[Federal Register Volume 75, Number 173 (Wednesday, September 8, 2010)]
[Proposed Rules]
[Pages 54530-54536]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-22247]


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DEPARTMENT OF AGRICULTURE

Food and Nutrition Service

7 CFR Part 253

[FNS-2008-001]
RIN 0584-AD85


Food Distribution Program on Indian Reservations: Administrative 
Funding Allocations

AGENCY: Food and Nutrition Service, USDA.

ACTION: Proposed rule.

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SUMMARY: This rule proposes to establish the requirements regarding the 
allocation of administrative funds for the Food Distribution Program on 
Indian Reservations and the Food Distribution Program for Indian 
Households in Oklahoma, both of which are referred to as ``FDPIR'' in 
this rulemaking. The rulemaking would propose amendments to FDPIR 
regulations to ensure that administrative funding is allocated in a 
fair and equitable manner. The proposed rule would also revise FDPIR 
regulations to clarify current program requirements relative to the 
distribution of administrative funds to Indian Tribal Organizations 
(ITOs) and State agencies.

DATES: To be assured of consideration, comments must be received on or 
before December 7, 2010.

ADDRESSES: FNS invites interested persons to submit comments on this 
proposed rule. You may submit comments, identified by Regulatory 
Identifier Number (RIN) number 0584-AD85, by any of the following 
methods:
     Federal eRulemaking Portal: Go to http://www.regulations.gov. Preferred method; follow the online instructions 
for submitting comments on ``FNS-2008-001.''
     Fax: Submit comments by facsimile transmission to Laura 
Castro at (703) 305-2420.
     Mail: Send comments to Laura Castro, Branch Chief, Policy 
Branch, Food Distribution Division, Food and Nutrition Service, U.S. 
Department of Agriculture, Room 500, 3101 Park Center Drive, 
Alexandria, Virginia 22302-1594.
     Hand Delivery or Courier: Deliver comments to the above 
address during regular business hours.
    Comments submitted in response to this rule will be included in the 
record and will be made available to the public. Please be advised that 
the substance of the comments and the identity of the individuals or 
entities submitting the comments will be subject to public disclosure. 
FNS will make the comments publicly available on the Internet via 
http://www.regulations.gov.

FOR FURTHER INFORMATION CONTACT: Laura Castro at the above address or 
telephone (703) 305-2662. You may also contact Dana Rasmussen at (703) 
305-1628, or via e-mail at [email protected].

SUPPLEMENTARY INFORMATION:

I. Public Comment Procedures
II. Procedural Matters
III. Background and Discussion of the Proposed Rule

I. Public Comment Procedures

    Your written comments on this proposed rule should be specific, 
should be confined to issues pertinent to the proposed rule, and should 
explain your reason(s) for any change you recommend or proposal(s) you 
oppose. Where possible, you should reference the specific section or 
paragraph of the proposal you are addressing. Comments received after 
the close of the comment period (see DATES) will not be considered or 
included in the Administrative Record for the final rule.
    Executive Order 12866 requires each agency to write regulations 
that are simple and easy to understand. We invite your comments on how 
to make these regulations easier to understand, including answers to 
questions such as the following:
    (1) Are the requirements in the rule clearly stated?
    (2) Does the rule contain technical language or jargon that 
interferes with its clarity?
    (3) Does the format of the rule (e.g., grouping and order of 
sections, use of headings, and paragraphs) make it clearer or less 
clear?
    (4) Would the rule be easier to understand if it were divided into 
more (but shorter) sections?
    (5) Is the description of the rule in the preamble section entitled 
``Background and Discussion of the Proposed Rule'' helpful in 
understanding the rule? How could this description be more helpful in 
making the rule easier to understand?

II. Procedural Matters

    In the following discussion and regulatory text, the term ``State 
agency,'' as defined at 7 CFR 253.2, is used to include ITOs authorized 
to operate FDPIR in accordance with 7 CFR parts 253 and 254.

A. Executive Order 12866, ``Regulatory Planning and Review''

    This proposed rule has been determined to be not significant for 
purposes of Executive Order 12866. Therefore it was not reviewed by the 
Office of Management and Budget (OMB).

B. Title 5, United States Code 601-612, ``Regulatory Flexibility Act''

    This proposed rule has been reviewed with regard to the 
requirements of the Regulatory Flexibility Act (5 U.S.C. 601-612). It 
has been certified that this action will not have a significant impact 
on a substantial number of small entities. While State agencies that 
administer FDPIR will be affected by this rulemaking, the economic 
effect will not be significant.

