[Federal Register Volume 76, Number 163 (Tuesday, August 23, 2011)]
[Proposed Rules]
[Pages 52581-52593]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2011-20796]


 ========================================================================
 Proposed Rules
                                                 Federal Register
 ________________________________________________________________________
 
 This section of the FEDERAL REGISTER contains notices to the public of 
 the proposed issuance of rules and regulations. The purpose of these 
 notices is to give interested persons an opportunity to participate in 
 the rule making prior to the adoption of the final rules.
 
 ========================================================================
 

  Federal Register / Vol. 76, No. 163 / Tuesday, August 23, 2011 / 
Proposed Rules  

[[Page 52581]]



DEPARTMENT OF AGRICULTURE

Food and Nutrition Service

7 CFR Part 277

RIN 0584-AD99


Automated Data Processing and Information Retrieval System 
Requirements

AGENCY: Food and Nutrition Service, USDA.

ACTION: Proposed rule.

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

SUMMARY: This rule proposes to amend Supplemental Nutrition Assistance 
Program (SNAP)--formerly the Food Stamp Program) regulations to 
implement the Food, Conservation, and Energy Act of 2008 (the Farm 
Bill), which requires adequate system testing before and after 
implementation of a new State automatic data processing (ADP) and 
information retrieval system, including the evaluation of data from 
pilot projects in limited areas for major systems changes, before the 
Secretary approves the system to be implemented more broadly. It also 
provides that systems be operated in accordance with an adequate plan 
for continuous updating to reflect changed policy and circumstances, 
and for testing the effects of the system on access by eligible 
households and on payment accuracy. This proposed rule would also 
specify the requirements for submission of a test plan. Further, the 
rule proposes changing the due date of an Advance Planning Document 
Update (APDU) from 90 days after to 60 days prior to the expiration of 
the Federal financial participation (FFP) approval and revises language 
regarding the Federal share of costs in consolidated information 
technology (IT) operations to specify that the threshold for service 
agreements applies to federally aided public assistance programs, 
rather than to SNAP alone. In addition, this rule proposes to amend the 
SNAP regulations relating to the establishment of an automated data 
processing and information retrieval system and to provide 
clarifications and updates which have occurred since this section was 
last updated in 1996.

DATES: Comments must be received on or before October 24, 2011.

ADDRESSES: The Food and Nutrition Service, USDA, invites interested 
persons to submit comments on this proposed rule. Comments may be 
submitted by one of the following methods:
     Preferred method: Federal eRulemaking Portal: Go to http://www.regulations.gov; follow the online instructions for submitting 
comments on docket FNS-2009-0020.
     Mail: Comments should be addressed to Neva Terry, 
Director, State Systems Office, Food and Nutrition Service--USDA, 3101 
Park Center Drive, Room 820, Alexandria, VA 22302-1500.
     Hand Delivery or Courier: Deliver comments to the Food and 
Nutrition Service, State Systems Office, 3101 Park Center Drive, Room 
820, Alexandria, Virginia 22302-1500, during business hours of 9 a.m.-
4:30 p.m. Eastern Time, from Monday-Friday, excluding Federal holidays.
All comments submitted in response to this proposed 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. All written submissions will 
be available for public inspection at the address above during regular 
business hours.

FOR FURTHER INFORMATION CONTACT: Questions regarding this rulemaking 
should be addressed to Neva Terry, Director, State Systems Office, at 
the above address if mailed, by telephone at (703) 605-4315 or via the 
Internet at [email protected].

SUPPLEMENTARY INFORMATION:

I. Additional Information on Comment Filing

Written Comments

    Comments on the proposed rule should be specific, confined to 
issues pertinent to the proposal, and explain the reason for any change 
you recommend. Where possible, you should reference the specific 
section or paragraph of the proposed rule you are addressing. We may 
not consider or include in the Administrative Record those comments 
received after the close of the comment period or comments delivered to 
an address other than that listed above.

II. Procedural Matters

Executive Order 12866 and Executive Order 13563

    Executive Orders 12866 and 13563 direct agencies to assess all 
costs and benefits of available regulatory alternatives and, if 
regulation is necessary, to select regulatory approaches that maximize 
net benefits (including potential economic, environmental, public 
health and safety effects, distributive impacts, and equity). Executive 
Order 13563 emphasizes the importance of quantifying both costs and 
benefits, of reducing costs, of harmonizing rules, and of promoting 
flexibility.
    This proposed rule has been designated non-significant under 
section 3(f) of Executive Order 12866.

Regulatory Flexibility Act

    This 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 rule would not have significant economic impact on a 
substantial number of small entities. State agencies which administer 
SNAP will be affected to the extent that they implement new State 
automated systems or major changes to existing systems.

Unfunded Mandates Reform Act

    Title II of the Unfunded Mandates Reform Act of 1995 (UMRA), Public 
Law 104-4, establishes requirements for Federal agencies to assess the 
effects of their regulatory actions on State, local, and tribal 
governments and the private sector. Under Section 202 of the UMRA, the 
Department 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 the

[[Page 52582]]

Department to identify and consider a reasonable number of regulatory 
alternatives and adopt the least costly, more cost-effective or least 
burdensome alternative that achieves the objectives of the rule.
    This rule contains no Federal mandates (under the regulatory 
provisions of Title II of the UMRA) that impose costs on State, local, 
or tribal governments or to 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.

Executive Order 12372

    SNAP is listed in the Catalog of Federal Domestic Assistance under 
No. 10.561. For the reasons set forth in the final rule in 7 CFR part 
3015, Subpart V and related Notice published at [48 FR 29114 for SNP; 
48 FR 29115 for FSP], June 24, 1983, this Program is excluded from the 
scope of Executive Order 12372, which requires intergovernmental 
consultation with State and local officials.

