported the 
proposed provision that would have made agreements between FNS and 
State agencies permanent. No other comments were received relative to 
this section of the proposed rule. However, in order to make clear to 
the reader the duration of other types of agreements, such as 
agreements with storage facilities, we have amended Sec.  247.4(d) of 
this final rule to include reference to 7 CFR 250.12(c).
    Since no comments were received relative to the other provisions 
contained in Sec.  247.4 of the proposed rule, they are retained in 
this final rule as proposed.

State and Local Agency Responsibilities, Section 247.5

    Section 247.5, as proposed, would have outlined the major 
responsibilities of State and local agencies in administering the 
program. No comments were received relative to the provisions contained 
in Sec.  247.5 of the proposed rule. Those provisions are retained in 
this final rule with the clarification in Sec.  247.5(b)(15) that 
States must ensure that program participation does not exceed the State 
agency's caseload allocation on an average monthly basis.

State Plan, Section 247.6

    Section 247.6, as proposed, would have addressed those requirements 
associated with the State Plan. One commenter concurred with Sec.  
247.6(c) of the proposed rule, which would have required that the State 
CSFP agency collaborate with the State WIC agency in developing plans 
to prevent and detect dual participation. To review, ``dual 
participation'' is the simultaneous participation by an individual in 
CSFP and the WIC Program, or in CSFP at more than one distribution 
site. Another commenter, although in support of the requirement for 
collaboration in the area of dual participation, requested that we 
require collaboration of the State CSFP agency with the State WIC 
agency in the development of multiple elements of the State Plans for 
the respective programs. We believe this requirement would create an 
undue burden on State agencies, since most States have already 
implemented the most efficient, cost effective systems for 
collaboration between programs in this regard. Thus, the requirements 
in this final rule will not be extended to include additional mandatory 
elements of collaboration.
    One commenter requested that we require CSFP State agencies to 
maintain updated Memoranda of Understanding with WIC State agencies, 
since State Plans would be permanent. We do not consider this change 
necessary since Sec.  247.6(d) requires the State agency to submit 
amendments to FNS to reflect any changes in aspects of program 
operations or administration that are addressed in the State Plan. This 
includes any changes to any elements of the State plan listed in Sec.  
247.6(c).
    Since no other comments were received relative to the provisions 
contained in Sec.  247.6 of the proposed rule, they are retained in 
this final rule as proposed.

Selection of Local Agencies, Section 247.7

    The provisions contained in Sec.  247.7 of the proposed rule would 
have addressed requirements associated with the submission of local 
agency applications for participation in the program, criteria that the 
State agency must consider in approving or denying such applications, 
and the amount of time the State agency has to act on a local agency's 
application.
    Section 247.7(b) of the proposed rule would have set forth the 
basic guidelines a State agency must consider in making a decision on a 
local agency's

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application for participation in the program. Two commenters 
recommended that the proposed local agency selection criteria be 
regulatory minimums, and that the State agency be permitted to specify 
additional criteria in the State Plan. The commenters cited differences 
between State agencies in the administration of the program, and the 
need for additional State-specified criteria as warranted. We agree 
that varied administration of the program from State to State may 
warrant additional local agency selection criteria. Therefore, this 
final rule amends Sec.  247.7(b) to permit State agencies to consider 
additional criteria in approving or denying a local agency's 
application to participate in the program.
    Section 247.7 of the proposed rule would have removed the 
requirement that the State justify the need for approval of a local 
agency in an area already served by the WIC Program. One commenter 
opposed the proposed removal of this requirement due to the possibility 
of dual participation. In relation to the dual participation issue, 
another commenter recommended that the Memorandum of Understanding 
between the State CSFP agency and the State WIC agency require the 
State CSFP agency to inform the State WIC agency when a new CSFP 
program application has been received in order to prevent occurrences 
of dual participation. However, we believe the provision contained in 
Sec.  247.6 of this final rule, which encourages State agencies to 
coordinate with the WIC State agency in formulating plans to serve 
women, infants, and children in common areas of service, is sufficient 
in this regard. In addition, a recent guidance memorandum issued by FNS 
on May 6, 2004, entitled ``Dual Participation in the Special 
Supplemental Nutrition Program for Women, Infants, and Children (WIC) 
and the Commodity Supplemental Food Program (CSFP)'' makes clear the 
discretion that CSFP and WIC State agencies have in establishing the 
most efficient and effective procedures for use in addressing the issue 
of dual participation.
    Since no other comments were received relative to the other 
provisions contained in Sec.  247.7, they are retained in this final 
rule as proposed.

Individuals Applying to Participate in CSFP, Section 247.8

    Section 247.8 of the proposed rule would have described specific 
requirements associated with individuals applying for participation in 
the program. One commenter expressed support for the requirement in 
Sec.  247.8(a) of the proposed rule that individuals applying to 
participate in the CSFP show some form of identification. No other 
comments were received relative to the provisions contained in Sec.  
247.8(a). However, we have amended Sec.  247.8(a) of this final rule to 
clarify that those individuals determined by the local agency to be 
automatically eligible under Sec.  247.9(b)(1)(i) and (b)(1)(ii) are 
not required to provide household size or income information. These 
individuals are eligible to participate in the program based on their 
participation in other Federal means-tested programs and are, 
therefore, not required to provide this information. In addition, Sec.  
247.8(a) of this final rule has been amended to clarify that household 
size must be ascertained for all households, except those determined to 
be automatically eligible, in order to establish an applicant's income 
limit under the Federal Poverty Income Guidelines published annually by 
the Department of Health and Human Services (HHS).
    One commenter requested that Sec.  247.8(b) be amended to require 
that a statement specifically referencing dual participation as a 
program violation be added to the application form that is signed by 
the applicant, adult parent, or caretaker. We agree that, in order to 
deter program participants from committing dual participation, a 
statement should be included on the application form. Therefore, this 
final rule amends Sec.  247.8(b) to require that the application form 
include reference to the prohibition of simultaneously receiving CSFP 
and WIC benefits, or CSFP benefits at more than one CSFP site. As the 
application form is modified to reflect this information, Sec.  
247.12(b)(1) of the proposed rule, which would have required local 
agencies to provide this information separately to the applicant, is 
not included in this final rule.
    In addition, in order to make clear the applicant's civil rights, 
this final rule amends Sec.  247.8(b) to require inclusion of the 
Department's nondiscrimination statement on all application forms. FNS 
Instruction 113-2 provides an approved example of a program 
nondiscrimination statement for the State agency's reference.
    Since no other comments were received relative to other provisions 
contained in Sec.  247.8, they are retained in this final rule as 
proposed.

Eligibility Requirements, Section 247.9

    Section 247.9 of the proposed rule would have addressed the 
requirements that must be used in determining an individual's 
eligibility to participate in the program. One commenter 
enthusiastically supported the proposed provision in Sec.  247.9(b)(3), 
which would have required that, for a pregnant woman, each embryo or 
fetus in utero be counted as a household member in determining if the 
household meets the income eligibility standards for the program.
    Section 247.9(d) of the proposed rule would have included reference 
to the notification, by memorandum, of the annual adjustment of the 
income guidelines by household size, and the effective date of the 
adjustments. The notification provides the adjusted guidelines for 185 
percent, 130 percent, and 100 percent of the poverty guidelines.
    Section 247.9(d) of the proposed rule would have further required 
that the State agency implement the adjusted guidelines for the elderly 
immediately upon receipt of the memorandum, in order to minimize the 
time gap between the adjustment of the guidelines and the cost-of-
living adjustment in Social Security benefits, which is made in 
January. This requirement would have decreased the likelihood that 
elderly persons receiving Social Security benefits would become 
temporarily ineligible for CSFP. Finally, Sec.  247.9(d) of the 
proposed rule would have required that the adjusted guidelines be 
implemented for women, infants, and children at the same time that the 
State WIC agency implements the adjusted guidelines for WIC eligibility 
in order to reflect current practices.
    One commenter specifically supported the proposed requirements for 
implementation of the adjusted income guidelines for participants. The 
same commenter requested that the Department specifically issue 
separate CSFP and WIC Program adjusted income guidelines for women, 
infants, and children. We agree that the Department should separately 
issue adjusted income guidelines for the CSFP and WIC Programs. As the 
WIC Program currently issues adjusted income guidelines for women, 
infants, and children on an annual basis, we plan to issue separate 
adjusted income guidelines for women, infants, and children 
participating in the CSFP. Since Sec.  247.9(d) of the proposed rule 
would have permitted such action, no change in this regard is 
necessary.
    Two commenters expressed support for the provision contained in 
Sec.  247.9(e) of the proposed rule, which would have permitted State 
agencies to allow local agencies to consider the household's average 
income during the previous 12 months and current household income

[[Page 47056]]

to determine which more accurately reflects the household's status.
    Based on the comments received, the provisions contained in Sec.  
247.9 of the proposed rule are retained in this final rule as proposed.

Distribution and Use of CSFP Commodities, Section 247.10

    Section 247.10, as proposed, would have described the requirements 
associated with the distribution and use of commodities donated by the 
Department for use in the program. One commenter concurred with the 
proposed removal of the current requirement that the local agency 
choosing to distribute foods every other month provide the participant 
the option to continue to receive foods on a monthly basis. The 
commenter agreed that, as stated in the preamble to the proposed rule, 
although the local agency may provide this option, the requirement to 
do so may place an undue burden on the local agency. In addition, the 
commenter suggested that a tri-monthly commodity issuance be offered 
for those households with participants in both the CSFP and WIC 
Program. We appreciate the commenter's request to add a third commodity 
issuance option. However, there is no evidence that there would be 
broad interest in such an issuance option with the potential to benefit 
only a small portion of the CSFP population. In addition, the weight of 
the food packages renders it impractical for many CSFP participants to 
transport three months' worth of supplemental food packages to their 
homes. Finally, allowing the issuance of three month's worth of 
commodities, some of which require refrigeration, increases the risk of 
commodities going out of condition which, in turn, could negatively 
affect needy participants. Therefore, the proposed provision is 
retained without change in the final rule. Since no other comments were 
received relative to the provisions contained in Sec.  247.10 of the 
proposed rule, they are retained in this final rule as proposed.

Applicants Exceed Caseload Levels, Section 247.11

    Section 247.11 of the proposed rule would have described the order 
of priority in serving the various population groups, and the 
requirements associated with assigning applicants to a waiting list. 
Section 247.11(b), as proposed, would have listed the order of priority 
in service, and would have required that women, infants, and children 
receive priority of service over the elderly, per the requirements of 
the Agriculture and Consumer Protection Act of 1973, Public Law 93-86.
    One commenter requested that the Department reorder its priorities 
in service to make service to the elderly the first priority. The 
commenter cited the limited availability of nutrition assistance 
programs for elderly individuals in her area and observed that women, 
infants, and children have access to many programs, including the WIC 
Program, which adequately meet the needs of that population group. 
However, since legislation requires that priority in service be given 
to women, infants, and children, the Department does not have authority 
to adopt this recommendation.
    No other comments were received relative to the provisions 
contained in this section of the proposed rule. Those provisions are 
retained in this final rule with a cross-reference in Sec.  247.11(a) 
that clarifies notification policy to the reader. Section 247.11(a) of 
the final rule cross-references Sec.  247.15, since Sec.  247.15 
requires that applicants be notified of their placement on a waiting 
list, or their ineligibility or eligibility for benefits, within 10 
days from the date of application.

Rights and Responsibilities, Section 247.12

    Section 247.12 of the proposed rule would have included the most 
basic rights and responsibilities of program applicants. Section 
247.12(a) of the proposed rule would have included the right of 
applicants to receive benefits without discrimination based on race, 
color, national origin, age, sex, or disability. One commenter 
suggested that program standards do in fact discriminate by age. The 
commenter cited difficulties in providing services to senior housing 
sites where some residents are under sixty years of age, the minimum 
age required for seniors to qualify for participation in the program. 
By law, participation in the program is limited to those individuals 
who are ``categorically'' eligible. Therefore, the regulatory age 
limitations are not discriminatory. Section 247.12(a) of the proposed 
rule is, however, amended in this final rule to remove the requirement 
to inform applicants of the right to participate without 
discrimination, since Sec.  247.8(b) of this final rule requires that 
an approved nondiscrimination statement to be printed on all 
application forms.
    Section 247.12(b) of the proposed rule would have required that 
applicants be informed of the prohibition on dual participation, and 
the possibility of a claim against an individual who receives benefits 
improperly as a result of dual participation or other program 
violations, in accordance with the provisions contained in Sec.  
247.30, which addresses claims. However, Sec.  247.8(b) of the proposed 
rule has been amended in this final rule to require that information 
regarding the prohibition on dual participation be included on the 
application form. Therefore, the requirement that this information be 
provided to applicants separately is not included in Sec.  247.12(b) of 
this final rule.
    One commenter suggested that the concept of dual participation is 
not well understood by participants and that local agency staff should 
be required to explain the concept to applicants and participants. It 
has been determined that the provisions set forth in Sec.  247.12(b) 
and Sec.  247.8 of this final rule are sufficient to ensure that 
program applicants are made aware of what constitutes dual 
participation, the prohibition against dual participation, and the 
possible consequences of such action. Therefore, this requirement has 
not been included in Sec.  247.12(b) of this final rule.

Provisions for Non-English or Limited-English Speakers, Section 247.13

    Section 247.13, as proposed, would have described the provisions 
associated with providing non-English or limited-English speaking 
persons program information in an appropriate language. Section 
247.13(b) of the proposed rule would have required that, in areas where 
a significant proportion of the population speak little or no English 
but have a language in common, the State agency ensure that local 
agencies provide applicants with program information in an appropriate 
language, not including application materials. One commenter 
recommended that all application materials be required in appropriate 
languages, as several different languages may be prevalent in a given 
area. Section 247.13(a) of the proposed rule would have required State 
and local agencies to provide bilingual staff members and interpreters 
in areas where a significant proportion of the population is comprised 
of non-English or limited-English speaking persons with a common 
language. Since this requirement adequately accommodates the needs of 
the most diverse range of population groups without significantly 
increasing program costs at the local level, the provisions contained 
in Sec.  247.13(b) of the proposed rule are retained in this final rule 
as proposed. However, the phrase ``to such persons in an appropriate 
language'' in proposed rule Sec.  247.13(b) has been amended in this 
final rule to read ``to such persons

[[Page 47057]]

in their appropriate language'' for clarification purposes.
    Since no other comments were received relative to the remaining 
provisions contained in Sec.  247.13 of the proposed rule, they are 
retained in this final rule as proposed. It is important to note that 
the Department plans to clarify its policy in the future regarding the 
provisions for non-English or limited-English speaking persons. FNS 
will implement this policy once received.

Other Public Assistance Programs, Section 247.14

    Section 247.14 of the proposed rule would have described the 
requirements associated with the provision of information to program 
applicants. Section 247.14(a) of the proposed rule would have required 
that the local agency provide applicants with written information on 
the specific, locally available programs that may affect their health, 
nutrition, or general welfare, including the WIC Program. This would 
allow individuals eligible for both CSFP and WIC to choose the program 
in which they wish to participate.
    Local agencies would also be required to make referrals to these 
programs, as appropriate. One commenter recommended that we take the 
referral process one step further, and require local agencies to forego 
CSFP certification of applicants eligible for the WIC Program, and 
refer those applicants to the WIC Program instead. The Agriculture and 
Consumer Protection Act of 1973 requires that eligible women, infants, 
and children be given priority in access to the CSFP. Therefore, the 
Department does not have the authority to deny participation to those 
women, infants, and children that choose to participate in CSFP rather 
than WIC.
    Another commenter recommended that, in addition to providing 
general WIC Program information to individuals, the CSFP local agency 
should also be required to provide the individual with information 
about the WIC Program's assistance with gaining access to health care, 
the addresses and phone number of one or more nearby WIC offices, and 
specific details about how individuals can apply for participation in 
the WIC Program. We believe that imposing additional, more specific 
requirements in this regard would create an undue burden on CSFP State 
and local agencies. In addition, administration of the program varies 
significantly among State and local agencies. Therefore, State agencies 
are better able to determine the type of information that should be 
provided when referring applicants to other programs, including WIC.
    Since no other comments were received in reference to the 
provisions contained in Sec.  247.14 of the proposed rule, they are 
retained in this final rule as proposed.

