[Federal Register Volume 71, Number 238 (Tuesday, December 12, 2006)]
[Rules and Regulations]
[Pages 74618-74654]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 06-9569]



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Part III





Department of Agriculture





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Food and Nutrition Service



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7 CFR Part 249



Senior Farmers' Market Nutrition Program Regulations; Final Rule

  Federal Register / Vol. 71, No. 238 / Tuesday, December 12, 2006 / 
Rules and Regulations  

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DEPARTMENT OF AGRICULTURE

Food and Nutrition Service

7 CFR Part 249

RIN 0584-AD35


Senior Farmers' Market Nutrition Program Regulations

AGENCY: Food and Nutrition Service (FNS), USDA.

ACTION: Final rule.

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SUMMARY: This final rule implements the provision of the Farm Security 
and Rural Investment Act of 2002 that gives the Secretary of 
Agriculture the authority to promulgate regulations for the operation 
and administration of the Senior Farmers' Market Nutrition Program 
(SFMNP), thereby making it a permanent program rather than a 
competitive grant. The purposes of the SFMNP are to provide resources 
in the form of fresh, nutritious, unprepared, locally grown fruits, 
vegetables, and herbs from farmers' markets, roadside stands, and 
community supported agriculture programs to low-income seniors; to 
increase the domestic consumption of agricultural commodities by 
expanding or aiding in the expansion of domestic farmers' markets, 
roadside stands, and community supported agriculture programs; and to 
develop or aid in the development of new and additional farmers' 
markets, roadside stands, and community supported agriculture programs.

DATES: This rule becomes effective on January 11, 2007.

FOR FURTHER INFORMATION CONTACT: Debra Whitford or Donna Hines, 
Supplemental Food Programs Division, Food and Nutrition Service, USDA, 
3101 Park Center Drive, Room 528, Alexandria, Virginia 22302, (703) 
305-2746, OR [email protected], or [email protected].

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

    As required for all rules that have been designated as Significant 
by the Office of Management and Budget, a Regulatory Impact Analysis 
was developed for this rule. It is attached as an appendix to this 
final rule.

Need for Action

    Congress established the SFMNP in Section 4402 of Public Law 107-
171 to provide resources in the form of fresh, nutritious, unprepared, 
locally grown fruits, vegetables, and herbs from farmers' markets, 
roadside stands, and community supported agriculture programs (CSAs) to 
low-income seniors; increase the domestic consumption of agricultural 
commodities by expanding or aiding in the expansion of domestic 
farmers' markets, roadside stands, and CSA programs; and develop or aid 
in the development of new and additional farmers' markets, roadside 
stands, and CSA programs. This final rule provides operating guidelines 
for the SFMNP, consistent with legislative intent.
    The requirements of the final USDA rule for the SFMNP are similar 
to two USDA interventions: The WIC Farmers' Market Nutrition Program 
(FMNP), for individuals participating in the Special Supplemental 
Nutrition Program for Women, Infants and Children (WIC) and those 
individuals on a waiting list for WIC benefits; and the Senior Farmers' 
Market Nutrition Pilot Program (SFMNPP), administered by USDA as a 
pilot program in 2001. The SFMNP has been administered by USDA as a 
competitive grant program since Fiscal Year (FY) 2001. Establishing 
rules for the SFMNP similar to the FMNP and SFMNP eases the 
administrative burden for USDA, State agencies, farmers, and program 
recipients.

Benefits

Benefits to Seniors
    Low-income seniors will be afforded nutrition education as well as 
a coupon benefit ranging in value from $20 to $50 per annum, which will 
be used to purchase fresh, unprepared fruits, vegetables, and herbs 
intended to improve seniors' diets. Seniors, and ultimately 
participating farmers, in each State agency will benefit from the total 
Federal grant to the State agencies minus the amount that State 
agencies spend on administration--up to 10 percent of the total grant.
    It is possible that seniors will not eat additional fresh fruits 
and vegetables, but rather will substitute the fruits and vegetables 
that they would have purchased with their own funds with fruits and 
vegetables purchased with SFMNP coupons. You, et al., ``Consumer Demand 
for Fresh Fruits and Vegetables in the United States'' (1998) found 
that the demand for fresh fruits and vegetables in the United States 
was responsive to price changes, but not changes in income.
Benefits to Farmers
    Farmers will collect revenue from redeemed coupons up to the total 
Federal grants to State agencies for food costs (the total amount of 
revenue collected will depend also on the amount of the grant State 
agencies use to cover administrative costs). Additional revenue may be 
reaped as seniors might spend their own money (and in some States, food 
stamps) to purchase additional goods at the farmers' markets. Farmers 
will also benefit from the exposure of new populations to farmers' 
markets, roadside stands and CSAs, which could lead to increased 
revenues.
    In FY 2005, the SFMNP operated at 2,663 farmers' markets, 2,001 
roadside stands and 237 CSAs. USDA's Economic Research Service (ERS) 
reported in 2001, that the SFMNP has not been as effective [as 
envisioned] in developing new farmers' markets, produce stands, and 
community supported agricultural programs or in expanding existing 
ones. Nevertheless, ERS suggests that given evidence from the WIC FMNP, 
the SFMNP could increase the number of farmers' markets, roadside 
stands, and CSAs in the long run.

Costs

    The costs associated with the SFMNP are based on the following 
assumptions:
     Funding for FY 2007-FY 2011 is maintained at the current 
authorized level of $15 million annually (assumes no carryover funds 
are available in 2007-2011);
     State agencies use 10 percent of the Federal grant for 
administration in FY 2007-FY 2011;
     State agencies provide an average benefit level of $17.50 
to recipients (as shown in Table 4 on page 25); and
     The poverty rate among seniors remains constant over the 
period of analysis.
    FNS also assumes for the purpose of this analysis that total 
funding and benefit levels will not be indexed for inflation; 
therefore, their value has been deflated using projections of the 
Consumer Price Index--Urban index for fresh fruits and vegetables (1989 
baseline). Based on these assumptions, we estimate there will be little 
change in the percent of SFMNP eligibles served in the analysis period, 
due to the large number of eligibles nationally.
    Because the resources devoted to the SFMNP are likely to be small 
in comparison to the size of the eligible population, the permanent 
Program will not enable State agencies to reach the majority of those 
eligible. However, the minimum and maximum benefit levels

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put forth in this final rule will help enable State agencies to serve 
as many eligible individuals as possible. The final rule allows for 
future growth, should additional funds be made available. Further, 
State agencies are allowed to contribute their own funds to enhance 
their Federal SFMNP grants. There were five State agency grantees that 
added State funds to their SFMNP food benefits in FY 2005.

Regulatory Flexibility Act

    This rule has been reviewed with regard to the requirements of the 
Regulatory Flexibility Act (5 U.S.C. 601-612). Nancy Montanez Johner, 
Under Secretary for Food, Nutrition, and Consumer Services, has 
certified that this rule will not have a significant economic impact on 
a substantial number of small entities. The provisions of this 
rulemaking are applicable to all State and local agencies, farmers, 
farmers' markets, roadside stands, and community supported agriculture 
programs, regardless of their size or of the volume of SFMNP business 
they conduct.

Public Law 104-4, Unfunded Mandate Reform Act of 1995 (UMRA)

    Title II of the UMRA 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, 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 by 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 final rule contains no Federal mandates (under the regulatory 
provisions of Title II of the UMRA) for State, local, or tribal 
governments or the private sector of $100 million or more in any one 
year. Thus, the rule is not subject to the requirements of Sections 202 
and 205 of the UMRA.

Executive Order 12372

    The Senior Farmers' Market Nutrition Program is listed in the 
Catalog of Federal Domestic Assistance under No. 10.576. 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 that requires intergovernmental 
consultation with State and local officials.

Executive Order 12988

    This rule has been reviewed under Executive Order 12988, Civil 
Justice Reform. This rule is intended to have preemptive effect with 
respect to any State or local laws, regulations, or policies that 
conflict with its provisions or that would otherwise impede its full 
implementation. This rule is not intended to have retroactive effect 
unless so specified in the Dates paragraph of the preamble of the final 
rule. Prior to any judicial challenge to the application of the 
provisions of this rule, all applicable administrative procedures must 
be exhausted.
    In the Senior Farmers' Market Nutrition Program, the administrative 
procedures are as follows:
     Local agencies, farmers, farmers' markets, roadside 
stands, and community supported agriculture programs--State agency 
hearing procedures issued pursuant to 7 CFR 249.16;
     Applicants and participants--State agency hearing 
procedures pursuant to 7 CFR 249.16;
     Sanctions against State agencies (but not claims for 
repayment assessed against a State agency) pursuant to 7 CFR 249.17--
administrative appeal in accordance with 7 CFR 249.16; and
     Procurement by State or local agencies--administrative 
appeal to the extent required by 7 CFR 3016.36.

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. 
Therefore, under Section 6(b) of the Executive Order, a federalism 
summary impact statement is not required.

Civil Rights Impact Analysis

    FNS has reviewed this rule in accordance with FNS 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, and the characteristics of SFMNP participants, FNS has 
determined that none of the provisions in this rule have a discernible 
impact on minorities, women, or persons with disabilities that are 
likely to result in inequitable treatment. FNS specifically prohibits 
the State agencies, and their cooperators, that administer the SFMNP 
from engaging in actions that discriminate against any individual in 
any of the protected classes (see 7 CFR 249.7 for the nondiscrimination 
policy in the SFMNP). Where State agencies have options, and they 
choose to implement a certain provision, they must implement it in such 
a way that it complies with the SFMNP regulations set forth at Sec.  
249.7.

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. The information collections in this rule are being 
reviewed by OMB and will not be effective until they have received OMB 
approval. Once they have received OMB approval, FNS will publish a 
notice in the Federal Register.

E-Government Act Compliance

    FNS is committed to complying with the E-Government Act, to promote 
the use of the Internet and other information technologies to provide 
increased opportunities for citizen access to Government information 
and services, and for other purposes.

Background

History of the SFMNP--FY 2001 Through FY 2004

    USDA's Commodity Credit Corporation (CCC) established the Senior 
Farmers' Market Nutrition Program (SFMNP) in November 2000 as a pilot 
program (65 FR 65825, Nov. 2, 2000). A brief history of the program 
from FY 2001-FY 2004 was included in the preamble to the proposed rule. 
A total of $15 million was made available for the pilot SFMNP, in which 
grant awards ranging from $9,000 to $1.2 million were made to 30 
States, 5 Indian tribal governments, and the District of Columbia. 
Nearly 420,000 low-income seniors participated in the

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SFMNP that first year. In FY 2002, Public Law 107-78 (the Agriculture, 
Rural Development, Food and Drug Administration and Related Agencies 
Appropriations Act) provided $10 million from FNS' Commodity Assistance 
Program account to continue the SFMNP for a second year.
    An additional $5 million was provided from CCC funds by Section 
4402 of the Farm Security and Rural Investment Act of 2002 (the Farm 
Bill), Public Law 107-171 (7 U.S.C. 3007). The Farm Bill also 
authorized the SFMNP for FY 2003 through FY 2007, provided funding at 
$15 million for each of those years, and gave FNS the authority to 
develop regulations as deemed necessary for the SFMNP. The basic 
structure of the SFMNP has remained unchanged since its inception, with 
only slight modifications in the competitive grant process. By the end 
of FY 2004, 47 State agencies were participating in the program, and 
over 800,000 seniors had received SFMNP benefits during that year's 
market season.
    The information below brings the history of the SFMNP up to date 
since the proposed rule was published.

SFMNP--FY 2005 Through FY 2006

    Just prior to the beginning of FY 2005, OMB clarified to FNS that 
SFMNP funds that were not expended in the previous fiscal year could 
not be carried over for allocation in the current fiscal year, i.e., 
that only $15 million could be allocated to grantees. To accommodate 
this clarification, FNS reduced each participating SFMNP State agency's 
grant award for FY 2005 by 10.2 percent. No funds were available to 
support the expansion of any current grantee's existing program, or the 
addition of any new State agencies that might have been interested in 
initiating a new SFMNP. Additionally, one State agency discontinued its 
SFMNP operation due to the unavailability of State funds. The SFMNP 
funds that had been initially allocated to this grantee were then 
redistributed proportionally to the remaining 46 SFMNP State agencies. 
Despite the reduction in their grant awards, the 46 State agency 
grantees not only continued to operate the SFMNP, but many were also 
able to leverage State, local, or private funds to make up the 
difference.
    Public Law 108-447 (Rural Development, Food and Drug Administration 
and Related Agencies Appropriations Act 2005) included a provision that 
allows FNS to allocate any unspent funds from FY 2005, as well as the 
$15 million appropriated for FY 2006, to eligible SFMNP grantees. The 
availability of these unspent funds is expected to restore the grant 
awards for the 46 current SFMNP State agencies to levels approaching 
the grants that were awarded in FY 2004, but there will still be 
insufficient funds to solicit grant applications from new State 
agencies.

Consistency With the WIC Farmers' Market Nutrition Program (FMNP)

    USDA's FNS has administered the FMNP since its inception as a pilot 
program in 1988, through its transition to an authorized independent 
program when the WIC Farmers' Market Nutrition Act of 1992 (Pub. L. 
102-314) amended Section 17(m) of the Child Nutrition Act of 1966 (42 
U.S.C. 1786(m)). The FMNP provides coupons to eligible WIC participants 
(or to individuals on WIC waiting lists) for the purchase of fresh, 
nutritious, unprepared fruits, vegetables and herbs at farmers' markets 
and, at the State agency's option, at roadside stands or farm stands. 
Many of the State agencies that have received SFMNP grant awards since 
FY 2001 were already established as administering agencies for the FMNP 
in that State. Based on the similar natures of the FMNP and the SFMNP, 
and in an effort to create consistency between the two programs, this 
final rule is constructed on the framework of the FMNP regulations, for 
which the final rule was published in the Federal Register on September 
27, 1995 (60 FR 49739).

General Summary of Comments Received on the SFMNP Proposed Rule

    The SFMNP Proposed Rule was published in the Federal Register on 
May 26, 2005 (70 FR 30558), with a 90-day comment period. A total of 
415 comments were received on the Proposed Rule, over half of which 
were from program participants, and generally expressed support for the 
SFMNP's establishment as a permanent nutrition assistance program. One 
comment was opposed to the proposed rule in all of its provisions, and 
another commenter suggested that the SFMNP not be changed in any aspect 
beyond the addition of available funding.
    The remaining comments were submitted from a variety of sources, 
including current SFMNP State agency grantees, State agencies not 
currently participating in the Program but interested in doing so, 
local agencies, farmers, professional organizations and associations, 
Congressional delegations, advocacy groups, nutritionists, and private 
citizens. The major comments are addressed by topic in further detail 
throughout this preamble.
    What follows is a discussion of each section of the final SFMNP 
rule, including the major provisions set forth in each section; a brief 
summary of the comments received that addressed these issues; and FNS' 
rationale for either modifying each section in the final rule, or 
retaining its provisions as initially proposed. The section numbers 
referenced in the following discussion shall be sections of Title 7, 
Code of Federal Regulations, unless otherwise indicated.
1. General Purpose and Scope (Sec.  249.1)
    While the essential purpose of the SFMNP is very similar to that of 
the FMNP, it differs from the FMNP purpose in one significant aspect--
it includes community supported agriculture (CSA) programs (as defined 
in Sec.  249.2) as allowable outlets for accepting SFMNP coupons or 
funds. CSA programs, while fairly familiar to the small farmer and 
sustainable agriculture communities, have not previously been 
associated with FNS programs.
    A total of 220 comments were received in support of converting the 
SFMNP from a competitive grant program to permanent status, and of the 
stated purposes of the program. In fact, close to 200 form letters were 
sent in by participating seniors in a single county. The purposes and 
scope of the SFMNP are retained in this final rule unchanged from the 
proposal.
    As directed by the provisions of Public Law 107-171 (7 U.S.C. 
3007), the purpose and scope of the SFMNP are to improve/enhance the 
diets of low-income seniors by enabling them to obtain fresh fruits and 
vegetables from farmers' markets, roadside stands, and CSA programs, 
and to develop or expand these outlets by broadening their customer 
bases.
2. Definitions (Sec.  249.2)
    Most of the definitions used in this rulemaking for the SFMNP are 
either the same as those used in the FMNP or are definitions used in 
the SFMNP competitive grant program. The majority of these definitions 
were either not addressed by commenters at all, or were supported by 
general comments to that effect. Therefore, with the exception of the 
definitions addressed below, all of the other definitions contained in 
Sec.  249.2 of this final rule are retained as proposed.
    ``Bulk purchase.'' A number of SFMNP grantees have used a modified 
CSA program model in which bulk quantities of certain produce items, 
such as apples or sweet potatoes, were purchased directly from 
authorized

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farmers by the State agency. These items were then equitably divided 
among SFMNP participants, and distributed directly to them, either at a 
central distribution point (such as a local senior center) or through 
some type of home delivery network. Such a program model was found to 
be very successful, but was not addressed in the proposed rule. Three 
commenters argued that the bulk purchase option should be retained in 
the permanent SFMNP, and FNS concurs with this position, as long as it 
is carefully managed to ensure that all other program requirements are 
met, e.g, only eligible foods are purchased in bulk for distribution, 
farmers from whom the produce is purchased are authorized by the State 
agency, and the value of the produce provided to SFMNP participants 
does not exceed the allowable maximum of $50 per participant. 
Therefore, a definition for ``bulk purchase'' is added to the list of 
regulatory definitions at Sec.  249.2; additional information regarding 
the bulk purchase option is also provided in Section 10 of this 
preamble.
    ``Eligible foods.'' In the proposed rule, FNS defined ``eligible 
foods'' as fresh, nutritious, unprepared, locally grown fruits, 
vegetables, and herbs for human consumption. Three commenters suggested 
that the proposed definition of ``eligible foods'' be broadened to 
include fruits and vegetables that are not otherwise available through 
local production, as well as other nutritionally healthful items such 
as dried fruits and raw nuts. Another 6 commenters supported the 
addition of locally-produced honey to the list of eligible foods, and 2 
comments supported allowing dried beans for purchase. One comment 
suggested the inclusion of any edible farm produce, with an emphasis on 
variety, while another proposed that State agencies be given the 
authority to determine what food items should be considered to be 
eligible for purchase under the SFMNP. Finally, one commenter suggested 
that FNS should provide a master list of eligible foods from which 
State agencies would select the items that could be purchased with 
SFMNP benefits or funds.
    While FNS understands the motivation behind the suggested addition 
of such items as honey, dried fruits or beans, and raw nuts to the list 
of eligible SFMNP foods, it has no legislative authority to make such 
additions. The Farm Security and Rural Investment Act of 2002 (Pub. L. 
107-171, also known as the Farm Bill) specifically stipulates that 
SFMNP funds are to be used for the purchase of fresh, unprepared fruits 
and vegetables. State agencies do have a considerable amount of 
latitude in determining which fruits and vegetables are allowed for 
purchase within the Federal definition of eligible foods. It is not 
realistic to expect FNS to provide a master list of eligible foods 
beyond what is included in the current definition; FNS believes that 
individual State agencies are in the best position to know which fruits 
and vegetables are appropriate for sale within that State. Further, 
horticultural advances are constantly being made, and FNS would not 
want to exclude a potentially eligible fruit or vegetable from 
inclusion by establishing an exhaustive--and possibly inaccurate--list 
of eligible foods for the SFMNP.
    Therefore, the definition of ``eligible foods'' for the SFMNP will 
be retained in this final rule as proposed.
    ``Locally grown.'' In the proposed rule, ``locally grown'' was 
defined as foods that are grown within the borders of the State that 
the project serves. State agencies also have the option to define 
``locally grown'' to mean foods grown in areas of States adjacent to 
that State, as long as such areas are part of the United States, and/or 
to use a more stringent definition than the one established by FNS. Two 
comments were received that addressed the proposed definition of 
``locally grown''. One commenter expressed concern that the definition 
as proposed is not sufficiently restrictive to ensure that the 
interests of local (i.e., within-State) farmers are protected, and 
suggested that the definition be strengthened to include a mandatory 
percentage of locally grown produce that must be offered for purchase 
through the SFMNP by authorized farmers, markets, and/or CSAs. The 
second commenter suggested that State agencies be allowed to define 
``locally grown'' with no federally-imposed restrictions.
    While FNS encourages all participating State agencies to promote 
the sale of locally-grown eligible foods to the greatest extent 
possible, we also realize that circumstances beyond the local farmers' 
control may occur to make it impossible to meet the demands of SFMNP 
participants entirely, at any given point in the market season. Once 
SFMNP coupons have been issued, or CSA shares assigned, a commitment 
has been made by the State agency to the participant that sufficient 
produce will be available to him or her in exchange for the full amount 
of benefits provided, should the participant want to use them. Thus it 
becomes incumbent upon the authorized farmer(s) to find a way to meet 
that demand. FNS believes that each individual State agency is in the 
best position to determine how much of the produce offered must 
actually be grown by the farmer who accepts the SFMNP coupons in a 
transaction. Consistent with the FMNP, SFMNP State agencies will be 
responsible for defining the percentage of produce that must be grown 
by an authorized farmer. However, as clearly stated in the proposed 
rule, FNS believes that it is important for an authorized farmer to 
produce at least some portion of the fruits and vegetables that she/he 
offers for sale. This requirement is intended to support small farmers.
    Therefore, the definition of ``locally grown'' is retained in this 
final rule as set forth in the proposed rule.
    ``Participant.'' The term ``participant'' was suggested by a 
commenter as a replacement for the term ``recipient'' that was included 
in the proposed rule. As the commenter pointed out, ``participant'' is 
consistent with the term used in other FNS-administered nutrition 
assistance programs. FNS agrees; therefore, the definition of 
``recipient'' that was initially set forth in the proposed rulemaking 
is now used to define ``participant'' for SFMNP purposes, the term 
``recipient'' is removed from Sec.  249.2, and the term ``participant'' 
replaces ``recipient''throughout this final rule.
3. Administration (Sec.  249.3)
    This section of the rule delegates to FNS the responsibility within 
USDA for administering the SFMNP, and delegates the responsibility for 
direct administration of the program to State agencies. It also 
requires each State agency to submit an annual State Plan of 
Operations, and to execute written agreements between the administering 
(lead) State agency and any other State, local, or nonprofit agencies 
or entities involved in operating any aspect of the SFMNP. Finally, 
each State agency must ensure that sufficient staff is available to 
administer the SFMNP efficiently and effectively.
    Three comments were received that addressed this section of the 
proposed rulemaking, and most of them were essentially supportive of 
the administrative structure set forth in the proposed rule. One 
commenter proposed that the final rule include a formal delegation of 
authority to operate and/or administer the SFMNP at the local level, 
but this provision is already included as a State agency option at 
Sec.  249.3(d).
    Therefore, Sec.  249.3 is retained in this final rule as proposed.

[[Page 74622]]

4. State Plan Provisions (Sec.  249.4)
    In establishing the SFMNP as a permanent program, Congress gave FNS 
the authority to set out basic standards and requirements for its 
operation. Consistent with other FNS nutrition assistance programs, as 
proposed, each State agency that desires to receive a SFMNP grant, 
including State agencies currently participating in the SFMNP, will 
need to submit a State Plan of Operation for approval by FNS. These 
State Plans will be due by November 15 of each year. Four commenters 
misunderstood this particular provision of the proposed rule, and wrote 
to suggest that submission of a SFMNP State Plan should not be required 
until the final SFMNP rule is published. It was never FNS' intent, nor 
was it suggested in the SFMNP proposed rule, that State Plans would be 
required prior to publication of the final rule. Therefore, the first 
SFMNP State Plans will be due to FNS Regional Offices by February 15, 
2007, for the FY 2007 market season, and by November 15 of each year 
thereafter.
    The State plan process replaces the grant application process that 
was used for the SFMNP since its inception in FY 2001. One commenter 
suggested that the SFMNP continue to be administered as a competitive 
grant program. This is not a feasible option for future oversight of 
the SFMNP; once the status of the SFMNP as a permanent program has been 
established, its administration at the Federal level is expected to be 
consistent with other FNS nutrition assistance programs, i.e., State 
plans are submitted by and approved for each participating State 
agency, and the direct oversight and day-to-day management of the 
program is provided through the seven FNS Regional Offices. Therefore, 
this final rule sets out at Sec.  249.4(a) the specific elements that 
must be included in each State Plan submitted. A complete list of State 
Plan requirements is contained at Sec.  249.4.
    As indicated above, Sec.  249.4(a) sets out specific requirements 
for information that must be included in the State Plan of Operation. 
Many of the requirements included in the SFMNP proposed rule were new 
to SFMNP operators, and reflected administrative requirements that 
generated a considerable number of comments in opposition to the 
requirements. Listed below are discussions of most of the proposed 
information to be included in SFMNP State Plans, the comments received, 
and FNS' decision regarding each proposed provision. Some of the larger 
administrative issues, such as income eligibility determination for 
SFMNP applicants, are addressed in greater detail under their 
respective Sections.
    Number and addresses of authorized participating markets, roadside 
stands, and CSA programs (Sec.  249.4(a)(8)(i))--Two commenters pointed 
out that it is unreasonable to require the actual addresses of all 
authorized SFMNP outlets in November as part of the State Plan before 
the market season actually begins the following spring or summer. As 
noted, markets and roadside stands are not always permanent locations, 
and circumstances may change during the intervening months that cause 
these locations to change. Commenters noted that providing the number 
of outlets by type (market, roadside stand, CSA) that are expected to 
be authorized for the coming season, based on the prior year's 
authorizations and/or projected additions such as new markets that are 
being solicited for inclusion in the SFMNP, should be sufficient. FNS 
agrees with commenters that providing the addresses of market outlets 
for the prior year is sufficient. Therefore, this final is revised in 
Sec.  249.4(a)(8)(i) to require a State agency to provide in its State 
Plan the number and addresses of authorized market outlets that 
participated in the SFMNP during the prior year.
    A technical oversight in this paragraph of the proposed rule has 
also been corrected in this final rule by adding the number of 
individual farmers authorized to accept SFMNP coupons or CSA program 
funds to this requirement.
    Listing of all SFMNP certification/issuance sites, including a map 
outlining the service area and proximity of markets, roadside stands, 
and/or CSA programs to certification/issuance or distribution sites 
(Sec.  249.4(a)(8)(ii))--Similar to the requirement for the addresses 
of all authorized outlets, 4 commenters pointed out that this provision 
is burdensome and unrealistic, given that reasonable access to the 
authorized outlets where participants will be able to use their program 
benefits is essential to the fundamental success of the SFMNP. Again, 
FNS agrees that providing a list of SFMNP certification and issuance 
sites, including a map, for the upcoming market season is not 
reasonable. Therefore, this final is revised in Sec.  249.4(a)(8)(ii) 
to require a State agency to include in its State Plan the SFMNP 
certification and issuance sites, including a map outlining the service 
area and proximity of authorized market outlets that participated in 
the SFMNP during the prior year.
    Determination of areas to be served (Sec.  249.4(a)(9)(i))--In the 
proposed rule, FNS included a provision to require the State agency to 
describe in its State Plan how it intended to select the area(s) within 
the State where SFMNP services would be offered. One commenter 
suggested that FNS should allow State agencies to exercise their own 
discretion in making such decisions. The limited amount of funding that 
is available for the SFMNP currently forces State agencies to make such 
determinations very carefully, and it has become evident over the past 
5 years of operation that the considerations most important to FNS 
(higher concentrations of eligible persons and greater access to 
farmers' markets, roadside stands, and/or CSA programs) are already in 
use by the State agencies that received SFMNP grant awards. While we 
agree that State agencies have discretion to decide how to select the 
areas within the State to offer SFMNP benefits, FNS would like this 
information and believes State agencies should provide it information 
as part of the State Plan. Therefore, this requirement is retained in 
this final rule.
    Method for preventing and identifying dual participation (Sec.  
249.4(a)(9)(iv))--Six commenters opposed the dual participation 
requirement, pointing out that such a requirement is unnecessary in a 
program as small as the SFMNP. These commenters also stated that 
because the majority of SFMNP participants come into the program by 
virtue of their certification for or participation in another 
assistance program (such as Food Stamps or the Commodity Supplemental 
Food Program (CSFP)), the requirement designed to prevent dual 
participation in the SFMNP is redundant, because such programs already 
have mechanisms in place to detect and prevent dual participation. FNS 
believes that the commenters may have misunderstood the intention of 
this requirement, and would like to clarify that such mechanisms are 
not intended to prevent a senior from participating in two different 
programs for which she/he may be eligible, such as CSFP and SFMNP. 
State agencies are still required, however, to have in place a 
mechanism to assure that dual participation within the SFMNP, i.e., 
receipt of SFMNP benefits from more than one local agency or program 
model, can be detected and prevented. Such a mechanism does not have to 
be complicated or elaborate, and may be combined with a procedure 
already in place in a program for which participation or certification 
confers automatic SFMNP eligibility. Therefore, the requirement 
regarding dual