Executive Order 13132

    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 (Prior 
Consultation With State Officials, Nature of Concerns and the Need To 
Issue This Rule, and Extent to Which We Meet Those Concerns). FNS has 
considered the impact of this rule on State and local governments and 
determined that this rule does not have Federalism implications. This 
proposed rule does not impose substantial or direct compliance costs on 
State and local governments. Therefore, under Section 6(b) of the 
Executive Order, a federalism summary impact statement is not required.

Executive Order 12988

    This rule has been reviewed under Executive Order 12988, Civil 
Justice Reform. This rule is intended to have preemptive effect with 
respect to any State or local laws, regulations or policies which 
conflict with its provisions or which would otherwise impede its full 
implementation. Prior to any judicial challenge to the provisions of 
this rule or the application of its provisions, all applicable 
administrative procedures must be exhausted.

Executive Order 13175

    E.O. 13175 requires Federal agencies to consult and coordinate with 
tribes on a government-to-government basis on policies that have tribal 
implications, including regulations, legislative comments or proposed 
legislation, and other policy statements or actions that have 
substantial direct effects on one or more Indian tribes, on the 
relationship between the Federal Government and Indian tribes, or on 
the distribution of power and responsibilities between the Federal 
Government and Indian tribes. In late 2010 and early 2011, USDA engaged 
in a series of consultative sessions to obtain input by Tribal 
officials or their designees concerning the affect of this and other 
rules on tribes or Indian Tribal governments, or whether this rule may 
preempt Tribal law. In regard to this rule, no adverse comments were 
offered at those sessions. Further, the policies contained in this rule 
would not have Tribal implications that preempt Tribal law. Reports 
from the consultative sessions will be made part of the USDA annual 
reporting on Tribal Consultation and Collaboration. USDA will offer 
future opportunities, such as webinars and teleconferences, for 
collaborative conversations with Tribal leaders and their 
representatives concerning ways to improve rules with regard to their 
affect on Indian country.
    We are unaware of any current Tribal laws that could be in conflict 
with the proposed rule. We request that commenters address any concerns 
in this regard in their responses.

Civil Rights Impact Analysis

    FNS has reviewed this proposed 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, and the characteristics of 
SNAP households and individual participants, FNS has determined that 
there are no civil rights impacts in this proposed rule. All data 
available to FNS indicate that protected individuals have the same 
opportunity to participate in SNAP as non-protected individuals.
    FNS specifically prohibits the State and local government agencies 
that administer the Program from engaging in actions that discriminate 
based on age, race, color, sex, handicap, religious creed, national 
origin, or political beliefs. SNAP nondiscrimination policy can be 
found at 7 CFR 272.6 (a). 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 regulations at 7 CFR 272.6. 
Discrimination in any aspect of program administration is prohibited by 
these regulations, the Food Stamp Act of 1977 (the Act), the Age 
Discrimination Act of 1975 (Pub. L. 94-135), the Rehabilitation Act of 
1973 (Pub. L. 93-112, section 504), and title VI of the Civil Rights 
Act of 1964 (42 U.S.C. 2000d). Enforcement action may be brought under 
any applicable Federal law. Title VI complaints shall be processed in 
accord with 7 CFR part 15.

Paperwork Reduction Act

    The Paperwork Reduction Act of 1995 (44 U.S.C. Chapter 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 contains information collections that are subject to 
review and approval by OMB; therefore, FNS has submitted an information 
collection under 0584-0083, which contains the changes in burden from 
adoption of the proposals in the rule, for OMB's review and approval.
    Comments on the information collection in this proposed rule must 
be received by October 24, 2011.
    Send comments to the Office of Information and Regulatory Affairs, 
OMB, Attention: Desk Officer for FNS, Washington, DC 20503. Please also 
send a copy of your comments to Neva Terry, Director, State Systems 
Office, Food and Nutrition Service, U.S. Department of Agriculture, 
3101 Park Center Drive, Room 820, Alexandria, VA 22302-1500. For 
further information, or for copies of the information collection 
requirements, please contact Neva Terry at the address indicated above.
    Comments are invited on: (1) Whether the proposed collection of 
information is necessary for the proper performance of the Agency's 
functions, including whether the information will have practical 
utility; (2) the accuracy of the Agency's estimate of the proposed 
information collection burden, including the validity of the 
methodology and assumptions used; (3) ways to enhance the quality, 
utility and clarity of the information to be collected; and (4) ways to 
minimize the burden of the collection of information on those who are 
to respond, including use of appropriate automated, electronic, 
mechanical, or other

[[Page 52583]]

technological collection techniques or other forms of information 
technology.
    All responses to this request for comments will be summarized and 
included in the request for OMB approval. All comments will also become 
a matter of public record.
    This is a revision of a currently approved collection. The new 
provisions in this rule, which do not increase burden hours, affect the 
information collection requirements that will be merged into OMB 
Control Number 0584-0083, once approved by OMB. The current burden 
inventory for this collection is 0584-0083. These changes are 
contingent upon OMB approval under the Paperwork Reduction Act of 1995. 
When the information collection requirements have been approved, FNS 
will publish a separate action in the Federal Register announcing OMB's 
approval.
    Title: Supporting Statement for Paperwork Reduction Act Submission.
    OMB Number: 0584-0083.
    Expiration Date: 12/31/2013.
    Type of Request: Revision of a currently approved collection;
    Abstract: This proposed rule will have no impact on the State 
agency workload with regard to the additional testing requirements, as 
rigorous testing is already part of any well-managed systems project. 
Most State agencies will recognize the similarities between the 
documents already prepared during customary System Development Life 
Cycle (SDLC) processes, and those required by the SNAP APD approval 
processes. Although FNS is proposing to require information from State 
agencies on their plans for adequate system testing, FNS believes this 
information is already part of the regular SDLC process; it should 
already be in the State agencies' possession and only needs to be 
submitted to FNS for review and approval.
    Further, information collections associated with maintenance and 
operation (M&O) procurements prescribed under 7 CFR 277.18 would be 
reduced as systems move past their implementation phase. Currently, 
State agencies are required to submit to FNS Implementation APDs (IAPD) 
for M&O of their ADP systems. As proposed, State agencies would no 
longer be required to submit this IAPD information unless they contain 
significant changes such as system development through modifications 
and/or enhancements. State agencies will continue to be asked to 
provide copies to FNS of the requests for proposals and contracts 
relating to system M&O.
    Currently it is estimated that up to 53 State agencies may submit 
on an average of five (5) APD, Plan, or Update submission for a total 
of 265 annual responses at an average estimate of 2.5 hours per 
respondent. The reporting burden is 662.5 hours. In addition, FNS 
estimated that up to 53 State agencies may submit on an average of 5 
APD, Plan, or Update submission and approximately 265 records at an 
average estimate of .11 minutes per recordkeeper for an estimated total 
of 29.15 recordkeeping burden for this activity hours per recordkeeper. 
Since this proposed rule will lessen the burden for submittal of M&O 
IAPDs it is now estimated that the burden will lessen to four (4) APD, 
Plan or Update submittals.
    The average burden per response, the annual burden hours and the 
annualized cost to respondents are summarized in the charts which 
follow.