Notification of an Applicant's Eligibility or Ineligibility, or 
Placement on a Waiting List, Section 247.15

    Section 247.15 of the proposed rule would have required that the 
local agency notify applicants in writing of their eligibility or 
ineligibility, or placement on a waiting list within 10 days from the 
date of the application. One commenter recommended that 20 days is a 
more adequate timeframe for notifying applicants. We believe that 10 
days is a reasonable amount of time for a decision to be made on 
eligibility for food assistance, and to allow ineligible applicants to 
receive the information they need to seek other forms of assistance. No 
other comments were received relative to the provisions contained in 
Sec.  247.15 of the proposed rule. The provisions contained in Sec.  
247.15 of the proposed rule are retained in this final rule with the 
clarification that, in order to make clear the applicant's civil 
rights, an approved Department nondiscrimination statement must be 
included on all written notifications of an individual's eligibility, 
ineligibility, or placement on a waiting list.

Certification Period, Section 247.16

    Section 247.16 of the proposed rule would have addressed the 
requirements associated with the establishment of certification 
periods, the right of individuals to receive benefits under a transfer 
of certification when they move to a new area, and notification of 
individuals of the expiration of their certification period. To reduce 
the burden on local agencies, Sec.  247.16(a) of the proposed rule 
would have permitted State agencies to authorize local agencies to 
extend the certification period of elderly persons without a review of 
eligibility criteria for additional six-month periods (and not just for 
one six-month period) if, at each six-month interval, certain 
conditions are met. One commenter specifically supported this proposed 
provision. However, another commenter argued that, as elderly 
participants do not experience any major income adjustments, they 
should be permanently certified. We agree that elderly participants do 
not experience as many income adjustments as women, infants, and 
children in the program. However, we believe that changes in household 
composition and income do occur, regardless of participant age, and 
periodic checks of this information yield increased program efficiency 
and effectiveness.
    Section 247.16(a) of the proposed rule would have also required 
that the State agency establish certification periods for infants that 
do not exceed six months in length. Two commenters requested that 
certification requirements for infants be modified to allow infants to 
be certified up to their first birthday, or for a period of six months, 
whichever is longer. We appreciate the comments received in reference 
to this issue. However, we believe that fluctuations in household 
income are more commonplace for this population group in comparison to 
the elderly, and that the proposed rule provision regarding the length 
of infant certification periods is not unduly burdensome. Therefore, 
the proposed provision regarding infant certification periods is 
retained in this final rule.
    Section 247.16(c) of the proposed rule would have included the 
right of transfer of certification for individuals certified to 
participate in the programs who move to another area. The proposed rule 
would have removed the requirement that the State (or local) agency 
issue a verification of certification (VOC) form to the participant to 
facilitate this transfer. Instead, the proposed rule would have 
required that the local agency provide verification of the 
certification period to the participant upon request. One commenter did 
not agree with the proposal to eliminate the requirement that a VOC 
form be provided to all program participants moving to another area. 
Requiring the issuance of a VOC form to all such participants creates 
an undue burden on State and local agencies; transfer of participation 
can be more efficiently facilitated through communication between the 
local agency and the participant.
    No other comments were received relative to the provisions proposed 
in Sec.  247.16. For the reasons stated above, the provisions contained 
in Sec.  247.16 of the proposed rule are retained in this final rule, 
with the clarification that the local agency which determined the 
participant's eligibility must, upon request, provide to the 
participant verification of the expiration date of the certification 
period, instead of the extent of the certification period. This 
provides the participant with the most relevant information necessary 
to effect an efficient transfer of certification. In addition, in order 
to make clear the participant's civil rights, the requirement that an 
approved Department nondiscrimination

[[Page 47058]]

statement be included in the notice advising individuals that their 
certification period is about to expire has been included in Sec.  
247.16(d) of this final rule.

Notification of Discontinuance of Participant, Section 247.17

    Requirements associated with notifying participants that their 
participation in the program is discontinued would have been addressed 
in Sec.  247.17 of the proposed rule. While no specific comments were 
received relative to the provisions contained in Sec.  247.17 of the 
proposed rule, Sec.  247.17 of the proposed rule has been amended in 
this final rule to clarify that local agencies must provide the 
participant with prior written notification of discontinuance in 
instances where a participant's participation in the program must be 
discontinued prior to the end of the certification period, due to the 
lack of resources necessary to continue providing benefits to the 
participant. In addition, in order to make clear the participant's 
civil rights, the requirement that an approved Department 
nondiscrimination statement must be included in the notice of 
discontinuance has been included in Sec.  247.17(c) of this final rule.
    Since no other comments were received in reference to the remaining 
provisions contained in Sec.  247.17 of the proposed rule, they are 
retained in this final rule as proposed.

Nutrition Education, Section 247.18

    Section 247.18, as proposed, would have described nutrition 
education requirements. Section 247.18(a) of the proposed rule would 
have required that the State agency establish an evaluation procedure 
to ensure that the nutrition education provided is effective. The 
evaluation procedure would have included participant input and would 
have been directed by a nutritionist or other qualified professional. 
The evaluation would have been performed by the State or local agency 
or by another agency under agreement with the State or local agency. 
Two commenters, although strong supporters of nutrition education, 
asserted that the proposed requirement that the State agency establish 
a nutrition evaluation procedure under the direction of a nutritionist 
may be difficult to achieve, as many State agencies may not have 
immediate access to a nutritionist. We appreciate the commenters' 
concerns. However, Sec.  247.18(a), as proposed, would have permitted 
State agencies to use other qualified professionals, and would have 
provided State agencies adequate flexibility in developing evaluation 
procedures. The above provisions of Sec.  247.18(a) of the proposed 
rule are retained in this final rule, with the clarification that State 
agencies may allow local agencies to share personnel and educational 
resources with other programs in order to provide the best nutrition 
education possible to program participants. The remaining nutrition 
education evaluation procedure requirements detailed in Sec.  247.18(a) 
of the proposed rule are retained without change in this final rule.
    Section 247.18(b) of the proposed rule would have required that the 
local agency provide the participant with nutrition education 
information on certain specified subjects. Two commenters asserted that 
most local agency staff are not qualified to provide nutritional 
education to participants, especially in terms of special nutritional 
needs and how these needs may be met. While we appreciate the 
commenters' concerns, local agencies have discretion with regard to the 
manner in which the information is provided. In instances in which a 
qualified professional is not available to provide such information, 
the information can be provided in the form of printed materials. 
Therefore, Sec.  247.18(b) of the proposed rule is retained in this 
final rule without change.
    Since no other comments were received relative to the other 
provisions contained in Sec.  247.18 of the proposed rule, they are 
retained in this final rule as proposed.

Dual Participation, Section 247.19

    Section 247.19(a) of the proposed rule would have included the 
requirements for the prevention and detection of dual participation, 
including the requirement that the State agency agree on a plan with 
the State WIC agency to detect and prevent dual participation. For 
clarification purposes, we have included in this final rule reference 
to Sec.  247.8(a)(1), which requires local agencies to check the 
identification of all applicants when they are certified or 
recertified. In addition, we have included reference to Sec.  247.8(b) 
of this final rule, which requires that the local agency ensure that 
the applicant, or the adult parent or caretaker of the applicant, signs 
an application form which includes a statement advising the applicant 
that he or she may not receive both CSFP and WIC benefits 
simultaneously, or CSFP benefits at more than one CSFP site at the same 
time. Because the provision that references informing the applicant of 
the prohibition on dual participation contained in proposed rule Sec.  
247.12(b)(1) is not included in this final rule, and since this 
information is now required on the application form per Sec.  247.8(b) 
of this final rule, reference to Sec.  247.12(b)(1) has not been 
included in Sec.  247.19(a) of this final rule.
    One commenter suggested that the administrative burden for 
detecting and preventing dual participation be equally shared between 
CSFP and WIC State agencies. We appreciate the commenter's input in 
reference to this issue. However, as provided in the recent WIC/CSFP 
Dual Participation Guidance Memorandum issued by FNS on May 6, 2004, we 
recommend that WIC State agencies take the lead role in the detection 
of dual participation. WIC has a much larger database of women, 
infants, and children, and individuals eligible for both programs 
increasingly participate in WIC rather than CSFP. As provided in that 
guidance memorandum, we realize that in a number of States, CSFP State 
agencies take the lead role in the detection of dual participation. If 
such a system is already in place and both CSFP and WIC State agencies 
are satisfied with it, then we do not expect the State agencies to 
change their policies. To prescribe equal detection and prevention 
efforts by both State agencies would create an undue burden on many 
CSFP and/or WIC State agencies. Consistent with the recent guidance 
memorandum, discretion is given to CSFP and WIC State agencies to 
determine the best policy for the detection of dual participation. 
Therefore, the remaining provisions contained in Sec.  247.19(a) of the 
proposed rule are retained in this final rule as proposed.
    Two commenters requested that a specific process be included in the 
regulations that would establish clear parameters for dual 
participation enforcement. Section 247.19(b) of the proposed rule would 
have required, consistent with the dual participation guidance 
memorandum, that a participant found to be committing dual 
participation be disqualified from one of the programs (WIC or CSFP). 
In addition, Sec.  247.19(b) of the proposed rule would have required 
the local agency to initiate a claim against the participant to recover 
the value of CSFP benefits improperly received in accordance with Sec.  
247.30(c) of the proposed rule. If applied in conjunction with the 
guidelines set forth in the dual participation guidance memorandum, we 
believe that the provisions of Sec.  247.19(b) of the proposed rule 
would have adequately addressed dual participation enforcement 
measures. Therefore, the provisions contained in

[[Page 47059]]

Sec.  247.19(b) are retained in this final rule as proposed.

Program Violations, Section 247.20

    Section 247.20, as proposed, would have described the conditions 
under which applicants and participants may be disqualified from the 
program, the disqualification penalties, and the requirements for 
notifying individuals of their disqualification. In reference to Sec.  
247.20(b) of the proposed rule, one commenter specifically supported 
the proposal to extend the maximum disqualification period from three 
months to one year, as well as the proposal requiring local agencies to 
permanently disqualify participants who commit three program violations 
that involve fraud. Since no other comments were received relative to 
the provisions contained in Sec.  247.20 of the proposed rule, they are 
retained in this final rule as proposed.

Caseload Assignment, Section 247.21

    Section 247.21 of the proposed rule would have described provisions 
associated with the assignment of caseload. To ensure that additional 
caseload slots are allocated to States that are most likely to use 
them, Sec.  247.21(a) of the proposed rule would have established more 
realistic, rigorous performance measures. The revised performance 
measures would have included an increase in the caseload utilization 
requirement to establish eligibility for additional caseload from 90 
percent to 95 percent, and the removal of participation data during the 
month of September as an independent time period used to determine base 
caseload and a State's eligibility for additional caseload.
    Prior to proposing these more rigorous performance measures, we 
analyzed the performance of State agencies over a period of three 
fiscal years, beginning with fiscal year 2000 program performance data. 
Based on this analysis, and the availability of a specific enhanced 
level of administrative funds, it has been determined that State 
agencies can reasonably be expected to meet these more demanding 
measures. While these measures may negatively impact a small number of 
States in any given year, they will have a positive impact on the 
program as a whole by facilitating assignment of caseload slots to 
State agencies most likely to utilize them based on past performance. 
The allocation of caseload slots to such State agencies will ensure 
that the nutritional needs of low-income women, infants, children, and 
elderly persons are more fully met.
    We specifically requested comments on the removal of the month of 
September as an independent consideration. Of the comments received, 
two commenters expressed support for the proposed provision with 
changes, and one commenter did not support the removal of the month of 
September.
    One of the commenters expressed support for the removal of the 
month of September only if the highest quarter's participation is 
included as a time period used to determine a State's base caseload and 
eligibility for additional caseload. The goal of the provisions 
contained in Sec.  247.21(a) of the proposed rule was to establish 
performance standards that would result in the allocation of caseload 
to State agencies that are most likely to utilize it. We do not believe 
that using a State's highest quarter of participation will be helpful 
in achieving that goal. This approach is not appropriate because it 
undervalues current participation data relative to performance during a 
single past quarter after which significant decreases in participation 
may have occurred.
    One of the commenters argued that removal of the month of September 
as an independent consideration either in establishing base caseload or 
in determining eligibility for additional caseload would be misguided 
and shows a lack of understanding for how caseloads are managed at the 
State level. Our analysis indicates that many State agencies' highest 
participation period over the past few years has been the month of 
September, and that their participation often decreases significantly 
in the immediately following months. Eliminating the month of September 
as an independent measure should decrease the spiking in caseload 
utilization that frequently takes place in September and strengthen the 
incentive for States to fill available caseload slots sooner. Ensuring 
a more accurate and precise appraisal of States' performance should 
facilitate allocation of caseload to States that are most likely to 
utilize it. This will increase overall program efficiency and ensure 
that the nutritional needs of more low-income women, infants, children, 
and elderly persons are met during that caseload cycle.
    One of the commenters argued that when appropriations are not 
enacted by December 31, the month of September should be restored as an 
allowable stand-alone performance measure. The commenter asserted that 
the removal of September would discourage State agencies from making 
extraordinary efforts to serve clients in unserved areas, especially in 
years when caseload is assigned late. We agree that September 
participation should be included as an independent consideration, but 
only in circumstances that could reasonably lead to participation 
growth in that month. Even in a year of delayed appropriations, a State 
agency that has participated in two or more caseload cycles that 
receives only base caseload would be expected to maintain participation 
within a relatively narrow range throughout the year rather than peak 
in September. In contrast, a State agency entering its second year of 
program participation that is working to fully establish its program 
may exhibit a lower caseload utilization level at the beginning of its 
first year than other, more established States. Thus, participation 
growth through September can reasonably be expected for States entering 
their second year. Furthermore, when appropriations are unduly delayed 
and a State receives considerable expansion caseload, participation 
growth through September can reasonably be expected as well. Finally, 
the same factors that contribute to participation increases in 
September should serve to sustain that higher participation level at 
least through the following month.
    Therefore, for each State that has participated in two or more 
caseload cycles, Sec.  247.21(a) of this final rule includes September 
as an independent performance measure for determining a State's base 
caseload and eligibility for additional caseload only when, as of 
February 15 of the previous fiscal year, full-year appropriations were 
not enacted (thus delaying caseload assignment until after that date), 
the State received additional caseload in the previous caseload cycle 
that increased the State's total caseload by 10 percent or more over 
and above its assigned base caseload, and the State achieved an October 
participation total in the current fiscal year which was equal to or 
greater than 95 percent of the State's September participation total in 
the previous fiscal year. For example, State A was entering its third 
caseload cycle in 2004. Full-fiscal-year 2003 appropriations were not 
enacted until February 20, 2003. For the 2003 caseload cycle, 25 
caseload slots were allocated to State A in addition to its base 
caseload of 100, giving the State a total caseload of 125. State A's 
program participation for the month of September, fiscal year 2003, was 
120 persons, and the State's October participation in fiscal year 2004 
was 122 persons. When allocating caseload for the 2004 caseload cycle, 
September would be used as an independent