C. Public Law 104-4, ``Unfunded Mandates Reform Act of 1995'' (UMRA)

    Title II of the Unfunded Mandates Reform Act of 1995 (UMRA), Public 
Law 104-4, establishes requirements for Federal agencies to assess the 
effects of their regulatory actions on State, local, and Tribal 
governments and the private sector. Under Section 202 of the UMRA, FNS 
generally must prepare a written statement, including a cost-benefit 
analysis, for proposed and final rules with Federal mandates that may 
result in expenditures to State, local, or Tribal governments, in the 
aggregate, or to the private sector, of $100 million or more in any one 
year. When such a statement is needed for a rule, Section 205 of the 
UMRA generally requires FNS to identify and consider a reasonable 
number of regulatory alternatives and adopt the least costly, more 
cost-

[[Page 54531]]

effective or least burdensome alternative that achieves the objectives 
of the rule.
    This rule contains no Federal mandates (under the regulatory 
provisions of Title II of the UMRA) for State, local, and Tribal 
governments or the private sector of $100 million or more in any one 
year. This rule is, therefore, not subject to the requirements of 
Sections 202 and 205 of the UMRA.

D. Executive Order 12372, ``Intergovernmental Review of Federal 
Programs''

    The program addressed in this action is listed in the Catalog of 
Federal Domestic Assistance under No. 10.567. For the reasons set forth 
in the final rule in 7 CFR part 3015, subpart V and related Notice 
published at 48 FR 29115 on June 24, 1983, the donation of foods in 
such programs is included in the scope of Executive Order 12372, which 
requires intergovernmental consultation with State and local officials.

E. Executive Order 13132, ``Federalism''

    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.
1. Prior Consultation With State and Local Officials
    The programs that receive FDPIR administrative funding from FNS' 
Regional Offices are all Tribal or State-administered, federally-funded 
programs. On an ongoing basis, the FNS National and Regional Offices 
have formal and informal discussions related to FDPIR with Tribal and 
State officials. FNS meets regularly with the Board and the membership 
of the National Association of Food Distribution Programs on Indian 
Reservations (NAFDPIR), an association of Tribal and State-appointed 
FDPIR Program Directors, to discuss issues relating to the program.
    This rulemaking proposes regulatory changes regarding the 
distribution of FDPIR administrative funds to the FNS Regional Offices 
for allocation to the ITOs and State agencies that administer FDPIR. 
Section F, Tribal Consultation, below, provides additional information 
on FNS' efforts to work directly with the ITOs and State agencies in 
the development of the funding methodology proposed in this rule.
2. Nature of Concerns and the Need To Issue This Rule
    Current regulations at 7 CFR part 253 do not specify how FDPIR 
administrative funds must be distributed. For many years, the National 
Office of the FNS used fixed percentages to allocate FDPIR 
administrative funds to each of the FNS Regional Offices, which in turn 
distributed the available funding to FDPIR State agencies. As noted 
previously, FDPIR State agencies include both ITOs and agencies of 
state government. The funding methodology did not account for any 
administrative cost drivers, such as the number of ITOs and State 
agencies within each Region or the number of individuals served by each 
ITO/State agency. Therefore, it did not provide a rational basis for 
allocating funds to the Regional Offices. FDPIR State agencies 
expressed concern that the methodology did not allocate funds equitably 
to the FNS Regional Offices, and in turn negatively impacted certain 
State agencies' ability to adequately administer the program.
3. Extent To Which We Address Those Concerns
    FNS has considered the impact of the proposed rule on FDPIR State 
agencies. FNS does not expect the provisions of this rule to conflict 
with any State or local laws, regulations, or policies. The intent of 
this rule is to respond to the concerns of the State agencies by 
ensuring that funds are allocated to the FNS Regional Offices as fairly 
as possible; and to ensure that related program requirements with 
regard to the allocation of administrative funds to State agencies, as 
well as State agency matching requirements, are clear and easy to 
understand.