                                                           Reporting Estimates of Hour Burden
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                                              Annual
              Affected public                         Activity               Number of     Frequency of    Total annual      Time per        reporting
                                                                            respondents      response        responses       response         burden
--------------------------------------------------------------------------------------------------------------------------------------------------------
State Agencies............................  Other APD Plan or Update....              53               4             212             2.5             530
--------------------------------------------------------------------------------------------------------------------------------------------------------


                                                                  Recordkeeping Burden
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                         Number of
                              Activity                                  Number of       records per       Est. total       Hours per      Total  burden
                                                                      recordkeepers      respondent     annual records    recordkeeper
--------------------------------------------------------------------------------------------------------------------------------------------------------
Other APD Plan or Update...........................................              53                4              212             0.11            23.32
--------------------------------------------------------------------------------------------------------------------------------------------------------


                                         Annualized Cost to Respondents
----------------------------------------------------------------------------------------------------------------
                                                                                                    Respondent
                                             Type of survey        Reporting and    Hourly wage   cost--prior to
                                               instruments         recordkeeping       rate        Federal cost
                                                                      burden                          sharing
----------------------------------------------------------------------------------------------------------------
                                        Other APD Plan or Update          553.32          $33.29         $18,420
                                       -------------------------------------------------------------------------
    Total.............................  ........................        7,463.26           33.29         246,310
----------------------------------------------------------------------------------------------------------------

E-Government Act Compliance

    The Food and Nutrition Service is committed to complying with the 
E-Government Act, 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

    Section 4121 of the Food, Conservation and Energy Act of 2008 
amends subsection 16(g) of the Food and Nutrition Act of 2008 (7 U.S.C. 
2016) to require adequate system testing before and after 
implementation of a new State ADP and information retrieval system, 
including the evaluation of data from pilot projects in limited areas 
for major systems changes, before the Secretary approves the system to 
be implemented more broadly. It also provides that systems be operated 
in accordance with an adequate plan for continuous updating to reflect 
changed policy and circumstances, and for testing the effects

[[Page 52584]]

of the system on access by eligible households and on payment accuracy.
    Systems development or acquisition, whether in the public or 
private sector, goes through a detailed process of planning, analysis, 
preparation, budgeting, and negotiation. In order to receive Federal 
funding to develop, acquire, and/or implement information systems (IS) 
that support the operation of FNS programs there are policies and 
procedures that State agencies must follow. This is referred to as the 
Advance Planning Document (APD) process which employs common industry 
standards that are required for any well-planned and executed Systems 
Development Life Cycle (SDLC) project. The preparation, submission, 
review, approval, and use of the APD process and its related documents 
for project planning, management, and control purposes comprise the 
successive steps through which a State agency can meet Federal 
oversight requirements and subsequently receive Federal written prior 
approval and financial participation in IT projects.
    In developing this proposed rule, FNS has drawn on its experience 
with State IS and with systems for Electronic Benefits Transfer in the 
SNAP. FNS views this rule as having minimal impact on State agency 
workload with regard to the additional testing requirements, as 
rigorous testing is already part of any well-managed IS project. Most 
State agencies will recognize the similarities between the documents 
already prepared during customary SDLC processes, and those proposed to 
be required by the SNAP APD approval processes. This regulation 
proposes to codify the testing standards already found in well managed 
State projects in order to assure that all State agencies meet those 
standards.
    Many State agencies already include testing and pilot projects as 
well as some form of graduated roll out when implementing major 
systems. System testing is part of the overall project management and 
risk management planning process; testing is essential for successful 
system implementation outcomes. In the past few years, some State 
agencies have attempted aggressive implementation schedules of major 
system and program changes, which have had adverse effects on household 
access to SNAP benefits and payment accuracy. Section 4121 of the Farm 
Bill reflects Congress' concern that USDA use the Federal approval 
process to more deliberately review and monitor State agencies' plans 
for major system implementations, and encourage all State agencies to 
implement new systems using sound testing practices. Since the access 
of needy people to nutrition assistance is dependent upon the proper 
functioning of SNAP automated systems, FNS is now required to ensure 
that all eligibility systems are adequately reviewed and tested.
    The law requires accountability for ensuring test results are 
satisfactory prior to system implementation as a condition for 
continued funding of the project. If a State makes a decision to 
proceed to the next phase of the project (a ``go/no-go'' decision 
point, such as testing or pilot) when significant errors have been 
identified but are not resolved satisfactorily to support the decision 
to proceed, FNS can suspend or disallow Federal funds in whole or in 
part until the problems are resolved.
    Section 277.18 of the FNS regulations addresses the Establishment 
of an Automated Data Processing and Information Retrieval System. 
Section 277.18(n) (Basis for continued Federal financial participation) 
is proposed to be amended as a result of Section 4121 of the Farm Bill 
regarding IS testing. In addition, this regulation proposes to add or 
modify the following requirements:
     Change the Annual APDU due date from 90 days after 
anniversary of approval to 60 days prior to the expiration of the FFP 
approval;
     Revise language regarding Federal share of costs in 
consolidated IT operations, consistent with the Department of Health 
and Human Services (DHHS), to specify the threshold for service 
agreements applies to federally aided public assistance programs, 
rather than to SNAP alone; and
     Propose clarification and simplification of existing 
regulations relating to the APD process.