[[Page 47060]]

performance measure for determining base caseload and eligibility for 
additional caseload for State A because the 2003 full-year 
appropriation was not enacted before February 15, the State received 
additional caseload which increased its total caseload allocation by 25 
percent over and above base caseload, and the State achieved an October 
participation level in fiscal year 2004 which represented over 101 
percent of its September participation level in the previous fiscal 
year.
    To provide a contrasting example, State B was entering its fourth 
caseload cycle in 2004. For the previous caseload cycle, State B was 
assigned a base caseload of 90. The State received five additional 
caseload slots in the 2003 caseload cycle to bring its total caseload 
allocation to 95. Regardless of the timing of the full-year 
appropriation or State B's participation level in October, the month of 
September would not be used in determining the State's base caseload or 
eligibility to receive additional caseload for the 2004 caseload cycle, 
because the additional caseload allocation of only five slots in the 
previous caseload cycle increased the State's total caseload allocation 
by less than six percent, which is under than the 10-percent required 
minimum.
    Finally, State C was entering its seventh caseload cycle in 2004. 
For the previous caseload cycle, the State received 50 additional 
caseload slots over and above its base caseload of 25, bringing its 
total caseload to 75. State C's program participation for the month of 
September, fiscal year 2003, was 70 persons, but the State's October 
participation in the following fiscal year dropped to 50 persons. 
Because State C's October fiscal year 2004 participation was 
approximately 71 percent of its September fiscal year 2003 
participation, and well below the required minimum of 95 percent, the 
month of September would not be used in determining the State's base 
caseload or eligibility to receive additional caseload for the 2004 
caseload cycle.
    For each State entering its second caseload cycle, Sec.  247.21(a) 
of this final rule includes September as an independent performance 
measure for determining a State's eligibility for additional caseload 
only when, as of February 15 of the previous fiscal year, full-year 
appropriations were not enacted (thus delaying caseload assignment 
until after that date), and the State achieved an October participation 
total in the current fiscal year which was equal to or greater than 95 
percent of the State's September participation total in the previous 
fiscal year. Because States entering their second year of program 
participation do not receive additional caseload in their first 
caseload cycle, those States cannot be expected to meet the 10-percent 
minimum caseload increase standard that is applied to States that have 
participated in two or more caseload cycles. Thus, the 10-percent 
minimum increase standard does not apply to these States.
    To provide an example, State D was entering its second caseload 
cycle in 2004. To review, full-fiscal-year 2003 appropriations were not 
enacted until February 20, 2003. State D received caseload totaling 50 
slots in the 2003 caseload cycle. The State's participation for 
September of fiscal year 2003 was 49, and its October participation for 
the following fiscal year was 50. When allocating caseload for the 2004 
caseload cycle, September would be used as an independent performance 
measure for determining base caseload and eligibility for additional 
caseload for State D because full-year appropriations were not enacted 
before February 15, and the State achieved an October participation 
total in fiscal year 2004 which was 102 percent of the State's 
September participation total in the previous fiscal year, well above 
the 95-percent minimum requirement.
    To provide a contrasting example, State E was entering its second 
caseload cycle as well in 2004. State E received caseload totaling 200 
slots in the previous caseload cycle. The State's participation for 
September of fiscal year 2003 was 190, but its fiscal year 2004 October 
participation dropped to 150. Because State D's October participation 
was just under 79 percent of its September participation, and well 
below the required minimum of 95 percent, the month of September would 
not be used in determining the State's base caseload or eligibility to 
receive additional caseload for the 2004 caseload cycle.
    Section 247.21(a)(2) of the proposed rule would have required that 
a State agency utilize 95 percent of its assigned caseload, rather than 
the current 90 percent, to be eligible for additional caseload in the 
following caseload cycle. Three commenters did not support the proposed 
increase from 90 to 95 percent. One commenter suggested that the 
combined effect of both the 95 percent caseload utilization requirement 
and the removal of the month September from the computation to 
determine base caseload would create a situation where many State 
agencies would not qualify for additional caseload. As discussed 
previously, the commenter also asserted that such a requirement would 
discourage State agencies from making extraordinary efforts to serve 
clients in unserved areas. However, our analysis of what the combined 
impact of both proposed provisions would have had over a recent period 
of three fiscal years indicates that implementation of these more 
rigorous performance measures would have negatively impacted only a 
small proportion of currently participating CSFP State agencies. The 
impact on the few States would be consistent with allocation of limited 
resources in a performance-based program with the goal of maximizing 
services to eligible applicants.
    Two other commenters asserted that there might be legitimate 
reasons why the State agency does not meet the 95 percent performance 
measure, such as the introduction of additional caseload late in the 
year due to a late appropriation. The commenters further asserted that 
95 percent requirement limits the Department's flexibility in moving 
caseload where it is most needed. As discussed in detail above, for 
each State that has participated in two or more caseload cycles, Sec.  
247.21(a) of this final rule mandates the use of September 
participation data as an independent consideration in determining the 
State's base caseload and eligibility for additional caseload when the 
full-year appropriation was not enacted prior to February 15, the State 
received additional caseload in the previous caseload cycle that 
increased the State's total caseload by 10 percent or more over and 
above its assigned base caseload, and the State achieved an October 
participation total in the current fiscal year which was equal to or 
greater than 95 percent of the State's September participation total in 
the previous fiscal year. States entering their second year of program 
participation receive base caseload equal to the amount of caseload 
assigned to them in their first year of program participation. For 
these States, the 10-percent minimum caseload increase standard does 
not apply with regard to eligibility for additional caseload. These 
revisions should allay commenters' concerns regarding a State agency's 
inability to utilize 95 percent of caseload in years when caseload 
assignment occurs late due to the lateness of the appropriation while 
ensuring that caseload is assigned to those States that are most likely 
to utilize it.
    One commenter supported the proposed provision with changes. The 
commenter suggested that the increase from 90 to 95 percent caseload 
utilization is too large to make at one time. The commenter suggested 
that an

[[Page 47061]]

increase to 92 percent followed by a careful evaluation of the outcomes 
is more appropriate. As stated previously, our analysis of caseload 
utilization over a recent period of three fiscal years indicates that 
State agencies can reasonably be expected to meet these more rigorous 
measures. Therefore, the 95 percent caseload utilization requirement is 
retained in Sec.  247.21(a)(2) of this final rule as proposed.

Allocation and Disbursement of Administrative Funds to State Agencies, 
Section 247.22

    Section 247.22 of the proposed rule would have described those 
provisions associated with the allocation and disbursement of 
administrative funds. No comments were received relative to the 
provisions contained in Sec.  247.22 of the proposed rule. Those 
provisions are retained in this final rule with the clarification that 
only the method of payment, not the frequency, may be subject to other 
funding arrangements.

State Provision of Administrative Funds to Local Agencies, Section 
247.23

    Section 247.23 of the proposed rule would have described those 
provisions associated with the allocation of administrative funds by 
State agencies to local agencies. Since no comments were received 
relative to the provisions contained in Sec.  247.23 of the proposed 
rule, they are retained in this final rule as proposed.

Recovery and Redistribution of Caseload and Administrative Funds, 
Section 247.24

    Section 247.24(a), as proposed, would have provided that when a 
State agency has voluntarily given up caseload slots or FNS has taken 
action to recover caseload slots, the State agency must use 95 percent 
of its original caseload allocation to be eligible for additional 
caseload. Two commenters did not support the proposed requirement that 
the State agency be held to its original caseload allocation for 
purposes of establishing a caseload standard. The two commenters that 
did not support the proposed provision asserted that this approach 
prevents a State agency from getting back on track in terms of growth 
on a more modest basis. However, recoveries of caseload would only 
occur if a State agency realizes that a certain number of caseload 
slots cannot be utilized and returns that unused portion of that 
assigned caseload, or FNS takes action to recover caseload in a State 
where significant under-utilization of caseload is occurring. Current 
performance that would lead to either of these actions would tend not 
to be consistent with a realistic expectation of even modest growth in 
the immediate future. Therefore, Sec.  247.24(a) of this final rule 
retains the requirement that a State from which caseload has been 
recovered must utilize 95 percent of its originally assigned caseload 
to be eligible for additional caseload. However, it has come to our 
attention that the language contained in the proposed rule did not make 
it clear that a State agency would not have been permitted to exceed 
its assigned caseload on an average monthly basis through September of 
the caseload cycle in order to meet the 95-percent performance 
standard. Therefore, we have amended the language in Sec.  247.24(a) of 
this final rule to clarify that the State agency must not exceed its 
reduced caseload allocation on an average monthly basis. Some States 
that experience greater caseload reductions will be unable to meet the 
95-percent test. This result is consistent with effective allocation of 
limited resources in a performance-based program.
    We requested in the proposed rule that State and local agencies 
provide specific comments regarding procedures FNS should use in 
recovering caseload and administrative funds (e.g., is there a specific 
time during the caseload cycle that should be used to determine if 
there is a need to recover caseload and administrative funds?). One 
commenter suggested that, at minimum, six months' worth of 
participation data should be taken into consideration before action is 
contemplated. The commenter further argued that action should only be 
contemplated in instances when a State agency is severely 
underutilizing caseload. In addition, the commenter argued that a 
State's plans for increased caseload utilization should take precedence 
over caseload and administrative funds reductions initiated by FNS. 
Another commenter recommended that FNS review caseload participation in 
the fourth quarter only. The commenter further argued that caseload 
should only be recovered if the State agency demonstrates that it will 
not attain 95 percent caseload utilization by the end of the fourth 
quarter. Another commenter asserted that States should be allowed the 
full calendar year, or caseload cycle, to utilize assigned caseload 
before any recoveries are made.
    We agree that the State agency should be given every opportunity to 
utilize assigned caseload before recovery and redistribution actions 
are taken. We plan to continue working jointly with State agencies to 
facilitate full caseload utilization in order to avoid the need for 
recovery and redistribution measures. Specific procedures for the 
recovery of caseload slots have not been included in Sec.  247.24(a) of 
this final rule. However, we are aware that administrative funds could 
be targeted more efficiently in some circumstances, particularly in 
cases of significant underutilization of caseload. We will continue to 
explore options for ensuring that administrative funds are allocated in 
the most cost effective way possible in order to maximize the number of 
individuals served by the program.
    Section 247.24(b) of the proposed rule would have limited the 
amount of administrative funds that can be involuntarily recovered by 
FNS to no more than 25 percent of the State agency's allocation during 
any fiscal year. The term ``involuntarily'' in the proposed rule has 
been deleted and replaced with the term ``unilaterally'' in this final 
rule for clarification purposes. The proposed rule requested that State 
and local agencies provide specific comments regarding increasing or 
eliminating the 25-percent limitation.
    Three commenters did not support increasing or eliminating the 25-
percent limitation. The three commenters that did not support the 
change argued that increasing or eliminating the 25-percent limitation 
on the recovery of administrative funds could cripple the State agency 
from which administrative funds are recovered. In particular, two of 
the commenters asserted that the amount of administrative funds needed 
to administer the program is driven by food handling costs such as 
warehousing, trucking, refrigeration, boxing of commodities, and 
related costs. The same two commenters further asserted that a 25-
percent reduction halfway through the fiscal year is equivalent to a 
50-percent reduction for the remainder of the fiscal year, and that 
some States would not be able to sustain a funding loss of that 
magnitude. We agree that the cost of administering the program is 
directly affected by the cost of procuring services from private 
sources. These costs vary significantly among State agencies and, in 
many instances, funds to pay such costs are obligated early in the 
caseload cycle.
    However, in instances when a State significantly underutilizes 
allocated caseload during the year, and does not serve a large number 
of needy persons who could be served by other, more efficient States, 
FNS must have the capability to recover caseload and the administrative 
funds generated by that caseload over and above the 25-percent limit. 
Therefore, the provision which limits the caseload that FNS can recover 
to an amount which does not result in

[[Page 47062]]

the recovery of more than 25 percent of that State's administrative 
funds has been amended in Sec.  247.24(b) of this final rule to reflect 
a 50-percent limit. This provides FNS with the added flexibility 
necessary to ensure maximum service to eligible applicants. States that 
utilize a high percentage of caseload generally would not experience 
unilateral recoveries. However, States may, for various reasons, 
request that FNS recover any portion of their caseload. In such 
instances, the regulatory limitation would not apply. Thus, the 
proposed provision contained in Sec.  247.24(b) that removes the 
recoveries limit in such circumstances is retained in this final rule.

Allowable Uses of Administrative Funds and Other Funds, Section 247.25

    Section 247.25, as proposed, would have described provisions 
relative to the allowable uses of administrative funds, procedures for 
utilizing administrative funds, program income, and the use of funds 
recovered as a result of claims actions. Section 247.25(f) of the 
proposed rule would have permitted the State agency to authorize local 
agencies to utilize funds recovered through claims actions for 
allowable program costs incurred at the local level, rather than 
returning them to the State. Granting State agencies this authority is 
appropriate since, in some instances, these funds can be used more 
efficiently and effectively at the local level.
    Two commenters supported the proposed provision but recommended 
that this policy be documented in the State Plan. Requiring a State 
agency to stipulate its policy regarding the use of funds obtained 
through claims action is not appropriate since such decisions should be 
made on a case-by-case basis. Since no other comments were received 
relative to the provisions contained in Sec.  247.25 of the proposed 
rule, they are retained in this final rule as proposed, with the 
clarification that the State agency must use funds recovered as a 
result of claims actions against subdistributing or local agencies in 
accordance with the provisions of 7 CFR 250.15(c).

Return of Administrative Funds, Section 247.26

    The provisions contained in Sec.  247.26, as proposed, would have 
addressed the return of unused administrative funds by State agencies 
and the use of such funds. Section 247.26(b) of the proposed rule would 
have stipulated that administrative funds recovered at the end of the 
year would not be reallocated to State agencies in the form of 
administrative funds in addition to the mandated grant per slot. Two 
commenters concurred with the proposed provision. The provisions 
contained in Sec.  247.26 of the proposed rule reflect the current 
legislative requirements of Section 4201(b) of the Farm Security and 
Rural Investment Act of 2002, Public Law 107-171, and are, therefore, 
retained in this final rule as proposed.

Financial Management, Section 247.27

    Section 247.27 of the proposed rule would have described financial 
management requirements for State and local agencies. Since no comments 
were received relative to the provisions contained in Sec.  247.27 of 
the proposed rule, they are retained in this final rule as proposed.

Storage and Inventory of Commodities, Section 247.28

    Section 247.28, as proposed, would have described those provisions 
associated with the storage and inventory of commodities provided by 
the Department for use in the program. Since no comments were received 
relative to the provisions contained in Sec.  247.28 of the proposed 
rule, they are retained in this final rule as proposed.

Reports and Recordkeeping, Section 247.29

    Section 247.29, as proposed, would have described requirements 
associated with the maintenance of records and submission of reports. 
Section 247.29(a) of the proposed rule would have included a 
requirement that all records be available during normal business hours 
for use in management reviews, audits, or investigations, except 
medical case records of participants (unless they are the only source 
of certification data). Two commenters objected to the suggested use of 
medical case records. The commenters reasoned that the program is not 
providing medical services, and the use of this term could have serious 
implications with respect to the Health Insurance Portability and 
Accountability Act of 1996, Public Law 104-191. We appreciate the 
commenters' concerns in reference to this issue and agree that 
reference to such records should be removed. Therefore, Sec.  247.29(a) 
of this final rule contains no reference to medical case records. 
However, local agencies must ensure availability of certification 
records, other than medical case records, that document the information 
necessary to ensure that an individual was properly certified. Since no 
comments were received relative to the other provisions contained in 
Sec.  247.29 of the proposed rule, they are retained in this final rule 
as proposed.

Claims, Section 247.30

    Section 247.30, as proposed, would have described those provisions 
associated with establishing and pursuing claims against State, local, 
and subdistributing agencies, and program participants. Since no 
comments were received relative to the provisions contained in Sec.  
247.30 of the proposed rule, they are retained in this final rule as 
proposed, with the clarification that the State agency must use funds 
recovered as a result of claims actions against subdistributing or 
local agencies in accordance with the provisions of 7 CFR 250.15(c).

Audits and Investigations, Section 247.31

    Section 247.31 of the proposed rule would have described those 
provisions associated with audit and investigation activities. No 
comments were received relative to the provisions contained in this 
section of the proposed rule. However, since publication of the 
proposed rule, the dollar threshold that determines when an audit is 
required has been increased from $300,000 to $500,000. To ensure that 
State and local agencies comply with provisions contained in 7 CFR part 
3052, which are subject to change, Sec.  247.31(d) of this final rule 
does not include a dollar threshold and instead contains the general 
requirement that State and local government agencies, and nonprofit 
organizations have an audit conducted in accordance with 7 CFR part 
3052. All other provisions contained in Sec.  247.31 of the proposed 
rule are retained in this final rule without change.