[[Page 74623]]

participation at Sec.  249.4(a)(9)(iv) is retained in this final rule 
as proposed.
5. Selection of New State Agencies (Sec.  249.5)
    This section of the proposed rule stated that only State agencies, 
as defined in Sec.  249.2, would be eligible to receive grants for and 
administer the SFMNP. It also set forth FNS' intention to grandfather 
in as State agencies in the permanent SFMNP those State agencies that 
participated in the SFMNP during the previous fiscal year (i.e., FY 
2006) of the competitive grant program. In regard to the determination 
of entities that should be eligible to serve as SFMNP State agencies, 
one commenter expressed concern that local Area Agencies on Aging (AAA) 
would not be allowed to continue to administer the SFMNP. This is not 
the case. Since its inception, only a bona fide State agency or a 
federally recognized Indian Tribal Government has been eligible to 
receive funds as a SFMNP grantee. However, State agency grantees have 
also, since the inception of the SFMNP, had the option to allow local 
agencies such as AAAs to take on the day-to-day administrative and 
operational functions of the SFMNP. That option was expressly described 
in the proposed rule, and is retained in this final rule at Sec.  
249.5.
    Three comments were received that opposed the proposal to 
grandfather in those State agencies currently participating in the 
SFMNP. These commenters argued that everyone should be given a fair 
opportunity to apply for the Program, and that the grandfathering 
clause is unfair to State agencies that have been unable to join the 
SFMNP. While funding limitations have made it impossible to accept 
applications from prospective SFMNP State agencies for the past 2 
years, we disagree with the concern of overall unfairness. The 
grandfather clause is designed to facilitate the continuation of 
existing programs. Therefore, the clause is retained as proposed. Any 
new State agency interested in participating in the SFMNP is welcome to 
submit a State Plan of Operations to the appropriate FNS Regional 
Office by the regulatory deadline. Such prospective State agencies 
should keep in mind, however, that FNS approval of a SFMNP State Plan 
does not guarantee the availability of Federal funds to support the 
program.
6. Participant Eligibility (Sec.  249.6)
    a. Categorical Eligibility
    In Sec. Sec.  249.2 and 249.6(a)(1) of the proposed rule, FNS 
defined a person categorically eligible for the SFMNP (a ``senior'') as 
an individual 60 years of age or older. Indian tribal organizations 
administering the SFMNP could deem Native Americans who are 55 years of 
age or older as categorically eligible for SFMNP benefits. State 
agencies would have the option to establish a higher age limit, such as 
62 or 65 years of age. Four commenters specifically stated their 
support for these minimum age requirements. One additional commenter 
opposed the requirement for proof of age as an eligibility determinant, 
but no such requirement was included in the proposed rulemaking, nor 
has one been added to this final rule. Although two comments were 
received opposing the option for State agencies to establish a higher 
age limit, FNS believes that this option is important to State agencies 
as a potential caseload management tool.
    At Sec.  249.6(a)(1), FNS also proposed to allow State agencies the 
option to deem disabled individuals under 60 years of age, who live in 
housing facilities occupied primarily by older individuals where 
congregate nutrition services are provided, as categorically eligible 
for SFMNP benefits. SFMNP State agencies opting to serve such disabled 
individuals would be responsible for weighing the relative benefits of 
serving those persons in certain housing facilities against serving 
additional elderly participants who are 60 years of age and older in 
the same, or possibly another, service delivery area. Four comments 
were received that addressed this provision, most of which were 
generally supportive. In fact, only one commenter opposed the 
``mandate'' to serve persons less than 60 years old--a mandate that 
does not exist in either the proposed or this final rule.
    The provisions at Sec.  249.6(a)(1) regarding categorical 
eligibility for the SFMNP are therefore retained as set forth in the 
proposed rule.
b. Residency Requirement
    Section 249.6(a)(2) of the proposed rule would have allowed State 
agencies to establish a residency requirement for SFMNP applicants, to 
determine a service area for any local agency, and to require an 
applicant to reside within that service area at the time of 
application. No durational or fixed residency requirement could be 
imposed. Only one comment was received related to the residency 
requirement for the SFMNP, and that comment reflected support for the 
provision. Therefore, this provision is retained as set forth in the 
proposed rule.
c. Income Eligibility
    In developing the SFMNP proposed rule, FNS identified and 
considered three major aspects to the determination of income 
eligibility for the SFMNP:
    1. What should be the maximum allowable household income?
    2. Should FNS allow automatic income eligibility based on an 
individual's participation in other programs? If so, which programs 
should be included?
    3. How much documentation or verification of income eligibility 
should be required for SFMNP applicants?
    Five comments were received that generally opposed any and all 
income eligibility requirements. FNS does not support this view, 
because of the need for responsible stewardship and fundamental program 
accountability.
    Income eligibility guidelines. As described in the preamble to the 
SFMNP proposed rule, most participating SFMNP State agencies use a 
maximum household income of 185 percent of the annual poverty income 
guidelines. In FY 2005, 36 of the 46 participating SFMNP State agencies 
used an income eligibility standard of 185 percent of the poverty 
guidelines, and another 7 State agencies linked SFMNP income 
eligibility to the maximum income limit used in the Commodity 
Supplemental Food Program (CSFP), i.e., 130 percent (7 CFR 
247.7(a)(3)). A limited number of other variations existed, ranging 
from 150 to 200 percent of the poverty income guidelines. Therefore, in 
the proposed rule, FNS proposed a maximum household income of 185% of 
the poverty guidelines.
    Although over twice as many of the comments received pertaining to 
this provision suggested the option of using an income eligibility 
standard higher than 185 percent as supported the 185 percent limit (15 
and 7, respectively), FNS does not support the option of a higher 
standard, even on a case-by-case basis, because a fundamental principle 
of the SFMNP is to serve as many low-income seniors as possible. 
Therefore, in Sec.  249.6(a)(3), FNS retains the maximum income limit 
of 185 percent for the SFMNP as set forth in the proposed rule.
    Automatic income eligibility based on participation in other 
programs. Under the competitive grant model of the SFMNP, many grantees 
use participation in other means-tested programs, such as the Food 
Stamp Program, the CSFP, and the Food Distribution Program on Indian 
Reservations (FDPIR), to determine eligibility for the SFMNP. All of 
these programs use an income eligibility limit

[[Page 74624]]

that is at or below 130 percent of poverty.
    FNS proposed to continue to allow State agencies to deem applicants 
automatically eligible for the SFMNP based on participation/certified 
eligibility to receive benefits in another means-tested assistance 
program, as determined by the State agency, as long as income 
eligibility is set at or below the SFMNP maximum income, i.e., 185 
percent of the annual poverty income guidelines, and some form of 
documentation is required to establish income eligibility for that 
program.
    All 3 of the comments received addressing this provision were 
supportive. One commenter went on to suggest that persons eligible for 
the Pharmaceutical Assistance to the Aged and Disabled (PAAD) Program 
also be deemed income eligible for the SFMNP. As long as the process 
for establishing eligibility for the PAAD is consistent with the 
requirements described above, and the individual is otherwise 
(categorically and residentially) eligible to participate in the SFMNP, 
FNS has no objection should a State agency wish to include the PAAD 
among its group of programs that confer automatic income eligibility 
for the SFMNP.
    Documentation of income eligibility. Proposed Sec.  249.6(b) would 
have required SFMNP applicants who are not automatically income 
eligible for the program based on participation in or certified 
eligibility for another means-tested program to provide documentation 
of family income at certification.
    This requirement was strongly opposed in 123 comment letters, 
representing every commenter category. They expressed concern about 
imposing an administrative burden of this nature for such a relatively 
small annual benefit. One comment stated that the amount of time and 
effort anticipated to be necessary to obtain proof or documentation of 
income would be excessive given the value of the benefit offered--and 
the cost is unknown. This commenter went on to observe that the self-
identification of need for food assistance, self-declaration of 
participation in another means-tested assistance program, or self-
declaration of income should be the minimum requirement for accessing a 
$20 to $50 annual SFMNP benefit. FNS finds the arguments put forth in 
these comments to be compelling, and has not included in the final rule 
a requirement for income documentation from all SFMNP applicants who 
are not deemed otherwise income eligible. Instead, as set forth in this 
final rule, such applicants may be certified if they sign an affidavit 
affirming that their household income does not exceed the State 
agency's maximum income limit for their individual household size, 
except that State agencies offering a benefit greater than $50 per 
participant through a CSA program may not accept a signed affidavit of 
self-declared income eligibility, but must require documentation of 
household size and income for such participants. State and local 
agencies continue to have the option to verify reported income, in 
order to confirm an applicant's income eligibility for the SFMNP.
d. Certification Periods
    FNS established in the proposed rule at Sec.  249.6(c) a 
certification period for SFMNP participants. As proposed, recipients 
could be certified only for the current fiscal year's SFMNP period of 
operation. One commenter suggested that multiple-year SFMNP 
certification periods should be allowed, but FNS disagrees with this 
suggestion. Funds for the SFMNP are generally too limited, and turnover 
in the pool of potentially eligible senior SFMNP participants is too 
great, to justify such an option. Therefore, the provisions related to 
certification periods in the SFMNP are retained in this final rule as 
proposed.
e. Rights and Responsibilities
    In Sec.  249.6(d), FNS proposed to require State/local agencies to 
inform applicants or authorized representatives/proxies of their SFMNP 
rights and responsibilities. Several comments were received related to 
the Rights and Responsibilities notification--2 generally supported the 
provision, 3 specifically supported the provision of information on 
other services that may be available to SFMNP participants, and one 
suggested that a joint statement be allowed for seniors who are 
participating in both the SFMNP and the CSFP, when both programs are 
administered by the same State agency. FNS appreciates the principle 
behind such a suggestion, but does not agree. Even when one agency is 
responsible for administering multiple programs, such as the SFMNP and 
the CSFP, separate benefits are provided to participants under each 
program. Therefore, FNS believes that it is important to maintain 
separate statements of the participant's rights and responsibilities as 
they pertain to each individual program. This provision is retained in 
this final rule as proposed.
    This section as proposed also required State/local agencies to 
notify applicants in writing if they were ineligible for SFMNP benefits 
(including the reasons for the determination of ineligibility), and of 
their right to a fair hearing. A total of 18 comments were received 
opposing this written notification requirement, arguing that such a 
requirement is excessively burdensome in a program that has such a 
short duration each year. While FNS is sincere in its stated intention 
not to impose any administrative burden on participating State and 
local agencies that is not absolutely necessary, it cannot in good 
conscience eliminate this requirement. Once an individual has applied 
for Program benefits and has been found to be ineligible to receive 
them, that individual is entitled to a formal notification of such a 
determination and of his/her right to a fair hearing to challenge that 
decision. However, FNS also believes that there may be some confusion 
between an actual determination of an individual participant's program 
ineligibility and a State or local agency's inability to provide 
benefits because there simply are not enough funds (in the form of 
coupons or CSA shares) to serve everyone who is interested in receiving 
SFMNP benefits. This provision applies specifically to the former 
instance. The proposed rule did not intend to require that written 
notification be provided to all potentially eligible seniors in the 
State or local service delivery area when funds are not available to 
provide SFMNP benefits.
    The requirement for written notification of applicant ineligibility 
and the right to a fair hearing is therefore retained in this final 
rule as set forth in the proposed rule. However, State and local 
agencies are not expected to implement a complicated or time-consuming 
process in order to provide written notices of ineligibility and the 
right to a fair hearing; a form letter that has the pertinent 
information (date, name, basis of ineligibility, and signature of the 
certifying official) filled in as appropriate and handed to the 
applicant at the time of application is acceptable.
f. Certification Without Charge
    The proposed provision at Sec.  249.6(e), stipulating that no 
applicant or authorized representative may be charged to apply or be 
certified for the SFMNP, was not addressed by commenters. Therefore, 
the provision is retained in the final rule as proposed.
g. Use of Authorized Representatives/Proxies
    The SFMNP proposed rule included a provision requiring any State 
agency electing to allow proxies or authorized representatives to 
obtain a signed statement from the eligible senior designating another 
person as his/her

[[Page 74625]]

authorized representative. This provision was characterized by 4 
commenters as a positive addition; in fact, the use of proxies in the 
SFMNP has been an option for grantees since the program first began. 
However, another 5 comments were received that suggested that the 
requirement for a signed designation of a proxy by the eligible senior 
is too burdensome and should be deleted. FNS strongly disagrees, and 
finds this requirement to be essential in order to assure that SFMNP 
benefits are actually received by the eligible senior for whom they are 
intended. Therefore, in Sec.  249.6(f) of this final rule, the 
provision is retained as proposed.
g. Processing Standards/Waiting Lists
    SFMNP State agencies were required, at Sec.  249.6(g) in the 
proposed rule, to notify applicants of their eligibility or 
ineligibility for benefits, or placement on a waiting list, within 10 
days from the date of application. This provision was proposed to take 
into account the relatively short duration of the SFMNP's actual period 
of operation. Unlike other ongoing nutrition assistance programs, such 
as Food Stamps, FDPIR, or the CSFP, the SFMNP does not usually operate 
year-round. Therefore, it is important that the certification process 
for the SFMNP be expedited to some extent. Reaction to this provision 
was mixed--4 comment letters supported the 10-day standard, while 9 
maintained that it is entirely too short. While FNS cannot agree to the 
30-day processing standard suggested by 3 commenters, we can see some 
benefit to allowing State agencies a slightly longer period of time to 
complete the certification process. Therefore, in this final rule the 
processing standard for the SFMNP is increased at Sec.  249.6(g) to 15 
days. Although this is only 5 days longer than the 10 days initially 
proposed, the reduction of several significant administrative functions 
associated with the certification process (most notably the acceptance 
of a signed affidavit in the income eligibility determination process) 
makes the 15-day standard a reasonable one. State agencies would always 
have the option to establish a shorter processing standard for their 
local SFMNP agencies.
    Further, FNS proposed to require State agencies to keep a waiting 
list of individuals who apply for benefits but cannot be served. This 
information would enable State/local agencies to certify individuals if 
funding within the State is reallocated based on need. The waiting list 
would include the name of the applicant, the date he/she was placed on 
the waiting list, and an address or phone number in order to contact 
the applicant. These requirements are consistent with the FNS-
administered CSFP, which also serves seniors. However, as pointed out 
by 18 commenters, it is not reasonable to maintain a waiting list when 
there is no realistic expectation of additional benefits becoming 
available at some later date. SFMNP benefits are often exhausted very 
quickly, sometimes within a matter of days or even hours. FNS concurs 
with the commenters' position that in such cases, having to maintain a 
waiting list of eligible seniors who are interested in benefits is a 
futile and burdensome requirement. Therefore, this provision has been 
modified in this final rule to require a State agency to maintain a 
waiting list only when there is some reasonable expectation of being 
able to provide benefits at a later date to those additional unserved 
individuals.
7. Nondiscrimination (Sec.  249.7)
    As indicated in Sec.  249.7(a) of the proposed rule, Title VI of 
the Civil Rights Act of 1964 requires that racial and ethnic 
participation data be collected from all SFMNP benefit participants. 
Eight commenters suggested that the racial/ethnic data collection 
requirement be deleted, and another commenter proposed that the data 
collection at least be delayed until the new racial/ethnic categories 
stipulated by OMB are in place for the CSFP as well. FNS recognizes 
that this data collection requirement may duplicate data collections 
that have been performed for SFMNP participants when they applied for 
other nutrition assistance programs such as Food Stamps, FDPIR, and/or 
CSFP. Therefore, to avoid duplicate collection of racial/ethnic data, a 
separate SFMNP collection would not be required for those participants 
who come into the SFMNP as automatically eligible based on their 
participation in another assistance program. Racial/ethnic data must be 
collected for all other SFMNP participants. State agencies must be able 
to provide racial/ethnic data upon request by FNS for all participants, 
whether obtained via another assistance program or collected by the 
SFMNP State agency.
8. Eligible Foods and Level of Benefits (Sec.  249.8)

    Note: In the interest of clarity, the heading for this section 
is modified from the proposed rule to reflect the order of the 
topics addressed.

    A comprehensive discussion regarding eligible foods in the SFMNP is 
included in the preamble to the proposed rule. No other comments in 
addition to those discussed in section 2 of this preamble, regarding 
the definition of ``eligible foods'' for the SFMNP were received. 
Therefore, the provisions related to eligible foods set forth at Sec.  
249.8(a) are retained in this final rule as proposed.
    In Sec.  249.8(b), FNS proposed minimum and maximum annual benefit 
levels of $20 and $50, respectively, for all coupon issuance program 
models (farmers' markets, roadside stands and/or CSA programs). These 
levels were intended to accommodate the majority of State agencies that 
already use at least a $20 benefit level, and are consistent with the 
current average benefit level of SFMNP benefits issued nationwide.
    The proposed minimum and maximum benefit levels resulted in 
comments both for and against the provision. All 11 of the State 
agencies with benefit levels lower than $20, along with several other 
interested State and local SFMNP agencies, wrote to protest the 
necessity of reducing the number of eligible seniors they were 
currently serving in order to raise the benefit level to the $20 
minimum. A relatively small number of commenters (6) supported the 
principle of a regulatory minimum and maximum benefit level, but half 
of those commenters went on to suggest that State agencies be allowed 
to issue a smaller benefit when Federal funds are decreased, such as in 
FY 2005 when all SFMNP grantees experienced an across-the-board 
reduction in their SFMNP grant awards.
    Anecdotal evidence over the past 6 years of SFMNP operation 
consistently indicates that certified participants are more likely to 
make use of their SFMNP benefits when the benefit level is high enough 
to justify one or more trips to a farmers' market, roadside stand, and/
or CSA program for the purchase of eligible fresh fruits and 
vegetables. FNS believes establishing a minimum SFMNP benefit of $20 is 
not only appropriate, but will also be conducive to higher expenditure 
and redemption rates in future years of SFMNP operation. However, FNS 
also recognizes the difficulties that would be encountered by the 11 
State agencies currently offering a seasonal benefit of less than $20.
    The strongest objections to this provision were submitted in 
opposition to the $50 maximum benefit level. A variety of suggestions 
were put forth, including eliminating the benefit cap altogether, 
increasing the maximum benefit to $80 or to $100, and/or allowing State 
agencies the option of setting their own minimum and

[[Page 74626]]

maximum benefits, either for all program models or only for CSAs. 
Requests for a grandfather clause that would allow current State 
agencies to continue issuing the same level of SFMNP benefits came 
primarily from State agencies that expend the largest portion of their 
SFMNP grants on a CSA program model of operation. The basic structure 
of most CSAs is predicated upon shares of at least $100 each, and a 
total of 60 comments were received from State agencies, local agencies, 
participating farmers, and even participants to request that the 
maximum SFMNP benefit level be increased or at least allowed to remain 
at their FY 2004 levels. Nearly 30 farmers stated that if the maximum 
CSA benefit level were reduced to $50, they would no longer be willing 
or able to continue participating in the SFMNP.
    Therefore, FNS has reconsidered the matter of minimum and maximum 
benefit levels in the SFMNP in this final rule, and has revised the 
requirements as follows:
     The minimum benefit level of $20 is retained as proposed, 
except that SFMNP State agencies being grandfathered into the permanent 
program (i.e., that participated in the SFMNP in FY 2006) may continue 
to issue benefits at their FY 2006 levels.
     Current SFMNP State agencies that are grandfathering a CSA 
program model into the permanent program may continue to issue benefits 
to senior participants in the CSA programs at their current (FY 2006) 
levels, except that any State agency whose annual CSA participant 
benefit level is greater than $50 will not be eligible to receive 
expansion funds until the $50 benefit cap in the CSA program model is 
implemented. While FNS is sympathetic to the concerns expressed through 
the public comment process, we also believe in the principle of serving 
as many eligible senior participants as possible with the limited funds 
available to the SFMNP.
     New State agencies who begin operating the SFMNP after FY 
2006 must comply with the $20 benefit minimum as well as the $50 
benefit cap.
    SFMNP State agencies that do not use a CSA program model must 
comply with the $50 benefit cap as provided in the proposed rule.
    As one commenter suggested, State agencies will continue to have 
the option of providing a higher benefit level out of funding sources 
other than the Federal SFMNP grant. Finally, FNS disagrees with the 
commenter who stated that longer growing seasons justify higher benefit 
levels, because it can also be argued that shorter growing seasons, 
with commensurately higher prices for fresh produce because it is only 
available for a short time, can also justify higher benefit levels.
    In order to ensure equitable treatment in and access to the SFMNP, 
FNS proposed in Sec.  249.8(c) that all SFMNP participants served by 
the State agency must be offered the same level of SFMNP benefits. 
Reaction to this provision was almost evenly divided in support and 
opposition, but FNS is still convinced that a consistent statewide 
benefit level is important to the integrity of the SFMNP. Therefore, 
the requirement is retained in this final rule as proposed.
    Also as proposed, FNS has retained in this final rule the provision 
that the same statewide benefit level does not have to be applied for 
SFMNP participants who are receiving benefits through a CSA program. 
Such participants are eligible to receive $50 or more (if the State 
agency is exercising the grandfather clause set forth in Sec.  
249.8(b)) in SFMNP benefits, even if SFMNP participants in that same 
State are issued only $10 (if the State agency has been grandfathered 
in at the lower minimum benefit level) or $20 (for all other State 
agencies) in coupons to use at farmers' markets or roadside stands.
    As proposed and as set forth in this final rule, SFMNP participants 
may also receive benefits through a bulk purchase program model, as 
described in Sec.  249.2, as long as each participant receives an 
equitable value of fruits and vegetables. In addition, the total 
benefit provided to each participant (whether s/he receives a 
combination of coupons and bulk-purchased foods during the course of 
the season, or only bulk-purchased foods) must fall within the minimum 
and maximum levels set forth in this final rule.
    Finally, Sec.  249.8(c) of the proposed rule offered SFMNP State 
agencies the continued option to issue program benefits on either an 
individual or a household basis, as long as State agencies continue to 
report participant information to FNS on an individual basis. The 
household option, if SFMNP State agencies choose to implement it, 
allows more participants to be served with limited funds. The 
provisions contained in this section are retained in this final rule as 
proposed.
    Section 249.8(c)(3) of the proposed rule prohibited sharing of food 
purchased through the SFMNP with non-participating household members. 
Seven commenters opposed this non-sharing provision, calling it 
unenforceable and therefore unnecessary. FNS recognizes the difficulty 
of enforcing such a provision, but maintains that it is nonetheless an 
extremely important one. SFMNP benefits are generally issued to 
individuals with particular nutritional needs with the intention of 
improving that individual's diet by increasing his/her consumption of 
fresh fruits and vegetables. Therefore, program administrators can 
discuss this issue when participants are certified and/or provided 
basic information about the SFMNP. It is critical that program 
administrators and participants alike understand the importance of the 
SFMNP benefits that are being provided to specific eligible individuals 
for specific dietary reasons. Therefore, this provision is retained in 
this final rule as proposed.
9. Nutrition Education (Sec.  249.9)
    As proposed, this section of the rule defined the goal of nutrition 
education in the SFMNP, required the State agency to integrate 
nutrition education into its SFMNP operations, and provided guidance on 
coordinating the delivery of nutrition education through other agencies 
within the State. Thirteen comments were received regarding the 
nutrition education provisions of the SFMNP proposed rule, more than 
half of which were generally supportive. Two commenters suggested that 
there should be some level of flexibility for nutrition education at 
the local level. Although the proposed rule did not specifically 
address such flexibility, FNS supports such discretion as long as the 
State agency is aware of the content and quality of the nutrition 
education that is being provided, and monitors it regularly as 
required. Additional suggestions related to the nutrition education 
provisions that were not incorporated into this final SFMNP rule 
included stipulating that all nutrition education should be provided or 
overseen by a Registered Dietician or other qualified nutrition 
professional (2 comments), and that each local agency should bear the 
costs associated with providing nutrition education to SFMNP 
participants. Conversely, it was suggested in another comment letter 
that the State agency should be responsible for providing all nutrition 
education materials to the local agencies, in all languages necessary.
    FNS' view is that issues related to nutrition education are matters 
best negotiated between the State and local agency, rather than 
addressed through Federal program regulations. FNS agrees that it is 
important to take into consideration those participants with limited 
English proficiency, but believes that this is sufficiently covered in 
the

[[Page 74627]]