1. What changes is FNS proposing for 277.18(n), basis for continued 
Federal financial participation, as a result of the Food, Conservation 
and Energy Act of 2008?

    FNS is proposing to move section 277.18(n) (Basis for continued 
Federal financial participation) and renumber it as 277.18(g). In 
addition, proposed language is being added to describe FNS' 
expectations for a detailed testing plan starting at User Acceptance 
Testing (UAT) through pilot testing and including opportunities for 
State agency and/or Federal reviews prior to UAT as well as after the 
system is fully implemented.
    State agencies would submit a test plan which describes how all 
system testing will be conducted in order to verify that the system 
complies with SNAP requirements and system design specifications. The 
level of detail specified in proposed section 277.18(g)(2) would be 
provided to FNS prior to the State agency beginning its testing of the 
system. The test plan would include a contingency plan component which 
identifies alternative strategies that may be used if specific risk 
events occur, such as a failure of test results to support a decision 
to proceed to the next phase of the project. Examples include 
alternative schedule activities, staffing plans and emergency responses 
to reduce the impact of risk events.

2. What would need to be addressed in the contingency plan for testing?

    Under the pressures of an overly optimistic schedule, a State 
agency may feel compelled to move forward with a project even when 
testing results indicate that the system is not ready for the next 
step. The purpose of a testing contingency plan is to assure FNS that 
the State agency has an agreed upon alternative in place if testing 
indicates that the system is not ready to progress to the next stage. 
The plan should address what steps will be taken in response to an 
excessive failure rate or ``no-go'' decision at any point in the 
testing process. Such steps might include: Delaying or revising 
staffing plans; rescheduling training; adjusting pilot plans; and/or 
extending, rescheduling or redeploying testing resources such as space, 
contractor and state staff, servers and other equipment. Plans might 
include researching, in advance, the authority to exercise personnel 
policies, utilize overtime pay or compensatory time, or to withdraw or 
reschedule approved discretionary leave. It should also include plans 
for revising other dependent schedules such as those for legacy system 
maintenance or the implementation of required annual mass changes. The 
plan should address who has the authority to activate contingency 
procedures and how decisions will be made. Contingency plans should 
address both project and business dependencies. Although FNS would not 
dictate exactly what must be included, the plan would be expected to 
demonstrate the State agency's awareness that testing is, by 
definition, the period when problems are identified which may result in 
delays. The plan must demonstrate that the State agency is prepared to 
adjust and ``fall back'' to a sustainable position to continue testing 
when necessary, and not allow a project to proceed with unacceptable 
risks in order to stay on schedule.

[[Page 52585]]

3. How will FNS assess the adequacy of a State agency's system test 
plan?

    As proposed, FNS would review a State agency's overall plan to 
ensure that risk is mitigated and managed to the extent feasible. FNS' 
examination of State agencies' plans would include, but not be limited 
to, the following areas: Risk management, rigorous methodologies, 
industry standards, professional test management, repeatable test 
processes, specific pass/fail metrics, adequate time allotted for 
testing, and an unbiased decision-making process.
    FNS intends to use a pro-active analysis of State test plans. 
Results from the UAT and Pilot Test and others, if appropriate, would 
be evaluated from a system perspective as well as a program perspective 
to determine whether their outcomes can be considered successful.
    Although successful UAT and Pilot Test are commonly used decision 
points, ``go/no-go'' points may be established at any milestone in the 
SDLC to assess the project status and determine if continuing to the 
next phase is in the best interest of the project. The project should 
not advance to the next phase until all critical criteria are 
satisfactorily addressed. FFP could be in jeopardy if the State agency 
advances to the next phase without FNS approval.

4. What data will a State agency need to provide to FNS to demonstrate 
its system testing is adequate?

    The State agency will need to provide a preliminary test plan in 
its initial IAPD, a final test plan prior to the start of the testing 
phase, and test results throughout the testing phase. FNS proposes to 
evaluate the initial information provided by a State agency to 
determine if the State agency's plans, methodology, results tracking 
and analysis approach are adequate, and whether additional information 
is needed. FNS intends to work with the State agency to determine what 
information is practicable and require only information that is 
necessary and not otherwise available. FNS would expect to negotiate 
the reporting requirements necessary to evaluate system performance 
with each State agency.

5. What would be considered adequate system testing?

    Even before State testing begins, ``adequate testing'' should 
include holding the system developer responsible for delivering a 
product that has been thoroughly tested by the developer and is ready 
for UAT. Adequate testing includes ensuring that high standards for 
test results are set and met before the system is considered to have 
passed the tests and be ready for the next phase. However, once 
delivered, the State agency must validate that the system meets the 
performance expectations and all functional requirements described in 
the functional design specifications document. Testing methodology must 
be rigorous and results must be documented thoroughly. If errors are 
identified in the system's functionality or performance, the fixes the 
developer makes to the system to resolve these errors should be 
regression tested. Regression testing is the process that requires the 
users to validate that the error has been fixed and that the fix does 
not adversely impact the system in other ways. Only when these 
conditions are met can testing be considered adequate to demonstrate 
that the system is ready for pilot.
    Documentation of the results of performance and UAT of the system 
before the system is piloted in a production environment needs to be 
provided to FNS and FNS concurrence to advance from testing to pilot 
will be a condition for continued FFP. Also, the State agency needs to 
provide documentation to FNS of the pilot evaluation. FNS' approval to 
implement the system more broadly will also be a condition for 
continued FFP.