Termination of Agency Participation, Section 247.32

    Section 247.32, as proposed, would have described those provisions 
associated with the termination of State and local agreements. As 
discussed in detail above, 30 days' notice of intent to terminate 
program operations is not always adequate. Therefore, Sec.  247.32 of 
this final rule establishes the 30-day written notice-of-termination 
requirement as a regulatory minimum. In Sec.  247.32(a) of the proposed 
rule, we inaccurately referenced ``local'' agency programs. We have 
corrected the inaccurate reference by including the term ``State'' for 
``local'' in Sec.  247.32(a) of this final rule. Since no comments were 
received relative to other provisions contained in Sec.  247.32 of the 
proposed rule, they are retained in this final rule as proposed.

[[Page 47063]]

Fair Hearings, Section 247.33

    Section 247.33 of the proposed rule would have described those 
provisions associated with the fair hearing process. No specific 
comments were received relative to the provisions contained in this 
proposed section. However, since Federal regulations do not require 
State agencies to implement a State-level review or rehearing process, 
Sec.  247.33 of this final rule clarifies that the State or local 
agency must describe any State-level review or rehearing process in 
instances when one is available. In addition, Sec.  247.33 of this 
final rule clarifies that the State or local agency must inform the 
individual of the right to pursue judicial review of the decision. All 
other provisions contained in Sec.  247.33 of the proposed rule are 
retained in this final rule as proposed.

Management Reviews, Section 247.34

    Section 247.34, as proposed, would have described those provisions 
associated with management reviews of agencies conducting program 
activities. To reduce the burden on State agencies in conducting 
management reviews, Sec.  247.34(a) of the proposed rule would have 
required that the State agency perform on-site reviews of local 
agencies and storage facilities at least once every two years, instead 
of annually. Two commenters strongly concurred with the proposed 
requirement that the State agency perform on-site reviews of local 
agencies and storage facilities at least once every two years, instead 
of annually. Based on the comments received, the provisions contained 
in Sec.  247.34 of the proposed rule are retained in this final rule as 
proposed.

Local Agency Appeals of State Agency Actions, Section 247.35

    Section 247.35 of the proposed rule would have described those 
provisions associated with appeals by local agencies of State agency 
actions. Section 247.35 of the proposed rule incorrectly referred to 
the denial of a local agency's application for participation in the 
program as an example of a decision that local agencies may appeal. 
Therefore, reference to denial of a local agency's application for 
participation in the program is omitted from this final rule. Since no 
comments were received relative to the provisions contained in Sec.  
247.35 of the proposed rule, all other provisions are retained in this 
final rule as proposed.

Confidentiality of Applicants or Participants, Section 247.36

    Section 247.36, as proposed, would have described those provisions 
associated with the disclosure of applicant and participant 
information. Since no comments were received relative to the provisions 
contained in Sec.  247.36 of the proposed rule, they are retained in 
this final rule as proposed.

Civil Rights Requirements, Section 247.37

    Section 247.37, as proposed, would have described the Department's 
civil rights requirements. Since no comments were received relative to 
the provisions contained in Sec.  247.37 of the proposed rule, they are 
retained in this final rule as proposed.

List of Subjects in 7 CFR part 247

    Agricultural commodities, Food assistance programs, Infants and 
children, Maternal and child health, Public assistance programs, 
nutrition, women, aged.

0
Accordingly, 7 CFR part 247 is revised to read as follows:

PART 247--COMMODITY SUPPLEMENTAL FOOD PROGRAM

Sec.
247.1 Definitions.
247.2 The purpose and scope of CSFP.
247.3 Administering agencies.
247.4 Agreements.
247.5 State and local agency responsibilities.
247.6 State Plan.
247.7 Selection of local agencies.
247.8 Individuals applying to participate in CSFP.
247.9 Eligibility requirements.
247.10 Distribution and use of CSFP commodities.
247.11 Applicants exceed caseload levels.
247.12 Rights and responsibilities.
247.13 Provisions for non-English or limited-English speakers.
247.14 Other public assistance programs.
247.15 Notification of eligibility or ineligibility of applicant.
247.16 Certification period.
247.17 Notification of discontinuance of participant.
247.18 Nutrition education.
247.19 Dual participation.
247.20 Program violations.
247.21 Caseload assignment.
247.22 Allocation and disbursement of administrative funds to State 
agencies.
247.23 State provision of administrative funds to local agencies.
247.24 Recovery and redistribution of caseload and administrative 
funds.
247.25 Allowable uses of administrative funds and other funds.
247.26 Return of administrative funds.
247.27 Financial management.
247.28 Storage and inventory of commodities.
247.29 Reports and recordkeeping.
247.30 Claims.
247.31 Audits and investigations.
247.32 Termination of agency participation.
247.33 Fair hearings.
247.34 Management reviews.
247.35 Local agency appeals of State agency actions.
247.36 Confidentiality of applicants or participants.
247.37 Civil rights requirements.

    Authority: Sec. 5, Pub. L. 93-86, 87 Stat. 249, as added by Sec. 
1304(b)(2), Pub. L. 95-113, 91 Stat. 980 (7 U.S.C. 612c note); sec. 
1335, Pub. L. 97-98, 95 Stat. 1293 (7 U.S.C. 612c note); sec. 209, 
Pub. L. 98-8, 97 Stat. 35 (7 U.S.C. 612c note); sec. 2(8), Pub. L. 
98-92, 97 Stat. 611 (7 U.S.C. 612c note); sec. 1562, Pub. L. 99-198, 
99 Stat. 1590 (7 U.S.C. 612c note); sec. 101(k), Pub. L. 100-202; 
sec. 1771(a), Pub. L. 101-624, 101 Stat. 3806 (7 U.S.C. 612c note); 
sec. 402(a), Pub. L. 104-127, 110 Stat. 1028 (7 U.S.C. 612c note); 
Pub. L. 107-171.


Sec.  247.1  Definitions.

    Following is a list of definitions that apply to the Commodity 
Supplemental Food Program (CSFP).
    Applicant means any person who applies to receive program benefits. 
Applicants include program participants applying for recertification.
    Breastfeeding women means women up to one year postpartum who are 
breastfeeding their infants.
    Caseload means the number of persons the State agency may serve on 
an average monthly basis over the course of the caseload cycle.
    Caseload cycle means the period from January 1 through the 
following December 31.
    Certification means the use of procedures to determine an 
applicant's eligibility for the program.
    Certification period means the period of time that a participant 
may continue to receive program benefits without a review of his or her 
eligibility.
    Children means persons who are at least one year of age but have 
not reached their sixth birthday.
    Commodities means nutritious foods purchased by USDA to supplement 
the diets of CSFP participants.
    CSFP means the Commodity Supplemental Food Program.
    Department means the U.S. Department of Agriculture.
    Disqualification means the act of ending Program participation of a 
participant as a punitive sanction.
    Dual participation means simultaneous participation by an 
individual in CSFP and the WIC Program, or in CSFP at more than one 
distribution site.
    Elderly persons means persons at least 60 years of age.
    Fiscal year means the period from October 1 through the following 
September 30.
    FNS means the Food and Nutrition Service.

[[Page 47064]]

    Infants means persons under one year of age.
    Local agency means a public or private nonprofit agency, including 
an Indian tribal organization, which enters into an agreement with the 
State agency to administer CSFP at the local level.
    Nonprofit agency means a private agency or organization with tax-
exempt status under the Internal Revenue Code, or that has applied for 
tax-exempt status with the Internal Revenue Service.
    Postpartum women means women up to one year after termination of 
pregnancy.
    Proxy means any person designated by a participant, or by the 
participant's adult parent or caretaker, to obtain supplemental foods 
on behalf of the participant.
    7 CFR part 250 means the Department's regulations pertaining to the 
donation of foods for use in USDA food distribution programs.
    7 CFR part 3016 means the Department's regulations pertaining to 
administrative requirements for grants and cooperative agreements with 
State, local, and Indian tribal governments.
    7 CFR part 3019 means the Department's regulations pertaining to 
administrative requirements for grants and cooperative agreements with 
nonprofit organizations.
    7 CFR part 3052 means the Department's regulations pertaining to 
audits of States, local governments, and nonprofit organizations.
    State means any of the 50 States, the District of Columbia, the 
Commonwealth of Puerto Rico, the Virgin Islands, Guam, American Samoa, 
the Trust Territory of the Pacific Islands, and the Northern Mariana 
Islands.
    State agency means the agency designated by the State to administer 
CSFP at the State level; an Indian tribe or tribal organization 
recognized by the Department of the Interior that administers the 
program for a specified tribe or tribes; or, the appropriate area 
office of the Indian Health Service of the Department of Health and 
Human Services.
    State Plan means the document that describes the manner in which 
the State agency intends to administer the program in the State.
    Subdistributing agency means an agency or organization that has 
entered into an agreement with the State agency to perform functions 
normally performed by the State, such as entering into agreements with 
eligible recipient agencies under which commodities are made available, 
ordering commodities and/or making arrangements for the storage and 
delivery of such commodities on behalf of eligible recipient agencies.
    WIC Program means the Special Supplemental Nutrition Program for 
Women, Infants, and Children.


Sec.  247.2  The purpose and scope of CSFP.

    (a) How does CSFP help participants? Through CSFP, the Department 
provides nutritious commodities to help State and local agencies meet 
the nutritional needs of low-income pregnant, postpartum, and 
breastfeeding women, infants under one year of age, children who are at 
least one year of age but have not reached their sixth birthday, and 
elderly persons. Through local agencies, each participant receives a 
monthly package of commodities, based on food package guide rates 
developed by FNS, with input from State and local agencies. Food 
packages include such nutritious foods as infant formula and cereal, 
juices, canned fruits and vegetables, canned meat or poultry and other 
protein items, and grain products such as pasta, as well as other 
foods. Participants also receive nutrition education.
    (b) How many persons may be served in CSFP? State agencies may 
serve eligible persons up to the caseload limit assigned to them by 
FNS. Caseload is the number of persons that may be served on an average 
monthly basis over the course of the caseload cycle, which extends from 
January 1 through the following December 31.


Sec.  247.3  Administering agencies.

    (a) What agencies are responsible for administering CSFP? CSFP is 
administered at the Federal level by the Department's Food and 
Nutrition Service (FNS), which provides commodities, assigns caseload, 
and allocates administrative funds to State agencies. State agencies 
are responsible for administering the program at the State level. The 
State agency may select local agencies to administer the program in 
local areas of the State. The State agency must provide guidance to 
local agencies on all aspects of program operations. The State agency 
may also select subdistributing agencies (e.g., another State agency, a 
local governmental agency, or a nonprofit organization) to distribute 
or store commodities, or to perform other program functions on behalf 
of the State agency. Local or subdistributing agencies may also select 
other agencies to perform specific program functions (e.g., food 
distribution or storage), with the State agency's approval. Although 
the State agency may select other organizations to perform specific 
activities, the State agency is ultimately responsible for all aspects 
of program administration.
    (b) Are there specific functions that the State agency cannot 
delegate to another agency? Yes. The State agency may not delegate the 
performance of the following functions to another agency:
    (1) Establishing eligibility requirements, in accordance with the 
options provided to the State agency under Sec.  247.9; or
    (2) Establishing a management review system and conducting reviews 
of local agencies, in accordance with Sec.  247.34.
    (c) What Federal requirements must State, subdistributing, and 
local agencies follow in administering CSFP? State, subdistributing, 
and local agencies must administer the program in accordance with the 
provisions of this part, and with the provisions contained in part 250 
of this chapter, unless they are inconsistent with the provisions of 
this part.


Sec.  247.4  Agreements.

    (a) What agreements are necessary for agencies to administer CSFP? 
The following agreements are necessary for agencies to administer CSFP:
    (1) Agreements between FNS and State agencies. Each State agency 
must enter into an agreement with FNS (Form FNS-74, the Federal-State 
Agreement) prior to receiving commodities or administrative funds;
    (2) Agreements between State agencies and local or subdistributing 
agencies. The State agency must enter into written agreements with 
local or subdistributing agencies prior to making commodities or 
administrative funds available to them. The agreements must contain the 
information specified in paragraph (b) of this section. Agreements 
between State and local agencies must also contain the information 
specified in paragraph (c) of this section. Copies of all agreements 
must be kept on file by the parties to the agreements; and
    (3) Agreements between local and subdistributing agencies and other 
agencies. The State agency must ensure that local and subdistributing 
agencies enter into written agreements with other agencies prior to 
making commodities or administrative funds available to these other 
agencies. The agreements must contain the information specified in 
paragraph (b) of this section. Copies of all agreements must be kept on 
file by the parties to the agreements.
    (b) What are the required contents of agreements? All agreements 
described under paragraphs (a)(2) and (a)(3) of this section must 
contain the following:
    (1) An assurance that each agency will administer the program in 
accordance

[[Page 47065]]

with the provisions of this part and with the provisions of part 250 of 
this chapter, unless they are inconsistent with the provisions of this 
part;
    (2) An assurance that each agency will maintain accurate and 
complete records for a period of three years from the close of the 
fiscal year to which they pertain, or longer if the records are related 
to unresolved claims actions, audits, or investigations;
    (3) A statement that each agency receiving commodities for 
distribution is responsible for any loss resulting from improper 
distribution, or improper storage, care, or handling of commodities;
    (4) A statement that each agency receiving program funds is 
responsible for any misuse of program funds;
    (5) A description of the specific functions that the State, 
subdistributing, or local agency is delegating to another agency; and
    (6) A statement specifying:
    (i) That either party may terminate the agreement by written notice 
to the other; and
    (ii) The minimum number of days of advance notice that must be 
given. (The advance notification period must be at least 30 days.)
    (c) What other assurances or information must be included in 
agreements between State and local agencies? In addition to the 
requirements under paragraph (b) of this section, agreements between 
State and local agencies must contain the following:
    (1) An assurance that the local agency will provide, or cause to be 
provided, nutrition education to participants, as required in Sec.  
247.18;
    (2) An assurance that the local agency will provide information to 
participants on other health, nutrition, and public assistance 
programs, and make referrals as appropriate, as required in Sec.  
247.14;
    (3) An assurance that the local agency will distribute commodities 
in accordance with the approved food package guide rate;
    (4) An assurance that the local agency will take steps to prevent 
and detect dual participation, as required in Sec.  247.19;
    (5) The names and addresses of all certification, distribution, and 
storage sites under the jurisdiction of the local agency; and
    (6) An assurance that the local agency will not subject any person 
to discrimination under the program on the grounds of race, color, 
national origin, age, sex, or disability.
    (d) What is the duration of required agreements? Agreements between 
FNS and State agencies are considered permanent, but may be amended at 
the initiation of State agencies or at the request of FNS. All 
amendments must be approved by FNS. The State agency establishes the 
duration of agreements it signs with local agencies or subdistributing 
agencies. The State agency may establish, or permit the local or 
subdistributing agency to establish, the duration of agreements between 
local or subdistributing agencies and other agencies. However, State 
and local agencies must comply with the requirements in Sec.  250.12(c) 
of this chapter when entering agreements with other entities.
    (Approved by the Office of Management and Budget under control 
numbers 0584-0067, 0584-0293)


Sec.  247.5  State and local agency responsibilities.