F. Executive Order 13175, ``Tribal Impact Statement''

    This rulemaking proposes regulatory changes regarding the 
distribution of FDPIR administrative funds to the FNS Regional Offices, 
which further allocate the funds to the ITOs and State agencies that 
administer FDPIR. These amendments are intended to ensure that FDPIR 
administrative funding is distributed to the FNS Regional Offices in a 
fair and equitable manner. The proposed rule would also revise FDPIR 
regulations to clarify current program requirements relative to the 
allocation of administrative funds to ITOs and State agencies. During 
the course of developing this rule, FNS has taken a number of actions 
to ensure meaningful and timely input by elected tribal leaders. In 
2005 FNS convened a work group comprised of FNS staff and Tribal and 
State-appointed FDPIR Program Directors representing NAFDPIR and its 
membership. The work group was asked to develop a proposal(s) for a new 
funding methodology for the allocation of FDPIR federal administrative 
funds. The work group conducted its deliberations via 33 conference 
calls and six face-to-face meetings from May 2005 through October 2007. 
Discussions were also held at the annual meetings of the membership of 
NAFDPIR, in which some elected Tribal leaders took part. The work group 
and FNS solicited written comments from elected Tribal leaders and 
State officials at various stages of the development of the funding 
methodology proposed in this rule. In addition to the requests for 
written comments, FNS hosted public meetings that were held in January 
2007 at four locations throughout the country. Elected Tribal leaders 
and State officials were invited to discuss the proposal to develop a 
funding methodology at those public meetings. Discussion from the 
public meetings and written comments submitted to the work group were 
considered by the work group in the development of its recommendations 
to FNS' Administrator. On October 19, 2007, the work group presented 
recommendations for a funding methodology. These recommendations were 
used to develop the funding methodology proposed in this rule.
    In fiscal year 2008, FNS implemented the funding methodology 
proposed in this rulemaking on a trial basis. FNS solicited comments 
from elected Tribal leaders and State officials on the impact of the 
funding methodology in fiscal year 2008 for consideration in 
determining the funding methodology to be used in fiscal year 2009, 
pending the development of this proposed rulemaking.
    A regulatory work plan was developed in fiscal year 2008 for the 
development of this proposed rulemaking with the intent of soliciting 
comments from elected Tribal leaders, State officials, and other 
interested members of the public in response to the funding methodology 
implemented in fiscal year 2008 and proposed in this rule.
    A summary of concerns raised by tribal officials, the agency's need 
to issue this regulation, and an explanation of how these concerns have 
been addressed is thoroughly discussed in section III of the preamble.

G. Executive Order 12988, ``Civil Justice Reform''

    This proposed rule has been reviewed under Executive Order 12988, 
Civil

[[Page 54532]]

Justice Reform. Although the provisions of this rule are not expected 
to conflict with any State or local laws, regulations, or policies, the 
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 proposed 
rule is not intended to have retroactive effect. Prior to any judicial 
challenge to the provisions of this rule or the application of its 
provisions, all applicable administrative procedures must be exhausted.

H. Department Regulation 4300-4, ``Civil Rights Impact Analysis''

    FNS has reviewed this rule in accordance with the Department 
Regulation 4300-4, ``Civil Rights Impact Analysis,'' to identify and 
address any major civil rights impacts the rule might have on 
minorities, women, and persons with disabilities. After a careful 
review of the rule's intent and provisions, FNS has determined that 
this rule will not in any way limit or reduce the ability of 
participants to receive the benefits of donated foods on the basis of 
an individual's or group's race, color, national origin, sex, age, 
political beliefs, religious creed, or disability. FNS found no factors 
that would negatively and disproportionately affect any group of 
individuals.

I. Title 44, United States Code, Chapter 35, ``Paperwork Reduction 
Act''

    The Paperwork Reduction Act of 1995 (44 U.S.C. Chap. 35; see 5 CFR 
part 1320) requires that 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. This 
proposed rule does not contain any new information collection 
requirements subject to review and approval by OMB under the Paperwork 
Reduction Act of 1995. However, previous burdens for 7 CFR part 253 
information collections associated with this rule have been approved 
under OMB control number 0584-0293.

J. Public Law 107-347, ``E-Government Act Compliance''

    FNS is committed to complying with the E-Government Act of 2002 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.

III. Background and Discussion of the Proposed Rule

    The proposed rule would amend the regulations for FDPIR at 7 CFR 
253.11 and impact 7 CFR part 254, which cross-references 7 CFR part 
253.