6. What is meant by UAT?

    User Acceptance Testing (UAT) is a crucial part of the integration 
and testing phase of the SDLC. UAT is necessary to confirm that the 
developed system meets all State agency functional and technical 
requirements. Testers should work with users early in the project to 
define system criteria for meeting user needs, incorporate them into 
the acceptance test plan, and create detailed test scripts. UAT should 
be conducted in a user environment in which simulated or real target 
platforms and infrastructures are used. This environment should be 
separate from the development and production environments, but as 
similar to the production environment as possible. Typically, a 
separate test environment is set up for testing by developers and an 
additional test environment is set up for UAT.
    UAT is a final test of the complete SDLC that is conducted prior to 
pilot and implementation and the point at which the State agency 
``accepts'' the system. It involves testing the system capabilities as 
documented in the system design, and is a precursor to accepting 
delivery of the system. Functional demonstrations and acceptance 
testing should be completed prior to implementation of the pilot. FNS 
staff may participate to a limited extent in the functional 
demonstrations and acceptance testing.

7. What are the components of a successful UAT?

    A State agency should develop a formal test plan for UAT that 
includes real-life scenarios and establishes error severity levels, 
error tracking software, results reporting, and regression testing. The 
system should be tested from end-to-end, including both normal and 
abnormal conditions such as user mistakes. Once the UAT plan is 
executed, an acceptance decision is made based on the results of this 
testing, followed by users' sign-off upon successful completion of the 
UAT plan.

8. What is the purpose of the Pilot Test?

    The purpose of the Pilot Test (Pilot) is to provide the State 
agency with a smaller scale shakedown test prior to expansion. Most 
State agencies recognize the need for Pilot project operations and 
first implement systems on a small scale. The length of the Pilot would 
need to be agreed upon by the State agency and FNS. Some of the factors 
that would need to be taken into consideration will be the size of the 
Pilot; the rate of phase-in of the Pilot caseload; and the track 
record, if any, of the system being implemented. A Pilot is important 
for more than just providing a dry run for the computer system. It is 
also an opportunity for State agencies to determine and ensure that 
that all parties (e.g. recipients and State/local staffs) are 
comfortable with the system, the State agency's approach to training is 
effective, and any program and system interfaces are effective. This 
rule does not remove the latitude provided to State agencies in 
choosing the Pilot sites. State agencies should, however, take into 
consideration how well the Pilot's caseload represents the demands on 
the fully operational system.
    The Pilot is a key milestone in project development and occurs when 
a fully functional prototype system is available for testing, but 
before statewide implementation. The Pilot needs to include operating 
all components of the system in a live environment. The State agency 
should define its own ``go/no-go'' criteria and FNS may also establish 
additional ``go/no-go'' criteria and decision points for continuing 
with system implementation of the project. In some cases, FNS may make 
approval of Federal funds for implementation conditional on the result 
of the Pilot.

[[Page 52586]]

FNS may also participate in the Pilot to assist and corroborate the 
findings of the State agency.
    Under this proposal, State agencies would likely be reporting 
activity to FNS for the duration of the Pilot, which would provide FNS 
with an opportunity to monitor Pilot activities, anticipate the success 
of the Pilot, and determine if rollout may occur. The State agency must 
allow sufficient time after the Pilot period to evaluate Pilot results 
and secure FNS concurrence for rollout.
    Pilot tests may also be necessary in limited areas for major system 
changes. FNS proposes to interpret the limited area as not synonymous 
with a geographic area, but rather focus on a limited scale or scope of 
the Pilot.

9. How does a State agency move forward and expand beyond the pilot 
phase?

    Upon successful completion of the Pilot project, the State agency 
would have to receive written approval from FNS before expanding beyond 
the Pilot. This rule proposes at paragraph 277.18(g)(2)(ii) that State 
agencies operate Pilot projects until a state of routine operation is 
reached with the full caseload in the Pilot area (usually a minimum 
duration of three months). This waiting period would permit the system 
to work through all functions and potential system problems.

10. Does FNS propose to certify system testing and outcomes?

    No. To ``certify'' a system generally means that the certifying 
entity verifies through independent evaluation that a fixed set of 
standardized tests have been passed or criteria on a standard checklist 
have been met. The certifying agency issues some sort of statement or 
document attesting to the certification, which may have legal 
implications. FNS does not certify systems or system testing. FNS may, 
however, conduct pre and/or post implementation reviews. These reviews 
would be intended to: Evaluate system performance and accuracy; verify 
that functional requirements were met; ensure that the policy to be 
administered is accurate; analyze data capture, integrity edits and 
calculations; verify that UAT was thorough and successfully completed; 
and, ensure that the system interfaces successfully with other programs 
and external entities, including EBT. FNS may conduct reviews either 
onsite or by examining relevant documents provided by the State agency. 
Post implementation reviews may be conducted once the system is fully 
operational Statewide. These system reviews encompass technical and 
security components as well as program and financial aspects. Reviews 
by FNS are a function of its regulatory oversight authority. Resolution 
of any issues identified or completion of corrective action required by 
FNS, and subsequent closure of a report, review or project does not 
constitute ``certification.''

11. Why is FNS proposing changes to the annual Advanced Planning 
Document Update (APDU) due date?

    FNS proposes in paragraph 277.18(c)(3)(i)(C) to align the due date 
for the annual APDU from the current requirement of within 90 days 
after the anniversary date of the original APD approval to the current 
Department of Health and Human Services (DHHS) requirement of 60 days 
prior to the expiration of the FFP approval. Although this proposal 
shortens the timeframe provided to State agencies for submission of 
annual updates, since most APDs are submitted to both USDA and DHHS, 
FNS believes creating consistency on this due date would simplify the 
process for State agencies and increase the likelihood that the 
document will be submitted timely to both Departments.

12. Why is FNS proposing a change to the provision regarding service 
agreements?

    Service agreements are used when IT services are to be provided by 
a centralized State facility or another State or local agency. The 
current regulatory language at paragraph 277.18(f)(6) references the 
need to obtain FNS approval when these equipment and services will 
primarily support the SNAP by billing it for more than 50 percent of 
the total charges made to all users. FNS is proposing to modify this 
language at paragraph 277.18(e)(6) to clarify that the 50 percent 
threshold for service agreements applies to the sum total of all 
Federal public assistance programs and not just the SNAP portion. This 
modification would make the FNS language more consistent with that of 
DHHS, which does not identify any specific programs in its regulatory 
language relating to service agreements.