Participant Rights and Responsibilities statement set forth at Sec.  
249.6(g).
    FNS believes nutrition education to be an integral component of any 
effective nutrition assistance program. For this reason, SFMNP State 
agencies have been required, since the inception of the pilot program 
in FY 2001, to include nutrition education as part of their program 
design in order to receive a Federal SFMNP grant.
    Nutrition education has also long been the hallmark of several 
other FNS-assisted nutrition assistance programs, particularly the WIC 
Program and the FMNP, upon which the SFMNP is closely modeled. While 
nutrition education is being made increasingly available in other FNS 
programs, such as the Food Stamp Program, FDPIR, and CSFP, there is 
still no guarantee that SFMNP participants are also participating in 
any of these programs, or that the focus of the nutrition education 
that is offered is appropriate for the SFMNP participant population.
    As proposed, this final rule requires, at Sec.  249.9, all 
participating State agencies to describe the nutrition education that 
will be provided to SFMNP participants, including the agencies that 
will be responsible for providing the nutrition education (e.g., 
Cooperative Extension Service or local Area Agencies on Aging), the 
format(s) in which the nutrition education will be provided (e.g., 
recipe cards or cooking demonstrations), and the locations where the 
nutrition education is likely to be offered (e.g., senior centers, 
farmers' markets, common rooms in assisted living facilities). The 
content of the nutrition education should be age- and circumstance-
appropriate for SFMNP participants. FNS encourages State agencies to 
take advantage wherever possible of existing nutrition education 
opportunities for senior participants. Such opportunities may exist, 
for example, in nutrition education classes or events emphasizing the 
importance of fresh fruits and vegetables to a healthy diet that may be 
offered to Food Stamp Program participants who are also participating 
in the SFMNP, or through food demonstrations and tastings provided as 
part of a congregate nutrition program funded by the Older Americans 
Act at a local senior center or farmers' market.
10. Coupon, Market and CSA Program Management (Sec.  249.10)
    This section of the proposed rule outlined the State agency 
requirements regarding all aspects of coupon, market, and CSA program 
management in the SFMNP, specifically general responsibilities, 
agreements, training, monitoring, coupon control and payment, coupon 
reconciliation, instructions to SFMNP participants, complaints and 
sanctions, and CSA program management.
    The requirements set forth in Sec.  249.10 regarding each of these 
areas were discussed at length in the preamble to the proposed rule. 
Five comments were received in general support of the market management 
and monitoring provisions, and another 2 commenters specifically cited 
their support for the proposed rule's efforts toward consistency 
between the SFMNP and the FMNP. Several commenters suggested that the 
SFMNP be allowed to operate year-round. Once the SFMNP is converted 
from a competitive grant program to a permanent, State Plan-based 
program, there is no reason that a SFMNP State agency cannot do so, as 
long as there are funds available to support the longer program period. 
Except as noted below, the provisions in this section are retained in 
this final as proposed.
a. Authorization
    As proposed, the State agency would have been responsible for 
establishing criteria for the authorization of farmers, farmers' 
markets, and/or roadside stands, as well as the number of outlets that 
it plans to authorize, as provided in Sec.  249.10. One commenter 
suggested that State agencies rank farmers, farmers' markets, roadside 
stands, and/or CSAs by risk factors as part of the authorization 
process. While FNS does not believe that this should be a regulatory 
requirement, there is nothing in either the proposed or the final SFMNP 
rule that would prohibit a State agency from doing so if it believes 
that such a process will result in a better group of authorized SFMNP 
outlets. Therefore, these provisions remain unchanged in this final 
rule.
    One commenter expressed opposition to all of the requirements 
proposed at Sec.  249.10(a) through (e), i.e., everything related to 
the authorization, training, monitoring, and payment of farmers, 
farmers' markets, roadside stands, and CSA programs in the SFMNP, and 
proposed that FNS should be responsible for authorizing all farmers, 
farmers' markets, roadside stands, and/or CSAs for the SFMNP, rather 
than individual SFMNP State agencies. The commenter cited as precedent 
for this proposal the fact that FNS is responsible for authorizing 
retailers in the Food Stamp Program. However, legislative authority 
would be necessary for such a provision to be implemented in the SFMNP. 
Furthermore, it would be extremely difficult for SFMNP State agencies 
to maintain the degree of individuality that has been a hallmark of 
this program from the very beginning if FNS were to take on such a 
responsibility.
b. Agreements
    As proposed, Section 249.10(b) outlined the contents of the 
farmers' market/CSA program agreement. No comments were received in 
regard to the provisions in this section, so they are retained in this 
final rule as proposed, with the additional provision allowing bulk 
purchases as defined at Sec.  249.2.
c. Training
    Pursuant to Sec.  249.10(d), as proposed, FNS State agencies must 
conduct annual training for farmers, farmers' market managers, and (as 
appropriate) CSA program managers. State agencies have discretion in 
determining the method used for training purposes. Four commenters 
suggested that the final rule allow face-to-face training to include 
phone, videoconference, and/or web-based training. Section 249.10(d) in 
this final rule is clear in its requirement that all farmers and 
farmers' market managers who are participating in the SFMNP for the 
first time must receive interactive training that allows for real-time 
questions and answers between the State agency trainer and the farmer 
or farmers' market manager. Such training includes, for example, face-
to-face training, videoconference training, and/or web-based training. 
Alternative methods of training may be used after the first year of 
program participation, at the State agency's discretion. The points 
that must be covered in training are listed at Sec.  249.10(d), and are 
retained in this final rule as proposed.
d. Sanctions
    Proposed Sec.  249.10(k) set out a number of provisions related to 
sanctions that may be applied in the SFMNP. Comment letters were 
received from four State agencies suggesting that this section be 
rewritten in such a manner as to leave all fraud and sanction policies 
and procedures to the discretion of the State agency. FNS believes that 
the proposed rule offered sufficient flexibility and latitude to allow 
SFMNP State agencies to tailor the process to the particular needs and 
characteristics of its own program operations. Therefore, the 
provisions described in this section are retained in this final rule.
e. Community Supported Agriculture (CSA) Programs
    The most significant difference between the FMNP and the SFMNP 
regarding market management

[[Page 74628]]

procedures falls in the area of CSA programs, which are not allowable 
outlets for program funds in the FMNP. As expected, there were a 
significant number of comments (44 in all) received in regard to, and 
largely in support of, CSA program operations and systems. Most of 
these comments focused on allowing State agencies with existing CSA 
program models in place to continue operating their programs with 
virtually no modifications or restrictions. Seventeen commenters 
supported the inclusion of CSAs in the SFMNP or opposed the 
implementation of a final rule that favors a coupon-based program over 
one that uses the CSA model.
    A discussion of CSA programs and their unique requirements is 
provided below.
    CSA programs are described in detail in the preamble to the 
proposed rule. The majority of State agencies that include a CSA 
program component in their SFMNP operations only do so on a limited 
basis, in combination with the more traditional coupon model. However, 
at least two State agencies have operated their SFMNP programs 
exclusively through the CSA program model since the SFMNP began in FY 
2001.
    Seven commenters categorically opposed FNS' proposal to restrict 
CSAs to no more than 50 percent of the State agency's total Federal 
SFMNP food grant, and another commenter requested further clarification 
of FNS' intent in establishing such a cap. As explained above, FNS 
believes that a greater number of low-income eligible seniors can be 
served through the more traditional coupon system, thereby improving 
the diets of a larger percentage of this vulnerable population.
    One commenter expressed his objections to the limitations proposed 
for CSA program models. This commenter was of the opinion that Public 
Law 107-171 affords equal status to farmers' markets, roadside stands, 
and community supported agriculture programs, and that FNS does not 
have the discretion to choose those parts of the SFMNP that it wishes 
to support. This commenter further observed that Congress gave the 
States discretion to choose among these different delivery models in 
their development of successful SFMNP programs, and that FNS should not 
preempt such a state-level responsibility through rulemaking. FNS does 
not agree with this opinion. It is unquestionably true that no 
preference was stated or implied in the law for one program model over 
another, and USDA has made every effort to work with State agencies in 
the development and success of less traditional program models as well 
as those to which we may have been more accustomed. This does not mean, 
however, that FNS is prepared to allow any State agency, regardless of 
the program model selected, to operate outside the fundamental Program 
guidelines and expectations that have been developed to assure 
integrity and accountability. Congress, with the passage of the Farm 
Bill, did in fact empower FNS to promulgate regulations for the SFMNP 
that would provide such assurances. The restrictions and limitations 
that are imposed on CSA program models for the SFMNP in this final rule 
are based on information collected over the past 5 years of SFMNP 
operation, and represent FNS' best efforts to prevent as many problems 
as possible as the SFMNP matures. Therefore, this final rule retains 
the requirement as proposed.
    FNS further proposed to establish at Sec.  249.8(b) one minimum and 
one maximum benefit level in the SFMNP, regardless of the program model 
used by the State agency. We recognized the impact of this proposal on 
the CSA program models in use by SFMNP State agencies around the 
country. The revised approach to participant benefit levels designed in 
response to the comments received on this topic is discussed earlier in 
this preamble and reflected at Sec.  249.8.
    In Sec.  249.10(b)(3)(vi), FNS proposed to require that State 
agencies enter into written agreements with CSA programs, in order to 
ensure that CSA programs track the value of program benefits actually 
provided to individual participants and the remaining value owed, 
provide State agencies with access to such a tracking system, and 
ensure that the value of program benefits provided is consistent with 
program requirements addressing minimum and maximum benefit levels for 
each participant. None of the commenters addressed these requirements, 
and they are retained in this final rule as proposed.
    Finally, 2 SFMNP State agencies have used a portion of their grants 
to purchase CSA program shares that are then used to supplement meals 
served at congregate feeding sites. Such a practice was technically 
allowable under the SFMNP competitive grants, primarily because there 
were no legislative or regulatory provisions to prevent it and the 
grants provided an opportunity to look at various program models. 
However, it is not consistent with the underlying intent of the SFMNP, 
which is to provide individual low-income seniors with a resource that 
benefits their diets directly, rather than through any type of 
congregate feeding program. Therefore, at Sec.  249.12(a)(3), FNS 
proposed that the use of any SFMNP funds to supplement congregate meal 
programs would be specifically prohibited. A total of 21 commenters 
wrote to protest this prohibition. However, FNS believes that adherence 
to the fundamental intent of the SFMNP cannot be ensured without such a 
restriction, and is retaining this provision as set forth in the 
proposed rule.
11. Financial Management System (Sec.  249.11)
    This section of the proposed rule set forth FNS' specific 
requirements that would ensure the prompt and accurate payment or 
allowable costs in the SFMNP, as well as the allowability and 
allocability of costs in accordance with established general accounting 
and management procedures. Only one comment was received regarding this 
section, expressing general support for its provisions. Therefore, this 
section is retained in its entirety as proposed.
12. SFMNP Costs (Sec.  249.12)
a. Administrative Funding
    The proposed SFMNP rule contained a provision that would have 
allowed a State agency to use up to 8 percent of its total Federal 
grant to defray administrative costs associated with the SFMNP, as 
described at Sec.  249.12(a)(1)(i). Nearly 40 comments were received in 
opposition to the 8 percent administrative allowance, citing the 
extensive increase in administrative requirements for State and local 
agencies as well as the inequity between the administrative cost 
allowance for the FMNP and the proposed level for the SFMNP--a problem 
for the many State agencies that administer both programs. Based on 
commenters' suggestions, FNS has increased the maximum administrative 
allowance for the SFMNP in this final rule to 10 percent of the State 
agency's total Federal grant. This position is consistent with OMB 
Circular A-87 and the mission of this Agency to provide a level of 
administrative funding to help reasonably offset the costs for 
administering the program.
    Eleven commenters also suggested that FNS should secure additional 
Federal funds for the SFMNP to cover the administrative allowance. This 
is not an issue that can be addressed through the regulatory process.

[[Page 74629]]

b. Food and Administrative Costs
    As proposed, this section of the rule defined allowable and 
unallowable costs for the SFMNP, and defined specified allowable SFMNP 
costs. No comments were received that specifically addressed this 
section. It is retained in the final rule as proposed.
13. SFMNP Income (Sec.  249.13)
    As proposed, this section defined program income for the SFMNP as 
gross income the State agency earns from grant-supported activities, 
and established procedures for its use and documentation. No comments 
were received that specifically addressed this section. It is retained 
in the final rule as proposed.
14. Distribution of Funds to State Agencies (Sec.  249.14)
    In order to grandfather in those State agencies currently 
participating in the SFMNP competitive grant program, as previously 
discussed in Section 5 of this preamble, Selection of State Agencies, 
it was necessary to establish some fundamental principles for the 
allocation of SFMNP funds. The preamble to the proposed rule provided a 
comprehensive description of FNS' proposal for allocating both base 
grants and any SFMNP funds that might be available for expansion once 
the base grants are fulfilled. Briefly, SFMNP base grant levels would 
be based on the prior fiscal year's grant levels (rather than the prior 
year's expenditures); in the event that the amount of funding available 
to the SFMNP in any fiscal year is not sufficient to maintain the prior 
year funding levels for each participating SFMNP State agency, each 
State's grant would be ratably reduced by FNS. Once the base grants 
have been satisfied, any remaining funds that are available to the 
SFMNP will be allocated so that 75 percent of the remaining funding 
would be available to currently participating State agencies to expand 
their existing programs, and 25 percent would be available to State 
agencies with approved State plans that have not previously 
participated in the SFMNP. If either amount is greater than the amount 
necessary to satisfy requests for that category (i.e., current State 
agencies or new State agencies), the unallocated amount is then applied 
toward satisfying any unmet need in the other category.
    Most of the 15 commenters that addressed these provisions were 
supportive of the base grant provision, but opinions were divided 
regarding the division of available funds after base grant commitments 
are met; one commenter specifically supported the 75/25 split, and 3 
commenters suggested a 50/50 split instead. Other comments included a 
recommendation to give preference to new State agencies over current 
ones, and 3 commenters stated that SFMNP funding is not proportionally 
allocated and that all State agencies should have an equal chance to 
secure funds for the SFMNP at the beginning of each year. However, FNS 
continues to believe that the funding allocation process set forth in 
the SFMNP proposed rule is the most logical and equitable process for 
the disbursal of SFMNP funds. Thus, these provisions are retained in 
this final rule as proposed.
    It was also suggested that SFMNP funds should be made available to 
all interested State agencies and ITOs, and that funding should be 
increased for the SFMNP. As indicated earlier in this section, these 
are not matters that can be addressed through the promulgation of 
program regulations.
    Finally, 4 commenters suggested that a timeline for base grant and 
expansion funding allocations be set out in the SFMNP regulations. FNS 
will allocate the funds as soon as they become available. No changes 
have been made in this final rule to address this commitment.
15. Closeout Procedures (Sec.  249.15)
    As proposed, this section required SFMNP State agencies to submit a 
final closeout report to FNS for each fiscal year, and set forth the 
specific procedures to be followed when a SFMNP grant to a State agency 
is terminated. No comments were received that specifically addressed 
this section. It is retained in this final rule as proposed.
16. Administrative Appeal of State Agency Decisions (Sec.  249.16)
    As proposed, SFMNP State agencies are required to provide a hearing 
procedure whereby any entity (applicants, participants, local agencies 
and farmers, farmers' markets, roadside stands, and/or CSA programs) 
adversely affected by certain actions of the State agency may appeal 
those actions. This section provided a list of the adverse actions that 
may be appealed. It also set out the procedures that must be followed 
when an appeal is requested, and clarifies that appealing an adverse 
action does not relieve the entity that has been permitted to continue 
in the SFMNP while its appeal is pending from responsibility for 
continued compliance with the terms of the written agreement or 
contract with the State agency. Finally, as proposed, Sec.  249.16 
required that the State agency explain the appellant's right to 
judicial review of any State level decision rendered against the 
appellant, and set forth additional proposed appeals procedures for 
State agencies that authorize farmers' markets rather than individual 
farmers.
    Three comments were received that objected to the provisions in 
this section as too burdensome, and suggested that a less formal system 
be permitted. FNS does not agree with these comments. The requirements 
set forth regarding a formal hearing process for participants are 
necessary to ensure due process for any participant against whom an 
adverse action has been taken, and as such are critically important to 
protecting the rights of all participants. Therefore, the requirements 
set forth in the proposed rule are retained in this final rule.
17. Management Evaluations and Reviews (Sec.  249.17)
    This section of the proposed rule would have required FNS and each 
SFMNP State agency to establish a management evaluation system in order 
to assess the accomplishment of SFMNP objectives, the State Plan, and 
the written agreement with FNS. No comments were received that 
specifically addressed this section. Therefore, the monitoring 
requirements are retained in this final rule as proposed.
18. Audits (Sec.  249.18)
    As proposed, this section set forth the specific audit requirements 
for SFMNP State agencies. No comments were received that specifically 
addressed this section. It is retained in this final rule as proposed.
19. Investigations (Sec.  249.19)
    Under this section of the proposed rule, FNS would be allowed to 
make an investigation of any allegation of noncompliance with the SFMNP 
regulations and FNS guidelines and instructions. As proposed, this 
section also requires that the identity of every complainant be kept 
confidential to the maximum extent possible. No comments were received 
that specifically addressed this section. It is retained in this final 
rule as proposed.
20. Claims and Penalties (Sec.  249.20)
    As proposed, this section established procedures for the assessment 
of claims against a State agency, established the conditions under 
which interest would accrue on any unpaid claim against a State agency, 
and set out mandatory penalties for embezzlement, willful

[[Page 74630]]

misapplication, theft, or fraudulent acquisition of SFMNP funds. No 
comments were received that specifically addressed the provisions 
related to claims and interest charges against State agencies (Sec.  
249.20(a) and (b)). These provisions are retained in this final rule as 
proposed.
    Although no comments were received on the provision concerning 
penalties for embezzlement, willful misapplication, theft, or 
fraudulent acquisition (Sec.  249.20(c)), upon further review, we do 
not believe these provisions are authorized by the SFMNP legislation. 
The provisions proposed at Sec.  249.20(c) are therefore deleted from 
the final rule. It should be noted, however, that the actions specified 
in the proposed rule are punishable under other Federal and State 
criminal laws.
21. Procurement and Property Management (Sec.  249.21)
    The requirements in this section were proposed by FNS to ensure 
that all materials and services are obtained for the SFMNP in an 
effective manner and in compliance with the provisions of applicable 
law and executive orders. No comments were received that specifically 
addressed this section. It is retained in this final rule as proposed.
22. Nonprocurement/Suspension, Drug-Free Workplace, and Lobbying 
Restrictions (Sec.  249.22)
    Under the proposed rule, SFMNP State agencies were required to 
ensure compliance with the requirements of FNS' regulations governing 
nonprocurement debarment and suspension, drug-free workplace, and FNS' 
regulations governing restrictions on lobbying, where applicable. No 
comments were received that specifically addressed this section. It is 
retained in this final rule as proposed.
23. Records and Reports (Sec.  249.23)
    As proposed, this section set forth FNS' requirements to ensure 
that each SFMNP State agency maintains full and complete records 
concerning SFMNP operations, including the types of records that must 
be maintained, retention requirements for such records, and provisions 
addressing the access and availability of such records. It also 
required State agencies to submit financial and SFMNP performance data 
on a yearly basis as specified by FNS, and identified the minimum data 
that must be provided in such reports. In response to a technical 
comment, the words ``and type''are removed from Sec.  249.23(b)(1) of 
the final rule; they are not applicable to the SFMNP.
24. Data Safeguarding Requirements (Sec.  249.24)
    This section of the proposed rule would affirm the Department's 
commitment to protecting the privacy of SFMNP applicants and 
participants by restricting the use or disclosure of information 
obtained from SFMNP applicants and participants to individuals directly 
connected with the operation or enforcement of the SFMNP, 
representatives of public organizations that administer food, 
nutrition, or other assistance programs serving persons categorically 
eligible for the SFMNP when written agreements with such organizations 
are in place, and the Comptroller General of the United States, for 
audit purposes. Although no comments were received that specifically 
addressed this section, it has been slightly revised and renamed for 
clarity.
25. Other Provisions (Sec.  249.25)
    Section 249.25(a) of the proposed rule clarified that participation 
in the SFMNP did not preclude a participant from participating in food 
or nutrition assistance programs for which she/he may also be eligible. 
Two commenters wrote to support this provision. No other comments were 
received that specifically addressed this section. It is retained in 
this final rule as proposed.
26. SFMNP Information (Sec.  249.26)
    This section lists the seven Regional offices of FNS, provides 
their contact information, and identifies the State agencies that are 
covered by each one.
27. OMB Control Number (Sec.  249.27)
    The information collections in this rule are being reviewed by OMB 
and will not be effective until they have received OMB approval. Once 
they have received OMB approval, FNS will publish a notice in the 
Federal Register.

List of Subjects in 7 CFR Part 249

    Aging, Community supported agriculture programs, Elderly, Farmers, 
Farmers' markets, Food assistance programs, Food donations, Grant 
programs, Nutrition education, Public assistance programs, Seniors, 
Social programs.

0
Accordingly, 7 CFR part 249 is added to read as follows:

PART 249--SENIOR FARMERS' MARKET NUTRITION PROGRAM (SFMNP)

Subpart A--General

Sec.

249.1 General purpose and scope.
249.2 Definitions.
249.3 Administration.

Subpart B--State Agency Eligibility

249.4 State plan.
249.5 Selection of new State agencies.

Subpart C--Participant Eligibility

249.6 Participant eligibility.
249.7 Nondiscrimination.

Subpart D--Participant Benefits

249.8 Level of benefits and eligible foods.
249.9 Nutrition education.

Subpart E--State Agency Provisions

249.10 Coupon, market, and CSA program management.
249.11 Financial management system.
249.12 SFMNP costs.
249.13 Program income.
249.14 Distribution of funds to State agencies.
249.15 Closeout procedures.
249.16 Administrative appeal of State agency decisions.

Subpart F--Monitoring and Review of State Agencies

249.17 Management evaluations and reviews.
249.18 Audits.
249.19 Investigations.

Subpart G--Miscellaneous Provisions

249.20 Claims and penalties.
249.21 Procurement and property management.
249.22 Nonprocurement debarment/suspension, drug-free workplace, and 
lobbying restrictions.
249.23 Records and reports.
249.24 Data safeguarding requirements.
249.25 Other provisions.
249.26 SFMNP information.
249.27 OMB control number. [Reserved]

    Authority: 7 U.S.C. 3007.

Subpart A--General


Sec.  249.1  General purpose and scope.

    (a) This part announces regulations under which the Secretary of 
Agriculture shall carry out the Senior Farmers' Market Nutrition 
Program (SFMNP). The purposes of the SFMNP are to:
    (1) Provide resources in the form of fresh, nutritious, unprepared, 
locally grown fruits, vegetables and herbs from farmers' markets, 
roadside stands, and community supported agriculture (CSA) programs to 
low-income seniors;
    (2) Increase the domestic consumption of agricultural commodities 
by expanding or aiding in the expansion of domestic farmers' markets, 
roadside stands, and CSAs; and

[[Page 74631]]

    (3) Develop or aid in the development of new and additional 
farmers' markets, roadside stands, and CSAs.
    (b) These goals will be accomplished through payment of cash grants 
to approved State agencies. The SFMNP shall be supplementary to the 
food stamp program carried out under the Food Stamp Act of 1977 (7 
U.S.C. 2011, et seq.), and to any other Federal or State food or 
nutrition assistance program under which foods are distributed to needy 
families in lieu of food stamps.


Sec.  249.2  Definitions.

    For the purpose of this part and all contracts, guidelines, 
instructions, forms and other documents related hereto, the term:
    Administrative costs means those direct and indirect costs (as 
defined in--249.12(a)(1)(ii)), exclusive of food costs, which State 
agencies determine to be necessary to support SFMNP operations. 
Administrative costs include, but are not limited to, the costs 
associated with administration and start-up; the provision of nutrition 
education; SFMNP coupon issuance; participant education covering coupon 
redemption procedures; eligibility determinations; outreach services; 
printing SFMNP coupons, processing redeemed coupons, and training 
farmers, market managers, and/or farmers who operate CSA programs on 
the food delivery system; monitoring and reviewing program operations; 
required reporting and recordkeeping; determining which local sites 
will be utilized; recruiting and authorizing farmers, farmers' markets, 
roadside stands, and/or CSA programs to participate in the SFMNP; 
preparing contracts for farmers, farmers' markets, roadside stands, 
and/or CSA programs; developing a data processing system for redemption 
and reconciliation of coupons; designing program training and 
informational materials; and coordinating SFMNP implementation 
responsibilities between designated administering agencies.
    Bulk purchase means a program model in which bulk quantities of 
certain produce items, such as apples or sweet potatoes, are purchased 
directly from authorized farmers by the State agency, and are then 
equitably divided among and distributed directly to eligible SFMNP 
participants, either at a central distribution point (such as a local 
senior center) or through some type of home delivery network.
    Community supported agriculture (CSA) program means a program under 
which a farmer or group of farmers grows food for a group of 
shareholders (or subscribers) who pledge to buy a portion of the 
farmer's crop(s) for that season. State agencies may purchase shares or 
subscribe to a community supported agriculture program on behalf of 
individual SFMNP participants.
    Compliance buy means a covert, on-site investigation in which a 
SFMNP representative poses as a SFMNP participant or authorized 
representative and attempts to transact one or more SFMNP coupons, or, 
in the case of CSA programs, attempts to obtain eligible foods 
purchased with SFMNP funds at a distribution site.
    Coupon means a check or other negotiable financial instrument by 
which benefits under the program are transferred to program 
participants.
    Days means calendar days.
    Department means the U.S. Department of Agriculture.
    Distribution site means the location where packages of eligible 
foods are assembled for and/or distributed to SFMNP participants who 
are shareholders in CSA programs.
    Eligible foods means fresh, nutritious, unprepared, locally grown 
fruits, vegetables and herbs for human consumption. Eligible foods may 
not be processed or prepared beyond their natural state except for 
usual harvesting and cleaning processes. Dried fruits or vegetables, 
such as prunes (dried plums), raisins (dried grapes), sun-dried 
tomatoes, or dried chili peppers are not considered eligible foods. 
Potted fruit or vegetable plants, potted or dried herbs, wild rice, 
nuts of any kind (even raw), honey, maple syrup, cider, seeds, eggs, 
meat, cheese and seafood are also not eligible foods for purposes of 
the SFMNP.
    Farmer means an individual authorized to sell eligible foods at 
participating farmers' markets and/or roadside stands, and through 
CSAs. Individuals who exclusively sell produce grown by someone else, 
such as wholesale distributors, cannot be authorized to participate in 
the SFMNP. A participating State agency has the option to authorize 
individual farmers or farmers' markets, roadside stands, and/or CSA 
programs.
    Farmers' market means an association of local farmers who assemble 
at a defined location for the purpose of selling their produce directly 
to consumers.
    Federally recognized Indian tribal government means the same as the 
definition of that term found at Sec.  3016.3 of this chapter, i.e., 
the governing body or a governmental agency of any Indian tribe, band, 
organization, or other organized group or community (including any 
Native village as defined in section 3 of the Alaska Native Claims 
Settlement Act, 85 Stat. 688) certified by the Secretary of the 
Interior as eligible for the special programs and services provided by 
the Secretary through the Bureau of Indian Affairs.
    Fiscal year means the period of 12 calendar months beginning 
October 1 of any calendar year and ending September 30 of the following 
calendar year.
    FNS means the Food and Nutrition Service of the U.S. Department of 
Agriculture.
    Food costs means the cost of eligible foods purchased at authorized 
farmers' markets, roadside stands, and/or through bulk purchases or CSA 
programs.
    Household means a group of related or nonrelated individuals who 
are living together as one economic unit.
    Local agency means any nonprofit entity or local government agency 
that certifies eligible participants, issues SFMNP coupons, arranges 
for distribution of eligible foods through CSA programs, and/or 
provides nutrition education or information on operational aspects of 
the Program to SFMNP participants.
    Locally grown means grown within State borders. If the State agency 
chooses, locally grown may also mean grown in areas of States adjacent 
to that State, as long as such areas are part of the United States.
    Nonprofit agency means a private agency that is exempt from the 
payment of Federal income tax under the Internal Revenue Code of 1986, 
as amended (26 U.S.C. 1, et seq.).
    Nutrition education means:
    (1) Individual or group sessions; and
    (2) The provision of relevant materials, in keeping with the 
individual's personal, cultural, and socioeconomic preferences and the 
Dietary Guidelines for Americans, that:
    (i) Emphasize relationships between nutrition and health; and
    (ii) Encourage participants to build healthful eating patterns, and 
to take action for good health.
    OIG means FNS' Office of Inspector General.
    Participant means a person or household who meets the eligibility 
requirements of the SFMNP and to whom coupons or equivalent benefits 
have been issued.
    Program or SFMNP means the Senior Farmers' Market Nutrition Program 
authorized by Section 4402 of the Farm Security and Rural Investment 
Act of 2002, 7 U.S.C. 3007.
    Proxy means an individual authorized by an eligible senior to act 
on the senior's behalf, including application for certification, 
receipt of SFMNP

[[Page 74632]]

coupons or other benefits, use of SFMNP coupons at authorized outlets, 
and/or acceptance of SFMNP foods provided through a CSA program, as 
long as the SFMNP benefits are ultimately received by the eligible 
senior. The terms proxy and authorized representative may be used 
interchangeably for purposes of this program.
    Roadside stand means a location at which an individual farmer sells 
his/her produce directly to consumers. This is in contrast to a group 
or association of farmers selling their produce at a farmers' market or 
through a CSA program. The term roadside stand may be used 
interchangeably with the term farmstand as defined in Sec.  248.2 of 
this chapter.
    Senior means an individual 60 years of age or older, or as defined 
in Sec.  249.6(a)(1).
    SFPD means the Supplemental Food Programs Division of the Food and 
Nutrition Service of the U.S. Department of Agriculture.
    Shareholder means a SFMNP participant for whom a full or partial 
share in a community supported agriculture program has been purchased 
by the State agency, and who receives SFMNP benefits in the form of 
actual eligible foods rather than coupons that must be exchanged for 
eligible foods at farmers' markets and/or roadside stands.
    State means any of the 50 States, the District of Columbia, the 
Commonwealth of Puerto Rico, the Virgin Islands, Guam, and as 
applicable, American Samoa or the Commonwealth of the Northern 
Marianas.
    State agency means the agriculture, aging, or health department, or 
any other agency approved by the Chief Executive Officer of the State 
that has administrative responsibility for the SFMNP; an intertribal 
council or group that is an authorized representative of Indian tribes, 
bands, or groups recognized by FNS of the Interior and that has an 
ongoing relationship with such tribes, bands, or groups for other 
purposes and has contracted with them to administer the Program; or the 
appropriate area office of the Indian Health Service, a division of FNS 
of Health and Human Services.
    State Plan means a plan of SFMNP operation and administration that 
describes the manner in which the State agency intends to implement, 
operate and administer all aspects of the SFMNP within its jurisdiction 
in accordance with Sec.  249.4.
    WIC means the Special Supplemental Nutrition Program for Women, 
Infants and Children authorized by Section 17 of the Child Nutrition 
Act of 1966 (42 U.S.C. 1786).
    WIC Farmers' Market Nutrition Program (FMNP) means the nutrition 
assistance program authorized by Section 17(m) of the Child Nutrition 
Act of 1966 (42 U.S.C. 1786(m)), to provide resources to women, 
infants, and children who are nutritionally at risk, in the form of 
fresh, nutritious, unprepared foods (such as fruits and vegetables) 
from farmers' markets; to expand the awareness and use of farmers' 
markets; and to increase sales at such markets.