A. Prior Administrative Funding Allocation Methodology

    Currently, FDPIR regulations at 7 CFR 253.11 do not specify a 
methodology for the allocation of administrative funds. Under the 
traditional practice, the FNS National Office allocated funds to the 
FNS Regional Offices using fixed percentages. These funding percentages 
varied from one Region to the next, did not change for many years prior 
to fiscal year 2008, and did not reflect cost drivers such as each 
Region's share of national program participation and current number of 
ITOs and State agencies. Regional Offices then allocated each State 
agency its share of administrative funds based on negotiations between 
the two entities. Because FNS Regional Offices received funding without 
regard to the effect of cost drivers, similar State agencies in 
different Regions could have received significantly different funding 
levels. This in turn could have impacted program operations and 
potentially resulted in inconsistent or uneven service to participants.

B. FDPIR Funding Methodology Work Group and Public Meetings

    To address concerns raised by FDPIR State agencies over potential 
FDPIR administrative funding inequities, a funding methodology work 
group was convened by FNS in 2005. The work group, which was comprised 
of FDPIR program representatives, including NAFDPIR officers, and FNS 
staff, was charged with developing a new methodology for the 
distribution of FDPIR administrative funds that would be fair, 
objective, and easy to understand.
    After conducting data collection and analysis for several months, 
the work group completed a preliminary proposal in November 2006 and 
submitted it to elected Tribal leaders and State officials for written 
comment. Elected Tribal leaders and State officials were also invited 
to attend public meetings held in January 2007 at four locations across 
the country in order to discuss the work group's preliminary proposal--
Green Bay, Wisconsin, Oklahoma City, Oklahoma, Rapid City, South 
Dakota, and San Francisco, California. Over 100 elected Tribal leaders, 
State officials, and FDPIR program officials attended the public 
meetings and/or submitted written comments on the preliminary 
proposals.
    The work group met in April 2007 to review the written comments and 
transcripts of the four public meetings. The comments reflected a 
diversity of opinion among elected Tribal leaders and State officials. 
From April through October 2007, the work group diligently attempted to 
address the issues and concerns presented in the comments, and resolve 
any differences of opinion within the work group as well. The work 
group submitted its final recommendations to former FNS Administrator 
in a letter dated October 19, 2007. The work group was unable to reach 
consensus on a single approach, thus it provided three funding 
allocation methodology proposals. All of the work group members 
supported at least one of the proposals.
    Under the work group's first proposal, individual State agencies 
would have submitted annual budgets to their respective FNS Regional 
Offices that reflected their individual program needs. If the total 
amount requested by all State agencies combined exceeded the amount of 
the available funding in any fiscal year, the FNS National Office would 
have reduced each Region's total request by an equal percentage.
    Under the work group's second proposal, the FNS National Office 
would have allocated funds to the Regional Offices based on three 
weighted factors: Each Region's share of the national participation 
level averaged over the most recent three-year period; the current 
number of programs in each Region; and the current number of programs 
in each Region with tailgate operations, home delivery, and/or multiple 
warehouses or other issuance methods. As a background, tailgate 
operations are mobile distribution systems where food packages are 
delivered to a site or sites nearer to clients' residences rather than 
being distributed solely out of a central location. Under the work 
group's second proposal, the FNS Regional Offices would have negotiated 
budgets with their State agencies within the amount of funds made 
available.
    Under the work group's third proposal, the FNS National Office 
would have employed a formula to determine a basic grant amount that 
each State agency would receive. Each State agency would have had the 
opportunity to negotiate with their FNS Regional Office for 
supplemental funds to meet their individual needs. Under this proposal, 
85 percent of the available funding each year would have been allocated 
to the State agencies in the form of a basic grant. The basic grant

[[Page 54533]]

would have been determined by two factors: A fixed base amount that 
would be adjusted annually by an inflation factor; and an amount based 
on each State agency's share of the national participation level 
averaged over the most recent three-year period. The FNS National 
Office would have allocated the remaining 15 percent of available 
funding to the FNS Regional Offices based on each Region's share of the 
national participation level averaged over the most recent three-year 
period. That funding would have been used by the FNS Regional Offices 
to supplement the basic grants to the State agencies based on 
individual negotiations.