13. Why is FNS proposing additional changes to the Automated Data 
Processing and Information Retrieval System requirements section of the 
regulations beyond those mandated by the Farm Bill?

    The last changes made to Sec.  277.18 were in 1996. Since then FNS 
has identified provisions in this section of the regulations that need 
clarification and enhancement to improve the public's understanding of 
the process. Some subsections would be moved and renumbered to improve 
the flow and clarity of the entire section and improve its usefulness 
as a reference for regulatory authority.
    FNS' intent is to stress the importance of project management and 
risk management in the system planning process. These are not new 
concepts, but this renewed emphasis is to assist State agencies' focus 
on these areas in order to increase the likelihood of positive 
outcomes.

14. How is FNS changing the current order in Sec.  277.18 and moving 
provisions within the section?

    Paragraph 277.18(a) (Scope and application) provides an 
introductory statement for the rest of the section. It currently 
contains a sentence regarding cost allocation which has been moved to 
paragraph 277.18(j) (General cost requirements).
    Paragraph 277.18(d) (APD content requirements) contains a 
discussion on the cost allocation plan for the Planning APD (PAPD). 
This is clarified and moved to new paragraph 277.18(d)(1)(vii).
    Paragraph 277.18(e) (APD update) is moved and renumbered as 277.18 
(d)(3).
    Paragraph 277.18(f) (Service agreements) language which requires a 
State agency to maintain a copy of its service agreements in its files 
for Federal review is moved from the introductory paragraph to a new 
paragraph 277.18(e)(9) and the entire paragraph is moved and renumbered 
as 277.18(e).
    Paragraph 277.18(g) (Conditions for receiving FFP), is moved and 
renumbered as 277.18(f).
    Paragraph 277.18(h) (Emergency acquisition requirements), is moved 
and renumbered as 277.18(i).
    Paragraph 277.18(i) (Cost determination and claiming costs) is 
renamed as General cost requirements, moved, and renumbered as 
277.18(j).
    Paragraph 277.18(j) (Procurement requirements) is moved and 
renumbered as 277.18(c)(2)(iii).
    Paragraph 277.18(n) (Basis for continued Federal financial 
participation) is moved and renumbered as 277.18(g)
    Paragraph 277.18(o) (Disallowance of Federal financial 
participation) is moved and renumbered as 277.18(h).
    Paragraph 277.18(p) (ADP system security requirements and review 
process) is moved and renumbered as 277.18(m).
    No changes are being made to paragraph 277.18(k) (Access to the 
system and records).

[[Page 52587]]

    FNS removed paragraph 277.18(m) (Use of ADP systems) as it was 
determined to be unnecessary.

15. What terminology changes would be made in this proposed rule?

    There are two terminology changes made in Sec.  277.18. All 
instances of the use of the ``Food Stamp Program'' or ``FSP'' are 
changed to the ``Supplemental Nutrition Assistance Program'' or 
``SNAP'' the name made effective by the Food, Conservation, and Energy 
Act of 2008 on October 1, 2008. In addition, all instances of the use 
of ``Automated Data Processing'' (ADP) would be changed to 
``Information System'' (IS) or to ``Information Technology'' (IT), as 
appropriate given the context of their use.

16. What changes is FNS making to the definitions Sec.  277.18(b)?

    This paragraph currently provides definitions for 18 terms commonly 
used in the remainder of this section. Some definitions are antiquated 
and therefore would be removed, globally replaced (as discussed in the 
previous question); or renamed. Others would be incorporated in the 
subsection that specifically addresses that topic, such as Feasibility 
Study. Four definitions are added to this section which are not related 
to new requirements, but intended to provide a ready reference summary 
for terms used in this section: acquisition, project, Commercial Off-
the- Shelf software, and enhancements.

17. Why are definitions proposed to be added for ``acquisition'' and 
``project''?

    In paragraph 277.18(b) (Definitions), the terms ``acquisition'' and 
``project'' are changed to clarify the difference between the two. FNS 
added these definitions to assist the reader in noting that projects 
and acquisitions are separate events and while they may be related in 
the holistic view of the project, the review requirements and 
submission thresholds vary as discussed in paragraph 277.18(c).

18. Why is the definition of Commercial Off-the-Shelf software added to 
the regulation?

    In paragraph 277.18(b) (Definitions), FNS added the definition of 
Commercial Off-the-Shelf (COTS) products which are beginning to find a 
place in the Human Services sector. A definition is added to specify 
FNS' criteria for software to be considered COTS, and clarify where 
Federal ownership rules do and do not apply to COTS products.

19. Why is a definition for ``Enhancement'' added?

    State agencies often make corrective and adaptive changes in the 
course of normal maintenance and operations of a system. For extensive 
renovation or replacement of a system, a State agency would undertake a 
detailed planning process. Enhancements to a system often fall 
somewhere in between. By providing a definition of ``enhancement'' this 
regulation will help State agencies understand the distinctions, and 
know when an enhancement may represent a substantial enough change in 
system functionality to require FNS approval. Guidance presented in FNS 
Handbook 901, ``Advance Planning Documents'' as well as this rulemaking 
clarifies when enhancements may require prior approval via the 
submission of documentation to FNS.

20. Why would FNS expand the definition of Implementation APD?

    The definition would be expanded to delineate the major activities 
of the System Development Life Cycle (SDLC) that are expected to occur 
during the Implementation Phase, which the Implementation APD 
encompasses. These major activities are defined as design, development, 
testing, and implementation. The intent is to provide clarification to 
State agencies that the APD process follows that of the SDLC and 
mirrors State government and industry standards.