Sec.  249.3  Administration.

    (a) Delegation to FNS. Within FNS, FNS shall act on behalf of the 
Department in the administration of the SFMNP. Within FNS, SFPD and the 
FNS Regional Offices are responsible for SFMNP administration. FNS 
shall provide assistance to State agencies and evaluate all levels of 
SFMNP operations to ensure that the goals of the SFMNP are achieved in 
the most effective and efficient manner possible.
    (b) Delegation to State agency. The State agency is responsible for 
the effective and efficient administration of the SFMNP in accordance 
with the requirements of this Part; the requirements of FNS' 
regulations governing nondiscrimination (parts 15, 15a and 15b of this 
title), administration of grants (part 3016 of this title), 
nonprocurement debarment/suspension (part 3017 of this title), drug-
free workplace (part 3021 of this title), and lobbying (part 3018 of 
this title); FNS guidelines; FNS Instructions issued under the FNS 
Directives Management System; and Office of Management and Budget 
Circular A-130 (For availability of OMB Circulars referenced in this 
section, see 5 CFR 1310.3). The State agency shall provide guidance to 
cooperating State and local agencies on all aspects of SFMNP 
operations. State agencies may operate the SFMNP locally through 
nonprofit organizations or local government entities and must ensure 
coordination among the appropriate agencies and organizations.
    (c) Agreement and State Plan. Each State agency desiring to 
administer the SFMNP shall annually submit a State Plan of Operations 
and enter into a written agreement with FNS for administration of the 
Program in the jurisdiction of the State agency in accordance with the 
provisions of this Part. If the State agency administers both the SFMNP 
and the WIC Farmers' Market Nutrition Program (FMNP), one consolidated 
State Plan may be submitted for both programs, in accordance with 
guidance provided by FNS.
    (d) Coordination with other agencies. The Chief Executive Officer 
of the State shall ensure coordination between the designated 
administering State agency and any other State, local, or nonprofit 
agencies or entities involved in administering any aspect of the SFMNP 
by ensuring that the agencies enter into a written agreement or letter/
memorandum of understanding. The written agreement or letter/memorandum 
of understanding must delineate the responsibilities of each agency, 
describe any compensation for services, and must be signed by the 
designated representative of each agency. This agreement must be 
submitted each year along with the State Plan.
    (e) State staffing standards. Each State agency shall ensure that 
sufficient staff is available to administer the SFMNP efficiently and 
effectively. This shall include, but not be limited to, sufficient 
staff to identify and certify eligible SFMNP participants, provide 
program information and nutrition education to participants, and 
oversee coupon, market, and/or CSA program management, fiscal 
reporting, monitoring, and training. The State agency shall provide in 
its State Plan an outline of administrative staff and job descriptions 
for staff whose salaries will be paid from program funds.

Subpart B--State Agency Eligibility


Sec.  249.4  State Plan.

    (a) Requirements. By November 15 of each year, each applying or 
participating State agency shall submit to FNS for approval a State 
Plan for the following year as a prerequisite to receiving funds under 
this section. If the State agency administers both the SFMNP and the 
FMNP, one consolidated State Plan may be submitted for both programs, 
in accordance with guidance provided by FNS. The State Plan must be 
signed by the State-designated official responsible for ensuring that 
the Program is operated in accordance with the State Plan. FNS will 
provide written approval or denial of a completed State Plan or 
amendment within 30 days of receipt. Portions of the State Plan that do 
not change annually need not be resubmitted. However, the State agency 
shall provide the title of the sections that remain unchanged, as well 
as the year of the last Plan in which the sections were submitted. At a 
minimum, the Plan must include the following items, which must include 
sufficient detail to demonstrate the State agency's ability to meet the 
requirements of the SFMNP:

[[Page 74633]]

    (1) A copy of the agreement between the designated administering 
State agency and any other cooperating State, local, or nonprofit 
agencies or organizations for services such as certification of 
eligible participants, issuance of SFMNP coupons or benefits, and/or 
nutrition education, as required in Sec.  249.3(d).
    (2) A description of the State agency's procedures for identifying 
and certifying eligible SFMNP participants, including the specific age 
and income criteria that will be used to determine SFMNP eligibility.
    (3) An estimated number of participants for the fiscal year, and 
proposed months of operation.
    (4) A detailed budget for the SFMNP, including:
    (i) The minimum amount necessary to operate the SFMNP;
    (ii) A description of the Federal and non-Federal funds that will 
be used to operate the Program; and
    (iii) An assurance that no more than 50 percent of the Federal 
SFMNP grant will be used to support a CSA program model for the 
delivery of SFMNP benefits.
    (5) An outline of administrative staff and job descriptions.
    (6) A detailed description of the SFMNP recordkeeping system 
including, but not limited to, the system for maintaining separate 
records for SFMNP funds pertaining to financial operations, coupon 
issuance and redemption, authorization of farmers, markets, and/or CSA 
programs, distribution of eligible foods through CSA programs, and 
SFMNP participation.
    (7) A detailed description of the State agency's financial 
management system, including how the system will provide accurate, 
current and complete disclosure of the program's financial status and 
required reports.
    (8) A detailed description of the service area, including:
    (i) The number and addresses of authorized farmers, farmers' 
markets, roadside stands, and community supported agriculture programs 
that participated in the SFMNP during the prior year; and
    (ii) SFMNP certification/issuance sites (such as senior centers or 
senior housing facilities), including a map outlining the service area 
and proximity of markets, roadside stands, and/or community supported 
agriculture programs to certification/issuance or distribution sites 
that participated in the SFMNP during the prior year.
    (9) A description of the coupon issuance system including:
    (i) A description of how the State agency will target areas with 
the highest concentrations of eligible persons and greatest access to 
farmers' markets and/or roadside stands;
    (ii) The benefit level per participant, or household if benefits 
are issued on a household basis, including:
    (A) How coupons will be issued;
    (B) The value of benefits provided to each participant or household 
at each issuance during the year;
    (C) The frequency of coupon issuance; and
    (D) The total amount of SFMNP benefits issued to each participant 
or household during the year.
    (iii) A method for instructing participants on the proper use of 
SFMNP coupons and the purpose of the SFMNP;
    (iv) A method for ensuring that SFMNP coupons are issued only to 
eligible participants; and
    (v) A method for preventing and identifying dual participation, in 
accordance with Sec.  249.6(d)(1).
    (10) If the agency is using a ``paperless'' system, i.e., a system 
that does not issue actual coupons, a complete description of how such 
a system will be operated in a manner that ensures the integrity of 
SFMNP funds and benefits.
    (11) A detailed description of the SFMNP coupon redemption process 
including:
    (i) The procedures for ensuring the secure transportation and 
storage of SFMNP coupons;
    (ii) A system for identifying and reconciling SFMNP coupons; and
    (iii) The timeframes for SFMNP coupon redemption by participants, 
submission for payment by farmers or authorized outlets (farmers' 
markets and/or roadside stands), and payment by the State agency.
    (12) A description of the State agency's CSA program, if 
applicable, including:
    (i) How the State agency will target and select community supported 
agriculture programs designed to provide SFMNP benefits to eligible 
participants;
    (ii) The annual benefit amount per participant or household, if 
benefits are issued on a household basis;
    (iii) How CSA program contracts are developed, negotiated, and 
executed by the State agency;
    (iv) How CSA program shares are allocated to eligible SFMNP 
participants;
    (v) A method for instructing participants and farmers participating 
in the CSA program on the purpose of the SFMNP, and the procedures for 
delivery and distribution of eligible foods provided for the SFMNP 
through the CSA;
    (vi) A system to ensure receipt by eligible participants of 
eligible foods provided through a CSA program. Such a system should 
include a written receipt or distribution log, with the participant's 
signature (or that of the eligible participant's proxy, if proxies are 
allowed) and the date of each distribution;
    (vii) The payment procedures for the CSA program(s) used by the 
State agency;
    (viii) How the State agency ensures that the full value of eligible 
foods for which it has contracted is provided regularly throughout the 
SFMNP season;
    (ix) A listing of delivery dates and distribution sites for CSA 
program-provided eligible foods; and
    (x) A system for ensuring that each SFMNP shareholder receives an 
equitable amount of eligible foods at each delivery, and that the total 
value of the eligible foods provided under the SFMNP falls within the 
minimum and maximum Federal SFMNP benefit levels, as specified in Sec.  
249.8(b).
    (13) A complete description of age- and circumstance-appropriate 
nutrition education to be provided to SFMNP participants, including:
    (i) The agencies that will provide the nutrition education;
    (ii) The format(s) in which the nutrition education will be 
provided; and
    (iii) The locations where nutrition education is likely to be 
provided.
    (14) A detailed description of the State agency's system for 
managing its coupon, market, and CSA program management systems, 
including:
    (i) The criteria for authorizing farmers' markets, roadside stands, 
and/or community supported agriculture programs, including the agency 
responsible for authorization;
    (ii) The procedures for training farmers, market managers, and/or 
CSA program farmers at authorization, and annually thereafter;
    (iii) The procedures for monitoring farmers' markets, roadside 
stands, and/or community supported agriculture programs;
    (iv) A description of the State agency's system for identifying 
high-risk farmers and farmers' markets, roadside stands, and/or 
community supported agriculture programs, as set forth at Sec.  
249.10(e)(2)(ii);
    (v) The procedures for sanctioning farmers, farmers' markets, 
roadside stands, and/or community supported agriculture programs;
    (vi) A facsimile of the SFMNP coupon, including the denominations 
of

[[Page 74634]]

coupons that will be issued, and a clear indication of where the 
participant/proxy and (if applicable) farmer are required to sign, 
stamp, or otherwise endorse the coupon before it can be redeemed;
    (vii) A complete listing of the fresh, nutritious, unprepared 
fruits, vegetables, and herbs eligible for purchase under the SFMNP;
    (viii) A description of SFMNP coupon replacement policy or 
statement that coupons will not be replaced; and
    (ix) The State agency's procedures for handling participant and 
farmer/farmers' market, roadside stands, and CSA program complaints.
    (15) A system for ensuring that SFMNP coupons are redeemed only by 
authorized farmers/farmers' markets/roadside stands, and only for 
eligible foods.
    (16) A system for identifying SFMNP coupons that are redeemed or 
submitted for payment outside valid dates or by unauthorized farmers/
farmers' markets/roadside stands.
    (17) A copy of the written agreement to be used between the State 
agency and authorized farmers/farmers' markets, roadside stands, and/or 
CSA programs. In those States that authorize farmers' markets, but not 
individual farmers, this agreement shall specify in detail the role of 
and procedures to be used by farmers' markets for monitoring and 
sanctioning farmers, and the appropriate procedures to be used by a 
farmer to appeal a sanction or disqualification imposed by a farmers' 
market.
    (18) If available, information on the change in consumption of 
fresh fruits, vegetables, and herbs by SFMNP participants. This 
information shall be submitted as an addendum to the State Plan and 
shall be submitted at a date specified by the Secretary.
    (19) If available, information on the effects of the program on 
farmers' markets, roadside stands, and/or CSA programs. This 
information shall be submitted as an addendum to the State Plan and 
shall be submitted at a date specified by the Secretary.
    (20) A description of the procedures the State agency will use to 
comply with the civil rights requirements described in Sec.  249.7(a), 
including the processing of discrimination complaints.
    (21) A copy of the State agency's fair hearing procedures for SFMNP 
participants and the administrative appeal procedures for local 
agencies, farmers, farmers' markets, roadside stands, and/or CSA 
programs.
    (22) State agencies that have not previously participated in the 
SFMNP must provide:
    (i) A description of the need for the SFMNP in that State agency;
    (ii) The specific goals and objectives of the SFMNP, designed to 
fulfill the purpose of the Program as set forth in Sec.  249.1; and
    (iii) A capability statement that includes a summary description of 
any prior experience with farmers' market projects or programs, 
including information and data describing the attributes of such 
projects or programs.
    (23) For State agencies making expansion requests, documentation 
that demonstrates:
    (i) The need for an increase in funding;
    (ii) That the use of the increased funding will be consistent with 
serving eligible SFMNP participants by expanding benefits to more 
persons, by enhancing current benefits, or a combination of both, and 
expanding the awareness and use of farmers' markets, roadside stands, 
and CSA programs;
    (iii) The ability of the State agency to operate the existing SFMNP 
satisfactorily;
    (iv) The management capabilities of the State agency to expand; and
    (v) Whether, in the case of a State agency that intends to use the 
funding to increase the value of the Federal benefits received by a 
participant, the funding provided will increase the rate of coupon 
redemption.
    (b) Amendments. At any time after approval, the State agency may 
amend the State Plan to reflect changes. The State agency shall submit 
such amendments to FNS for approval. The proposed amendments shall be 
signed by the State-designated official responsible for ensuring that 
the SFMNP is operated in accordance with the State Plan. The amendments 
must be approved by FNS prior to implementation.
    (c) Retention of copy. A copy of the approved State Plan shall be 
kept on file at the State agency for public inspection.


Sec.  249.5  Selection of new State agencies.

    In selecting new State agencies, FNS will use objective criteria to 
rank and approve State plans submitted in accordance with Sec.  249.4. 
In making this ranking, FNS will consider the amount of funds necessary 
to operate the SFMNP successfully in the State compared with other 
States and with the total amount of funds available to the SFMNP, the 
number of participants estimated to be served, and the projected 
benefit level. Approval of a State Plan does not equate to an 
obligation on the part of FNS to fund the SFMNP within that State.

Subpart C--Participant Eligibility


Sec.  249.6  Participant eligibility.

    (a) Eligibility for certification. Individuals who are eligible to 
receive Federal benefits under the SFMNP are those who meet the 
following criteria:
    (1) Categorical eligibility. Participants must be not less than 60 
years of age, except that State agencies may exercise the option to 
deem Native Americans who are 55 years of age or older as categorically 
eligible for SFMNP benefits. State agencies may, at their discretion, 
also deem disabled individuals less than 60 years of age who are 
currently living in housing facilities occupied primarily by older 
individuals where congregate nutrition services are provided, as 
categorically eligible to receive SFMNP benefits.
    (2) Residency requirement. The State agency may establish a 
residency requirement for SFMNP applicants. The State agency may 
determine a service area for any local agency, and may require that an 
applicant be residing within the service area at the time of 
application to be eligible for the Program. However, the State agency 
may not impose any durational or fixed residency requirements.
    (3) Income eligibility. The State agency must ensure that local 
agencies determine income eligibility through the use of a clear and 
simple application process approved by the State agency. Participants 
must have a maximum household income of not more than 185 percent of 
the annual poverty income guidelines, or be determined automatically 
income eligible based on current participation/eligibility to receive 
benefits in another means-tested program, as designated by the State 
agency, for which income eligibility is set at or below 185 percent of 
the poverty income guidelines and for which documentation of family 
income is required. FNS will announce the income poverty guidelines 
annually.
    (b) Documentation of income eligibility.
    (1) Automatically income eligible applicants. The State or local 
agency must require applicants determined to be automatically income 
eligible to provide documentation of their eligibility to participate 
in another means-tested assistance program, as designated by the State 
agency.
    (2) Other applicants.
    (i) The State or local agency must require all other applicants to 
provide, at a minimum, a signed statement affirming that their 
household size and income does not exceed the maximum income 
eligibility standard in use by the State agency.

[[Page 74635]]

    (ii) If the State agency offers a benefit of more than $50 per 
participant through a CSA program, it must require documentation of 
household size and income from all participants receiving the higher 
benefit level.
    (iii) The State agency has the option to require all applicants to 
provide documentation of family income at certification, and/or to 
require verification of the information provided by the applicant.
    (c) Certification periods. Participants may be certified only for 
the current fiscal year's SFMNP period of operation. Eligibility must 
be determined at the beginning of each period of operation. Prior 
fiscal year certifications may not be carried over into subsequent 
fiscal years, but the State agency may make use of its participant 
enrollment listings from the prior fiscal year in its outreach efforts 
for the current fiscal year.
    (d) Participant rights and responsibilities. Where a significant 
number or proportion of the population eligible to be served needs 
information regarding participation in the SFMNP in a language other 
than English, reasonable steps must be taken to provide this 
information in the appropriate language(s) to such persons, considering 
the scope of the Program and the size and concentration of such 
population(s). In order to inform applicants and participants or their 
authorized representatives/proxies of SFMNP rights and 
responsibilities, State/local agencies must provide the following 
information:
    (1) During the certification process, every program applicant or 
authorized representative must be informed of the illegality of dual 
participation, i.e., obtaining SFMNP benefits from more than one 
service delivery area or from more than one SFMNP program model (coupon 
system and CSA program) within the same service delivery area.
    (2) At the time of certification, each SFMNP applicant or 
authorized representative must read or have read to him or her the 
following statements or similar statements:

    I have been advised of my rights and obligations under the 
SFMNP. I certify that the information I have provided for my 
eligibility determination is correct, to the best of my knowledge. 
This certification form is being submitted in connection with the 
receipt of Federal assistance. Program officials may verify 
information on this form. I understand that intentionally making a 
false or misleading statement or intentionally misrepresenting, 
concealing, or withholding facts may result in paying the State 
agency, in cash, the value of the food benefits improperly issued to 
me and may subject me to civil or criminal prosecution under State 
and Federal law.
    Standards for eligibility and participation in the SFMNP are the 
same for everyone, regardless of race, color, national origin, age, 
disability, or sex.
    I understand that I may appeal any decision made by the local 
agency regarding my eligibility for the SFMNP.

    (3) During the certification visit, each participant or authorized 
representative must:
    (i) Receive an explanation of how to use his/her SFMNP coupons at 
farmers' markets and roadside stands, and/or how SFMNP foods will be 
provided under the CSA program in that service delivery area; and
    (ii) Be advised of the other types of services that are available 
to SFMNP participants, where such services are located, how they may be 
obtained, and why they may be useful.
    (4) Persons found ineligible for the SFMNP during a certification 
visit must be advised in writing of their ineligibility, of the reasons 
for their ineligibility, and of their right to a fair hearing. The 
reasons for ineligibility must be properly documented and must be 
retained on file at the local agency. Such notice is not required when 
participation is denied solely because of lack of sufficient funding to 
provide SFMNP benefits to all eligible applicants.
    (5) When a State or local agency pursues collection of a claim 
pursuant to Sec.  249.20(c) against an individual who has been issued 
SFMNP benefits for which she/he is not eligible, the person must be 
advised in writing of the reason(s) for the claim, the value of the 
improperly issued benefits that must be repaid, and of his/her right to 
a fair hearing.
    (e) Certification without charge. Certification for the SFMNP must 
be performed at no cost to the applicant or the authorized 
representative.
    (f) Use of proxies or authorized representatives. At the State 
agency's discretion, a senior may designate an authorized 
representative (proxy) to apply for certification, shop at the farmers' 
market or roadside stands, and/or pick up their eligible foods from CSA 
program distribution sites on his/her behalf if the senior is unable to 
perform these actions. The State agency must obtain a signed statement 
from the eligible senior designating another individual as his/her 
authorized representative. A senior who has been certified to receive 
SFMNP benefits may designate an authorized representative at any point 
during the program's period of operation.
    (g) Processing standards. (1) Applicants for the SFMNP must be 
notified of their eligibility or ineligibility for benefits, or of 
their placement on a waiting list, as described in paragraph (g)(2) of 
this section, within 15 days from the date of application.
    (2) When all available program benefits have been allocated to 
eligible participants, and there is a reasonable expectation that 
additional funds may become available to provide further SFMNP benefits 
to eligible seniors, the local agency must maintain a waiting list of 
individuals who contact the local agency to apply for the Program. 
Individuals must be notified of their placement on a waiting list 
within 15 days after they contact the local agency to request Program 
benefits. To enable the local agency to contact these individuals when 
caseload space becomes available, the waiting list must include the 
name of the applicant, the date placed on the waiting list, and an 
address or phone number of the applicant.
    (h) Limitations on certification. If necessary to limit the number 
of participants, State agencies may impose additional eligibility 
requirements, such as limiting participant certification to certain 
geographic areas. Each State agency must specifically identify these 
limitations on certification in its State Plan.


Sec.  249.7  Nondiscrimination.

    (a) Civil rights requirements. (1) The State agency must comply 
with the following requirements to ensure that no person shall, on the 
grounds of race, color, national origin, age, sex or disability, be 
excluded from participation, be denied benefits, or be otherwise 
subjected to discrimination, under the SFMNP:
    (i) Title VI of the Civil Rights Act of 1964;
    (ii) Title IX of the Education Amendments of 1972;
    (iii) Section 504 of the Rehabilitation Act of 1973;
    (iv) The Age Discrimination Act of 1975;
    (v) Department of Agriculture regulations on nondiscrimination 
(parts 15, 15a and 15b of this title); and
    (vi) Applicable FNS Instructions, including requirements for racial 
and ethnic participation data collection, public notification of the 
nondiscrimination policy, and annual reviews of each local agency's 
racial and ethnic participation data (as required by title VI of the 
Civil Rights Act of 1964).
    (2) Compliance with Title VI of the Civil Rights Act of 1964, Title 
IX of the Education Amendments of 1972, Section 504 of the 
Rehabilitation Act of 1973, the Age Discrimination Act of

[[Page 74636]]

1975, and regulations and instructions issued thereunder shall include, 
but not be limited to:
    (i) Notification to the public of the nondiscrimination policy and 
complaint rights of participants and potentially eligible persons, 
which may be satisfied through FNS' required nondiscrimination 
statement on brochures and publications;
    (ii) Review and monitoring activity to ensure SFMNP compliance with 
the nondiscrimination laws and regulations; and
    (iii) Establishment of grievance procedures for handling 
participant complaints based on sex and handicap.
    (b) Complaints. Persons seeking to file discrimination complaints 
may file them either with the Secretary of Agriculture, or the 
Director, Office of Civil Rights, USDA, Washington, DC 20250 or with 
the office established by the State agency to handle discrimination 
grievances or complaints. All complaints received by State agencies 
that allege discrimination based on race, color, national origin, or 
age shall be referred to the Secretary of Agriculture or the Director 
of the Office of Civil Rights, USDA. A State agency may process 
complaints that allege discrimination based on sex or disability if 
grievance procedures are in place.

Subpart D--Participant Benefits


Sec.  249.8  Level of benefits and eligible foods.