C. Pilot Funding Allocation Methodology and Comment Solicitation

    In response to the work group's proposals, FNS developed an 
administrative funding allocation methodology that was based in large 
part on the work group's second proposal, to be piloted in fiscal year 
2008. The methodology, which has been used in FDPIR since fiscal year 
2008, allocates funding to the extent practicable to the Regional 
Offices based on two weighted components: Each Region's share of the 
total number of participants nationally, and each Region's share of the 
total current number of State agencies administering the program 
nationally. Proportionally more weight is given to the first element, 
program participation, which FNS believes to be a major cost driver in 
the administration of FDPIR. Sixty-five percent of all administrative 
funds available nationally are allocated to FNS Regional Offices in 
proportion to their share of the number of participants nationally, 
averaged over the three previous fiscal years. In order to recognize 
the fixed costs common to programs of all participation levels, the 
remaining 35 percent of all administrative funds available nationally 
are allocated to each FNS Regional Office in proportion to its share of 
the total current number of State agencies administering the program 
nationally.
    By selecting these two factors, FNS intended to design a funding 
methodology that would provide each FNS Regional Office with the 
funding to support the operational costs of all of its programs, 
particularly those impacted by the number of participants served by 
each State agency. FNS believes that this methodology is based on 
objective and current cost drivers and provides a reasonable basis for 
allocating administrative funds.
    FNS did not include the factor in the work group's second proposal 
which would have allocated funds based on each Region's share of 
tailgate operations, home deliveries, and/or multiple warehouses. FNS 
recognizes that such operations are important program components and 
contribute significantly to the cost of administering a program. Some 
State agencies expend considerable resources in conducting tailgate 
operations and maintaining multiple warehouses. However, this factor, 
as proposed by the work group, did not differentiate among the degree 
of service provided. In addition, exclusion of this factor was not 
expected to significantly impact Regional allocations because 90 
percent of FDPIR programs have some degree of tailgate operations, home 
delivery, and/or multiple warehouses.
    As a result, FNS opted to disregard this factor and provide 
proportionally greater emphasis to the other two factors outlined 
above. FNS believes that this approach offers a proper balance by 
providing each FNS Regional Office with funding to support the 
operational costs of all of its programs in relation to the number of 
participants served by each State agency.
    The decision to pilot a new funding methodology in fiscal year 2008 
was prompted by Congressional action. Recognizing the funding 
inequities in FDPIR, Congress appropriated a total of $34.7 million in 
FDPIR administrative funding for fiscal year 2008, an increase of 
nearly $7.7 million over the fiscal year 2007 level. Report language 
from both the House of Representatives and the Senate (House Report 
110-258, accompanying H.R. 3161, and Senate Committee Report 110-134, 
accompanying S. 1859, respectively) communicated Congress' expectation 
that this funding be used ``to address current inequities among tribes 
in the allocation of funds * * *.'' On October 31, 2007, FNS announced 
the decision to pilot the funding methodology in a letter to elected 
Tribal leaders and State officials. In that letter, FNS sought comments 
with regard to the impact of the piloted methodology on the program. 
The comments received were considered in the development of this 
proposed rule.

D. Comments Received and Analysis

    FNS received written comments from three elected Tribal leaders, 
one State official, and two FDPIR program administrators regarding FNS' 
decision. Five commenters supported the methodology as implemented, 
while one commenter opposed the allocation methodology. Of the five 
commenters supporting the funding allocation methodology, four 
specifically cited sufficient or improved State agency funding levels 
as one of the reasons for their support. Three of the five commenters 
cited equity or fairness as another factor in their support of the 
methodology. Three supporting commenters cited the funding 
methodology's positive impact on the program services provided to 
participants.
    One commenter opposed the manner in which administrative funds were 
allocated to the Regional Offices in fiscal year 2008. The commenter 
stated three key objections: FNS did not consult with the Tribes and 
State agencies prior to pilot implementation; the funding methodology 
implemented in fiscal year 2008 was not one of the three methodologies 
recommended by the work group; and FNS failed to address the work 
group's recommendation regarding food storage and transportation costs 
for the seven independent FDPIR programs serviced by the Montana and 
North Dakota State agencies.
    Regarding the commenter's first objection referencing Tribal 
consultation, the work group and FNS consulted with elected Tribal 
leaders and State officials on multiple occasions prior to the piloting 
the methodology, as outlined above. The decision to pilot the 
methodology was made in response to the Congressional expectation that 
FNS address funding inequities with the additional funds provided in 
fiscal year 2008. The pilot permitted FNS to test the new methodology 
in fiscal year 2008 in order to meet this Congressional expectation, 
while at the same time continuing to consult with elected Tribal 
leaders and State officials. The consultation process continues in this 
proposed rulemaking.
    Regarding the commenter's second objection, the commenter was 
correct in asserting that the funding methodology implemented was not 
one of the three methodologies recommended by the work group. However, 
as described above, the funding methodology which was implemented was 
based in large part on one of the work group's three proposals. The 
pilot included the two work group-proposed factors regarding the 
proportionate Regional Office shares of national program participation 
and the current number of State administering agencies. FNS removed the 
work group-proposed factor which would have allocated funds based on 
each Region's share of tailgate operations, home deliveries, and/or 
multiple warehouses, because it did not differentiate among the degree 
of service provided and was not expected to