    State and local agencies are responsible for administering the 
program in accordance with the provisions of this part, and with the 
provisions of part 250 of this chapter, as applicable. Although the 
State agency may delegate some responsibilities to another agency, the 
State agency is ultimately responsible for all aspects of program 
administration. The following is an outline of the major 
responsibilities of State and local agencies; it is not intended to be 
all-inclusive.
    (a) What are the major responsibilities shared by State and local 
agencies? The major responsibilities shared by State and local agencies 
include:
    (1) Entering into required agreements;
    (2) Ordering commodities for distribution;
    (3) Storing and distributing commodities;
    (4) Establishing procedures for resolving complaints about 
commodities;
    (5) Complying with civil rights requirements;
    (6) Maintaining accurate and complete records; and
    (7) Conducting program outreach.
    (b) What are the major State agency responsibilities? The major 
responsibilities of State agencies include:
    (1) Completing and submitting the State Plan;
    (2) Selecting local agencies to administer the program in local 
areas of the State;
    (3) Determining caseload needs, and submitting caseload requests to 
FNS;
    (4) Assigning caseload, and allocating administrative funds, to 
local agencies;
    (5) Establishing eligibility requirements, in accordance with the 
options provided to the State agency under Sec.  247.9. (This function 
may not be delegated to another agency.);
    (6) Establishing nutritional risk criteria and a residency 
requirement for participants, if such criteria are to be used;
    (7) Establishing a financial management system that effectively 
accounts for funds received for program administration;
    (8) Developing a plan for the detection and prevention of dual 
participation, in coordination with CSFP local agencies and with the 
State WIC agency;
    (9) Developing a plan for providing nutrition education to 
participants;
    (10) Establishing appeals and fair hearing procedures for local 
agencies and program participants;
    (11) Developing a management review system and conducting reviews 
of local agencies.
    (This function may not be delegated to another agency.);
    (12) Determining and pursuing claims, and establishing standards 
for pursuit of claims against participants;
    (13) Ensuring compliance with Federal audit requirements;
    (14) Providing guidance to local agencies, as needed; and
    (15) Ensuring that program participation does not exceed the State 
agency's caseload allocation on an average monthly basis.
    (c) What are the major local agency responsibilities? The major 
local agency responsibilities include:
    (1) Determining eligibility of applicants in accordance with 
eligibility criteria established by the State agency;
    (2) Complying with fiscal and operational requirements established 
by the State agency;
    (3) Ensuring that participation does not exceed the caseload 
assigned by the State agency;
    (4) Issuing foods to participants in accordance with the 
established food package guide rates;
    (5) Providing nutrition education and information on the 
availability of other nutrition and health assistance programs to 
participants;
    (6) Informing applicants of their rights and responsibilities in 
the program;
    (7) Meeting the special needs of the homebound elderly, to the 
extent possible; and
    (8) Pursuing claims against participants.


Sec.  247.6  State Plan.

    (a) What is the State Plan? The State Plan is a document that 
describes how the State agency will operate CSFP and the caseload 
needed to serve eligible applicants. The State agency must submit the 
State Plan to FNS for

[[Page 47066]]

approval. Once submitted and approved, the State Plan is considered 
permanent, with amendments submitted at the State agency's initiative, 
or at FNS request. All amendments are subject to FNS approval. The 
State Plan may be submitted in the format provided in FNS guidance, in 
an alternate format, or in combination with other documents required by 
Federal regulations. The State agency is encouraged to collaborate with 
the State WIC agency in developing the State Plan, for example, in 
developing plans for serving women, infants, and children, program 
outreach, and nutrition education. (Collaboration with the State WIC 
agency is required in preventing and detecting dual participation.) The 
State Plan must be signed by the State agency official responsible for 
program administration. A copy of the State Plan must be kept on file 
at the State agency for public inspection.
    (b) When must the State Plan be submitted? The State Plan must be 
submitted by August 15 to take effect for the fiscal year beginning in 
the following October. FNS will provide notification of the approval or 
disapproval of the State Plan within 30 days of receipt, and will 
notify the State agency within 15 days of receipt if additional 
information is needed. Disapproval of the Plan will include a reason 
for the disapproval. Approval of the Plan is a prerequisite to the 
assignment of caseload and allocation of administrative funds, but does 
not ensure that caseload and funds will be provided.
    (c) What must be included in the State Plan? The State Plan must 
include:
    (1) The names and addresses of all local agencies and 
subdistributing agencies with which the State agency has entered into 
agreement;
    (2) The income eligibility standards to be used for women, infants, 
and children, and the options to be used relating to income or other 
eligibility requirements, as provided under Sec.  247.9;
    (3) The nutritional risk criteria to be used, if the State chooses 
to establish such criteria;
    (4) A description of plans for serving women, infants, children, 
and elderly participants and the caseload needed to serve them;
    (5) A description of plans for conducting outreach to women, 
infants, children, and the elderly;
    (6) A description of the system for storing and distributing 
commodities;
    (7) A description of plans for providing nutrition education to 
participants;
    (8) A description of the means by which the State agency will 
detect and prevent dual participation, including collaboration with the 
State WIC agency, and a copy of the agreement signed with the State WIC 
agency to accomplish this;
    (9) A description of the standards the State agency will use in 
determining if the pursuit of a claim against a participant is cost-
effective;
    (10) A description of the means by which the State will meet the 
needs of the homebound elderly; and
    (11) Copies of all agreements entered into by the State agency.
    (d) When must the State agency submit amendments to the State Plan? 
The State agency must submit amendments to FNS to reflect any changes 
in program operations or administration described in the State Plan, 
and to request additional caseload for the following caseload cycle. 
FNS may also require that the State Plan be amended to reflect changes 
in Federal law or policy. The State agency may submit amendments to the 
State Plan at any time during the fiscal year, for FNS approval. The 
amendments will take effect immediately upon approval, unless otherwise 
specified by FNS. If a State agency would like to receive additional 
caseload for the caseload cycle beginning the following January 1, it 
must submit an amendment to the Plan which conveys the request for 
additional caseload by November 5. The State agency must also describe 
in this submission any plans for serving women, infants, children, and 
the elderly at new sites. FNS action on the State agency's request for 
additional caseload is part of the caseload assignment process, as 
described under Sec.  247.21.
    (Approved by the Office of Management and Budget under control 
number 0584-0293)


Sec.  247.7  Selection of local agencies.

    (a) How does a local agency apply to participate in CSFP? Local 
agencies wishing to participate in CSFP must submit a written 
application to the State agency. The application must describe how the 
local agency will operate the program and, for nonprofit agencies, must 
include the agency's tax-exempt status. To be eligible to participate 
in CSFP, a nonprofit agency must have tax-exempt status under the 
Internal Revenue Code (IRC), or have applied for tax-exempt status with 
the Internal Revenue Service (IRS), and be moving towards such status. 
Nonprofit agencies organized or operated exclusively for religious 
purposes are automatically tax-exempt under the IRC. Nonprofit agencies 
required to obtain tax-exempt status must provide documentation from 
the IRS that they have obtained such status, or have applied for it.
    (b) On what basis does the State agency make a decision on the 
local agency's application? The State agency must approve or disapprove 
the local agency's application based on, at minimum, the following 
criteria:
    (1) The ability of the local agency to operate the program in 
accordance with Federal and State requirements;
    (2) The need for the program in the projected service area of the 
local agency;
    (3) The resources available (caseload and funds) for initiating a 
program in the local area; and
    (4) For nonprofit agencies, the tax-exempt status, with appropriate 
documentation.
    (c) What must the State agency do if a nonprofit agency approved 
for CSFP is subsequently denied tax-exempt status by the IRS, or does 
not obtain this status within a certain period of time? In accordance 
with paragraph (a) of this section, the State agency may approve a 
nonprofit agency that has applied to the IRS for tax-exempt status, and 
is moving toward compliance with the requirements for recognition of 
tax-exempt status. However, if the IRS subsequently denies a 
participating agency's application for recognition of tax-exempt 
status, the agency must immediately notify the State agency of the 
denial. The State agency must terminate the agency's agreement and 
participation immediately upon notification. If documentation of 
recognition of tax-exempt status is not received within 180 days of the 
effective date of the agency's approval to participate in CSFP, the 
State agency must terminate the agency's participation until such time 
as recognition of tax-exempt status is obtained. However, the State 
agency may grant an extension of 90 days if the agency demonstrates 
that its inability to obtain tax-exempt status in the 180-day period is 
due to circumstances beyond its control.
    (d) How much time does the State agency have to make a decision on 
the local agency's application? The State agency must inform the local 
agency of approval or denial of the application within 60 days of its 
receipt. If the application is denied, the State agency must provide a 
written explanation for the denial, along with notification of the 
local agency's right to appeal the decision, in accordance with Sec.  
247.35. If the application is approved, the State and local agency must 
enter into an

[[Page 47067]]

agreement in accordance with the requirements of Sec.  247.4.
    (Approved by the Office of Management and Budget under control 
number 0584-0293)


Sec.  247.8  Individuals applying to participate in CSFP.

    (a) What information must individuals applying to participate in 
CSFP provide? To apply for CSFP benefits, the applicant, or the adult 
parent or caretaker of the applicant, must provide the following 
information on the application:
    (1) Name and address, including some form of identification for 
each applicant;
    (2) Household income, except where the applicant is determined to 
be automatically eligible under Sec.  247.9(b)(1)(i) and (b)(1)(ii);
    (3) Household size, except where the applicant is determined to be 
automatically eligible under Sec.  247.9(b)(1)(i) and (b)(1)(ii); and
    (4) Other information related to eligibility, such as age or 
pregnancy, as applicable.
    (b) What else is required on the application form? The application 
form must include a nondiscrimination statement that informs the 
applicant that program standards are applied without discrimination by 
race, color, national origin, age, sex, or disability. After informing 
the applicant (or adult parent or caretaker) of his or her rights and 
responsibilities, in accordance with Sec.  247.12, the local agency 
must ensure that the applicant, or the adult parent or caretaker of the 
applicant, signs the application form beneath the following pre-printed 
statement. The statement must be read by, or to, the applicant (or 
adult parent or caretaker) before signing.
    ``This application is being completed in connection with the 
receipt of Federal assistance. Program officials may verify information 
on this form. I am aware that deliberate misrepresentation may subject 
me to prosecution under applicable State and Federal statutes. I am 
also aware that I may not receive both CSFP and WIC benefits 
simultaneously, and I may not receive CSFP benefits at more than one 
CSFP site at the same time. Furthermore, I am aware that the 
information provided may be shared with other organizations to detect 
and prevent dual participation. I have been advised of my rights and 
obligations under the program. I certify that the information I have 
provided for my eligibility determination is correct to the best of my 
knowledge.
    I authorize the release of information provided on this application 
form to other organizations administering assistance programs for use 
in determining my eligibility for participation in other public 
assistance programs and for program outreach purposes. (Please indicate 
decision by placing a checkmark in the appropriate box.)


YES [ ]

NO [ ]''

    (Approved by the Office of Management and Budget under control 
number 0584-0293)


Sec.  247.9  Eligibility requirements.

    (a) Who is eligible for CSFP? To be eligible for CSFP, individuals 
must fall into one of the following population groups:
    (1) Infants, i.e., persons under one year of age;
    (2) Children, i.e., persons who are at least one year of age but 
have not reached their sixth birthday;
    (3) Pregnant women;
    (4) Breastfeeding women, up to one year after giving birth (post-
partum);
    (5) Post-partum women, up to one year after termination of 
pregnancy; or
    (6) Elderly persons, i.e., persons at least 60 years of age.
    (b) What are the income eligibility requirements for women, 
infants, and children? (1) The State agency must establish household 
income limits that are at or below 185 percent of the Federal Poverty 
Income Guidelines published annually by the Department of Health and 
Human Services, but not below 100 percent of these guidelines. However, 
the State agency must accept as income-eligible, regardless of actual 
income, any applicant who is:
    (i) Certified as eligible to receive food stamps under the Food 
Stamp Act of 1977 (7 U.S.C. 2011 et seq.), Temporary Assistance for 
Needy Families (TANF) under Part A of Title IV of the Social Security 
Act (42 U.S.C. 601 et seq.), or Medical Assistance (i.e., Medicaid) 
under Title XIX of the Social Security Act (42 U.S.C. 1396 et seq.); or
    (ii) A member of a family that is certified eligible to receive 
assistance under TANF, or a member of a family in which a pregnant 
woman or an infant is certified eligible to receive assistance under 
Medicaid.
    (2) The State agency may consider women, infants, and children 
participating in another Federal, State, or local food, health, or 
welfare program as automatically eligible for CSFP if the income 
eligibility limits for the program are equal to or lower than the 
established CSFP limits.
    (3) For a pregnant woman, the State agency must count each embryo 
or fetus in utero as a household member in determining if the household 
meets the income eligibility standards.
    (c) What are the income eligibility requirements for elderly 
persons? The State agency must use a household income limit at or below 
130 percent of the Federal Poverty Income Guidelines. Elderly persons 
in households with income at or below this level must be considered 
eligible for CSFP benefits (assuming they meet other requirements 
contained in this part). However, elderly persons certified before 
September 17, 1986 (i.e., under the three elderly pilot projects) must 
remain subject to the eligibility criteria in effect at the time of 
their certification.
    (d) When must the State agency revise the CSFP income guidelines to 
reflect the annual adjustments of the Federal Poverty Income 
Guidelines? Each year, FNS will notify State agencies, by memorandum, 
of adjusted income guidelines by household size at 185 percent, 130 
percent, and 100 percent of the Federal Poverty Income Guidelines. The 
memorandum will reflect the annual adjustments to the Federal Poverty 
Income Guidelines issued by the Department of Health and Human 
Services. The State agency must implement the adjusted guidelines for 
elderly applicants immediately upon receipt of the memorandum. However, 
for women, infants, and children applicants, the State agency must 
implement the adjusted guidelines at the same time that the State WIC 
agency implements the adjusted guidelines in WIC.
    (e) How is income defined and considered as it relates to CSFP 
eligibility? (1) Income means gross income before deductions for such 
items as income taxes, employees' social security taxes, insurance 
premiums, and bonds.
    (2) The State agency may exclude from consideration the following 
sources of income listed under the WIC regulations at Sec.  
246.7(d)(2)(iv) of this chapter:
    (i) Any basic allowance for housing received by military services 
personnel residing off military installations; and
    (ii) The value of inkind housing and other inkind benefits.
    (3) The State agency must exclude from consideration all income 
sources excluded by legislation, which are listed in Sec.  
246.7(d)(2)(iv)(C) of this chapter. FNS will notify State agencies of 
any new forms of income excluded by statute through program policy 
memoranda.
    (4) The State agency may authorize local agencies to consider the 
household's average income during the previous 12 months and current

[[Page 47068]]

household income to determine which more accurately reflects the 
household's status. In instances in which the State makes the decision 
to authorize local agencies to determine a household's income in this 
manner, all local agencies must comply with the State's decision and 
apply this method of income determination in situations in which it is 
warranted.
    (f) What other options does the State agency have in establishing 
eligibility requirements for CSFP? (1) The State agency may require 
that an individual be at nutritional risk, as determined by a physician 
or by local agency staff.
    (2) The State agency may require that an individual reside within 
the service area of the local agency at the time of application for 
CSFP benefits. However, the State agency may not require that an 
individual reside within the area for any fixed period of time.


Sec.  247.10  Distribution and use of CSFP commodities.

    (a) What are the requirements for distributing CSFP commodities to 
participants? The local agency must distribute a package of commodities 
to participants each month, or a two-month supply of commodities to 
participants every other month, in accordance with the food package 
guide rates established by FNS.
    (b) What must the local agency do to ensure that commodities are 
distributed only to CSFP participants? The local agency must require 
each participant, or participant's proxy, to present some form of 
identification before distributing commodities to that person.
    (c) What restrictions apply to State and local agencies in the 
distribution of CSFP commodities? State and local agencies must not 
require, or request, that participants make any payments, or provide 
any materials or services, in connection with the receipt of CSFP 
commodities. State and local agencies must not use the distribution of 
CSFP commodities as a means of furthering the political interests of 
any person or party.
    (d) What are the restrictions for the use of CSFP commodities? CSFP 
commodities may not be used for outreach, refreshments, or for any 
purposes other than distribution to, and nutrition education for, CSFP 
participants.


Sec.  247.11  Applicants exceed caseload levels.

    (a) What must the local agency do if the number of applicants 
exceeds the local agency's caseload level? If all caseload has been 
filled, the local agency must maintain a waiting list of individuals 
who apply for the program. In establishing the waiting list, the local 
agency must include the date of application, the population group of 
the applicant, and information necessary to allow the local agency to 
contact the applicant when caseload space becomes available. Unless 
they have been determined ineligible, applicants must be notified of 
their placement on a waiting list within 10 days of their request for 
benefits in accordance with Sec.  247.15.
    (b) What are the requirements for serving individuals on the 
waiting list once caseload slots become available? When caseload slots 
open up, the local agency must provide benefits to eligible individuals 
on the waiting list in the following order of priority:
    (1) Pregnant women, breastfeeding women, and infants;
    (2) Children ages 1 through 3;
    (3) Children ages 4 and 5;
    (4) Postpartum women; and
    (5) Elderly persons.