    (a) General. State agencies must identify in the State Plan the 
fresh, nutritious, unprepared, locally grown fruits, vegetables and 
herbs that are eligible for purchase under the SFMNP. Eligible foods 
may not be processed or prepared beyond their natural state except for 
usual harvesting and cleaning processes. Dried fruits or vegetables, 
such as prunes (dried plums), raisins (dried grapes), sun-dried 
tomatoes, or dried chili peppers are not considered eligible foods in 
the SFMNP. Potted fruit or vegetable plants, potted or dried herbs, 
wild rice, nuts of any kind (even raw), honey, maple syrup, cider, 
seeds, eggs, meat, cheese, and seafood are also not eligible for 
purposes of the SFMNP. ``Locally grown'' means produce grown only 
within a State's borders but may be defined by State agencies to 
include border areas in adjacent States. Under no circumstances may 
produce grown outside of the United States and its territories be 
considered eligible food.
    (b) The value of the Federal benefits received. (1) The Federal 
SFMNP benefit level received by each participant, whether individual or 
household, may not be less than $20 per year or more than $50 per year, 
except that:
    (i) A State agency that operated the SFMNP in FY 2006 may continue 
to issue the same level of benefits that was provided to participants 
in FY 2006, even if the benefit level was less than $20;
    (ii) Participants served by a State agency that operated the SFMNP 
through a CSA program model in FY 2006 may, at the State agency's 
discretion, continue to receive the same CSA benefit levels that were 
provided to such participants in FY 2006, subject to the conditions set 
forth at Sec.  249.14(e)(3), Distribution of Funds; and
    (iii) Participants who are participating in the SFMNP through a CSA 
program may receive a higher total benefit level than participants 
participating in a check or coupon program model, as long as that level 
is consistent for all Senior CSA program participants and does not 
exceed the $50 annual maximum per individual or household, except as 
provided in paragraph (b)(1) of this section.
    (2) The total value of SFMNP benefits provided in a combination of 
program models, such as coupons/checks and bulk purchase, may not 
exceed the $50 maximum benefit level set forth in paragraph 
249.8(b)(1).
    (c) Participant or household benefit allocation. (1) All SFMNP 
participants living in the areas served by the State agency must be 
offered the same amount of SFMNP benefits, regardless of the program 
model(s) used by that State agency.
    (2) Benefits may be allocated on an individual or on a household 
basis.
    (3) Foods provided are intended for the sole benefit of SFMNP 
participants and are not meant to be shared with other non-
participating household members.
    (4) Participants must receive SFMNP benefits free of charge.


Sec.  249.9  Nutrition education.

    (a) Goal. Nutrition education shall emphasize the relationship of 
proper nutrition to good health, including the importance of consuming 
fruits and vegetables.
    (b) Requirement. The State agency shall integrate nutrition 
education into SFMNP operations and may satisfy nutrition education 
requirements through coordination with other agencies within the State. 
State agencies wishing to coordinate nutrition education with another 
State agency or organization must enter into a written cooperative 
agreement with such agencies to offer nutrition education relevant to 
the use and nutritional value of foods available to SFMNP participants. 
In cases where SFMNP participants are receiving relevant nutrition 
education from an agency other than the administering State agency, the 
provision of nutrition education is an allowable administrative cost 
under the SFMNP.

Subpart E--State Agency Provisions


Sec.  249.10  Coupon, market, and CSA program management.

    (a) General. This section sets forth State agency responsibilities 
regarding the authorization of farmers, farmers' markets, roadside 
stands, and/or CSA programs. The State agency is responsible for the 
fiscal management of and accountability for SFMNP-related activities 
for farmers, farmers' markets, roadside stands, and CSA programs. Each 
State agency may decide whether to authorize individual farmers and 
farmers' markets separately, or to authorize only farmers' markets. In 
addition, each State agency may decide whether to authorize roadside 
stands and/or CSA programs. The State agency may authorize a farmer for 
participation in a farmers' market, a roadside stand, and/or CSA 
program simultaneously. All contracts or agreements entered into by the 
State agency for the management or operation of farmers, farmers' 
markets, roadside stands, and/or CSA programs shall conform to the 
requirements of part 3016 of this title.
    (1) Only farmers, farmers' markets, and/or roadside stands 
authorized by the State agency may redeem SFMNP coupons. Only farmers 
authorized by the State agency, or having a valid agreement with an 
authorized farmers' market, may redeem coupons. Only CSA programs 
authorized by the State agency may receive payment from the State 
agency at the beginning of the planting season, in order to provide 
eligible foods to senior participants who are shareholders.
    (2) The State agency must establish criteria for the authorization 
of individual farmers and/or farmers' markets, roadside stands, and/or 
CSA programs. Any authorized farmer, farmers' market, roadside stand 
and/or CSA program must agree to sell participants only those foods 
identified as eligible by the State agency. State agencies may 
determine farmers, farmers' markets and/or roadside stands as 
automatically authorized to participate in the SFMNP based on current 
authorization to operate in the FMNP under Part 248 of this chapter. 
Individuals who exclusively sell produce grown by someone else, such as 
wholesale distributors, cannot be

[[Page 74637]]

authorized to participate in the SFMNP, except individuals employed by 
a farmer otherwise qualified under these regulations, or individuals 
hired by a nonprofit organization to sell produce at roadside stands on 
behalf of local farmers.
    (3) The State agency must ensure that an appropriate number of 
farmers, farmers' markets, roadside stands, and/or CSA programs are 
authorized for adequate participant access in the area(s) proposed to 
be served and for effective management of the farmers, farmers' 
markets, roadside stands, and/or CSA programs by the State agency.
    (4) The State agency may establish criteria to limit the number of 
authorized farmers, farmers' markets, and/or roadside stands.
    (5) The State agency must limit the value of shares awarded to CSA 
programs to no more than 50 percent of their total Federal SFMNP food 
grant, except in the case of a State agency that has grandfathered a 
CSA program model into the permanent SFMNP that uses more than 50 
percent of the total Federal SFMNP food grant for the CSA program. The 
State agency shall make efforts to select the CSA program(s) that 
provides the greatest variety of eligible foods.
    (6) The State agency may purchase bulk quantities of eligible foods 
directly from authorized farmers. Such foods must then be equitably 
divided among and distributed directly to eligible SFMNP participants. 
SFMNP participants who have received checks or coupons to purchase 
eligible foods earlier in the season may also receive foods through the 
bulk purchase option as long as the total combined value of the 
benefits provided to each SFMNP participant does not exceed $50, as 
stipulated in Sec.  249.8(b).
    (7) The State agency shall ensure that training is conducted prior 
to start up of the first year of SFMNP participation of an individual 
farmer, farmers' market, roadside stand, and/or CSA program. The 
training shall include at a minimum those items listed in paragraph (d) 
of this section, and may be delivered in a variety of methods, 
including but not limited to classroom settings, telephone conferences, 
videoconferences, and web-based training modules.
    (8) Authorized farmers shall display a sign stating that they are 
authorized to redeem SFMNP coupons.
    (9) Authorized farmers, farmers' markets, roadside stands, and/or 
CSA programs shall comply with the requirements of Title VI of the 
Civil Rights Act of 1964, Title IX of the Education Amendments of 1972, 
Section 504 of the Rehabilitation Act of 1973, the Age Discrimination 
Act of 1975, Department of Agriculture regulations on nondiscrimination 
(parts 15, 15a and 15b of this title), and FNS Instructions as outlined 
in Sec.  249.7.
    (10) The State agency shall ensure that there is no conflict of 
interest between the State or local agency and any participating 
farmer, farmers' market, roadside stand and/or CSA program.
    (b) Farmer, farmers' market, roadside stand, and/or CSA program 
agreements. The State agency shall ensure that all participating 
farmers' markets, roadside stands, and/or CSA programs enter into 
written agreements with the State agency. State agencies that authorize 
individual farmers shall also enter into written agreements with the 
individual farmers. The agreement must be signed by a representative 
who has legal authority to obligate the farmer, farmers' market, 
roadside stand, and/or CSA program. Agreements must include a 
description of sanctions for noncompliance with SFMNP requirements and 
shall contain, at a minimum, the following specifications, although the 
State agency may determine the exact wording to be used:
    (1) The farmer, farmers' market and/or roadside stand shall:
    (i) Provide such information as the State agency may require for 
its periodic reports to FNS;
    (ii) Assure that SFMNP coupons are redeemed only for eligible 
foods;
    (iii) Provide eligible foods at or less than the price charged to 
other customers;
    (iv) Accept SFMNP coupons within the dates of their validity and 
submit such coupons for payment within the allowable time period 
established by the State agency;
    (v) In accordance with a procedure established by the State agency, 
mark each transacted coupon with a farmer identifier. In those cases 
where the agreement is between the State agency and the farmer and/or 
roadside stand, each transacted SFMNP coupon shall contain a farmer 
identifier and shall be batched for reimbursement under that 
identifier. In those cases where the agreement is between the State 
agency and the farmers' market, each transacted SFMNP coupon shall 
contain a farmer identifier and be batched for reimbursement under a 
farmers' market identifier.
    (vi) Accept training on SFMNP procedures and provide training to 
farmers and any employees with SFMNP responsibilities on such 
procedures;
    (vii) Agree to be monitored for compliance with SFMNP requirements, 
including both overt and covert monitoring;
    (viii) Be accountable for actions of farmers or employees in the 
provision of eligible foods and related activities;
    (ix) Pay the State agency for any coupons transacted in violation 
of this agreement;
    (x) Offer SFMNP participants the same courtesies as other 
customers;
    (xi) Comply with the nondiscrimination provisions of USDA 
regulations as provided in Sec.  249.7; and
    (xii) Notify the State agency if any farmer, farmers' market or 
roadside stand ceases operation prior to the end of the authorization 
period.
    (2) The farmer, farmers' market and/or roadside stand shall 
neither:
    (i) Seek restitution from SFMNP participants for coupons not paid 
by the State agency; nor
    (ii) Issue cash change for purchases that are in an amount less 
than the value of the SFMNP coupon(s).
    (3) The CSA program shall:
    (i) Provide such information as the State agency may require for 
its periodic reports to FNS;
    (ii) Assure that SFMNP participants receive only eligible foods;
    (iii) Provide eligible foods to their SFMNP shareholders at or less 
than the price charged to other customers;
    (iv) Assure that the shareholder receives eligible foods that are 
of equitable value and quantity to their share;
    (v) Assure that all funds from the State agency are used for 
planting of crops for SFMNP shareholders;
    (vi) Provide to the State agency access to a tracking system that 
determines the value of the eligible foods provided and the remaining 
value owed to each SFMNP shareholder;
    (vii) Assure that SFMNP shareholders/authorized representatives 
provide written acknowledgement of receipt of eligible foods;
    (viii) Accept training on SFMNP procedures and provide training to 
farmers and any employees with SFMNP responsibilities for such 
procedures;
    (ix) Agree to be monitored for compliance with SFMNP requirements, 
including both overt and covert monitoring;
    (x) Be accountable for actions of farmers or employees in the 
provision of eligible foods and related activities;
    (xi) Offer SFMNP shareholders the same courtesies as other 
customers;
    (xii) Notify the State agency immediately when the CSA program is 
experiencing a problem with its crops, and may be unable to provide 
SFMNP shareholders with the complete amount

[[Page 74638]]

of eligible foods agreed upon between the CSA program and the State 
agency;
    (xiii) Comply with the nondiscrimination provisions of USDA 
regulations as provided in Sec.  249.7; and
    (xiv) Notify the State agency if any CSA program ceases operation 
prior to the end of the authorization period.
    (4) The CSA program shall not substitute ineligible produce when 
eligible foods are not available.
    (5) Neither the State agency nor the farmer, farmers' market, 
roadside stand, and/or CSA program has an obligation to renew the 
agreement. The State agency or the farmer, farmers' market, roadside 
stand and/or CSA program may terminate the agreement for cause after 
providing advance written notification.
    (6) The State agency may deny payment to the farmer, farmers' 
market and/or roadside stand for improperly redeemed SFMNP coupons and 
may demand refunds for payments already made on improperly redeemed 
coupons.
    (7) The State agency may demand a refund from any CSA program that 
fails to provide the full benefit to all SFMNP shareholders as 
specified in its contract, or that provides ineligible foods as 
substitutes for eligible foods.
    (8) The State agency may disqualify a farmer, farmers' market, 
roadside stand, and/or CSA program for SFMNP violations. The farmer, 
farmers' market, roadside stand, and/or CSA program has the right to 
appeal a denial of an application to participate, a disqualification, 
or a SFMNP sanction by the State agency. Expiration of a contract or 
agreement with a farmer, farmers' market, roadside stand, and/or CSA 
program, and claims actions under Sec.  249.20, are not appealable.
    (9) A farmer, farmers' market, roadside stand, and/or CSA program, 
which commits fraud or engages in other illegal activity is liable to 
prosecution under applicable Federal, State or local laws.
    (10) Agreements may not exceed 3 years.
    (c) Agreements with farmers' markets that do not authorize 
individual farmers. Those State agencies that authorize farmers' 
markets but not individual farmers shall require authorized farmers' 
markets to enter into a written agreement with each farmer within the 
market that is participating in SFMNP. The State agency must set forth 
the required terms for the agreement and provide a sample agreement 
that may be used.
    (d) Annual training for farmers, farmers' market managers and/or 
farmers that operate a roadside stand or CSA program. State agencies 
shall conduct annual training for farmers, farmers' market managers, 
and/or farmers who operate a CSA program in the SFMNP. The State agency 
must conduct interactive training for all farmers and farmers' market 
managers who have never previously participated in the SFMNP. After a 
farmer/farmers' market manager's first year of SFMNP operation, State 
agencies have discretion in determining the method used for annual 
training purposes. At a minimum, annual training shall include 
instruction emphasizing:
    (1) Eligible food choices;
    (2) Proper SFMNP coupon redemption procedures, including deadlines 
for submission of coupons for payment, and/or receipt of payment for 
CSA programs' distribution of eligible foods;
    (3) Equitable treatment of SFMNP participants, including the 
availability of eligible foods to SFMNP participants that are of the 
same quality and cost as that sold to other customers;
    (4) Civil rights compliance and guidelines;
    (5) Guidelines for storing SFMNP coupons safely; and
    (6) Guidelines for cancelling SFMNP coupons, such as punching holes 
or rubber-stamping.
    (e) Monitoring and review of farmers, farmers' markets, roadside 
stands, CSA programs and local agencies. The State agency shall be 
responsible for the monitoring of farmers, farmers' markets, roadside 
stands, CSA programs and local agencies within its jurisdiction. This 
shall include developing a system for identifying high risk farmers, 
farmers' markets, roadside stands, and/or CSA programs, and ensuring 
on-site monitoring, conducting further investigation, and sanctioning 
of such farmers, farmers' markets, roadside stands, and/or CSA programs 
as appropriate. In States where both the SFMNP and the FMNP are in 
operation, these monitoring/review requirements may be coordinated to 
avoid duplication. If the same farmers, farmers' markets, and/or 
roadside stands are authorized for both programs, a review conducted by 
one program may be counted toward the requirement for the other 
program.
    (1) Where coupon reimbursement responsibilities are delegated to 
farmers' market managers, farmers' market associations, or nonprofit 
organizations, the State agency may establish bonding requirements for 
these entities. Costs of such bonding are not reimbursable 
administrative expenses.
    (2)(i) Each State agency shall rank participating farmers, farmers' 
markets, roadside stands, and/or CSA programs by risk factors, and 
shall conduct annual, on-site monitoring of at least 10 percent of 
farmers, 10 percent of farmers' markets, 10 percent of roadside stands, 
and 10 percent of the CSA programs or one of each program model, 
whichever is greater, which shall include those farmers, farmers' 
markets, roadside stands, and/or CSA programs identified as being the 
highest-risk.
    (ii) Mandatory high-risk indicators include:
    (A) A proportionately high volume of SFMNP coupons redeemed by a 
farmer within a farmers' market or at a single roadside stand (as 
compared to other farmers within the farmers' market or within the 
State);
    (B) Participant complaints;
    (C) In the case of CSA programs, an extended or ongoing inability 
to provide the full SFMNP benefit to each shareholder as contracted; 
and
    (D) Farmers, farmers' markets, roadside stands, and/or CSA programs 
in their first year of SFMNP operation. States are encouraged to 
formally establish other high-risk indicators for identifying potential 
problems.
    (iii) If additional high-risk indicators are established, they must 
be set forth in the farmers, farmers' market, roadside stand, and/or 
CSA program agreement and in the State Plan. If application of the 
high-risk indicators results in fewer than 10 percent of farmers, 
farmers' markets, roadside stands, and/or CSA programs being designated 
as high-risk, the State agency shall randomly select additional 
farmers, farmers' markets, roadside stands, and/or CSA programs to be 
monitored in order to meet the 10 percent minimum. The high-risk 
indicators listed above generally apply to a State agency already 
participating in the SFMNP. A State agency participating in the SFMNP 
for the first time shall, in lieu of applying the high-risk indicators, 
randomly select 10 percent of its participating farmers, 10 percent of 
its participating farmers' markets, 10 percent of its participating 
roadside stands, and 10 percent of its participating CSA programs or at 
least one farmers' market, roadside stand, and/or CSA program, 
whichever is greater, for monitoring visits.
    (3)(i) The following shall be documented for all on-site monitoring 
visits to farmers, farmers' markets, roadside stands, and/or CSA 
programs, at a minimum:
    (A) Names of both the farmer, farmers' market, roadside stand, and/
or CSA program and the reviewer;
    (B) Date of review;
    (C) Nature of problem(s) detected or the observation that the 
farmer, farmers' market, roadside stand, and/or CSA

[[Page 74639]]

program appears to be in compliance with SFMNP requirements;
    (D) Record of interviews with participants, market managers, 
farmers, and/or farmers who operate a CSA program; and
    (E) Signature of the reviewer.
    (ii) Reviewers are not required to notify the farmer, farmers' 
market, roadside stand, and/or CSA program of the monitoring visit 
before, during, or immediately after the visit. The State agency shall 
do so after a reasonable delay when necessary to protect the identity 
of the reviewer(s) or the integrity of the investigation.
    (iii) In instances where the farmer, farmers' market, roadside 
stand, and/or CSA program will be permitted to continue participating 
in the SFMNP after being informed of any deficiencies detected by the 
monitoring visit, the farmer, farmers' market, roadside stand, and/or 
CSA program shall provide plans as to how the deficiencies will be 
corrected.
    (4) At least every 2 years, the State agency must review all local 
agencies within its jurisdiction.
    (f) Control of SFMNP coupons. The State agency must:
    (1) Control and provide accountability for the receipt and issuance 
of SFMNP coupons;
    (2) Ensure that there is secure transportation and storage of 
unissued SFMNP coupons; and
    (3) Design and implement a system of review of SFMNP coupons to 
detect errors. At a minimum, the errors the system must detect are a 
missing participant signature (if such signature is required by the 
State agency), a missing farmer and/or market identification, and 
redemption by a farmer outside of the valid date. The State agency must 
have procedures in place to reduce the number of errors in 
transactions.
    (g) Payment to farmers, farmers' markets, roadside stands, and/or 
CSA programs. The State agency must ensure that farmers, farmers' 
markets, roadside stands, and/or CSA programs are promptly paid for 
food costs.
    (h) Reconciliation of SFMNP coupons. The State agency shall 
identify the disposition of all SFMNP coupons as validly redeemed, lost 
or stolen, expired, or not matching issuance records. Validly redeemed 
SFMNP coupons are those that are issued to a valid participant and 
redeemed by an authorized farmer, farmers' market, and/or roadside 
stand within valid dates. SFMNP coupons that were redeemed but cannot 
be traced to a valid participant or authorized farmer, farmers' market, 
and/or roadside stand shall be subject to claims action in accordance 
with Sec.  249.20.
    (1) If the State agency elects to replace lost, stolen or damaged 
SFMNP coupons, it must describe its system for doing so in the State 
Plan.
    (2) The State agency must use uniform SFMNP coupons within its 
jurisdiction.
    (3) SFMNP coupons must include, at a minimum, the following 
information:
    (i) The last date by which the participant may use the coupon. This 
date shall be no later than November 30 of each year.
    (ii) A date by which the farmer or farmers' market must submit the 
coupon for payment. When establishing this date, State agencies shall 
take into consideration the date financial statements are due to the 
FNS, and allow time for the corresponding coupon reconciliation that 
must be done by the State agency prior to submission of financial 
statements. Financial statements are due to FNS by January 30.
    (iii) A unique and sequential serial number.
    (iv) A denomination (dollar amount).
    (v) A farmer identifier for the redeeming farmer when agreements 
are between the State agency and the farmer.
    (vi) In those instances where State agencies have agreements with 
farmers' markets, there must be a farmer identifier on each coupon and 
a market identifier on the cover of coupons that are batched by the 
market manager for reimbursement.
    (i) Instructions to participants. Each participant must receive 
instruction on the redemption of the SFMNP coupons, or participation in 
a CSA program (where applicable), including, but not limited to:
    (1) A list of names and addresses of authorized farmers, farmers' 
markets, and/or roadside stands at which SFMNP coupons may be redeemed, 
or procedures on the home-delivery process;
    (2) Procedures to designate a proxy;
    (3) The name and address of the authorized farmer of the CSA 
program, and locations of distribution sites;
    (4) A description of eligible foods and the prohibition against 
cash change for SFMNP purchases of eligible foods;
    (5) A description of eligible foods that will be provided through 
the CSA program;
    (6) A schedule outlining a timeframe for distribution of the 
eligible foods from the CSA program; and
    (7) An explanation of his/her right to complain about improper 
farmer, farmers' market, roadside stand, and/or CSA program practices 
with regard to SFMNP responsibilities and the process for doing so.
    (j) Participant and farmer, farmers' market, roadside stand, and/or 
CSA program complaints. The State agency must have procedures that 
document the handling of complaints from participants and farmers/
farmers' markets, roadside stands, and/or CSA programs. Complaints of 
civil rights discrimination shall be handled in accordance with Sec.  
249.7(b).
    (k) Participant and farmer, farmers' market, roadside stand, and/or 
CSA program sanctions. (1) The State agency must establish policies 
which determine the type and level of sanctions to be applied against 
participants and farmers, farmers' markets, roadside stands, and/or CSA 
programs based upon the severity and nature of the SFMNP violations 
observed, and such other factors as the State agency determines 
appropriate, such as whether repeated offenses have occurred over a 
period of time. Farmers, farmers' markets, roadside stands, and/or CSA 
programs may be sanctioned, disqualified, or both, when appropriate. 
Sanctions may include fines for improper SFMNP coupon redemption and 
the penalties outlined in Sec.  249.20, in the case of deliberate 
fraud.
    (2) In those instances where compliance purchases are conducted, 
the results of covert compliance purchases can be a basis for farmer, 
farmers' market, and/or roadside stand sanctions.
    (3) A farmer, farmers' market, roadside stand, and/or CSA program 
committing fraud or other unlawful activities are liable to prosecution 
under applicable Federal, State or local laws.
    (4) State agency policies must ensure that a farmer that is 
disqualified from the SFMNP at one market, roadside stand, or CSA 
program shall not participate in the SFMNP at any other farmers' 
market, roadside stand or CSA program in the State's jurisdiction 
during the disqualification period.
    (5) State agency policies must ensure that a farmer, farmers' 
market, roadside stand, and/or CSA program that is disqualified from 
participating in the WIC Farmers' Market Nutrition Program is also 
disqualified from participating in the SFMNP in the State's 
jurisdiction during the disqualification period.


Sec.  249.11  Financial management system.

    (a) Disclosure of expenditures. The State agency must maintain a 
financial management system that provides accurate, current and 
complete disclosure of the financial status of the SFMNP. This must 
include an accounting for all property and other

[[Page 74640]]

assets and all SFMNP funds received and expended each fiscal year.
    (b) Internal controls. The State agency shall maintain effective 
controls over and accountability for all SFMNP funds. The State agency 
must have effective internal controls to ensure that expenditures 
financed with SFMNP funds are authorized and properly chargeable to the 
SFMNP.
    (c) Record of expenditures. The State agency must maintain records 
that adequately identify the source and use of funds expended for SFMNP 
activities. These records must contain, but are not limited to, 
information pertaining to authorization, receipt of funds, obligations, 
unobligated balances, assets, liabilities, outlays, and income.
    (d) Payment of costs. The State agency must implement procedures 
that ensure prompt and accurate payment of allowable costs, and ensure 
the allowability and allocability of costs in accordance with the cost 
principles and standard provisions of this part, part 3016 of this 
title, and FNS guidelines and Instructions.
    (e) Identification of obligated funds. The State agency must 
implement procedures that accurately identify obligated SFMNP funds at 
the time the obligations are made.
    (f) Resolution of audit findings. The State agency shall implement 
procedures that ensure timely and appropriate resolution of claims and 
other matters resulting from audit findings and recommendations.
    (g) Reconciliation of food instruments. The State agency must 
reconcile SFMNP coupons in accordance with Sec.  249.10(h).
    (h) Transfer of cash. The State agency must establish the timing 
and amounts of its cash draws against its Letter of Credit in 
accordance with 31 CFR Part 205.


Sec.  249.12  SFMNP costs.

    (a) General. (1) Composition of allowable costs. In general, a cost 
item will be deemed allowable if it is reasonable and necessary for 
SFMNP purposes and otherwise satisfies allowability criteria set forth 
in part 3016.22 of this title and this Part. SFMNP purposes include the 
administration and operation of the SFMNP. Allowable SFMNP costs may be 
classified as follows:
    (i) Food costs and administrative costs. Food costs are the costs 
of eligible foods provided to SFMNP participants. Administrative costs 
are the costs associated with providing SFMNP benefits and services to 
participants and generally administering the SFMNP. Specific examples 
of allowable administrative costs are listed in paragraph (b) of this 
section. A State agency may use up to 10 percent of its total Federal 
SFMNP grant to cover administrative costs. Any costs incurred for food 
and/or administration above the Federal grant level will be the State 
agency's responsibility.
    (ii) Direct and indirect costs. Direct costs are food and 
administrative costs incurred specifically for the SFMNP. Indirect 
costs are administrative costs that benefit multiple programs or 
activities, and cannot be identified to any one program or activity 
without effort disproportionate to the results achieved. In accordance 
with the provisions of part 3016 of this title, a claim for 
reimbursement of indirect costs shall be supported by an approved 
allocation plan for the determination of such costs. An indirect cost 
rate developed through such an allocation plan may not be applied to a 
base that includes food costs.
    (2) Costs allowable with prior approval. A State or local agency 
must obtain prior approval in accordance with part 3016.22 of this 
title before charging to the SFMNP any capital expenditures and other 
cost items designated by part 3016.22 of this title as requiring such 
approval.
    (3) Unallowable costs. Costs that are not reasonable and necessary 
for SFMNP purposes, or that do not otherwise satisfy the cost 
principles of part 3016.22 of this title, are unallowable. 
Notwithstanding any other provision of part 3016 of this title or this 
Part, the cost of constructing or operating a farmers' market is 
unallowable. The use of SFMNP funds to supplement congregate meal 
programs is prohibited. Unallowable costs may never be claimed for 
Federal reimbursement.
    (b) Specified allowable administrative costs. Allowable 
administrative costs include the following:
    (1) The costs associated with administration and start-up;
    (2) The costs associated with the provision of nutrition education 
that meets the requirements of Sec.  249.9;
    (3) The costs of SFMNP coupon issuance, or participant education 
covering proper coupon redemption procedures;
    (4) The cost of eligibility determinations and outreach services;
    (5) The costs associated with the coupon and market management 
process, such as printing SFMNP coupons, processing redeemed coupons, 
purchasing bags or other containers to be used in home-delivery and 
bulk purchase operations, and training farmers, market managers, and/or 
farmers who operate CSA programs on SFMNP operations;
    (6) The cost of monitoring and reviewing Program operations;
    (7) The cost of SFMNP training;
    (8) The cost of required reporting and recordkeeping;
    (9) The cost of determining which local sites will be utilized;
    (10) The cost of recruiting and authorizing farmers, farmers' 
markets, roadside stands, and/or CSA programs to participate in the 
SFMNP;
    (11) The cost of preparing contracts for farmers, farmers' markets, 
roadside stands, and/or CSA programs;
    (12) The cost of developing a data processing system for redemption 
and reconciliation of SFMNP coupons;
    (13) The cost of designing program training and informational 
materials; and
    (14) The cost of coordinating SFMNP responsibilities between 
designated administering agencies.