21. Why would the APDU definition be revised?

    In paragraph 277.18(b) (Definitions), FNS clarifies that the APDU 
is more than an annual report as the current definition states. The 
APDU is an annual or as needed report of activities as well as a 
request for continuation of funding, either at the current or an 
updated funding amount. The APDU reports the status of activities as 
well as changes to the project's scope, schedule, budget, cost 
allocation or procurement strategy. As previously defined, it may have 
been implied this was simply a report and did not emphasize the 
importance of this update as a requirement for continuing funding for 
the project. FNS often approves funding or project approval for a 
specified period of time during the project. The mechanism to ensure 
that funding and project approval continues for future development 
through project completion is the APDU, either annual or as needed, 
whichever is appropriate for the conditions of a specific project. The 
phrase ``self-certification'' was removed as this is not the intent of 
the APDU.

22. Why is FNS waiving the annual APDU if an As Needed APDU has been 
submitted?

    In paragraph 277.18(c)(3)(i)(C) FNS includes a provision for FNS to 
waive the annual APDU or reset the APD anniversary date to coincide 
with the As Needed APDU, if appropriate. Recognizing that many State 
agencies which submit As Needed APDUs may be duplicating their efforts 
when submitting annual APDUs, FNS hopes to alleviate this burden by 
waiving the submission of the Annual APDU until the following year or 
modifying the Annual APDU due date to be one year from the approval of 
the As Needed APDU . This is intended to lessen the State reporting 
burden.

23. Are State agencies required to approve all IS acquisitions no 
matter how small?

    In paragraph 277.18(c)(4) (Approval by the State agency) FNS is 
revising the language to allow the State agency to delegate approval 
authority to any subordinate entity for those acquisitions of IS 
equipment and services not requiring prior approval by FNS. The State 
agency is free to set its own pre-approval thresholds so long as those 
thresholds do not exceed the FNS pre-approval thresholds.

24. Why is FNS making changes to the APD content requirements in 
paragraphs 277.18(c), 277.18(d) and 277.18(e)?

    Language on content requirements for an PAPD, Implementation APD 
(IAPD), Annual APDU and As Needed APDU is being revised to allow FNS to 
be more responsive to States that are implementing IS and to revise 
requirements in the future by policy rather than regulation if 
circumstances warrant. Detailed guidance on the specific content can be 
found in FNS Handbook 901, ``Advanced Planning Documents.''

25. Why is FNS making changes to the dollar thresholds for prior 
approval of IS procurements?

    FNS proposes in 277.18(c)(1) and 277.18(c)(2) to align the dollar 
thresholds for prior approval for IS procurements to the current 
Department of Health and Human Services (DHHS) requirement of $6 
million versus the current FNS requirement of $5 million. Also, FNS 
proposes to align the dollar thresholds for prior approval of contract 
amendments to the current DHHS requirement of 20 percent

[[Page 52588]]

(cumulatively) of base contract costs. FNS believes creating 
consistency on these dollar thresholds would simplify the process for 
State agencies.

26. Why would FNS remove the requirement that a system be used for the 
lifespan specified in the cost benefit analysis of the Implementation 
Advance Planning Document?

    The requirements for the cost benefits analysis in paragraph 
277.18(d)(2)(vii) included a statement indicating the period of time 
the State agency intended to use the proposed equipment or system. 
Paragraph 277.18(m) required that systems designed, developed or 
installed with FFP be used for the period of time specified in the cost 
benefit analysis. These were determined to be unnecessary and therefore 
have been removed. These were originally meant to assure that a system 
was kept in use long enough to reach the ``break even'' date determined 
in the cost benefit analysis. However, experience has shown that many 
facts and assumptions used in that analysis change significantly over 
the life of the system, likely making the break even date, and 
therefore the anticipated lifespan inaccurate. Furthermore, State 
agencies often keep systems in use long past the anticipated lifespan 
due to budget pressures, and consider system replacement only when 
driven by technological necessity, such as unsupportable platforms, 
outdated programming languages, or the excessive cost of maintaining 
antiquated systems. Finally, the advance planning period and SDLC 
associated with a large-scale, complex project require that State 
agencies begin the process of system replacement years before their 
legacy systems reach the true end of their lifespan and become 
insupportable.

27. Is FNS changing the requirements for an Emergency Acquisition 
Request (EAR)?

    No, the changes in paragraph 277.18(h) regarding EARs, as in 
paragraph 277.18(i), only clarify the relationship of emergency 
acquisition requirements to general acquisition requirements. The 
existing language might have been interpreted to mean that FNS may 
recognize the need for a State agency to act quickly, but does not 
actually approve anything until after the receipt of an approvable IAPD 
following the emergency action. The revised language is intended to 
clarify that FNS does provide formal conditional approval of EARs, 
assuring financial support for up to 90 days, until an approvable IAPD 
is submitted. If complete documentation is not received within that 
timeframe, costs may be disallowed.

28. Why is FNS renaming the paragraph currently called ``Cost 
determination and claiming costs''?

    In paragraph 277.18(i)(Cost determination and claiming costs), FNS 
is renaming the paragraph as ``General cost requirements'' to increase 
consistency within the section. In the paragraph on Development costs, 
FNS is inserting a reference to the cost principles set forth in OMB 
Circular A-87 (2 CFR part 225). This Circular establishes principles 
and standards for determining costs for Federal awards carried out 
through grants, cost reimbursement contracts, and other agreements with 
State and local governments and federally-recognized Indian tribal 
governments (governmental units). The paragraph on Budget authority, 
clarifies that an As Needed APDU report, as well as an amended budget, 
would be required for FNS approval.

29. What is the purpose of adding a discussion of Commercial Off-the-
Shelf (COTS) software to the regulation?

    In paragraph 277.18(l) (Ownership rights), FNS clarifies that 
software packages which meet the definition of COTS at paragraph 
277.18(b) are not subject to the ownership provisions of this 
paragraph. Along with long-established licensed COTS products such as 
operating systems, database software and desktop/office software, FNS 
recognizes the potential of COTS software in the Human Services sector 
to provide a proprietary framework and/or tool set which can be used to 
standardize, simplify and speed the process of building public domain 
modules, objects or processes within it. The addition of language about 
COTS products seeks to recognize exceptions to the overarching 
ownership provisions in the rule. However, a clarification in the 
language emphasizes that FFP would not be available for COTS products 
developed specifically for the SNAP program.