Sec.  247.12  Rights and responsibilities.

    (a) What information regarding an individual's rights in CSFP must 
the local agency provide to the applicant? The local agency is 
responsible for informing the applicant, orally or in writing, of the 
following:
    (1) The local agency will provide notification of a decision to 
deny or terminate CSFP benefits, and of an individual's right to appeal 
this decision by requesting a fair hearing, in accordance with Sec.  
247.33(a);
    (2) The local agency will make nutrition education available to all 
adult participants, and to parents or caretakers of infant and child 
participants, and will encourage them to participate; and
    (3) The local agency will provide information on other nutrition, 
health, or assistance programs, and make referrals as appropriate.
    (b) What information regarding an individual's responsibilities in 
CSFP must the local agency provide to the applicant? In addition to the 
written statement required by Sec.  247.8(b), the local agency is 
responsible for informing the applicant, orally or in writing, of the 
following:
    (1) Improper use or receipt of CSFP benefits as a result of dual 
participation or other program violations may lead to a claim against 
the individual to recover the value of the benefits, and may lead to 
disqualification from CSFP; and
    (2) Participants must report changes in household income or 
composition within 10 days after the change becomes known to the 
household.


Sec.  247.13  Provisions for non-English or limited-English speakers.

    (a) What must State and local agencies do to ensure that non-
English or limited-English speaking persons are aware of their rights 
and responsibilities in the program? If a significant proportion of the 
population in an area is comprised of non-English or limited-English 
speaking persons with a common language, the State agency must ensure 
that local agencies inform such persons of their rights and 
responsibilities in the program, as listed under Sec.  247.12, in an 
appropriate language. State and local agencies must ensure that 
bilingual staff members or interpreters are available to serve these 
persons.
    (b) What must State and local agencies do to ensure that non-
English or limited-English speaking persons are aware of other program 
information? If a significant proportion of the population in an area 
is comprised of non-English or limited-English speaking persons with a 
common language, the State agency must ensure that local agencies 
provide other program information, except application forms, to such 
persons in their appropriate language.


Sec.  247.14  Other public assistance programs.

    (a) What information on other public assistance programs must the 
local agency provide to women, infants, and children applicants? The 
local agency must provide CSFP applicants eligible for both CSFP and 
WIC with written information on the WIC Program, to assist them in 
choosing the program in which they wish to participate. Additionally, 
the local agency must provide women, infants, and children applicants 
with written information on the following nutrition, health, or public 
assistance programs, and make referrals to these programs as 
appropriate:
    (1) The Medicaid Program, which is the medical assistance program 
established under Title XIX of the Social Security Act (42 U.S.C. 1396 
et seq.), and other health insurance programs for low-income households 
in the State. The State agency must provide local agencies with 
materials showing the income standards utilized in the Medicaid 
Program;
    (2) The Temporary Assistance for Needy Families (TANF) program 
under part A of Title IV of the Social Security Act (42 U.S.C. 601 et 
seq.);
    (3) The Child Support Enforcement Program under part D of Title IV 
of the Social Security Act (42 U.S.C. 651 et seq.); and

[[Page 47069]]

    (4) The Food Stamp Program (7 U.S.C. 2011 et seq.).
    (b) What information on other public assistance programs must the 
local agency provide to elderly applicants? The local agency must 
provide elderly applicants with written information on the following 
programs, and make referrals, as appropriate:
    (1) Supplemental security income benefits provided under Title XVI 
of the Social Security Act (42 U.S.C. 1381 et seq.);
    (2) Medical assistance provided under Title XIX of the Social 
Security Act (42 U.S.C. 1396 et seq.), including medical assistance 
provided to a qualified Medicare beneficiary (42 U.S.C. 1395(p) and 
1396d(5)); and
    (3) The Food Stamp Program (7 U.S.C. 2011 et seq.).
    (c) Is the value of CSFP benefits counted as income or resources 
for any other public assistance programs? No. The value of benefits 
received in CSFP may not be considered as income or resources of 
participants or their families for any purpose under Federal, State, or 
local laws, including laws relating to taxation and public assistance 
programs.


Sec.  247.15  Notification of eligibility or ineligibility of 
applicant.

    (a) What is the timeframe for notifying an applicant of eligibility 
or ineligibility for CSFP benefits? Local agencies must notify 
applicants of their eligibility or ineligibility for CSFP benefits, or 
their placement on a waiting list, within 10 days from the date of 
application.
    (b) What must be included in the notification of eligibility or 
ineligibility? The notification of eligibility must include information 
on the time, location, and means of food distribution, and the length 
of the certification period. Notification of ineligibility must be in 
writing, and must include the reason the applicant is not eligible, a 
statement of the individual's right to a fair hearing to appeal the 
decision, and a statement that informs the applicant that program 
standards are applied without discrimination by race, color, national 
origin, age, sex, or disability.


Sec.  247.16  Certification period.

    (a) How long is the certification period? (1) Women, infants, and 
children. For women, infants, and children, the State agency must 
establish certification periods that may not exceed 6 months in length. 
However, pregnant women may be certified to participate for the 
duration of their pregnancy and for up to six weeks post-partum.
    (2) Elderly persons. For elderly persons, the State agency must 
establish certification periods that may not exceed 6 months in length. 
However, the State agency may authorize local agencies to extend the 
certification period without a formal review of eligibility for 
additional 6-month periods, as long as the following conditions are 
met:
    (i) The person's address and continued interest in receiving 
program benefits are verified;
    (ii) The local agency has sufficient reason to believe that the 
person still meets the income eligibility standards (e.g., the elderly 
person has a fixed income); and
    (iii) No eligible women, infants, or children are waiting to be 
served.
    (b) On what day of the final month does the certification period 
end? The certification period extends to the final day of the month in 
which eligibility expires (e.g., the last day of the month in which a 
child reaches his or her sixth birthday).
    (c) Does the certification period end when a participant moves from 
the local area in which he or she was receiving benefits? No. The State 
agency must ensure that local agencies serve a CSFP participant, or WIC 
participant (if also eligible for CSFP), who moves from another area to 
an area served by CSFP, and whose certification period has not expired. 
The participant must be given the opportunity to continue to receive 
CSFP benefits for the duration of the certification period. If the 
local agency has a waiting list, the participant must be placed on its 
waiting list ahead of all other waiting applicants. The local agency 
that determined the participant's eligibility must provide verification 
of the expiration date of the certification period to the participant 
upon request.
    (d) What must the local agency do to ensure that participants are 
aware of the expiration of the certification period? The local agency 
must notify program participants in writing at least 15 days before the 
expiration date that eligibility for the program is about to expire. 
The local agency must include a statement in the written notification 
that informs the applicant that program standards are applied without 
discrimination by race, color, national origin, age, sex, or 
disability.
    (Approved by the Office of Management and Budget under control 
number 0584-0293)


Sec.  247.17  Notification of discontinuance of participant.

    (a) What must a local agency do if it has evidence that a 
participant is no longer eligible for CSFP benefits during the 
certification period? If a local agency has evidence that a participant 
is no longer eligible for CSFP benefits during the certification 
period, it must provide the participant with a written notification of 
discontinuance at least 15 days before the effective date of 
discontinuance.
    (b) What must a local agency do if it has to discontinue a 
participant from participation in the program prior to the end of the 
certification period due to the lack of resources necessary to continue 
providing benefits to the participant? If a local agency does not have 
sufficient resources, such as a sufficient number of caseload slots, to 
continue providing benefits to the participant(s) for the entire 
certification period, it must provide the participant(s) with a written 
notification of discontinuance at least 15 days before the effective 
date of discontinuance.
    (c) What must be included in the notification of discontinuance? 
The notification of discontinuance must include the effective date of 
discontinuance, the reason for the participant's discontinuance, a 
statement of the individual's right to appeal the discontinuance 
through the fair hearing process, in accordance with Sec.  247.33(a), 
and a statement that informs the applicant that program standards are 
applied without discrimination by race, color, national origin, age, 
sex, or disability.


Sec.  247.18  Nutrition education.

    (a) What are the State agency's responsibilities in ensuring that 
nutrition education is provided? The State agency must establish an 
overall nutrition education plan and must ensure that local agencies 
provide nutrition education to participants in accordance with the 
plan. The State agency may allow local agencies to share personnel and 
educational resources with other programs in order to provide the best 
nutrition education possible to participants. The State agency must 
establish an evaluation procedure to ensure that the nutrition 
education provided is effective. The evaluation procedure must include 
participant input and must be directed by a nutritionist or other 
qualified professional. The evaluation may be conducted by the State or 
local agency, or by another agency under agreement with the State or 
local agency.
    (b) What type of nutrition education must the local agency provide? 
The local agency must provide nutrition education that can be easily 
understood by participants and is related to their nutritional needs 
and household situations. The local agency must

[[Page 47070]]

provide nutrition education that includes the following information, 
which should account for specific ethnic and cultural characteristics 
whenever possible:
    (1) The nutritional value of CSFP foods, and their relationship to 
the overall dietary needs of the population groups served;
    (2) Nutritious ways to use CSFP foods;
    (3) Special nutritional needs of participants and how these needs 
may be met;
    (4) For pregnant and postpartum women, the benefits of 
breastfeeding;
    (5) The importance of health care, and the role nutrition plays in 
maintaining good health; and
    (6) The importance of the use of the foods by the participant to 
whom they are distributed, and not by another person.
    (c) To whom must local agencies provide nutrition education? The 
local agency must make nutrition education available to all adult 
participants and to parents or caretakers of infants and child 
participants. Local agencies are encouraged to make nutrition education 
available to children, where appropriate.
    (d) May CSFP foods be used in cooking demonstrations? Yes. The 
State or local agency, or another agency with which it has signed an 
agreement, may use CSFP foods to conduct cooking demonstrations as part 
of the nutrition education provided to program participants, but not 
for other purposes.


Sec.  247.19  Dual participation.

    (a) What must State and local agencies do to prevent and detect 
dual participation? The State agency must work with the State WIC 
agency to develop a plan to prevent and detect dual participation.
    In accordance with an agreement signed by both agencies. The State 
agency must also work with local agencies to prevent and detect dual 
participation. In accordance with Sec.  247.8(a)(1), the local agency 
must check the identification of all applicants when they are certified 
or recertified. In accordance with Sec.  247.8(b), the local agency 
must ensure that the applicant, or the adult parent or caretaker of the 
applicant, signs an application form which includes a statement 
advising the applicant that he or she may not receive both CSFP and WIC 
benefits simultaneously, or CSFP benefits at more than one CSFP site at 
the same time.
    (b) What must the local agency do if a CSFP participant is found to 
be committing dual participation? A participant found to be committing 
dual participation must be discontinued from one of the programs (WIC 
or CSFP), or from participation at more than one CSFP site. Whenever an 
individual's participation in CSFP is discontinued, the local agency 
must notify the individual of the discontinuance, in accordance with 
Sec.  247.17. The individual may appeal the discontinuance through the 
fair hearing process, in accordance with Sec.  247.33(a). In accordance 
with Sec.  247.20(b), if the dual participation resulted from the 
participant, or the parent or caretaker of the participant, making 
false or misleading statements, or intentionally withholding 
information, the local agency must disqualify the participant from 
CSFP, unless the local agency determines that disqualification would 
result in a serious health risk. The local agency must also initiate a 
claim against the participant to recover the value of CSFP benefits 
improperly received, in accordance with Sec.  247.30(c).
    (Approved by the Office of Management and Budget under control 
number 0584-0293)


Sec.  247.20  Program violations.

    (a) What are program violations in CSFP? Program violations are 
actions taken by CSFP applicants or participants, or the parents or 
caretakers of applicants or participants, to obtain or use CSFP 
benefits improperly. Program violations include the following actions:
    (1) Intentionally making false or misleading statements, orally or 
in writing;
    (2) Intentionally withholding information pertaining to eligibility 
in CSFP;
    (3) Selling commodities obtained in the program, or exchanging them 
for non-food items;
    (4) Physical abuse, or threat of physical abuse, of program staff; 
or
    (5) Committing dual participation.
    (b) What are the penalties for committing program violations? If 
applicants or participants, or the parents or caretakers of applicants 
or participants, commit program violations, the State agency may 
require local agencies to disqualify the applicants or participants for 
a period of up to one year. However, if the local agency determines 
that disqualification would result in a serious health risk, the 
disqualification may be waived. For program violations that involve 
fraud, the State agency must require local agencies to disqualify the 
participant from CSFP for a period of up to one year, unless the local 
agency determines that disqualification would result in a serious 
health risk. The State agency must require local agencies to 
permanently disqualify a participant who commits three program 
violations that involve fraud. For purposes of this program, fraud 
includes:
    (1) Intentionally making false or misleading statements to obtain 
CSFP commodities;
    (2) Intentionally withholding information to obtain CSFP 
commodities; or
    (3) Selling CSFP commodities, or exchanging them for non-food 
items.
    (c) What must the local agency do to notify the individual of 
disqualification from CSFP? The local agency must provide the 
individual with written notification of disqualification from CSFP at 
least 15 days before the effective date of disqualification. The 
notification must include the effective date and period of 
disqualification, the reason for the disqualification, and a statement 
that the individual may appeal the disqualification through the fair 
hearing process, in accordance with Sec.  247.33(a).


Sec.  247.21  Caseload assignment.

    (a) How does FNS assign caseload to State agencies? Each year, FNS 
assigns a caseload to each State agency to allow persons meeting the 
eligibility criteria listed under Sec.  247.9 to participate in the 
program, up to the caseload limit. To the extent that resources are 
available, FNS assigns caseload to State agencies in the following 
order:
    (1) Base caseload. The State agency may not receive base caseload 
in excess of its total caseload assigned for the previous caseload 
cycle. Base caseload is determined in the following manner:
    (i) Each State agency entering its second year of program 
participation receives base caseload equal to the amount assigned to it 
in its first year of participation; and
    (ii) A State agency that has participated in two or more caseload 
cycles receives base caseload equal to the highest of:
    (A) Average monthly participation for the previous fiscal year; or
    (B) Average monthly participation for the last quarter of the 
previous fiscal year; or
    (C) Participation during September of the previous fiscal year, but 
only if:
    (1) The full-year appropriation for the preceding fiscal year was 
enacted on or after February 15; and
    (2) The State agency received additional caseload equal to or 
greater than 10 percent of its base caseload in the previous caseload 
cycle; and
    (3) October participation in the current fiscal year was equal to 
or greater than 95 percent of September participation in the previous 
fiscal year.