Sec.  249.13  Program income.

    Program income means gross income the State agency earns from grant 
supported activities. It includes fees for services performed and 
receipts from the use or rental of real or personal property acquired 
with Federal grant funds, but does not include proceeds from the 
disposition of such property. The State agency must retain Program 
income earned during the agreement period and use it for Program 
purposes in accordance with the addition method described in part 
3016.25(g)(2) of this title. Fines, penalties or assessments paid by 
local agencies or farmers, farmers' markets, roadside stands, and/or 
CSA program are also deemed to be Program income. The State agency must 
ensure that the sources and applications of Program income are fully 
documented.


Sec.  249.14  Distribution of funds to State agencies.

    (a) State Plan and agreement. As a prerequisite to the receipt of 
Federal funds, a State agency must have its State Plan approved and 
must execute an agreement with FNS in accordance with Sec.  249.3(c).
    (b) Distribution of SFMNP funds to previously participating State 
agencies. Provided that sufficient SFMNP funds are available, each 
State agency that participated in the SFMNP in any prior fiscal year 
shall receive not less than the amount of funds the State agency 
received in the most recent fiscal year in which it received funding, 
if it otherwise complies with the requirements established in this 
Part.
    (c) Ratable reduction. If amounts appropriated for any fiscal year 
for

[[Page 74641]]

grants under the SFMNP are not sufficient to pay to each previously 
participating State agency at least an amount as identified in 
paragraph (b) of this section, each State agency's grant must be 
ratably reduced. However, to the extent permitted by available funds, 
each State agency shall receive at least $75,000 or the amount that the 
State agency received for the most recent prior fiscal year in which 
the State participated, if that amount is less than $75,000.
    (d) Expansion of participating State agencies and establishment of 
new State agencies. Any SFMNP funds remaining for allocation after 
meeting the requirements of paragraph (b) of this section shall be 
allocated in the following manner:
    (1) Of the remaining funds, 75 percent shall be made available to 
State agencies already participating in the SFMNP that wish to serve 
additional participants or increase the current benefit level. If this 
amount is greater than that necessary to satisfy all State Plans 
approved for expansion, the unallocated amount shall be applied toward 
satisfying any unmet need in paragraph (d)(2) of this section.
    (2) Of the remaining funds, 25 percent shall be made available to 
State agencies that have not participated in the SFMNP in any prior 
fiscal year. If this amount is greater than that necessary to satisfy 
the approved State Plans for new States, the unallocated amount shall 
be applied toward satisfying any unmet need in paragraph (d)(1) of this 
section. FNS reserves the right not to fund every State agency with an 
approved State Plan.
    (e) Expansion for current State agencies. In providing funds to 
State agencies that participated in the SFMNP in the previous fiscal 
year, FNS must consider on a case-by-case basis the following factors:
    (1) Whether the State agency utilized at least 80 percent of its 
prior year food grant. States that did not spend at least 80 percent of 
their prior year food grant may still be eligible for expansion funding 
if, in the judgment of FNS, good cause existed which was beyond the 
management control of the State, such as severe weather conditions or 
unanticipated decreases in participant caseload;
    (2) Documentation supporting the funds expansion request as 
outlined in Sec.  249.4(a)(23); and
    (3) Whether the State agency currently issues a participant benefit 
greater than $50. Such State agencies will not be eligible to receive 
additional SFMNP funds for expansion until the maximum participant 
benefit no longer exceeds $50.
    (f) Funding of new State agencies. Funds will be awarded to new 
SFMNP State agencies in accordance with Sec.  249.5.
    (g) Administrative funding. A State agency will have available for 
administrative costs an amount not greater than 10 percent of the total 
SFMNP funds it receives.
    (h) Recovery of unused funds. State agencies must return to FNS any 
unexpended funds made available for a given fiscal year by February 1 
of the following fiscal year.


Sec.  249.15  Closeout procedures.

    (a) General. State agencies must submit to FNS a final closeout 
report for the fiscal year on a form prescribed by FNS and on a date 
specified by FNS.
    (b) Grant closeout procedures. When grants to State agencies are 
terminated, the following procedures shall be followed in accordance 
with part 3016 of this title.
    (1) FNS may disqualify a State agency's participation under the 
SFMNP, in whole or in part, or take such remedies as may be 
appropriate, whenever FNS determines that the State agency failed to 
comply with the conditions prescribed in this part, in its Federal-
State Agreement, or in FNS guidelines and Instructions. FNS will 
promptly notify the State agency in writing of the disqualification 
together with the effective date.
    (2) FNS may terminate a grant when both parties agree that 
continuation under the SFMNP would not produce beneficial results 
commensurate with the further expenditure of funds.
    (3) Upon termination of a grant, the affected agency may not incur 
new obligations after the effective date of the disqualification, and 
must cancel as many outstanding obligations as possible. FNS will allow 
full credit to the State agency for the Federal share of the 
noncancellable obligations properly incurred by the State agency prior 
to disqualification, and the State agency shall do the same for 
farmers, farmers' markets, roadside stands, and/or CSA programs.
    (4) A grant closeout shall not affect the retention period for, or 
Federal rights of access to, SFMNP records as specified in Sec.  
249.23(a). The closeout of a grant does not affect the responsibilities 
of the State agency regarding property or with respect to any SFMNP 
income for which the State agency is still accountable.
    (5) A final audit is not a required part of the grant closeout and 
should not be needed unless there are problems with the grant that 
require attention. If FNS considers a final audit to be necessary, it 
shall so inform OIG. OIG will be responsible for ensuring that 
necessary final audits are performed and for any necessary coordination 
with other Federal cognizant audit agencies or State or local auditors. 
Audits performed in accordance with Sec.  249.18 may serve as final 
audits providing such audits meet the needs of requesting agencies. If 
the grant is closed out without an audit, FNS reserves the right to 
disallow and recover an appropriate amount after fully considering any 
recommended disallowances resulting from an audit which may be 
conducted later.


Sec.  249.16  Administrative appeal of State agency decisions.

    (a) Requirements. The State agency shall provide a hearing 
procedure whereby applicants, participants, local agencies and farmers, 
farmers' markets, roadside stands, and/or CSA programs adversely 
affected by certain actions of the State agency may appeal those 
actions.
    (1) What may be appealed.
    (i) An applicant may appeal denial of certification of SFMNP 
benefits, except that no appeal is available if certification is denied 
solely because of the lack of sufficient funding to provide SFMNP 
benefits to all eligible applicants.
    (ii) A participant may appeal disqualification/suspension of SFMNP 
benefits.
    (iii) A local agency may appeal an action of the State agency 
disqualifying it from participating in the SFMNP.
    (iv) A farmer, farmers' market, roadside stand, and/or CSA program 
may appeal an action of the State agency denying its application to 
participate, imposing a sanction, or disqualifying it from 
participating in the SFMNP.
    (2) What may not be appealed. Expiration of a contract or agreement 
shall not be subject to appeal.
    (b) Time limit for request. The State or local agency must provide 
individuals, local agencies, farmers, farmers' markets, roadside 
stands, and/or CSA programs a reasonable period of time to request a 
fair hearing. Such time limit must not be less than 30 days from the 
date the agency mails or otherwise issues the notice of adverse action.
    (c) Postponement pending decision. An adverse action may, at the 
State agency's option, be postponed until a decision in the appeal is 
rendered.
    (1) In a case where an adverse action affects a local agency or 
farmer, farmers' market, roadside stand, and/or CSA program, a 
postponement is appropriate where the State agency finds that 
participants would be unduly

[[Page 74642]]

inconvenienced by the adverse action. In addition, the State agency may 
determine other relevant criteria to be considered in deciding whether 
or not to postpone an adverse action.
    (2) Applicants who are denied benefits at initial certification may 
appeal the denial, but must not receive SFMNP benefits while awaiting 
the hearing. Participants who appeal the termination of benefits within 
the period of time provided under paragraph (b) of this section must 
continue to receive Program benefits until the hearing official reaches 
a decision or the certification period expires, whichever occurs first. 
This does not apply to participants whose certification period has 
already expired or who become otherwise ineligible for SFMNP benefits. 
Participants who become ineligible during a certification, or whose 
certification period expires, may appeal the termination, but must not 
receive benefits while awaiting the hearing.
    (d) Procedure. The State agency hearing procedure shall at a 
minimum provide the participant, local agency or farmer, farmers' 
market, roadside stand, and/or CSA program with the following:
    (1) Written notification of the adverse action, the cause(s) for 
the action, and the effective date of the action, including the State 
agency's determination of whether the action shall be postponed under 
paragraph (c) of this section if it is appealed, and the opportunity 
for a hearing. Such notification shall be provided within a reasonable 
timeframe established by the State agency and in advance of the 
effective date of the action.
    (2) The opportunity to appeal the action within the time specified 
by the State agency in its notification of adverse action.
    (3) Adequate advance notice of the time and place of the hearing to 
provide all parties involved sufficient time to prepare for the 
hearing.
    (4) The opportunity to present its case and at least one 
opportunity to reschedule the hearing date upon specific request. The 
State agency may set standards on how many hearing dates can be 
scheduled, provided that a minimum of two hearing dates is allowed.
    (5) The opportunity to confront and cross-examine adverse 
witnesses.
    (6) The opportunity to be represented by counsel or, in the case of 
a participant appeal, by a representative designated by the 
participant, if desired.
    (7) The opportunity to review the case record prior to the hearing.
    (8) An impartial decision maker, whose decision as to the validity 
of the State agency's action shall rest solely on the evidence 
presented at the hearing and the statutory and regulatory provisions 
governing the SFMNP. The basis for the decision shall be stated in 
writing, although it need not amount to a full opinion or contain 
formal findings of fact and conclusions of law.
    (9) Written notification of the decision in the appeal, within 60 
days from the date of receipt of the request for a hearing by the State 
agency.
    (e) Continuing responsibilities. When a farmer, farmers' market, 
roadside stand, CSA program, and/or local agency appeals an adverse 
action (and is permitted to continue in the SFMNP while its appeal is 
pending), it continues to be responsible for compliance with the terms 
of the written agreement or contract with the State agency.
    (f) Judicial review. If a State level decision is rendered against 
the participant, local agency, farmer, farmers' market, roadside stand, 
and/or CSA program and the appellant expresses an interest in pursuing 
a further review of the decision, the State agency shall explain any 
further State level review of the decision and any available State 
level rehearing process. If neither is available or both have been 
exhausted, the State agency shall explain the right to pursue judicial 
review of the decision.
    (g) Additional appeals procedures for State agencies that authorize 
farmers' markets and not individual farmers. A State agency that 
authorizes farmers' markets and not individual farmers shall ensure 
that procedures are in place to be used when a farmer seeks to appeal 
an action of a farmers' market or association denying the farmer's 
application to participate, or sanctioning or disqualifying the farmer. 
The procedures shall be set forth in the State Plan and in the 
agreements entered into by the State agency and the farmers' market and 
the farmers' market and the farmer.

Subpart F--Monitoring and Review of State Agencies


Sec.  249.17  Management evaluations and reviews.

    (a) General. FNS and each State agency shall establish a management 
evaluation system in order to assess the accomplishment of SFMNP 
objectives as provided under these regulations, the State Plan, and the 
written agreement with FNS. FNS will:
    (1) Provide assistance to State agencies in discharging this 
responsibility;
    (2) Establish standards and procedures to determine how well the 
objectives of this Part are being accomplished; and
    (3) Implement sanction procedures as warranted by State SFMNP 
performance.
    (b) Responsibilities of FNS. FNS will establish evaluation 
procedures to determine whether State agencies carry out the purposes 
and provisions of this part, the State Plan, and the written agreement 
with FNS. As a part of the evaluation procedure, FNS will review audits 
to ensure that the SFMNP has been included in audit examinations at a 
reasonable frequency. These evaluations shall also include reviews of 
selected local agencies, and on-site reviews of selected farmers, 
farmers' markets, roadside stands, and community supported agriculture 
programs. These evaluations will measure the State agency's progress 
toward meeting the objectives outlined in its State Plan and the State 
agency's compliance with these regulations.
    (1) FNS may withhold up to 10 percent of the State agency's total 
SFMNP grant if FNS determines that the State agency has:
    (i) Failed, without good cause, to demonstrate efficient and 
effective administration of its SFMNP; or
    (ii) Failed to comply with the requirements contained in this 
section or the State Plan.
    (2) Sanctions imposed upon a State agency by FNS in accordance with 
this section (but not claims for repayment assessed against a State 
agency) may be appealed in accordance with the procedures established 
in Sec.  249.20(a). Before carrying out any sanction against a State 
agency, the following procedures will be followed:
    (i) FNS will notify the chief departmental officer of the 
administering agency in writing of the deficiencies found and of FNS' 
intention to withhold administrative funds unless an acceptable 
corrective action plan is submitted by the State agency to FNS within 
45 days after mailing of notification.
    (ii) The State agency shall develop a corrective action plan, 
including timeframes for implementation to address the deficiencies and 
prevent their future recurrence.
    (iii) If the corrective action plan is acceptable, FNS will notify 
the chief departmental officer of the administering agency in writing 
within 30 days of receipt of the plan. The letter will advise the State 
agency of the sanctions to be imposed if the corrective action plan is 
not implemented

[[Page 74643]]

according to the schedule set forth in the approved plan.
    (iv) Upon notification from the State agency that corrective action 
has been taken, FNS will assess such action and, if necessary, perform 
a follow-up review to determine if the noted deficiencies have been 
corrected. FNS will then advise the State agency of whether the actions 
taken are in compliance with the corrective action plan, and whether 
the deficiency is resolved or further corrective action is needed. 
Compliance buys can be required if, during FNS management evaluations 
by regional offices, a State agency is found to be out of compliance 
with its responsibility to monitor and review farmers, farmers' 
markets, roadside stands, and community supported agriculture programs.
    (v) If an acceptable corrective action plan is not submitted within 
45 days, or if corrective action is not completed according to the 
schedule established in the corrective action plan, FNS may withhold 
the award of SFMNP administrative funds. If the 45-day warning period 
ends in the fourth quarter of a fiscal year, FNS may elect not to 
withhold funds until the next fiscal year. In such an event, FNS will 
notify the chief departmental officer of the administering State 
agency.
    (vi) If compliance is achieved before the end of the fiscal year in 
which the SFMNP administrative funds are withheld, the funds withheld 
may be restored to the State agency. FNS is not required to restore 
funds withheld beyond the end of the fiscal year for which the funds 
were initially awarded.
    (c) Responsibilities of State agencies. The State agency is 
responsible for meeting the following requirements:
    (1) The State agency must establish evaluation and review 
procedures and document the results of such procedures. The procedures 
must include, but are not limited to:
    (i) Conducting annual monitoring reviews of participating farmers' 
markets, roadside stands, and community supported agriculture programs. 
This includes on-site reviews of a minimum of 10 percent of farmers and 
10 percent of each type of authorized outlet (farmers' markets, 
roadside stands, and community supported agriculture programs), and 
includes those farmers and authorized outlets identified as being at 
the highest risk. The first year of operation in the SFMNP shall be 
considered a high-risk indicator. More frequent reviews may be 
performed, as the State agency deems necessary. In States where both 
the SFMNP and the WIC Farmers' Market Nutrition Program are in 
operation, these reviews may be coordinated to avoid duplication. A 
review by one program may be counted by the other program toward the 
monitoring requirement, provided that appropriate sanction action is 
taken for all violations found.
    (ii) Conducting monitoring reviews of all local agencies within the 
State agency's jurisdiction at least once every 2 years. Monitoring of 
local agencies shall encompass, but not be limited to, evaluation of 
management, accountability, certification, nutrition education, 
financial management systems, and coupon and/or CSA program management 
systems. When the State agency conducts a local agency review outside 
of the SFMNP season, a review of documents and procedural plans of the 
SFMNP, rather than actual SFMNP activities, is acceptable.
    (iii) Instituting the necessary follow-up procedures to correct 
identified problem areas.
    (2) On its own initiative or when required by FNS, the State agency 
must provide special reports on SFMNP activities, and take positive 
action to correct deficiencies in SFMNP operations.


Sec.  249.18  Audits.

    (a) Federal access to information. The Secretary of the U.S. 
Department of Agriculture, the Comptroller General of the United 
States, or any of their duly authorized representatives, or duly 
authorized State auditors shall have access to any books, documents, 
papers, and records of the State agency and their contractors, for the 
purpose of making surveys, audits, examinations, excerpts, and 
transcripts.
    (b) State agency response. The State agency may take exception to 
particular audit findings and recommendations. The State agency shall 
submit a response or statement to FNS as to the action taken or planned 
regarding the findings. A proposed corrective action plan developed and 
submitted by the State agency must include specific time frames for its 
implementation and for completion of the correction of deficiencies and 
problems leading to the deficiencies.
    (c) Corrective action. FNS will determine whether SFMNP 
deficiencies identified in an audit have been adequately corrected. If 
additional corrective action is necessary, FNS shall schedule a follow-
up review, allowing a reasonable time for such corrective action to be 
taken.
    (d) State sponsored audits. State and local agencies must conduct 
independent audits in accordance with parts 3015, 3016 (Sec.  3016.26 
of this title), or 3051 of this title, as applicable. A State or local 
agency may elect to obtain either an organization-wide audit or an 
audit of the Program if it qualifies to make such an election under 
applicable regulations.


Sec.  249.19  Investigations.

    (a) Authority. FNS may make an investigation of any allegation of 
noncompliance with this part and FNS guidelines and instructions. The 
investigation may include, where appropriate, a review of pertinent 
practices and policies of any State and local agency, the circumstances 
under which the possible noncompliance with this Part occurred, and 
other factors relevant to a determination as to whether the State and 
local agency has failed to comply with the requirements of this Part.
    (b) Confidentiality. No State or local agency, participant, or 
other person shall intimidate, threaten, coerce, or discriminate 
against any individual for the purpose of interfering with any right or 
privilege under this Part because that person has made a complaint or 
formal allegation, or has testified, assisted, or participated in any 
manner in an investigation, proceeding, or hearing under this Part. The 
identity of every complainant shall be kept confidential except to the 
extent necessary to carry out the purposes of this Part, including the 
conducting of any investigation, hearing, or judicial proceeding.

Subpart G--Miscellaneous Provisions


Sec.  249.20  Claims and penalties.

    (a) Claims against State agencies. (1) If FNS determines through a 
review of the State agency's reports, program or financial analysis, 
monitoring, audit, or otherwise, that any SFMNP funds provided to a 
State agency for food or administrative purposes were, through State 
agency negligence or fraud, misused or otherwise diverted from SFMNP 
purposes, a formal claim will be assessed by FNS against the State 
agency. The State agency must pay promptly to FNS a sum equal to the 
amount of the administrative funds or the value of coupons and/or 
eligible foods so misused or diverted.
    (2) If FNS determines that any part of the SFMNP funds received, 
coupons printed, and/or eligible foods otherwise lost by a State agency 
were lost as a result of theft, embezzlement, or unexplained causes, 
the State agency must, on demand by FNS, pay to FNS a sum equal to the 
amount of the money or the value of the SFMNP funds or coupons/eligible 
foods so lost.

[[Page 74644]]

    (3) The State agency will have full opportunity to submit evidence, 
explanation or information concerning alleged instances of 
noncompliance or diversion before a final determination is made in such 
cases.
    (4) FNS is authorized to establish claims against a State agency 
for unreconciled SFMNP coupons, and/or for failure to comply with the 
terms of duly executed CSA program contracts or agreements. When a 
State agency can demonstrate that all reasonable management efforts 
have been devoted to reconciliation and 99 percent or more of the SFMNP 
coupons issued, or of the eligible foods contracted for delivery by the 
CSA program, have been accounted for by the reconciliation process, FNS 
may determine that the reconciliation process has been completed to 
satisfaction.
    (b) Interest charge on claims against State agencies. If an 
agreement cannot be reached with the State agency for payment of its 
debts or for offset of debts on its current Letter of Credit within 30 
days from the date of the first demand letter from FNS, FNS will assess 
an interest (late) charge against the State agency. Interest accrual 
shall begin on the 31st day after the date of the first demand letter, 
bill or claim, and shall be computed monthly on any unpaid balance as 
long as the debt exists. From a source other than the SFMNP, the State 
agency shall provide the funds necessary to maintain SFMNP operations 
at the grant level authorized by FNS.


Sec.  249.21  Procurement and property management.

    (a) Requirements. State agencies must comply with the requirements 
of part 3016 of this title for procurement of supplies, equipment and 
other services with SFMNP funds. These requirements are adopted for use 
by FNS to ensure that such materials and services are obtained for the 
SFMNP in an effective manner and in compliance with the provisions of 
applicable laws and executive orders.
    (b) Contractual responsibilities. The standards contained in part 
3016 of this title do not relieve the State agency of the 
responsibilities arising under its contracts. The State agency is the 
responsible authority, without recourse to FNS, regarding the 
settlement and satisfaction of all contractual and administrative 
issues arising out of procurements entered into in connection with the 
SFMNP. This includes, but is not limited to, disputes, claims, protests 
of award, source evaluation, or other matters of a contractual nature. 
Matters concerning violation of law are to be referred to such local, 
State or Federal authority as may have proper jurisdiction.
    (c) State regulations. The State agency may use its own procurement 
regulations provided that:
    (1) Such regulations reflect applicable State and local 
regulations; and
    (2) Any procurements made with SFMNP funds adhere to the standards 
set forth in part 3016 of this title.
    (d) Property acquired with program funds. State and local agencies 
shall observe the standards prescribed in part 3016 of this title in 
their utilization and disposition of real property and equipment 
acquired in whole or in part with SFMNP funds.


Sec.  249.22  Nonprocurement debarment/suspension, drug-free workplace, 
and lobbying restrictions.

    The State agency must ensure compliance with the requirements of 
FNS' regulations governing nonprocurement debarment/suspension (part 
3017 of this title) and drug-free workplace (part 3021 of this title), 
as well as FNS' regulations governing restrictions on lobbying (part 
3018 of this title), where applicable.


Sec.  249.23  Records and reports.

    (a) Recordkeeping requirements. Each State agency must maintain 
full and complete records concerning SFMNP operations. Such records 
must comply with part 3016 of this title and the following 
requirements:
    (1) Records must include, but not be limited to, information 
pertaining to certification, financial operations, SFMNP coupon 
issuance and redemption, authorized outlet (farmers, farmers' markets, 
and CSA program) agreements, authorized outlet monitoring, CSA program 
agreements, invoices, delivery receipts, equipment purchases and 
inventory, nutrition education, fair hearings, and civil rights 
procedures.
    (2) All records must be retained for a minimum of 3 years following 
the date of submission of the final expenditure report for the period 
to which the report pertains. If any litigation, claim, negotiation, 
audit or other action involving the records has been started before the 
end of the 3-year period, the records must be kept until all issues are 
resolved, or until the end of the regular 3-year period, whichever is 
later. If FNS deems any of the SFMNP records to be of historical 
interest, it may require the State agency to forward such records to 
FNS whenever the State agency is disposing of them.
    (3) Records for nonexpendable property acquired in whole or in part 
with SFMNP funds must be retained for three years after its final 
disposition.
    (4) All records must be available during normal business hours for 
representatives of FNS of the Comptroller General of the United States 
to inspect, audit, and copy. Any reports resulting from such 
examinations shall not divulge names of individuals.
    (b) Financial and participant reports. State agencies must submit 
financial and SFMNP performance data on a yearly basis as specified by 
FNS. Such information must include, but shall not be limited to:
    (1) Number of participants served with Federal SFMNP funds;
    (2) Value of coupons issued and/or eligible foods ordered under CSA 
programs;
    (3) Value of coupons redeemed and/or eligible foods provided to 
participants under CSA programs; and
    (4) Number of authorized outlets by type; i.e., farmers, farmers' 
markets, roadside stands, and CSA programs.
    (c) Source documentation. To be acceptable for audit purposes, all 
financial and SFMNP performance reports must be traceable to source 
documentation.
    (d) Certification of reports. Financial and SFMNP reports must be 
certified as to their completeness and accuracy by the person given 
that responsibility by the State agency.
    (e) Use of reports. FNS will use State agency reports to measure 
progress in achieving objectives set forth in the State Plan, and this 
part, or other State agency performance plans. If it is determined, 
through review of State agency reports, SFMNP or financial analysis, or 
an audit, that a State agency is not meeting the objectives set forth 
in its State Plan, FNS may request additional information including, 
but not limited to, reasons for failure to achieve these objectives.


Sec.  249.24  Data safeguarding procedures.

    FNS and SFMNP State agencies will take reasonable steps to keep 
applicant and participant information/records private to the extent 
provided by law. Such steps include a requirement for each State agency 
to restrict the use or disclosure of information obtained from SFMNP 
applicants and participants to:
    (a) Persons directly connected with the administration or 
enforcement of the SFMNP, including persons investigating or 
prosecuting violations in the SFMNP under Federal, State or local 
authority;
    (b) Representatives of public organizations designated by the chief 
State agency officer (or, in the case of Indian Tribal governments 
acting as

[[Page 74645]]

SFMNP State agencies, the governing authority) that administer food, 
nutrition, or other assistance programs that serve persons 
categorically eligible for the SFMNP. The State agency must execute a 
written agreement with each such designated organization:
    (1) Specifying that the receiving organization may employ SFMNP 
information only for the purpose of establishing the eligibility of 
SFMNP applicants and participants for food, nutrition, or other 
assistance programs that it administers and conducts outreach to SFMNP 
applicants and participants for such programs; and
    (2) Containing the receiving organization's assurance that it will 
not, in turn, disclose the information to a third party.
    (c) The Comptroller General of the United States for audit and 
examination authorized by law.


Sec.  249.25  Other provisions.

    (a) No aid reduction. Any programs for which a grant is received 
under this part shall be supplementary to the food stamp program 
carried out under the Food Stamp Act of 1977 as amended (7 U.S.C. 2011, 
et seq.) and to any other Federal or State food or nutrition assistance 
program.
    (b) Statistical information. FNS reserves the right to use 
information obtained under the SFMNP in a summary, statistical or other 
form that does not identify particular individuals.


Sec.  249.26  SFMNP information.