[[Page 54534]]

significantly impact Regional allocations.
    Regarding the commenter's final objection, currently, the Montana 
and North Dakota State agencies maintain central warehouses to receive, 
store, and transport USDA foods to local programs that they administer. 
In addition, these two State agencies perform ordering, storage, and 
delivery functions for seven programs that are not under the 
administration of the two State agencies. Both Montana and North Dakota 
receive FDPIR administrative funds to support the Federal share of 
costs for warehousing and transporting USDA foods to both the 
independent programs and those programs that they administer directly. 
Because the two State agencies are performing functions similar to 
those performed by FNS, the work group recommended that Montana's and 
North Dakota's warehousing and transportation costs for the seven 
independent programs be paid with Federal funds appropriated for the 
purchase and delivery of USDA foods (i.e., ``food funds'') rather than 
administrative funds.
    However, funds appropriated for the purchase and delivery of USDA 
foods may only be used for food shipments to and from a USDA-contracted 
warehouse, or directly to a FDPIR program operator. The seven programs 
are too small to regularly take full-truck shipments directly from a 
vendor without significantly exceeding maximum inventory requirements 
and risking foods going out of condition. Therefore, the only way to 
shift their warehousing and delivery costs from administrative to food 
dollars would be to require that these independent operators be served 
by a USDA-contracted warehouse rather than the Montana and North Dakota 
warehouses.
    FNS researched this approach and found no evidence that the seven 
programs would receive better service from the national warehouse. 
Serving these independent programs through a USDA-contracted warehouse 
would increase costs significantly. Also, the Montana and North Dakota 
State agencies expressed objections in writing to this proposal. Since 
there is no evidence indicating that the seven independent programs 
would receive better service from the national warehouse, this was not 
considered a workable solution.
    As a result of the increase in the program appropriation and the 
pilot funding allocation methodology, the FNS Mountain Plains Regional 
Office, which provides administrative funds to Montana and North 
Dakota, received a sufficient increase in funding in fiscal year 2008 
to fully meet the budget requests of all State agencies. On April 22, 
2008, the Director, FNS Food Distribution Division advised the Montana 
and North Dakota State agencies and the affected FDPIR program 
operators that FNS did not intend to alter current warehousing and 
delivery arrangements for the seven independent programs served by 
Montana and North Dakota. They were also advised that the FNS National 
Office will work with the Mountain Plains Regional Office to ensure 
that future administrative funding needs are met.