[[Page 47071]]

    (2) Additional caseload. Each participating State agency may 
request additional caseload to increase service to women, infants, and 
children, and the elderly. Requests by State agencies to increase 
service to women, infants, and children receive priority over requests 
to increase service to the elderly. Eligibility for and assignment of 
additional caseload are determined in the following manner:
    (i) A State agency entering its second year of program 
participation qualifies to receive additional caseload if the State 
achieved a participation level which was equal to or greater than 95 
percent of assigned caseload for the previous caseload cycle, based on 
the highest of:
    (A) Average monthly participation for the previous fiscal year; or
    (B) Average monthly participation for the last quarter of the 
previous fiscal year; or
    (C) Participation during September of the previous fiscal year, but 
only if:
    (1) The full-year appropriation for the preceding fiscal year was 
enacted on or after February 15; and
    (2) October participation in the current fiscal year was equal to 
or greater than 95 percent of September participation in the previous 
fiscal year.
    (ii) A State agency that has participated in two or more caseload 
cycles qualifies to receive additional caseload if the State achieved a 
participation level which was equal to or greater than 95 percent of 
assigned caseload for the previous caseload cycle, based on the highest 
of:
    (A) Average monthly participation for the previous fiscal year; or
    (B) Average monthly participation for the last quarter of the 
previous fiscal year; or
    (C) Participation during September of the previous fiscal year, but 
only if:
    (1) The full-year appropriation for the preceding fiscal year was 
enacted on or after February 15; and
    (2) The State agency received additional caseload equal to or 
greater than 10 percent of its base caseload in the previous caseload 
cycle; and
    (3) October participation in the current fiscal year was equal to 
or greater than 95 percent of September participation in the previous 
fiscal year.
    (iii) Of each eligible State agency's request for additional 
caseload, FNS assigns an amount that it determines the State needs and 
can efficiently utilize. In making this determination, FNS considers 
the factors listed below, in descending order of importance. If all 
reasonable requests for additional caseload cannot be met, FNS assigns 
it to those States that are most likely to utilize it. The factors are:
    (A) Program participation of women, infants, and children, and the 
elderly in the State, in the previous fiscal year;
    (B) The percentage of caseload utilized by the State in the 
previous fiscal year;
    (C) Program participation trends in the State in previous fiscal 
years; and
    (D) Other information provided by the State agency in support of 
the request.
    (3) New caseload. Each State agency requesting to begin 
participation in the program, and with an approved State Plan, may 
receive caseload to serve women, infants, and children, and the 
elderly, as requested in the State Plan. State agency requests to 
initiate service to women, infants, and children receive priority over 
requests to initiate service to the elderly. Of the State agency's 
caseload request, FNS assigns caseload in an amount that it determines 
the State needs and can efficiently utilize. This determination is made 
based on information contained in the State Plan and on other relevant 
information. However, if all caseload requests cannot be met, FNS will 
assign caseload to those States that are most likely to utilize it.
    (b) When does FNS assign caseload to State agencies? FNS must 
assign caseload to State agencies by December 31 of each year, or 
within 30 days after enactment of appropriations legislation covering 
the full fiscal year, whichever comes later. Caseload assignments for 
the previous caseload cycle will remain in effect, subject to the 
availability of sufficient funding, until caseload assignments are made 
for the current caseload cycle.
    (c) How do State agencies request additional caseload for the next 
caseload cycle? In accordance with Sec.  247.6(d), a State agency that 
would like additional caseload for the next caseload cycle (beginning 
the following January 1) must submit a request for additional caseload 
by November 5, as an amendment to the State Plan. The State agency must 
also describe plans for serving women, infants, and children, and the 
elderly, at new sites in this submission.


Sec.  247.22  Allocation and disbursement of administrative funds to 
State agencies.

    (a) What must State agencies do to be eligible to receive 
administrative funds? In order to receive administrative funds, the 
State agency must have signed an agreement with FNS to operate the 
program, in accordance with Sec.  247.4(a)(1), and must have an 
approved State Plan.
    (b) How does FNS allocate administrative funds to State agencies? 
(1) As required by law, each fiscal year FNS allocates to each State 
agency an administrative grant per assigned caseload slot, adjusted 
each year for inflation.
    (2) For fiscal year 2003, the amount of the grant per assigned 
caseload slot was equal to the per-caseload slot amount provided in 
fiscal year 2001, adjusted by the percentage change between:
    (i) The value of the State and local government price index, as 
published by the Bureau of Economic Analysis of the Department of 
Commerce, for the 12-month period ending June 30, 2001; and
    (ii) The value of that index for the 12-month period ending June 
30, 2002.
    (3) For subsequent fiscal years, the amount of the grant per 
assigned caseload slot is equal to the amount of the grant per assigned 
caseload slot for the preceding fiscal year, adjusted by the percentage 
change between:
    (i) The value of the State and local government price index, as 
published by the Bureau of Economic Analysis of the Department of 
Commerce, for the 12-month period ending June 30 of the second 
preceding fiscal year; and
    (ii) The value of that index for the 12-month period ending June 30 
of the preceding fiscal year.
    (c) How do State agencies access administrative funds? FNS provides 
administrative funds to State agencies on a quarterly basis. Such funds 
are provided by means of a Letter of Credit, unless other funding 
arrangements have been made with FNS. The State agency obtains the 
funds by electronically accessing its Letter of Credit account.
    (Approved by the Office of Management and Budget under control 
number 0584-0293)


Sec.  247.23  State provision of administrative funds to local 
agencies.

    (a) How much of the administrative funds must State agencies 
provide to local agencies for their use? The State agency must provide 
to local agencies for their use all administrative funds it receives, 
except that the State agency may retain for its own use the amount 
determined by the following formula:
    (1) 15 percent of the first $50,000 received;
    (2) 10 percent of the next $100,000 received;
    (3) 5 percent of the next $250,000 received; and
    (4) A maximum of $30,000, if the administrative grant exceeds 
$400,000.
    (b) May a State agency request to retain more than the amount 
determined by the above formula in the

[[Page 47072]]

event of special needs? Yes, the State agency may request approval from 
FNS to retain a larger amount than is allowed under the formula 
prescribed in paragraph (a) of this section. However, in making its 
request, the State agency must provide justification of the need for 
the larger amount at the State level, and must ensure that local 
agencies will not suffer undue hardship as a result of a reduction in 
administrative funds.
    (c) How must the State agency distribute funds among local 
agencies? The State agency must distribute funds among local agencies 
on the basis of their respective needs, and in a manner that ensures 
the funds will be used to achieve program objectives.
    (Approved by the Office of Management and Budget under control 
number 0584-0293)


Sec.  247.24  Recovery and redistribution of caseload and 
administrative funds.

    (a) May FNS recover and redistribute caseload and administrative 
funds assigned to a State agency? Yes. FNS may recover and redistribute 
caseload and administrative funds assigned to a State agency during the 
fiscal year. FNS will redistribute these resources to other State 
agencies in accordance with the provisions of Sec. Sec.  247.21(a) and 
247.22(b). In reassigning caseload, FNS will use the most up-to-date 
data on participation and the extent to which caseload is being 
utilized, as well as other information provided by State agencies. In 
accordance with Sec.  247.21(a)(2), in instances in which FNS recovers 
caseload slots, the State agency must use 95 percent of its original 
caseload allocation to be eligible for additional caseload. However, 
the State agency must not exceed its reduced caseload allocation on an 
average monthly basis.
    (b) Is there a limit on the amount of caseload slots or 
administrative funds that FNS may recover? Yes. FNS will not 
unilaterally recover caseload that would result in the recovery of more 
than 50 percent of the State's administrative funds. However, in 
instances in which the State agency requests that FNS recover any 
portion of its assigned caseload, the 50-percent limitation will not 
apply.


Sec.  247.25  Allowable uses of administrative funds and other funds.

    (a) What are allowable uses of administrative funds provided to 
State and local agencies? Administrative funds may be used for costs 
that are necessary to ensure the efficient and effective administration 
of the program, in accordance with parts 3016 and 3019 of this title. 
Part 3016 of this title contains the rules for management of Federal 
grants to State, local, and Indian tribal governments, and part 3019 of 
this title contains the grants management rules for nonprofit 
organizations. These departmental regulations incorporate by reference 
OMB Circulars A-87 (Cost Principles for State, Local, and Indian Tribal 
Governments) and A-122 (Cost Principles for Non-Profit Organizations), 
which set out the principles for determining whether specific costs are 
allowable. For availability of OMB Circulars referenced in this 
section, see 5 CFR 1310.3. Some examples of allowable costs in CSFP 
include:
    (1) Storing, transporting, and distributing foods;
    (2) Determining the eligibility of program applicants;
    (3) Program outreach;
    (4) Nutrition education;
    (5) Audits and fair hearings;
    (6) Monitoring and review of program operations; and
    (7) Transportation of participants to and from the local agency, if 
necessary.
    (b) What are unallowable uses of administrative funds? In addition 
to those costs determined to be unallowable by the principles contained 
in the OMB circulars referenced in paragraph (a) of this section, 
specific examples of unallowable uses of administrative funds in CSFP 
include:
    (1) The cost of alteration of facilities not required specifically 
for the program; and
    (2) Actual losses which could have been covered by permissible 
insurance (through an approved self-insurance program or by other 
means).
    (c) What costs are allowable only with prior approval of FNS? 
Capital expenditures, which include the acquisition of facilities or 
equipment, or enhancements to such capital assets, with a cost per unit 
of at least $5,000, are allowable only with prior approval of FNS. 
Examples of equipment include automated information systems, automated 
data processing equipment, and other computer hardware and software.
    (d) What procedures must State and local agencies use in procuring 
property, equipment, or services with program funds, and disposing of 
such property or equipment? The procedures that State and local 
agencies must follow in procuring property, equipment, or services with 
program funds, or disposing of such property or equipment, are 
contained in parts 3016 and 3019 of this title. State, local, and 
Indian tribal governments must comply with part 3016 of this title, 
while nonprofit subgrantees must comply with part 3019 of this title. 
State and local agencies may use procurement procedures established by 
State and local regulations as long as these procedures do not conflict 
with Federal regulations. Federal regulations do not relieve State or 
local agencies from responsibilities established in contracts relating 
to procurement of property, equipment, or services. The State agency is 
the responsible authority regarding the settlement of all contractual 
and administrative issues arising out of procurements for the program.
    (e) What is program income and how must State and local agencies 
use it? Program income is income directly generated from program 
activities. It includes, for example, income from the sale of packing 
containers or pallets, and the salvage of commodities. Program income 
does not include interest earned from administrative funds. State and 
local agencies must use program income for allowable program costs, in 
accordance with part 3016 of this title.
    (f) How must State and local agencies use funds recovered as a 
result of claims actions? The State agency must use funds recovered as 
a result of claims actions against subdistributing or local agencies in 
accordance with the provisions of Sec.  250.15(c) of this chapter. The 
State agency must use funds recovered as a result of claims actions 
against participants for allowable program costs. The State agency may 
authorize local agencies to use such funds for allowable program costs 
incurred at the local level.


Sec.  247.26  Return of administrative funds.

    (a) Must State agencies return administrative funds that they do 
not use at the end of the fiscal year? Yes. If, by the end of the 
fiscal year, a State agency has not obligated all of its allocated 
administrative funds, the unobligated funds must be returned to FNS.
    (b) What happens to administrative funds that are returned by State 
agencies at the end of the fiscal year? If, in the following fiscal 
year, OMB reapportions the returned administrative funds, the funds are 
used to support the program. Such funds are not returned to State 
agencies in the form of administrative funds in addition to the 
legislatively mandated grant per assigned caseload slot.
    (Approved by the Office of Management and Budget under control 
number 0584-0293)


Sec.  247.27  Financial management.

    (a) What are the Federal requirements for State and local agencies 
with regard

[[Page 47073]]

to financial management? State and local public agencies must maintain 
a financial management system that complies with the Federal 
regulations contained in part 3016 of this title, while nonprofit 
organizations must comply with the Federal regulations contained in 
part 3019 of this title. The State agency's financial management system 
must provide accurate, current, and complete disclosure of the 
financial status of the program, including an accounting of all program 
funds received and expended each fiscal year. The State agency must 
ensure that local agencies develop and implement a financial management 
system that allows them to meet Federal requirements.
    (b) What are some of the major components of the State agency's 
financial management system? In addition to other requirements, the 
State agency's financial management system must provide for:
    (1) Prompt and accurate payment of allowable costs;
    (2) Timely disbursement of funds to local agencies;
    (3) Timely and appropriate resolution of claims and audit findings; 
and
    (4) Maintenance of records identifying the receipt and use of 
administrative funds, funds recovered as a result of claims actions, 
program income (as defined under Sec.  247.25(e)), and property and 
other assets procured with program funds.


Sec.  247.28  Storage and inventory of commodities.

    (a) What are the requirements for storage of commodities? State and 
local agencies must provide for storage of commodities that protects 
them from theft, spoilage, damage or destruction, or other loss. State 
and local agencies may contract with commercial facilities to store and 
distribute commodities. The required standards for warehousing and 
distribution systems, and for contracts with storage facilities, are 
included under Sec.  250.14 of this chapter.
    (b) What are the requirements for the inventory of commodities? A 
physical inventory of all USDA commodities must be conducted annually 
at each storage and distribution site where these commodities are 
stored. Results of the physical inventory must be reconciled with 
inventory records and maintained on file by the State or local agency.
    (Approved by the Office of Management and Budget under control 
number 0584-0293)


Sec.  247.29  Reports and recordkeeping.

    (a) What recordkeeping requirements must State and local agencies 
meet? State and local agencies must maintain accurate and complete 
records relating to the receipt, disposal, and inventory of 
commodities, the receipt and disbursement of administrative funds and 
other funds, eligibility determinations, fair hearings, and other 
program activities. State and local agencies must also maintain records 
pertaining to liability for any improper distribution of, use of, loss 
of, or damage to commodities, and the results obtained from the pursuit 
of claims arising in favor of the State or local agency. All records 
must be retained for a period of three years from the end of the fiscal 
year to which they pertain, or, if they are related to unresolved 
claims actions, audits, or investigations, until those activities have 
been resolved. All records must be available during normal business 
hours for use in management reviews, audits, investigations, or reports 
of the General Accounting Office.
    (b) What reports must State and local agencies submit to FNS? State 
agencies must submit the following reports to FNS:
    (1) SF-269A, Financial Status Report. The State agency must submit 
the SF-269A, Financial Status Report, to report the financial status of 
the program at the close of the fiscal year. This report must be 
submitted within 90 days after the end of the fiscal year. Obligations 
must be reported for the fiscal year in which they occur. Revised 
reports may be submitted at a later date, but FNS will not be 
responsible for reimbursing unpaid obligations later than one year 
after the end of the fiscal year in which they were incurred.
    (2) FNS-153, Monthly Report of the Commodity Supplemental Food 
Program and Quarterly Administrative Financial Status Report. The State 
agency must submit the FNS-153 on a monthly basis. FNS may permit the 
data contained in the report to be submitted less frequently, or in 
another format. The report must be submitted within 30 days after the 
end of the reporting period. On the FNS-153, the State agency reports:
    (i) The number of program participants in each population category 
(e.g., infants, children, and elderly);
    (ii) The receipt and distribution of commodities, and beginning and 
ending inventories, as well as other commodity data; and
    (iii) On a quarterly basis, the cumulative amount of administrative 
funds expended and obligated, and the amount remaining unobligated.
    (3) FNS-191, Racial/Ethnic Group Participation. Local agencies must 
submit a report of racial/ethnic participation each year, using the 
FNS-191.
    (c) Is there any other information that State and local agencies 
must provide to FNS? FNS may require State and local agencies to 
provide data collected in the program to aid in the evaluation of the 
effect of program benefits on the low-income populations served. Any 
such requests for data will not include identification of particular 
individuals.
    (Approved by the Office of Management and Budget under control 
numbers 0584-0025, 0584-0293)


Sec.  247.30  Claims.