    (a) Any person who wishes information, assistance, records or other 
public material must request such information from the State agency, or 
from the FNS Regional Office serving the appropriate State as listed 
below:
    (1) Connecticut, Maine, Massachusetts, New Hampshire, New York, 
Rhode Island, Vermont: U.S. Department of Agriculture, FNS, Northeast 
Region, 10 Causeway Street, Room 501, Boston, Massachusetts 02222-1066.
    (2) Delaware, District of Columbia, Maryland, New Jersey, 
Pennsylvania, Puerto Rico, Virginia, Virgin Islands, West Virginia: 
U.S. Department of Agriculture, FNS, Mid-Atlantic Region, Mercer 
Corporate Park, 300 Corporate Boulevard, Robbinsville, New Jersey, 
08691-1598.
    (3) Alabama, Florida, Georgia, Kentucky, Mississippi, North 
Carolina, South Carolina, Tennessee: U.S. Department of Agriculture, 
FNS, Southeast Region, 61 Forsyth Street, SW., Room 8T36, Atlanta, 
Georgia 30303.
    (4) Illinois, Indiana, Michigan, Minnesota, Ohio, Wisconsin: U.S. 
Department of Agriculture, FNS, Midwest Region, 77 West Jackson 
Boulevard--20th floor, Chicago, Illinois 60604-3507.
    (5) Arkansas, Louisiana, New Mexico, Oklahoma, Texas: U.S. 
Department of Agriculture, FNS, Southwest Region, 1100 Commerce Street, 
Room 555, Dallas, Texas 75242.
    (6) Colorado, Iowa, Kansas, Missouri, Montana, Nebraska, North 
Dakota, South Dakota, Utah, Wyoming: U.S. Department of Agriculture, 
FNS, Mountain Plains Region, 1244 Speer Boulevard, Suite 903, Denver, 
Colorado 80204.
    (7) Alaska, American Samoa, Arizona, California, Guam, Hawaii, 
Idaho, Nevada, Oregon, Trust Territory of the Pacific Islands, the 
Northern Mariana Islands, Washington: U.S. Department of Agriculture, 
FNS, Western Region, 550 Kearny Street, Room 400, San Francisco, 
California 94108.
    (b) Inquiries pertaining to the SFMNP administered by a federally 
recognized Indian tribal organization (ITO) should be addressed to the 
FNS Regional Office responsible for the geographic State in which that 
ITO is located.


Sec.  249.27  OMB control number. [Reserved]

    Dated: December 1, 2006.
Nancy Montanez Johner,
Under Secretary, Food, Nutrition, and Consumer Services.

    Note: This appendix will not be published in the Code of Federal 
Regulations.

Appendix--Regulatory Impact Analysis

    1. Title: 7 CFR 248: Senior Farmers' Market Nutrition Program 
(SFMNP).
    2. Statutory Authority: Farm Security and Rural Investment Act 
of 2002 (Pub. L. 101-171).
    3. Need and Program History: Congress established the Senior 
Farmers' Market Nutrition Program (SFMNP) in Public Law 101-171, 
Sect. 4401 to (1) provide resources in the form of fresh, 
nutritious, unprepared, locally grown fruits, vegetables, and herbs 
from farmers' markets, roadside stands, and community supported 
agriculture programs (CSAs) to low-income seniors; (2) increase the 
domestic consumption of agricultural commodities by expanding or 
aiding in the expansion of domestic farmers' markets, roadside 
stands, and CSA programs; and (3) develop or aid in the development 
of new and additional farmers' markets, roadside stands, and CSA 
programs. This final rule provides operating guidelines for the 
SFMNP, consistent with legislative intent.
    The requirements of the final USDA rule for the SFMNP are 
similar to two USDA interventions: (1) The WIC Farmers' Market 
Nutrition Program (FMNP), for individuals participating in the 
Special Supplemental Nutrition Program for Women, Infants and 
Children (WIC) and those individuals on a waiting list for WIC 
benefits; and (2) the Senior Farmers' Market Nutrition Pilot Program 
(SFMNPP), administered by USDA as a pilot program in 2001. The SFMNP 
has been administered by USDA as a competitive grant program since 
FY 2001. Establishing rules for the SFMNP similar to the FMNP and 
SFMNP eases the administrative burden for USDA, State agencies, 
farmers, and program recipients.

Special Nutritional Needs of Seniors

    Seniors are a rapidly increasing segment of the population, 
accounting for 30 percent of the nation's healthcare 
costs.1 2 The health and well-being of the nation's 
seniors has a substantial impact on the economy. Low-income seniors 
are at a particularly high nutritional risk. For instance, obesity 
rates for older adults with lower incomes are much higher than other 
population groups.\3\ Additionally, low-income seniors are found to 
consume fewer recommended foods from the Food Guide Pyramid and 
fewer nutrients.\4\ Further, in the general elderly population, not 
taking income into account, a study using USDA's 1994-1996 
Continuing Survey of Food Intakes by Individuals (CSFII) found that 
average intakes of food energy, dietary fiber, vitamins 
B6 and E, calcium, magnesium and zinc were lower than 
recommendations for older Americans.\5\
---------------------------------------------------------------------------

    \1\ Administration on Aging (AOA), U.S. Department of Health and 
Human Services. 2000. A Profile of Older Americans: 2000. 
Washington, DC: USDHHS.
    \2\ United States Department of Agriculture, Economic Research 
Service (USDA/ERS) 1998. Factors Affecting Nutrient Intake of the 
Elderly. Agricultural Economic Report Number 769. Washington, DC: 
USDA/ERS.
    \3\ Georgetown University, Center on an Aging Society. ``Obesity 
Among Older Americans At Risk for Chronic Conditions.'' http://www.aging-societ.org, number 10, July 2003.
    \4\ Guthrie, JF and BH Lin. Overview of the diets of lower- and 
higher-income elderly and their food assistance options. Journal of 
Nutrition Education Behavior, Supplement 1, March-April 2002.
    \5\ Gerrior, Shirley A. Dietary Changes in Older Americans from 
1977 to 1996: Implications for Dietary Quality. Center for Nutrition 
Policy and Promotion, Family Economics and Nutrition Review, Vol. 12 
No. 2, 1999.
---------------------------------------------------------------------------

    Consumption of fresh fruits and vegetables is important for all 
Americans and especially for the elderly who have additional health 
concerns.\6\ ``Scientific evidence shows that consuming the 
recommended 5 to 9 daily servings of fruits and vegetables helps 
protect against heart disease and cancer. While there is no estimate 
for disease-related costs or numbers of deaths attributable to low 
fruit and vegetable consumption, medical experts, including the 
Surgeon General, have noted that physical inactivity and poor diet--
of which low consumption of fruits and vegetables is a key 
component--cause diseases that result in the death of more than 
300,000 Americans each year.'' \7\
---------------------------------------------------------------------------

    \6\ Gerrior, Shirley A., 1999.
    \7\ United States General Accounting Office. Fruits and 
Vegetables: Enhanced Federal Efforts to Increase Consumption Could 
Yield Health Benefits for Americans. GAO-02-657, July 2002 (p. 4).

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

[[Page 74646]]

    Fruits and vegetables comprise two of the five major food groups 
in the food guide pyramid. However, the cost of fresh fruits and 
vegetables may be a barrier for many. In addition to cost 
constraints, seniors face other obstacles to achieving good health; 
many seniors live in social isolation, and have limited 
mobility.8 9 10
---------------------------------------------------------------------------

    \8\ Administration of Aging (AOA), U.S. Department of Health and 
Human Services. 1996. Aging in the 21st Century. Washington, 
DC:USDHHS.
    \9\ United States Department of Agriculture, Economic Research 
Service (USDA/ERS) 1998.
    \10\ United States Department of Agriculture, Food and Nutrition 
Service (USDA/FNS). 1999. Reaching the Working Poor and Poor Elderly 
Study: What We Learned and Recommendations for Future Research. 
Washington, DC: USDA/FNS.
---------------------------------------------------------------------------

Farmers, Farmers' Markets, Roadside Stands, and Community Supported 
Agriculture Programs (CSAs)

    In addition to increasing seniors' fresh fruit and vegetable 
consumption, the intent of Congress is also to increase the 
consumption of agricultural commodities and increase the number of 
farmers' markets, roadside stands, and CSAs.
    The number of farmers' markets in the United States has grown 
dramatically, increasing 111 percent from 1994 to 2004.\11\ 
According to the National Farmers' Market Directory, in 2004 there 
were over 3,700 farmers' markets operating in the United States; all 
50 States and the Virgin Islands operate farmers' markets. The 
number of farmers' markets operating in States varies widely, from 6 
in Delaware to 444 in California.\12\ According to the 2000 USDA 
Farmers Market Study Statistics, 19,000 farmers reported selling 
their produce only at farmers' markets.\13\ Further, 58 percent of 
markets participate in WIC FMNP, food stamps, local and/or State 
nutrition programs.\14\
---------------------------------------------------------------------------

    \11\ http://www.ams.usda.gov/farmersmarkets/facts.htm, April 5, 
2006.
    \12\ http://www.ams.usda.gov/farmersmarkets/map.htm, April 5, 
2006.
    \13\ http://www.ams.usda.gov/farmersmarkets/FMstudystats.htm, 
April 5, 2006.
    \14\ http://www.ams.usda.gov/farmersmarkets/FMstudystats.htm, 
April 5, 2006.
---------------------------------------------------------------------------

Programs Intended to Feed the Low-Income Elderly Population

    The SFMNP will operate alongside several other food assistance 
programs funded by the federal government that provide benefits to 
seniors. The commonality of the programs is that they provide food 
in some capacity, for example, a Food Stamp Electronic Benefits 
Transfer (EBT) Card or a home-delivered meal from Meals on Wheels.

Child and Adult Care Food Programs (CACFP)

    CACFP reimburses day care providers for making healthy meals and 
snacks available to children and adults in day care. Adult 
participants must be functionally impaired or age 60 or older, and 
enrolled in an adult care center where they may receive up to two 
meals and one snack each day. The total cost of the elderly 
component of the program in FY 2005 was $80.3 million; average daily 
adult attendance in CACFP was 103,386.\15\ In FY 2005, institutions 
caring for seniors received $64.81 per senior in monthly CACFP 
benefits.\16\
---------------------------------------------------------------------------

    \15\ FNS, National Data Bank, May 1, 2006.
    \16\ FNS, National Data Bank, May 1, 2006.
---------------------------------------------------------------------------

Commodity Supplemental Food Program (CSFP)

    Another program addressing the special needs of the low-income 
elderly population is the CSFP, operating in 32 States, the District 
of Columbia, and on two Indian reservations. USDA purchases food and 
makes it available to CSFP State agencies and Indian Tribal 
Organizations (ITOs), along with funds for administrative costs. 
State agencies that administer CSFP are typically departments of 
health, social services, education, or agriculture. State agencies 
store the food and distribute it to public and non-profit private 
local agencies. Local agencies determine the eligibility of 
applicants, distribute the foods, and provide nutrition education. 
Local agencies also provide referrals to other welfare, nutrition, 
and health care programs such as the Food Stamp Program, Medicaid, 
and Medicare. The food package for the elderly is designed for their 
specific nutritional needs and includes such nutritious foods as 
canned fruits and vegetables, juices, meats, fish, peanut butter, 
cheese, cereal and grain products, and dairy products. In FY 2005, 
the program, on average, served almost 460,000 elderly per month. 
Food costs totaled $67.2 million and the elderly received 
approximately $12.17 in food benefits per month.\17\
---------------------------------------------------------------------------

    \17\ FNS, National Data Bank, May 1, 2006.
---------------------------------------------------------------------------

Food Stamp Program (FSP)

    While the Food Stamp Program is available to alleviate hunger in 
the low-income senior population by providing EBT cards redeemable 
for food in approved food retail stores (and some farmers' markets), 
many seniors do not participate. In 2003, approximately 28 percent 
of eligible seniors used the program compared to a 56 percent 
participation rate in the total Food Stamp eligible population.\18\ 
Low participation rates by seniors are attributed to (1) A lack of 
information; (2) a perceived lack of need; (3) low expected food 
stamp program benefits; (4) burdensome program administration; and 
(5) stigma and other psychological reasons.19 20 In FY 
2004, the most recent year for which data is currently available, 
1.92 million seniors participated in the Food Stamp Program (8.2 
percent of the total FSP caseload). At that time, the average 
monthly senior benefit was $65 and the USDA spent about $1.5 billion 
on elderly participants.\21\
---------------------------------------------------------------------------

    \18\ United States Department of Agriculture, Food and Nutrition 
Service. Food Stamp Program Participation Rates: 2003. July 2005.
    \19\ USDA, 1999.
    \20\ Gabor, Vivian, et al. Seniors' Views of the Food Stamp 
Program and Ways To Improve Participation--Focus Group Findings in 
Washington State: Final Report. USDA/ERS, 2002.
    \21\ USDA/FNS. Characteristics of Food Stamp Households: FY 
2004, September 2005.
---------------------------------------------------------------------------

Food Distribution Program on Indian Reservations (FDPIR)

    FDPIR provides commodity foods to low-income households living 
on Indian reservations, and to American Indian households residing 
in approved areas near reservations or in Oklahoma. Many households 
participate in FDPIR as an alternative to the Food Stamp Program 
because they do not have easy access to food stamp offices or 
authorized food stores. Each month, participating households receive 
a food package to help them maintain a nutritionally balanced diet. 
No recent data exists on the number of elderly participating in the 
program. However, in 1990, the elderly constituted 14.8 percent of 
total program participation.\22\ If this has remained unchanged, the 
number of seniors participating in FY 2005 would have been about 
14,638 at a cost of about $11.3 million.\23\ At that time, FDPIR 
recipients received an average of $37 a month in commodities.\24\
---------------------------------------------------------------------------

    \22\ Evaluation of the Food Distribution Program on Indian 
Reservations, Volume 1: Final Report, Research Triangle Institute 
(prepared for USDA, Food and Nutrition Service), 1990.
    \23\ FNS National Data Bank, May 1, 2006.
    \24\ FNS National Data Bank, May 1, 2006.
---------------------------------------------------------------------------

The Elderly Nutrition Program

    The Administration on Aging's (AoA) Elderly Nutrition Program, 
authorized under Title III, Grants for State and Community Programs 
on Aging, and Title VI, Grants for Native Americans, under the Older 
Americans Act, provides grants to support congregate and home 
delivered (Meals on Wheels) meals and nutrition services to older 
people throughout the country. Meals served under the program must 
provide at least one-third of the daily-recommended dietary 
allowances established by the Food and Nutrition Board of the 
National Academy of Sciences--National Research Council (now the 
Institute of Medicine). In practice, elderly individuals 
participating in the Elderly Nutrition Program receive an estimated 
40 to 50 percent of many required nutrients.\25\ In FY 2002 (the 
most recent year that data is available), the ENP served 3.1 million 
elderly, costing the federal government $604 million.\26\ If the 
same number of participants were served in FY 2005, the cost of the 
ENP would have been about $650 million.\27\
---------------------------------------------------------------------------

    \25\ http://www.aoa.gov/press/fact/alpha/fact_elderly_nutrition.asp, April 10, 2006.
    \26\ http://www.aoa.gov, March 19, 2004.
    \27\ http://www.bls.gov (FY 2002 cost inflated by the CPI-food 
at home)
---------------------------------------------------------------------------

    While there is no means test among Elderly Nutrition Program 
participants, 80 to 90 percent have incomes below 200 percent of 
poverty.\28\ More than twice as many Title III participants live 
alone; and two-thirds of participants are either over or under their 
desirable weight, placing them at risk for nutrition and health 
problems. Title III home-delivered meals participants have twice as 
many physical impairments compared with the overall elderly 
population.\29\
---------------------------------------------------------------------------

    \28\ http://www.aoa.gov/press/fact/alpha/fact_elderly_nutrition.asp, April 10, 2006.
    \29\ http://www.aoa.gov/press/fact/alpha/fact_elderly_nutrition.asp, April 10, 2006.

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

[[Page 74647]]

    In 1995 Mathematica Policy Research, Inc. conducted an 
evaluation of the Elderly Nutrition Program for the Administration 
on Aging. Key findings included:
     People who receive ENP meals have higher daily intakes 
of key nutrients than similar nonparticipants.
     ENP meals provide approximately 40 to 50 percent of 
participants' daily intakes of most nutrients.
     Participants have more social contacts per month than 
similar nonparticipants.
     Most participants are satisfied with the services the 
ENP provides.\30\
---------------------------------------------------------------------------

    \30\ http://www.mathematica-mpr.com/3rdLevel/enphot.htm. Serving 
Elders at Risk, The Older Americans Act Nutrition Programs, National 
Evaluation of the Elderly Nutrition Program, 1993-1995, Mathematica 
Policy Research, Inc., 1995.
---------------------------------------------------------------------------

Summary

    The following chart depicts total nutrition assistance funding 
currently available for low-income seniors and the percent of total 
funding the SFMNP represents.
[GRAPHIC] [TIFF OMITTED] TR12DE06.000


[[Page 74648]]



------------------------------------------------------------------------
                                                         FY 2005 funding
              Nutrition assistance program               for seniors (in
                                                            millions)
------------------------------------------------------------------------
FSP....................................................          * $1500
ENP....................................................              650
CSFP...................................................               67
CACFP..................................................               80
SFMNP..................................................               15
FDPIR..................................................               11
                                                        ----------------
    Total..............................................            2,323
------------------------------------------------------------------------
* Food Stamp funding for seniors reflects the FY 2004 cost, which is the
  most recent year for which data is currently available.

SFMNP Program Models

    The final rule draws from a variety of other programs, 
specifically, the WIC FMNP and the Senior Farmers' Market Nutrition 
Pilot Program and the SFMNP under the competitive grant process. The 
following section describes these programs in an effort to provide 
an understanding of the framework and provisions of the final rule.

WIC Farmers' Market Nutrition Program (FMNP)

    In 1992, Congress established the WIC Farmers' Market Nutrition 
Program to provide WIC participants with additional benefits to 
purchase fresh, unprepared, locally grown fruits and vegetables, 
recognizing the importance of the nutritional benefits of fresh 
produce. The program also assists farmers by increasing sales, use 
and awareness of farmers' markets.
    The WIC FMNP provides grants to State agencies. Administrative 
funds are available; however, State agencies are required to match 
30 percent of the total administrative cost of the program.
    By law, the federal benefit level provided to FMNP recipients 
(WIC participants and those on a waiting list for WIC services) must 
be not less than $10 and not more than $30 per year.\31\ State 
agencies may supplement this amount with State funds.
---------------------------------------------------------------------------

    \31\ The 2004 Child Nutrition and WIC Reauthorization Law 
increased the maximum benefit from $20 to $30 in July 2004.
---------------------------------------------------------------------------

    Forty-five State agencies currently operate the WIC FMNP. In FY 
2005, almost 2.7 million or about 33 percent of WIC Program 
participants participated in the WIC FMNP. Farmers redeemed over $23 
million in coupons.\32\
---------------------------------------------------------------------------

    \32\ FNS National Data Bank, May 1, 2006.
---------------------------------------------------------------------------

Seniors Farmers' Market Nutrition Pilot Program 2001

    In an effort to extend FMNP services to other segments of the 
population and to promote farmers' markets, roadside stands and 
CSAs, USDA instituted the Seniors Farmers' Market Nutrition Pilot 
Program (SFMNPP) using Commodity Credit Corporation (CCC) funds in 
2001. This program provided grants to State agencies to use to 
distribute coupons to eligible seniors. Coupons were redeemed at a 
value established by each State agency for fresh fruits and 
vegetables at farmers' markets, roadside stands and CSAs.
    The pilot program was closely aligned to the WIC FMNP, as is the 
final rule. In 2001 USDA provided $15 million to 36 grantees (45 
State agencies applied for grants) using CCC funds. Grant awards 
ranged from $9,000 to $1.2 million, enabling participating States, 
tribes and the District of Columbia to serve 420,000 low-income 
seniors. Benefits to seniors differed by State agency, ranging from 
$10 to $540 per recipient per year. Approximately 8,508 farmers, 
1,205 farmers' markets, 886 roadside stands, and 49 CSAs 
participated in the SFMNPP in 2001. State agencies spent 83 percent 
of available funds.\33\
---------------------------------------------------------------------------

    \33\ USDA/FNS Administrative Data, 2001.
---------------------------------------------------------------------------

    Subsequent to its first year of operation, the USDA's Economic 
Research Service (ERS) conducted an in-house analysis of the pilot 
program. ERS found the pilot program to be highly popular among 
stakeholders, including Congress, income-eligible seniors and 
farmers. Early findings also suggest that the coupons increased low-
income seniors' ability to purchase fruits and vegetables, as 
seniors reported that produce at farmers' markets was less expensive 
than the produce at grocery stores. Additionally, ERS found that 
seniors are more inclined to redeem SFMNP coupons in contrast to 
food stamps where there is a stigma attached with redemption.\34\
---------------------------------------------------------------------------

    \34\ ``The Seniors Farmers' Market Nutrition Pilot Program: A 
Preliminary Assessment.'' Unpublished staff paper. USDA/ERS. October 
10, 2001.
---------------------------------------------------------------------------

    While ERS did not find the SFMNPP effective in developing 
farmers' markets or expanding existing markets, they did suggest 
that if the program continues to grow, it is possible that these 
goals will be realized as well. ERS also noted that State agencies 
wanted Federal funds to support administrative expenses. The final 
rule addresses this issue by allowing State agencies to use up to 10 
percent of Federal grant dollars to fund the administration of the 
program.

Senior Farmers' Market Nutrition Program 2002

    Congress continued to fund the SFMNP in 2002 and provided $15 
million to the program ($10 million from the Agriculture 
Appropriations Act of 2002 and $5 million from the Commodity Credit 
Corporation). In addition, Pub. L. 101-171 established the permanent 
SFMNP and authorized the SFMNP to be funded at $15 million for each 
year from FY 2003 to FY 2007 from CCC funds. USDA was authorized to 
promulgate regulations implementing the program. In 2002, USDA 
awarded 36 grants that enabled State agencies to serve 500,000 low-
income seniors. Approximately 10,000 farmers participated in 2002. 
Nearly 89 percent of program funds were spent.\35\
---------------------------------------------------------------------------

    \35\ USDA/FNS Administrative Data, 2002.
---------------------------------------------------------------------------

Senior Farmers' Market Nutrition Program 2003

    In 2003, the USDA grandfathered-in State agencies that had 
participated in the SFMNP in the previous year. After the original 
36 State agencies were awarded 2002 Federal grant funds, there was 
enough funding available from unspent carryover funds to award 
grants to 4 new State agencies and to provide additional grant money 
to 13 current grantees.\36\ USDA awarded a total of $16.8 million in 
grants to State agencies; 800,000 low-income seniors participated. 
Over 85 percent of the total available program funds were spent.
---------------------------------------------------------------------------

    \36\ USDA/FNS Administrative Data, 2003.
---------------------------------------------------------------------------

Senior Farmers' Market Nutrition Program 2004

    In FY 2004, USDA awarded State agencies a total of $16.7 million 
for SFMNP grants; over 802,000 low-income seniors participated. All 
40 State agencies that participated in the SFMNP in 2003 received 
funding. In addition, 4 new State agencies and 3 new ITOs received 
SFMNP funding in 2004. Nearly 86 percent of the total available 
program funds were spent.

Senior Farmers' Market Nutrition Program 2005

    In FY 2005, no carryover funds from FY 2004 were available and 
an across-the-board reduction of just over 10 percent was applied to 
the current grantees' base grants. One State agency that 
participated in FY 2004 did not participate in FY 2005. A total of 
$15 million was awarded to current State agencies and ITOs to fund 
their Programs; 94 percent of the SFMNP funds were spent in FY 2005.

                                         Table 1.--Summary of the 2005 Senior Farmers' Market Nutrition Program
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                       Income                          Average
                                    State agency   eligibility (%        Age        benefit level  Recipients per    Farmers'     Roadside     CSAs per
                                    grant amount     of poverty)     eligibility         per            state      markets per   stands per     state
                                                        \37\         ``elderly''     participant                      state        state
--------------------------------------------------------------------------------------------------------------------------------------------------------
Mean.............................        $326,087            172%              60             $33          17,505           58           44            5
Median...........................         130,811            185%              60              27           7,185           31            1            0
Minimum..........................           7,918            100%              55              10             148            0            0            0
Maximum..........................       1,366,229      All elders              65             165         175,914          370          704          169
                                  ----------------------------------------------------------------------------------------------------------------------

[[Page 74649]]

 
    Total........................      15,000,000  ..............  ..............  ..............         771,285        2,663        2,001          237
--------------------------------------------------------------------------------------------------------------------------------------------------------
Note: CSAs are Community Supported Agriculture Programs.


               Table 2.--2005 Participating State Agencies
------------------------------------------------------------------------
                     State agency                         Benefit level
------------------------------------------------------------------------
Alabama Farmers' Market Authority.....................            $20.00
Alaska Department of Health and Social Services.......             30.00
Arkansas Department of Human Services, Division of                 50.00
 Aging................................................
California Department of Aging........................             20.00
Chickasaw Nation of Oklahoma..........................            100.00
Colorado..............................................             20.00
Connecticut Department of Agriculture.................             15.00
District of Columbia Department of Health.............             30.00
Five Sandoval Indian Pueblos..........................             20.00
Florida Department of Elder Affairs...................             60.00
Grand Traverse Band of Ottawa & Chippewa Indians......             50.00
Hawaii Department of Labor & Industrial Relations.....            165.00
Illinois Department of Human Services.................             15.00
Indiana Department of Health..........................             18.00
Iowa Department of Agriculture & Land Stewardship.....             28.00
Kansas Department of Aging............................             30.00
Kentucky Department of Agriculture....................             40.00
Louisiana Department of Agriculture...................             16.00
Maine Department of Agriculture.......................             67.00
Maryland Department of Agriculture....................             15.00
Massachusetts Department of Food and Agriculture......             10.00
Michigan Office of Services to the Aging..............             40.00
Minnesota Department of Agriculture...................             20.00
Mississippi Department of Agriculture.................             28.00
Mississippi Band of Choctaw Indians...................             45.00
Montana Department of Public Health and Human Services             40.00
Nebraska Department of Agriculture....................             48.00
Nevada Department of Administration...................             30.00
New Hampshire Department of Health and Human Services.             18.00
New Jersey Department of Health and Senior Services...             20.00
New York Department of Agriculture and Markets........             18.00
North Carolina Department of Health & Human Services..             15.00
Ohio Department of Aging..............................             65.00
Oregon Department of Human Services...................             40.00
Osage Tribal Council..................................             25.00
Pennsylvania Department of Agriculture................             20.00
Pueblo of San Felipe..................................             40.00
Puerto Rico Department of Agriculture.................             16.00
Rhode Island Division of Agriculture..................             15.00
South Carolina Department of Social Services..........             25.00
Tennessee Department of Health........................             30.00
Vermont Department of Aging and Disabilities..........             61.00
Virginia Department for the Aging.....................             40.00
Washington Department of Social and Health Services...             31.00
West Virginia Department of Agriculture...............             20.00
Wisconsin Department of Agriculture, Trade, and                    30.00
 Consumer Protection..................................
------------------------------------------------------------------------

    4. Summary \37\ of Key Provisions: Following is a summary of key 
provisions of this rule and their impact on USDA, State and local 
agencies, farmers and recipients. Effects describe how the program 
will change compared to policies in place for the current SFMNP.
---------------------------------------------------------------------------

    \37\ The Grand Traverse Band of Ottawa and Chippewa Indians 
allows all elders to be income eligible; the Grand Traverse Band of 
Ottawa and Chippewa Indians is excluded from the calculation of the 
mean and median.