E. Proposed Regulatory Revisions

    Based on the comments submitted on the pilot implementation of the 
funding methodology, FNS is proposing revisions to Federal regulations 
at 7 CFR 253.11 to clarify existing program requirements relative to 
the allocation of appropriated FDPIR administrative funds to the FNS 
Regional Offices, and the further allocation of such funds to State 
agencies. FNS is also proposing revisions to 7 CFR 253.11 in order to 
make clear State agency administrative funding matching requirements. 
Additional guidance is contained in FNS Instruction 700-1, Rev. 2, FNS 
Instruction 716-4, Rev. 1, and FNS Handbook 501.
    First, FNS proposes to amend 7 CFR 253.11 by revising the title of 
that section to read ``Administrative funds'' rather than 
``Administrative funds for State agencies.'' This proposed revision 
would provide greater flexibility, permitting further explanation of 
the FNS National Office administrative funding allocations to FNS 
Regional Offices. This revision is necessary to more clearly detail the 
funding allocation process.
    As an overview, this rule proposes to amend 7 CFR 253.11(a) by 
removing the current regulatory language from that section, and 
replacing it with language specific to how administrative funds are 
allocated to FNS Regional Offices. This rule further proposes to 
redesignate paragraphs (b) through (h) of current 7 CFR 253.11 as 
paragraphs (d) through (j). Applicable provisions contained in current 
7 CFR 253.11(a) would be rewritten in plain language and set out in the 
newly designated and proposed paragraphs (b) and (c). Additional 
information reflecting current program requirements would be added to 
newly designated paragraph (c) of this proposed section as well.
    In new section 253.11(a), we are proposing to clarify that 
administrative funds would be allocated to the FNS Regional Offices in 
the following manner: Sixty-five percent of all administrative funds 
available nationally would be allocated to each FNS Regional Office in 
proportion to its share of the number of participants nationally, 
averaged over the three previous fiscal years; and thirty-five percent 
of all administrative funds available nationally would be allocated to 
each FNS Regional Office in proportion to its share of the total 
current number of State agencies administering the program nationally.
    As an outcome of the pilot implementation, FNS identified the need 
to incorporate regulatory language to ensure that the funding 
methodology does not have undue negative impact on individual FDPIR 
State agencies. FNS recognized that funding must be made available to 
support participation of new State agencies for which prior 
participation data is not available. Based on State agency total 
approved budgets, FNS also recognized the need to ensure that funding 
not needed by one FNS Regional Office could be distributed to other FNS 
Regional Offices. Finally, FNS recognized that some flexibility is 
required within the funding allocation methodology described above in 
order for it to meet 75 percent of State agency administrative costs 
approved by the FNS Regional Offices, should funding levels permit. 
Therefore, this proposed rule would permit the FNS National Office to 
allocate administrative funds to the FNS Regional Offices based on the 
proportionate shares of national program participation and the current 
number of State agencies administering the program, ``to the extent 
practicable * * *.'' This language would permit FNS some limited 
flexibility to meet individual State agency administrative funding 
needs not reflected under the two weighted factors. However, similar to 
current practice, the FNS National Office would allocate the vast 
majority of all administrative funds to the FNS Regional Offices based 
on each Region's proportionate shares of national program participation 
and the current number of State agencies administering the program.
    Regarding the current requirement at 7 CFR 253.11(a) that annual 
budget submissions and revisions must be approved by FNS, we propose to 
relocate this requirement to the new proposed section 253.11(b) with 
the clarification that the budget request must be sent to the FNS 
Regional Office for approval. This proposed requirement is consistent 
with FNS Instruction 700-1, Rev. 2, which gives each FNS Regional 
Administrator the authority to review State agency budget submissions. 
The current provision at 7

[[Page 54535]]

CFR 253.11(a) requiring State agencies to submit only those 
administrative costs which are allowable under 7 CFR part 277 would be 
relocated to proposed section 253.11(b) as well. This requirement is 
currently contained in FNS Instruction 716-4, Rev. 1, and FNS Handbook 
501. Finally, the current provision at 7 CFR 253.11(a) which specifies 
that, within funding limitations, FNS provides State agencies with 
administrative funds necessary to meet 75 percent of approved 
administrative costs would be revised in plain language and relocated 
to proposed section 253.11(b), with the clarification that FNS Regional 
Offices provide the administrative funds to State agencies. This 
reflects current program practice.
    The newly designated section 253.11(c) would set forth the State 
agency matching requirements. Paragraph (c)(1) of this proposed section 
would specify that the State agency matching requirement is 25 percent 
of approved administrative costs, and that both cash and non-cash 
contributions may be used to meet the matching requirement. This is 
currently required via FNS Instruction 716-4, Rev. 1. For the sake of 
clarity, paragraph (c)(1) of this proposed section would list the 
criteria for allowable cash and non-cash contributions, similar to what 
is currently provided in 7 CFR part 277.
    The current provision at 7 CFR 253.11(a) regarding requests for 
Federal matching rates that exceed 75 percent and compelling 
justification would be rewritten in plain language and relocated to the 
newly designated 7 CFR 253.11(c)(2). In paragraph (c)(2) of this 
proposed section, consistent with FNS Instruction 716-4, Rev. 1, and 
FNS Handbook 501, we require the State agency to submit a summary 
statement and supporting financial documents to the FNS Regional Office 
when providing compelling justification in its budget proposal. 
Furthermore, we propose to add a provision which gives the FNS Regional 
Office the discretion to provide additional administrative funds beyond 
75 percent. This is consistent with current program practice, and the 
Regional Office authority to approve State agency budget requests per 
proposed section 253.11(b). Finally, the types of acceptable compelling 
justification provided in current 7 CFR 253.11(a) and FNS Instruction 
716-4, Rev. 1, would be specified in paragraph (c)(2) of this proposed 
section. Per proposed paragraph (c)(2) of this section, compelling 
justification may include but would not be limited to: the need for 
additional administrative funding for startup costs during the first 
year of program operation, or the need to prevent a reduction in the 
level of necessary and reasonable program services provided.