    (a) What happens if a State or local agency misuses program funds? 
If FNS determines that a State or local agency has misused program 
funds through negligence, fraud, theft, embezzlement, or other causes, 
FNS must initiate and pursue a claim against the State agency to repay 
the amount of the misused funds. The State agency will be given the 
opportunity to contest the claim. The State agency is responsible for 
initiating and pursuing claims against subdistributing and local 
agencies if they misuse program funds.
    (b) What happens if a State or local agency misuses program 
commodities? If a State or local agency misuses program commodities, 
FNS must initiate a claim against the State agency to recover the value 
of the misused commodities. The procedures for pursuing claims 
resulting from misuse of commodities are detailed in Sec.  250.15(c) of 
this chapter. Misused commodities include commodities improperly 
distributed or lost, spoiled, stolen, or damaged as a result of 
improper storage, care, or handling. The State agency is responsible 
for initiating and pursuing claims against subdistributing agencies, 
local agencies, or other agencies or organizations if they misuse 
program commodities. The State agency must use funds recovered as a 
result of claims for commodity losses in accordance with Sec.  
250.15(c) of this chapter.
    (c) What happens if a participant improperly receives or uses CSFP 
benefits through fraud? The State agency must ensure that a local 
agency initiates a claim against a participant to recover the value of 
CSFP commodities improperly received or used if the local agency 
determines that the participant, or the parent or caretaker of the 
participant, fraudulently received or used the commodities. For 
purposes of this program, fraud includes intentionally making false or 
misleading statements, or intentionally withholding information, to 
obtain CSFP commodities, or the selling or exchange

[[Page 47074]]

of CSFP commodities for non-food items. The local agency must advise 
the participant of the opportunity to appeal the claim through the fair 
hearing process, in accordance with Sec.  247.33(a). The local agency 
must also disqualify the participant from CSFP for a period of up to 
one year, unless the local agency determines that disqualification 
would result in a serious health risk, in accordance with the 
requirements of Sec.  247.20(b).
    (d) What procedures must be used in pursuing claims against 
participants? The State agency must establish standards, based on a 
cost-benefit review, for determining when the pursuit of a claim is 
cost-effective, and must ensure that local agencies use these standards 
in determining if a claim is to be pursued. In pursuing a claim against 
a participant, the local agency must:
    (1) Issue a letter demanding repayment for the value of the 
commodities improperly received or used;
    (2) If repayment is not made in a timely manner, take additional 
collection actions that are cost-effective, in accordance with the 
standards established by the State agency; and
    (3) Maintain all records regarding claims actions taken against 
participants, in accordance with Sec.  247.29.
    (Approved by the Office of Management and Budget under control 
number 0584-0293)


Sec.  247.31  Audits and investigations.

    (a) What is the purpose of an audit? The purpose of an audit is to 
ensure that:
    (1) Financial operations are properly conducted;
    (2) Financial reports are fairly presented;
    (3) Proper inventory controls are maintained; and
    (4) Applicable laws, regulations, and administrative requirements 
are followed.
    (b) When may the Department conduct an audit or investigation of 
the program? The Department may conduct an audit of the program at the 
State or local agency level at its discretion, or may investigate an 
allegation that the State or local agency has not complied with Federal 
requirements. An investigation may include a review of any State or 
local agency policies or practices related to the specific area of 
concern.
    (c) What are the responsibilities of the State agency in responding 
to an audit by the Department? In responding to an audit by the 
Department, the State agency must:
    (1) Provide access to any records or documents compiled by the 
State or local agencies, or contractors; and
    (2) Submit a response or statement to FNS describing the actions 
planned or taken in response to audit findings or recommendations. The 
corrective action plan must include time frames for implementation and 
completion of actions. FNS will determine if actions or planned actions 
adequately respond to the program deficiencies identified in the audit. 
If additional actions are needed, FNS will schedule a follow-up review 
and allow sufficient time for further corrective actions. The State 
agency may also take exception to particular audit findings or 
recommendations.
    (d) When is a State or local agency audit required? State and local 
agency audits must be conducted in accordance with part 3052 of this 
title, which contains the Department's regulations pertaining to audits 
of States, local governments, and nonprofit organizations. The value of 
CSFP commodities distributed by the agency or organization must be 
considered part of the Federal award.
    (e) What are the requirements for State or local agency audits? 
State and local agency audits must be conducted in accordance with the 
requirements of part 3052 of this title, which contains the 
Department's regulations pertaining to audits of States, local 
governments, and nonprofit organizations. The State agency must ensure 
that local agencies meet the audit requirements. The State agency must 
ensure that all State or local agency audit reports are available for 
FNS review.
    (Approved by the Office of Management and Budget under control 
number 0584-0293)


Sec.  247.32  Termination of agency participation.

    (a) When may a State agency's participation in CSFP be terminated? 
While paragraphs (a)(1), (a)(2), and (a)(3) of this section, as 
applicable, describe the circumstances and basic procedures for 
terminating State agency programs, specific actions and procedures 
relating to program termination are more fully described in part 3016 
of this title.
    (1) Termination by FNS. FNS may terminate a State agency's 
participation in CSFP, in whole or in part, if the State agency does 
not comply with the requirements of this part. FNS must provide written 
notification to the State agency of termination, including the reasons 
for the action, and the effective date.
    (2) Termination by State agency. The State agency may terminate the 
program, in whole or in part, upon written notification to FNS, stating 
the reasons and effective date of the action. In accordance with Sec.  
247.4(b)(6), which relates to the termination of agreements, either 
party must provide, at minimum, 30 days' written notice.
    (3) Termination by mutual agreement. The State agency's program may 
also be terminated, in whole or in part, if both parties agree the 
action would be in the best interest of the program. The two parties 
must agree upon the conditions of the termination, including the 
effective date.
    (b) When may a local agency's participation in CSFP be terminated? 
While paragraphs (b)(1), (b)(2), and (b)(3) of this section, as 
applicable, describe the circumstances and basic procedures in 
termination of local agency programs, specific actions and procedures 
relating to program termination are more fully described in part 3016 
of this title.
    (1) Termination by State agency. The State agency may terminate a 
local agency's participation in CSFP, or may be required to terminate a 
local agency's participation, in whole or in part, if the local agency 
does not comply with the requirements of this part. The State agency 
must notify the local agency in writing of the termination, the reasons 
for the action, and the effective date, and must provide the local 
agency with an opportunity to appeal, in accordance with Sec.  247.35. 
(The local agency may appeal the termination in accordance with Sec.  
247.35.)
    (2) Termination by local agency. The local agency may terminate the 
program, in whole or in part, upon written notification to the State 
agency, stating the reasons and effective date of the action. In 
accordance with Sec.  247.4(b)(6), which relates to the termination of 
agreements, either party must provide, at minimum, 30 days' written 
notice.
    (3) Termination by mutual agreement. The local agency's program may 
also be terminated, in whole or in part, if both the State and local 
agency agree that the action would be in the best interest of the 
program. The two parties must agree upon the conditions of the 
termination, including the effective date.


Sec.  247.33  Fair hearings.

    (a) What is a fair hearing? A fair hearing is a process that allows 
a CSFP applicant or participant to appeal an adverse action, which may 
include the denial or discontinuance of program benefits, 
disqualification from the program, or a claim to repay the value of 
commodities received as a result of

[[Page 47075]]

fraud. State and local agencies must ensure that CSFP applicants and 
participants understand their right to appeal an adverse action through 
the fair hearing process, which includes providing written notification 
of the individual's right to a fair hearing along with notification of 
the adverse action. Such notification is not required at the expiration 
of a certification period.
    (b) What are the basic requirements the State agency must follow in 
establishing procedures to be used in fair hearings? The State agency 
must establish simple, clear, uniform rules of procedure to be used in 
fair hearings, including, at a minimum, the procedures outlined in this 
section. The State agency may use alternate procedures if approved by 
FNS. The rules of procedure must be available for public inspection and 
copying.
    (c) How may an individual request a fair hearing? An individual, or 
an individual's parent or caretaker, may request a fair hearing by 
making a clear expression, verbal or written, to a State or local 
agency official, that an appeal of the adverse action is desired.
    (d) How much time does an individual have to request a fair 
hearing? The State or local agency must allow an individual at least 60 
days from the date the agency mails or gives the individual the 
notification of adverse action to request a fair hearing.
    (e) When may a State or local agency deny a request for a fair 
hearing? The State or local agency may deny a request for a fair 
hearing when:
    (1) The request is not received within the time limit established 
in paragraph (d) of this section;
    (2) The request is withdrawn in writing by the individual 
requesting the hearing or by an authorized representative of the 
individual; or
    (3) The individual fails to appear, without good cause, for the 
scheduled hearing.
    (f) Does the request for a fair hearing have any effect on the 
receipt of CSFP benefits? Participants who appeal the discontinuance of 
program benefits within the 15-day advance notification period required 
under Sec. Sec.  247.17 and 247.20 must be permitted to continue to 
receive benefits until a decision on the appeal is made by the hearing 
official, or until the end of the participant's certification period, 
whichever occurs first. However, if the hearing decision finds that a 
participant received program benefits fraudulently, the local agency 
must include the value of benefits received during the time that the 
hearing was pending, as well as for any previous period, in its 
initiation and pursuit of a claim against the participant.
    (g) What notification must the State or local agency provide an 
individual in scheduling the hearing? The State or local agency must 
provide an individual with at least 10 days' advance written notice of 
the time and place of the hearing, and must include the rules of 
procedure for the hearing.
    (h) What are the individual's rights in the actual conduct of the 
hearing? The individual must have the opportunity to:
    (1) Examine documents supporting the State or local agency's 
decision before and during the hearing;
    (2) Be assisted or represented by an attorney or other persons;
    (3) Bring witnesses;
    (4) Present arguments;
    (5) Question or refute testimony or evidence, including an 
opportunity to confront and cross-examine others at the hearing; and,
    (6) Submit evidence to help establish facts and circumstances.
    (i) Who is responsible for conducting the fair hearing, and what 
are the specific responsibilities of that person? The fair hearing must 
be conducted by an impartial official who does not have any personal 
stake or involvement in the decision and who was not directly involved 
in the initial adverse action that resulted in the hearing. The hearing 
official is responsible for:
    (1) Administering oaths or affirmations, as required by the State;
    (2) Ensuring that all relevant issues are considered;
    (3) Ensuring that all evidence necessary for a decision to be made 
is presented at the hearing, and included in the record of the hearing;
    (4) Ensuring that the hearing is conducted in an orderly manner, in 
accordance with due process; and
    (5) Making a hearing decision.
    (j) How is a hearing decision made? The hearing official must make 
a decision that complies with Federal laws and regulations, and is 
based on the facts in the hearing record. In making the decision, the 
hearing official must summarize the facts of the case, specify the 
reasons for the decision, and identify the evidence supporting the 
decision and the laws or regulations that the decision upholds. The 
decision made by the hearing official is binding on the State or local 
agency.
    (k) What is the time limit for making a hearing decision and 
notifying the individual of the decision? A hearing decision must be 
made, and the individual notified of the decision, in writing, within 
45 days of the request for the hearing. The notification must include 
the reasons for the decision.
    (l) How does the hearing decision affect the individual's receipt 
of CSFP benefits? If a hearing decision is in favor of an applicant who 
was denied CSFP benefits, the receipt of benefits must begin within 45 
days from the date that the hearing was requested, if the applicant is 
still eligible for the program. If the hearing decision is against a 
participant, the State or local agency must discontinue benefits as 
soon as possible, or at a date determined by the hearing official.
    (m) What must be included in the hearing record? In addition to the 
hearing decision, the hearing record must include a transcript or 
recording of testimony, or an official report of all that transpired at 
the hearing, along with all exhibits, papers, and requests made. The 
record must be maintained in accordance with Sec.  247.29(a). The 
record of the hearing must be available for public inspection and 
copying, in accordance with the confidentiality requirements under 
Sec.  247.36(b).
    (n) What further steps may an individual take if a hearing decision 
is not in his or her favor? If a hearing decision upholds the State or 
local agency's action, and a State-level review or rehearing process is 
available, the State or local agency must describe to the individual 
any State-level review or rehearing process. The State or local agency 
must also inform the individual of the right of the individual to 
pursue judicial review of the decision.


Sec.  247.34  Management reviews.

    (a) What must the State agency do to ensure that local agencies 
meet program requirements and objectives? The State agency must 
establish a management review system to ensure that local agencies, 
subdistributing agencies, and other agencies conducting program 
activities meet program requirements and objectives. As part of the 
system, the State agency must perform an on-site review of all local 
agencies, and of all storage facilities utilized by local agencies, at 
least once every two years. As part of the on-site review, the State 
agency must evaluate all aspects of program administration, including 
certification procedures, nutrition education, civil rights compliance, 
food storage practices, inventory controls, and financial management 
systems. In addition to conducting on-site reviews, the State agency 
must evaluate program administration on an ongoing basis by reviewing 
financial reports, audit reports, food orders, inventory reports, and 
other relevant information.
    (b) What must the State agency do if it finds that a local agency 
is deficient in a particular area of program

[[Page 47076]]

administration? The State agency must record all deficiencies 
identified during the review and institute follow-up procedures to 
ensure that local agencies and subdistributing agencies correct all 
deficiencies within a reasonable period of time. To ensure improved 
program performance in the future, the State agency may require that 
local agencies adopt specific review procedures for use in reviewing 
their own operations and those of subsidiaries or contractors. The 
State agency must provide copies of review reports to FNS upon request.
    (Approved by the Office of Management and Budget under control 
number 0584-0293)


Sec.  247.35  Local agency appeals of State agency actions.

    (a) What recourse must the State agency provide local agencies to 
appeal a decision that adversely affects their participation in CSFP? 
The State agency must establish a hearing procedure to allow local 
agencies to appeal a decision that adversely affects their 
participation in CSFP--e.g., the termination of a local agency's 
participation in the program. The adverse action must be postponed 
until a decision on the appeal is made.
    (b) What must the State agency include in the hearing procedure to 
ensure that the local agency has a fair chance to present its case? The 
hearing procedure must provide the local agency:
    (1) Adequate advance notice of the time and place of the hearing;
    (2) An opportunity to review the record before the hearing, and to 
present evidence at the hearing;
    (3) An opportunity to confront and cross-examine witnesses; and
    (4) An opportunity to be represented by counsel, if desired.
    (c) Who conducts the hearing and how is a decision on the appeal 
made? The hearing must be conducted by an impartial person who must 
make a decision on the appeal that is based solely on the evidence 
presented at the hearing, and on program legislation and regulations. A 
decision must be made within 60 days from the date of the request for a 
hearing, and must be provided in writing to the local agency.


Sec.  247.36  Confidentiality of applicants or participants.

    (a) Can the State or local agency disclose information obtained 
from applicants or participants to other agencies or individuals? State 
and local agencies must restrict the use or disclosure of information 
obtained from CSFP applicants or participants to persons directly 
connected with the administration or enforcement of the program, 
including persons investigating or prosecuting program violations. The 
State or local agency may exchange participant information with other 
health or welfare programs for the purpose of preventing dual 
participation. In addition, with the consent of the participant, as 
indicated on the application form, the State or local agency may share 
information obtained with other health or welfare programs for use in 
determining eligibility for those programs, or for program outreach. 
However, the State agency must sign an agreement with the administering 
agencies for these programs to ensure that the information will be used 
only for the specified purposes, and that agencies receiving such 
information will not further share it.
    (b) Can the State or local agency disclose the identity of persons 
making a complaint or allegation against another individual 
participating in or administering the program? The State or local 
agency must protect the confidentiality, and other rights, of any 
person making allegations or complaints against another individual 
participating in, or administering CSFP, except as necessary to conduct 
an investigation, hearing, or judicial proceeding.


Sec.  247.37  Civil rights requirements.

    (a) What are the civil rights requirements that apply to CSFP? 
State and local agencies must comply with the requirements of Title VI 
of the Civil Rights Act of 1964 (42 U.S.C. 2000d et seq.), Title IX of 
the Education Amendments of 1972 (20 U.S.C. 1681 et seq.), section 504 
of the Rehabilitation Act of 1973 (29 U.S.C. 794 et seq.), the Age 
Discrimination Act of 1975 (42 U.S.C. 6101 et seq.), and titles II and 
III of the Americans with Disabilities Act of 1990 (42 U.S.C. 12101 et 
seq.). State and local agencies must also comply with the Department's 
regulations on nondiscrimination (parts 15, 15a, and 15b of this 
title), and with the provisions of FNS Instruction 113-2, including the 
collection of racial/ethnic participation data and public notification 
of nondiscrimination policy. State and local agencies must ensure that 
no person shall, on the grounds of race, color, national origin, age, 
sex, or disability, be subjected to discrimination under the program.
    (b) How does an applicant or participant file a complaint of 
discrimination? CSFP applicants or participants who believe they have 
been discriminated against should file a discrimination complaint with 
the USDA Director, Office of Civil Rights, Room 326W, Whitten Building, 
1400 Independence Avenue, SW., Washington, DC 20250-9410, or telephone 
(202) 720-5964.

    Dated: July 29, 2005.
Eric M. Bost,
Under Secretary, Food, Nutrition, and Consumer Services.
[FR Doc. 05-15778 Filed 8-10-05; 8:45 am]
BILLING CODE 3410-30-P