[[Page 74650]]



                                 Table 3
------------------------------------------------------------------------
            Final rule:                     Final rule effect on:
------------------------------------------------------------------------
Sec.   249.3 Administration:                         USDA
 
    (a) Delegates the                The Supplemental Food Programs
     responsibility within USDA to    Division and FNS Regional Offices
     administer the SFMNP to FNS.     will need to use resources to
    (b) Delegates the                 provide assistance to State
     responsibility for direct        agencies and to assess and/or
     administration of the SFMNP,     monitor all levels of Program
     in accordance with program       operations to ensure that the
     regulations, to State            goals of the Program are
     agencies. Allows State           effectively and efficiently
     agencies to operate the SFMNP    achieved.
     at the local level through      State/Local Agencies: State
     written agreements with          agencies will need to use
     nonprofit organizations or       resources to meet administrative
     local government entities..      requirements. However, State
    (c) Requires each State agency    agencies that participated in the
     to ensure that sufficient        SFMNP have administrative
     staff is available to            structures in place, mitigating
     administer the SFMNP             the need for resources to develop
     efficiently and effectively,     new administrative structures,
     and to include in the State      which can be supplemented if
     Plan an outline of               needed to meet any new
     administrative staff and job     responsibilities from this rule.
     descriptions for staff who
     will be paid out of SFMNP
     funds..
------------------------------------------------------------------------
Sec.   249.5 Selection of new State                  USDA
 agencies:
 
    All current SFMNP State          There will be some impact on FNS
     agencies are grandfathered       Regional Office resources in the
     into the proposed program. The   review and approval of State plans
     amount of the grant would be     submitted by State agencies,
     equal to the total Federal       including those not currently
     funds received in the prior      participating in the SFMNP.
     fiscal year, contingent upon
     the availability of sufficient
     funds for the SFMNP and an
     approved State Plan.
                                     State/Local Agencies: Congress has
                                      authorized $15 million per year
                                      for the SFMNP through FY 2007.
                                      Modest program expansion has been
                                      funded by unspent funds that have
                                      carried over into the next fiscal
                                      year. Therefore, it is unlikely
                                      that many additional State
                                      agencies will have the opportunity
                                      to participate in the program.
                                      Further, participating State
                                      agencies cannot expect to see
                                      their programs expand much. An
                                      appropriation not indexed to
                                      inflation will decrease in real
                                      dollars over time.
                                     Farmers: Grandfathering in State
                                      agencies that currently
                                      participate in the SFMNP, combined
                                      with limited funding is likely to
                                      limit the program primarily to
                                      farmers, markets, and CSAs in
                                      State agencies already
                                      participating.
                                     Recipients: Grandfathering in State
                                      agencies that currently
                                      participate in SFMNP, combined
                                      with limited funding is likely to
                                      limit the program to recipients in
                                      States currently participating.
------------------------------------------------------------------------
Sec.   249.6 Participant                             USDA
 eligibility:
 
    (a) Sets out criteria for        Most SFMNP participants are likely
     eligibility for certification.   to be income eligible based on
    1. Categorical Eligibility.       documentation of their eligibility
     Participants must not be less    to participate in another means-
     than 60 years of age. ITOs       tested assistance program.
     have the option to deem Native   However, because some State
     Americans who are 55 years or    agencies may not require
     older as categorically           documentation of income for other
     eligible. State agencies may,    participants, it is possible that
     at their discretion, also deem   some participants may not be
     disabled individuals less than   eligible, thus barring eligible
     60 years of age who currently    seniors from participating and
     reside in housing facilities     potentially resulting in some
     occupied primarily by older      erroneous payments. State agencies
     individuals where congregate     have the authority to require
     nutrition services are           income documentation from
     provided, as categorically       applicants, which would help
     eligible. States have the        alleviate the potential loss of
     option to establish a higher     funds due to erroneous payments.
     age limit..                     State/Local Agencies: State
    2. Residency requirement.         agencies have latitude in defining
     States are allowed to            the eligible population, enabling
     establish a residency            State agencies to tailor the
     requirement..                    program to their needs. The final
    3. Income eligibility is set at   rule also provides State agencies
     185% of poverty..                with the flexibility of not
                                      requiring income documentation
                                      from applicants who are not deemed
                                      automatically income eligible
                                      based on certification for or
                                      participation in another means-
                                      tested assistance program for
                                      which the income eligibility
                                      standard is not more than 185% of
                                      the Federal poverty income level.
                                      If State agencies choose to
                                      unilaterally require income
                                      documentation, they will face an
                                      increase in the administrative
                                      burden placed upon them. If income
                                      documentation is instead required
                                      on a case-by-case basis, State
                                      agencies would be expected to
                                      provide guidance to local agencies
                                      on when such documentation might
                                      be needed and local agencies will
                                      need to collect and review the
                                      documentation. It is not expected
                                      that these activities will impose
                                      a significant administrative
                                      burden upon State and local
                                      agencies.
    (b) The State or local agency    Recipients: The final rule allows
     must require applicants to       State agencies to continue serving
     either provide documentation     those currently participating and
     of their eligibility to          provides for expansion of the
     participate in another means-    program, based on the availability
     tested assistance program as     of funds.
     designated by the State
     agency, sign a statement
     attesting to the participation
     in or certification for
     another means-tested program
     as designated by the State
     agency, or sign a statement
     affirming that their household
     income does not exceed the
     maximum income eligibility
     standard in use by the State
     agency. State agencies have
     the option of requiring income
     documentation as they deem
     necessary.
------------------------------------------------------------------------

[[Page 74651]]

 
Sec.   249.8 Level of benefits and                   USDA
 eligible foods:
 
    (a) Eligible foods are fresh,    Instituting a minimum and maximum
     nutritious, unprepared fruits,   benefit level ensures a certain
     vegetables and herbs. States     level of participation is
     must specifically identify in    possible, given cost constraints.
     the State Plans those foods     Requiring a Statewide benefit level
     that may be purchased.           eases administrative burdens and
    (b) Establishes that the SFMNP    promotes equity within the
     benefit received by each         program.
     recipient may not be less than  State/Local Agencies: Maximum and
     $20 or more than $50 each        minimum benefit levels reduce
     year, except that State          flexibility.
     agencies that provided an       Grandfathering CSA program models
     annual SFMNP benefit of less     into the permanent program by
     than $20 in FY 2006 may          current State agencies will allow
     continue, at their discretion,   current State agencies to maintain
     to issue less than the $20       successful Programs by maintaining
     minimum after the program        its economic viability for
     becomes permanent.               authorized farmers.
     Participants served by a State  Recipients: The eligible food
     agency that operated the SFMNP   requirement increases access to
     through a CSA program model in   fresh fruits and vegetables for
     FY 2006 may, at the State        participating seniors.
     agency's discretion, continue   If State agencies are unable to
     to receive the same CSA          maintain current funding levels,
     benefit levels. New States may   State agencies will have to reduce
     issue higher benefits up to      benefits, reduce the number of
     $50 per year to participants     seniors served, or both.
     who are participating through
     a CSA program, as long as that
     level is consistent for all
     Senior CSA program
     participants..
    (c) Establishes that all SFMNP
     recipients living in the areas
     served by the State agency
     must be offered the same
     amount of SFMNP benefits,
     regardless of the program
     model used by that State
     agency. Benefits may be
     allocated on an individual or
     on a household basis..
------------------------------------------------------------------------
Sec.   249.9 Nutrition education:                    USDA
 
    (a) Defines the goal of          FNS will have to monitor State's
     nutrition education in the       provision of nutrition education.
     SFMNP, i.e., to emphasize the   State/Local Agencies: All State
     relationship of proper           agencies currently provide
     nutrition to the total concept   nutrition education. Only the new
     of good health, including the    State agencies would experience an
     importance of consuming fresh    increase in burden; however, the
     fruits and vegetables.           final rule allows State agencies
    a. Requires the State agency to   to use up to 10% of their Federal
     integrate nutrition education    grant to offset this burden.
     into SFMNP operations, and      Recipients: Nutrition education
     provides guidance on             could have a positive impact on
     coordinating the delivery of     the health of seniors. However,
     nutrition education through      the manner in which it is
     other agencies within the        provided, and its accessibility
     State..                          will determine the success of the
                                      education to improve eating and
                                      physical activity levels.
                                     Nutrition Education can be funded
                                      out of State agencies'
                                      administrative funds (up to 10% of
                                      the total grant), which could
                                      reduce (1) the amount of funds
                                      spent on program administration;
                                      and (2) the amount spent on food
                                      benefits.
------------------------------------------------------------------------
Sec.   249.12 SFMNP costs:
    (a) Defines allowable and        State/Local Agencies: The Program
     unallowable costs for the        has been operating since 2001.
     SFMNP.                           Administrative funds have not been
    1. States are permitted to use    available to State agencies since
     their grant of up to 10          the program was established. ERS
     percent for administrative       found in its 2001 in-house
     costs..                          evaluation of the program that
    2. Food costs are the costs of    most State agencies wanted
     eligible foods provided to       additional funds to support
     SFMNP recipients..               program administration.\38\ It is
    3. Administrative costs are       therefore likely that State
     those costs associated with      agencies will use the
     providing benefits and           administrative funds allowed under
     services to recipients..         the final rule. Additionally,
                                      State agencies have more
                                      administrative requirements under
                                      the program regulations in the
                                      final rule than they do under the
                                      current program (e.g. State Plan,
                                      racial/ethnic participation data
                                      collection and reporting, specific
                                      minimum and maximum benefit
                                      levels, management evaluation
                                      requirements for both FNS and each
                                      State agency, regular and routine
                                      participation and expenditure
                                      reports, audit requirements, and
                                      specific contractual requirements
                                      for authorized outlets.) There is
                                      no maintenance of effort
                                      requirement in the final rule, so
                                      it is unlikely that State agencies
                                      will continue to use the resources
                                      that they were using during the
                                      pilot programs.
                                     Because future funding levels are
                                      based on funding provided to
                                      current State agencies,
                                      administrative funding was not
                                      previously available, and the
                                      provisions in the final rule allow
                                      State agencies to use up to 10% of
                                      their total grant for
                                      administrative purposes, the
                                      actual dollar amount available for
                                      food benefits will likely be lower
                                      than the total food funds
                                      currently provided to State
                                      agencies.
                                     Farmers: The reduction in total
                                      benefits to seniors due to
                                      allocating funds for program
                                      administration will impact farmers
                                      authorized to redeem SFMNP
                                      coupons. As food benefits decrease
                                      there may be some decrease in
                                      recipients' demand for farmers'
                                      market produce.

[[Page 74652]]

 
                                     Recipients: Unless States augment
                                      federal funding, which they are
                                      encouraged to do, they will have
                                      to reduce SFMNP benefits, reduce
                                      the number of seniors served, or
                                      both. For instance, utilizing the
                                      total $15 million, the program
                                      could provide benefits to about
                                      4.9% of the eligible population in
                                      2007. Assuming State agencies use
                                      10% of grant funds for
                                      administration, the percentage of
                                      the eligible population served
                                      decreases by about 10 percent to
                                      4.4% in 2007.
------------------------------------------------------------------------
Sec.   249.14 Distribution of                        USDA
 funds:
 
    (a) Establishes a base grant     Basing grants on prior year grant
     level (prior fiscal year's       levels eases the administrative
     grant) for previously            burden for FNS.
     participating State agencies.   State/Local Agencies: Basing grant
    (b) Provides for a ratable        money on prior year grant levels
     reduction of all SFMNP grants    would help State agencies plan and
     in the event that appropriated   better manage their programs.
     funds in any fiscal year are    The funding formula allows State
     not sufficient to cover the      agencies to maintain their
     base grants at the prior         programs and, if funds are
     fiscal year's grant level..      available, for current and new
    (c) Establishes a funding         State agencies to expand or start
     formula for the allocation of    a SFMNP.
     any remaining SFMNP funds       Farmers: Basing current funding
     (after base grants are met)      levels on prior year levels
     for expansion of participating   provides stability within the
     State agencies (75 percent)      Program. The funding formula
     and introduction of new State    establishes a method to distribute
     agencies (25 percent)..          funds, when available, to allow
    (d) Sets out factors to be        current State agencies to expand
     considered in approving          their Program and to allow new
     requests for expansion from      State agencies to start operating
     participating State agencies..   the SFMNP. As current and new
    (e) Provides for the              State agencies expand or start
     reallocation by FNS of any       Programs, new program outlets
     unspent SFMNP funds..            (farmers' markets, roadside
                                      stands, and CSAs) will be added to
                                      the SFMNP.
                                     Recipients: Basing current funding
                                      levels on prior year levels
                                      provides stability within the
                                      Program. The funding formula
                                      establishes a method to distribute
                                      funds, when available, to allow
                                      current State agencies to expand
                                      their Program and to allow new
                                      State agencies to start operating
                                      the SFMNP. As current and new
                                      State agencies expand or start
                                      programs, the SFMNP will be able
                                      to serve a larger share of the
                                      eligible elderly population.
------------------------------------------------------------------------

    5. Cost/Benefit Analysis of Proposed Rule: Federal Cost. The 
SFMNP was authorized to be funded at $15 million annually through FY 
2007. This analysis assumes that the Program will continue to be 
funded at $15 million per year throughout the 5-year period of 
analysis. The real cost of the program will be less than the nominal 
cost of $15 million because the program is not indexed to 
inflation.\39\ The FNS administrative cost associated with program 
implementation is assumed to be less than 1.5 percent of the total 
federal grant to State agencies.
---------------------------------------------------------------------------

    \38\ USDA/ERS, 2001.
    \39\ Inflation rate based on 2005 CPI-U data for fresh fruits 
and vegetables.
---------------------------------------------------------------------------

Benefits to Seniors

    Low-income seniors will be afforded nutrition education as well 
as a coupon benefit ranging in value from $20 to $50 per annum, \40\ 
which will be used to purchase fresh, unprepared fruits, vegetables, 
and herbs intended to improve seniors' diets. Seniors, and 
ultimately participating farmers, in each State agency will benefit 
from the total Federal grant to the State agencies minus the amount 
that State agencies spend on administration--up to 10 percent of the 
total grant.
---------------------------------------------------------------------------

    \40\ This does not include those seniors participating in states 
that grandfathered a benefit level lower than $20 or a CSA program 
model into the permanent SFMNP.
---------------------------------------------------------------------------

    It is possible that seniors will not eat additional fresh fruits 
and vegetables, but rather will substitute the fruits and vegetables 
that they would have purchased with their own funds with fruits and 
vegetables purchased with SFMNP coupons. You et al. (1998) found 
that the demand for fresh fruits and vegetables in the United States 
was responsive to price changes, but not changes in income.\41\
---------------------------------------------------------------------------

    \41\ You et al. ``Consumer Demand for Fresh Fruits and 
Vegetables in the United States.'' The Georgia Agricultural 
Experiment Stations, College of Agricultural and Environmental 
Sciences, The University of Georgia. Research Bulletin, number 431 
(January 1998).
---------------------------------------------------------------------------

Benefits to Farmers

    Farmers will collect revenue from redeemed coupons up to the 
total Federal grants to State agencies for food costs (the total 
amount of revenue collected will depend also on the amount of the 
grant State agencies use to cover administrative costs). Additional 
revenue may be reaped as seniors might spend their own money (and in 
some States, food stamps) to purchase additional goods at the 
farmers' markets. Farmers will also benefit from the exposure of new 
populations to farmers' markets, roadside stands and CSAs, which 
could lead to increased revenues.
    In FY 2005, the SFMNP operated at 2,663 farmers' markets, 2,001 
roadside stands and 237 CSAs.\42\ ERS reported in 2001, that ``the 
SFMNPP has not been as effective in developing new farmers' markets, 
produce stands, and community supported agricultural programs or in 
expanding existing ones.''\43\ Nevertheless, ERS suggests that given 
evidence from the WIC FMNP, the SFMNP could increase the number of 
farmers' markets, roadside stands, and CSAs in the long run.
---------------------------------------------------------------------------

    \42\ USDA/FNS Administrative Data, 2006.
    \43\ ``The Seniors Farmers' Market Nutrition Pilot Program: A 
Preliminary Assessment.'' Unpublished (internal) staff paper. USDA/
Economic Research Service. October 10, 2001.
---------------------------------------------------------------------------

Limitations

    Benefits to seniors and farmers will be limited by the 
authorized funding for the program, which will go primarily to 
already participating State agencies. The use of the Federal grant 
money to cover administrative costs will also limit the benefits 
realized by seniors and farmers. FNS recognizes the tradeoffs 
involved in these decisions, but feels that they are necessary to 
maintain strong infrastructure for the program.

Uncertainties

    It is unclear what level of benefits State agencies will provide 
under this rule. The rule provides State agencies the flexibility to 
make tradeoffs between possibly making a larger difference in diet 
quality for a few seniors and providing some level of benefits for 
many. Growing seasons are also likely to have an impact; State 
agencies with longer growing/market seasons may be more likely to 
issue higher benefit levels so that seniors can take advantage of 
the season.
    It is also unclear who will be served--anyone meeting age/
residency and income requirements is eligible, but the program has 
not been funded at levels that come close to providing benefits to 
all who are eligible. State agencies will need to consider carefully 
their individual outreach and service priorities to ensure that the 
SFMNP,

[[Page 74653]]

consistent with other FNS nutrition assistance programs, targets 
those most in need.

Estimate of Costs and Benefits of the Proposed Rule

    The following table provides an estimate of the costs and 
benefits described above as well as the number of program recipients 
during 2007-2011. Key assumptions include:
     Funding for 2007-2011 is maintained at the current 
authorized level of $15 million annually (assumes no carryover funds 
are available in 2007-2011);
     State agencies use 10 percent of the Federal grant for 
administration in 2007-2011;
     State agencies provide an average benefit level of 
$17.50 to recipients (as shown in Table 4); and
     The poverty rate among seniors remains constant over 
the period of analysis.
    This analysis also assumes that total funding and benefit levels 
will not be indexed for inflation; therefore, their value has been 
deflated using projections of the Consumer Price Index--Urban index 
for fresh fruits and vegetables (1989 baseline). Based on these 
assumptions, we estimate there will be little change in the percent 
of SFMNP eligibles served in the analysis period, due to the large 
number of eligibles nationally.

                                    Table 4.--Projected Costs and Benefits of Proposed Rule in Constant Dollars \44\
                                                      [Figures in millions unless otherwise noted]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                          2005             2007             2008             2009             2010             2011
--------------------------------------------------------------------------------------------------------------------------------------------------------
Total Federal Grants to State Agencies............      $15,000,000      $15,000,000      $14,995,800      $14,992,300      $14,988,510      $14,984,720
Federal Administrative Costs......................         $180,000         $180,000         $180,000         $180,000         $180,000         $180,000
Administrative Funds for State Agencies...........               $0       $1,500,000       $1,499,580       $1,499,230       $1,498,850       $1,498,470
Benefits Paid to Participants/Farmers.............      $15,000,000      $13,500,000      $13,496,220      $13,493,070      $13,489,660      $13,486,250
Number of Recipients..............................          771,285          771,285          771,285          771,285          771,285          771,285
Average Benefit Per Participant \45\ Per Year.....           $19.45           $17.50           $17.50           $17.49           $17.49           $17.49
Number of Eligibles \46\..........................       16,620,000       17,470,000       17,975,000       18,476,000       19,180,000       19,451,000
Percent of Eligibles Served.......................            4.64%            4.41%            4.29%            4.17%            4.02%            3.97%
--------------------------------------------------------------------------------------------------------------------------------------------------------

    6. Alternatives: USDA considered a variety of alternatives when 
constructing the regulation for the Senior Farmers' Market Nutrition 
Program. Primarily, the proposed regulation is modeled after the 
FMNP, the SFMNPP, and the SFMNP under the competitive grant process. 
Consistency provides administrative ease among the State agencies, 
localities, and USDA as well as continuity to beneficiaries and 
farmers who have been participating in the FMNP and/or the SFMNPP. 
However, USDA carefully reviewed six alternatives with regard to: 
Grant structure, eligible grantees, provision of administrative 
funding, eligibility requirements, and benefit levels. An analysis 
of these alternatives was included in the regulatory impact analysis 
for the proposed rule. In response to comments on the proposed rule, 
USDA further considered additional alternatives to the final rule 
regarding participant eligibility, benefit levels, and SFMNP costs.
---------------------------------------------------------------------------

    \44\ Baseline is 1989 for all tables.
    \45\ Weighted average benefit offered by states.
    \46\ Eligibles are calculated using Census projections of the 
total number of seniors (60+) in 2007-2011. The total number of 
seniors was adjusted to account for those in poverty by using the 
March 2004 CPS Supplement. The poverty rate is held constant at the 
2004 level.
---------------------------------------------------------------------------

    The Department received numerous comments in opposition to the 
requirement that if an applicant was not automatically income 
eligible for the SFMNP that he/she must provide documentation of 
income at the time of certification. Commenters expressed concern 
over the administrative burden that would be placed upon State 
agency personnel in order to obtain proof or documentation of income 
given the benefit eligible applicants would receive. It was 
suggested that self-identification of need for food assistance, 
self-declaration of participation in another means-tested assistance 
program, or self-declaration of income should be the minimum 
requirement for accessing SFMNP benefits. As such, USDA removed the 
requirement that proof of income be provided by applicants not 
deemed income-eligible based on certification for or participation 
in another means-tested program that uses a maximum income level of 
not more than 185% of the Federal poverty income; however, the final 
rule continues to give State and local agencies the option to verify 
reported income.
    The proposed rule put forth annual minimum and maximum SFMNP 
benefit levels of $20 and $50, respectively. All of the State 
agencies with benefit levels below $20 as well as many other 
interested State and local SFMNP agencies opposed a $20 minimum 
stating that it would require reducing the number of eligible 
seniors they were currently serving in order to comply with the $20 
minimum benefit. Commenters also strongly opposed the proposed $50 
maximum benefit level. Numerous farmers stated that if the maximum 
CSA benefit level were reduced to $50, they would no longer be 
willing or able to participate in the SFMNP. USDA considered a 
variety of alternatives put forth by commenters, which included 
eliminating the benefit cap, increasing the maximum benefit to $80 
or $100, allowing State agencies the option of setting their own 
minimum and maximum benefits, either for all programs or only for 
CSAs, or allowing current State agencies to continue issuing 
benefits at their FY 2004 level. USDA recognizes the importance of 
farmer participation, particularly in CSA program models, to the 
success of the SFMNP. As such, the Department has revised the 
maximum benefit level requirements put forth in the proposed rule.
    The final rule retains the minimum benefit level at $20, as set 
forth in the proposed rule, but allows State agencies that issued a 
lower benefit in FY 2006 and that are grandfathered into the SFMNP 
when it becomes a permanent program to continue issuing benefits at 
the lower level. New State agencies who begin operating the SFMNP 
after FY 2006 must comply with the $20 benefit minimum and the $50 
benefit cap put forth in the proposed rule. Current SFMNP State 
agencies that are grandfathering a CSA program model into the 
permanent program may continue to issue benefits at their current, 
FY 2006, levels. Any State whose annual CSA participant benefit 
level is greater than $50 will not be eligible to receive expansion 
funds until the $50 benefit cap in the CSA program model is 
implemented, and must require each SFMNP applicant to provide 
documentation that his/her household income does not exceed the 185% 
standard set forth in the final rule. State agencies will have the 
option of providing a higher benefit level out of funding sources 
other than the Federal SFMNP grant. The Department believes these 
changes will allow State agencies to maintain their current caseload 
while adhering to our principle of serving as many eligible senior 
participants as possible with limited available funds.
    In addition, commenters suggested that the modified CSA program 
model in which bulk quantities of certain produce is purchased 
directly from authorized farmers by the State agency and then 
equitably divided among and distributed to SFMNP participants be 
retained in the permanent SFMNP. The Department did not address this 
type of program model in the proposed rule. Therefore, the final 
rule proposes and sets forth that SFMNP participants may also

[[Page 74654]]

receive benefits through a bulk purchase program model. Commenters 
found this type of program model to be very successful and the 
Department is committed to maintaining the success of the SFMNP. 
Because the final rule requires that each participant receive an 
equitable value of fruits and vegetables and that the total benefit 
provided to each participant fall within the minimum and maximum 
levels set forth in this final rule, this addition will not change 
the estimated costs or benefits of the final rule.
    7. Impact of the Final Rule on Current SFMNP Benefit Levels and 
Participation: Given the changes to the minimum and maximum benefit 
levels made from the proposed rule to the final rule, which gives 
State agencies more flexibility in establishing benefit levels, the 
Department expects that States will adjust benefits to a level that 
would allow them to maintain their current participation. This 
analysis assumes that State agencies will try to serve the same 
number of people in FY 2007 as they did in FY 2005. In doing so, it 
is expected that the weighted average benefit will decrease from 
approximately $19.45 in FY 2005 to about $17.50 in FY 2007. Because 
it is expected that State agencies will use 10 percent of their 
Federal grant to cover administrative costs, the estimated $1.95 
reduction in the average benefit level is the result of the 10 
percent reduction in food funds.
    If States choose to use a portion of their Federal grant to pay 
for the administrative costs of operating the SFMNP and do not 
adjust their benefit levels to capture the reduction in food funds, 
they may not be able to serve as many eligible elderly individuals 
in FY 2007 as they did in FY 2005. For example, in FY 2007, if State 
agencies continue to issue an average benefit of $19.45 and use 10 
percent of their Federal grant for administration, there could be a 
decrease in the number of recipients served in FY 2007 of about 
77,000 seniors. As a means of mitigating the effects of decreased 
food funds, State agencies could continue to cover administrative 
costs. This would allow States to maintain their FY 2005 
participation and benefit levels in FY 2007.

Summary

    Because the resources devoted to the SFMNP are likely to be 
small in comparison to the size of the eligible population, the 
permanent Program will not enable State agencies to reach the 
majority of those eligible. However, the minimum and maximum benefit 
levels put forth in this final rule will help enable State agencies 
to serve as many eligible individuals as possible. While the program 
is not currently fully funded, the final rule allows for future 
growth, should additional funds be made available.

Appendix A--Calculation of Eligibles

A. U.S. States
    1. Used Census 1995 State Projection Series for 2007-2011, 
broken out by race and age (60+)
    2. Multiplied State projection data by poverty rate, 185% and 
130%, (broken out by race and age, seniors 60+); Poverty rate data 
found in Census' Current Population Survey March Supplement, 2004
    3. Added all State eligibles to get total U.S. State eligibles 
at both 185% and 130% of poverty
B. U.S. Territories
    1. Used Census' International Data Base
    2. Used ``Other Demographic Aggregation'' (2004-2011), 
population by age and sex (by each territory)
    3. Multiplied population projections by 1999 Census poverty 
level estimates (by territory); 130% of poverty was not available 
(used 124% poverty)
C. Total
    1. Added eligibles from U.S. States and U.S. Territories
    2. Did not calculate eligibles in Indian Tribal Organizations 
(very small number and data not readily available)
    3. Did not calculate the disabled population living in senior 
facilities (very small number and data not readily available)

    Note: Assumed constant poverty rate over 2007-2011 period (held 
constant at 2004 level as calculated from CPS data)

[FR Doc. 06-9569 Filed 12-11-06; 8:45 am]
BILLING CODE 3410-30-P