List of Subjects in 7 CFR Part 253

    Administrative practice and procedure, Food assistance programs, 
Grant programs, Social programs, Indians, Reporting and recordkeeping 
requirements, Surplus agricultural commodities.

    Accordingly, 7 CFR part 253 is proposed to be amended as follows:

PART 253--ADMINISTRATION OF THE FOOD DISTRIBUTION PROGRAM FOR 
HOUSEHOLDS ON INDIAN RESERVATIONS

    1. The authority citation for 7 CFR part 253 continues to read as 
follows:

    Authority:  91 Stat. 958 (7 U.S.C. 2011-2036).

    2. In Sec.  253.11:
    a. Revise the heading of this section;
    b. Remove paragraph (a);
    c. Redesignate paragraphs (b) through (h) as paragraphs (d) through 
(j); and
    d. Add new paragraphs (a) through (c).
    The revisions and additions read as follows:


Sec.  253.11  Administrative funds.

    (a) Allocation of administrative funds to FNS Regional Offices. 
Each fiscal year, after enactment of a program appropriation for the 
full fiscal year and apportionment of funds by the Office of Management 
and Budget, administrative funds will be allocated to each FNS Regional 
Office for further allocation to State agencies. To the extent 
practicable, administrative funds will be allocated to FNS Regional 
Offices in the following manner:
    (1) 65 percent of all administrative funds available nationally 
will be allocated to each FNS Regional Office in proportion to its 
share of the number of participants nationally, averaged over the three 
previous fiscal years; and
    (2) 35 percent of all administrative funds available nationally 
will be allocated to each FNS Regional Office in proportion to its 
share of the total current number of State agencies administering the 
program nationally.
    (b) Allocation of administrative funds to State agencies. Prior to 
receiving administrative funds, State agencies must submit a proposed 
budget reflecting planned administrative costs to the appropriate FNS 
Regional Office for approval. Planned administrative costs must be 
allowable under part 277 of this chapter. To the extent that funding 
levels permit, the FNS Regional Office provides each State agency 
administrative funds necessary to cover 75 percent of approved 
administrative costs.
    (c) State agency matching requirement.
    (1) Unless Federal administrative funding is approved at a rate 
higher than 75 percent in accordance with paragraph (c)(2) of this 
section, each State agency must contribute 25 percent of its total 
approved administrative costs. Cash or non-cash contributions, 
including third party in-kind contributions, may be used to meet the 
State agency matching requirement. To be considered allowable towards 
meeting this requirement, both cash and non-cash contributions must 
meet the criteria established under Part 277 of this chapter. State 
agency contributions must:
    (i) Be verifiable;
    (ii) Not be contributed for another federally-assisted program, 
unless authorized by Federal legislation;
    (iii) Be necessary and reasonable to accomplish program objectives;
    (iv) Be allowable under part 277 of this chapter;
    (v) Not be paid by the Federal Government under another assistance 
agreement unless authorized under the other agreement and its subject 
laws and regulations; and
    (vi) Be included in the approved budget.
    (2) The State agency may request a waiver to reduce its matching 
requirement below 25 percent. In its proposed budget, the State agency 
must submit compelling justification to the appropriate FNS Regional 
Office that it is unable to meet the 25 percent matching rate and that 
additional administrative funds are necessary for the effective 
operation of the program. The FNS Regional Office may, at its 
discretion, provide additional administrative funds beyond 75 percent 
of approved administrative costs to a State agency that provides 
compelling justification. In its compelling justification submission, 
the State agency must include a summary statement and recent financial 
documents, in accordance with FNS instructions. Compelling 
justification may include but is not limited to:
    (i) The need for additional administrative funding for startup 
costs during the first year of program operation; or
    (ii) The need to prevent a reduction in the level of necessary and 
reasonable program services provided.
* * * * *


[[Page 54536]]


    Dated: August 31, 2010.
Jeffrey Tribiano,
Acting Administrator, Food and Nutrition Service.
[FR Doc. 2010-22247 Filed 9-7-10; 8:45 am]
BILLING CODE 3410-30-P