30. What is the impact of the language added to Disallowance of FFP?

    Current regulatory language at paragraph 277.18 (o) states that FFP 
in a project can be disallowed for failure to comply with the criteria, 
requirements, and other undertakings described in the approved or 
modified APD. The language makes it more consistent with DHHS 
regulations and allows FNS flexibility in dealing with these 
occurrences by giving FNS the options of suspending or disallowing a 
part of the funding.

31. Why is FNS removing Appendix A to Part 277 (Principles for 
Determining Costs Applicable to Administration of the SNAP by State 
Agencies)?

    FNS is removing Appendix A to Part 277 (Principles for Determining 
Costs Applicable to Administration of the SNAP by State Agencies) 
because it is now obsolete and has been replaced by an updated version 
of OMB Circular A-87 Cost Principals for State, Local, and Indian 
Tribal Governments as found at 2 CFR 225. As a result of this removal, 
FNS is also relocating two provisions and updating references to 
Appendix A in other sections.
    FNS is relocating one provision from Appendix A to another section 
to enhance the information provided in that section. The section to be 
enhanced includes: paragraph 277.13(b) (nonexpendable personal 
property) to increase the $1,000 threshold for capital expenditures to 
$5,000, as currently provided for in Appendix A.
    References to Appendix A included in eight other regulatory 
sections would be changed to refer to OMB Circular A-87 (2 CFR 225). 
These sections include: 272.1 (159) Amendment (385) which relates to 
funding; 274.12(k)(2) which relates to costs; 276.4(d) which relates to 
disallowance; 277.6(b)(6) which relates to costs; 277.9(c)(2) which 
relates to costs; 277.13(g) which relates to copyrights; 277.16(b)(2) 
which relates to disallowance; and 277.18(i)(1) which relates to costs. 
In addition, although Sec.  277.4 does not currently contain a 
reference to Appendix A, FNS is adding a reference to OMB Circular A-87 
(2 CFR 225) as this section relates to funding and allowable costs.

32. Does FNS plan to provide additional guidance for State agencies to 
assist their implementing this rulemaking?

    Yes, FNS plans to update the FNS Handbook 901, ``Advance Planning 
Documents,'' and provide other training and technical assistance 
materials, once the final rulemaking is issued. FNS invites suggestions 
for areas in which guidance would be useful. At this time, the 
following items have been tentatively identified for further guidance:
     When system enhancements may require prior approval;
     PAPD requirements, including: proposed budget and cost 
allocation plan;
     IAPD requirements, including: cost benefit analysis, 
project management plan; resource requirements statement;

[[Page 52589]]

cost allocation plan; implementation plan; training plan; and test 
plan.

List of Subjects in 7 CFR Part 277

    Food stamps, Fraud, Government procedure, Grant programs--social 
programs, Records, Reporting and recordkeeping requirements.

    For the reasons set forth in the preamble, 7 CFR Part 277 is 
proposed to be amended as set forth below:

PART 277--PAYMENTS OF CERTAIN ADMINISTRATIVE COSTS OF STATE 
AGENCIES

    1. The authority citation for part 277 continues to read as 
follows:

    Authority:  7 U.S.C. 2011-2036.

    2. In Sec.  277.13:
    a. Revise the figure ``$1,000'' to read ``$5,000'' wherever it 
occurs in the following paragraphs:
    i. (b)(2)(iii)(A);
    ii. (b)(3)(i);
    iii. (b)(3)(ii) introductory text;
    iv. (c) introductory text; and
    v. (e)(3) introductory text; and
    b. Revise paragraphs (b)(2)(iii)(A) and (b)(3) to read as follows:


Sec.  277.13  Property.

* * * * *
    (b) * * *
    (2) * * *
    (iii) When the State agency no longer has need for such property in 
any of its federally financed activities, the property may be used for 
the State agency's own official activities in accordance with the 
following standards:
    (A) If the property had a total acquisition cost of less than 
$1,000, the State agency may use the property without reimbursement to 
FNS.
* * * * *
    (3) Disposition. If the State agency has no need for the property, 
disposition of the property shall be made as follows:
    (i) If the property had a total acquisition cost of less than 
$1,000 per unit, the State agency may sell the property and retain the 
proceeds.
    (ii) If the property had an acquisition cost of $1,000 or more per 
unit, the State agency:
    (A) If instructed to ship the property elsewhere, the State agency 
shall be reimbursed with an amount which is computed by applying the 
percentage of the State agency's participation in the cost of the 
property to the current fair market value of the property, plus any 
shipping or interim storage costs incurred.
    (B) If instructed to otherwise dispose of the property, the State 
agency shall be reimbursed by FNS for the cost incurred in such 
disposition.
    (C) If disposition or other instructions are not issued by FNS 
within 120 days of a request from the State agency the State agency 
shall sell the property and reimburse FNS an amount which is computed 
by applying the percentage of FNS participation in the cost of the 
property to the sales proceeds. The State agency may, however, deduct 
and retain from FNS' share $500 or 10 percent of the proceeds, 
whichever is greater, for the State agency selling and handling 
expenses.
    3. Revise Sec.  277.18 to read as follows:


Sec.  277.18  State Systems Advance Planning Document (APD) process.

    (a) Scope and application. This section establishes conditions for 
initial and continuing authority to claim Federal financial 
participation (FFP) for the costs of the planning, development, 
acquisition, installation and implementation of Information System(IS) 
equipment and services used in the administration of the Supplemental 
Nutrition Assistance Program and as prescribed by appropriate Food and 
Nutrition Service (FNS) directives and guidance (i.e., FNS Handbook 
901, OMB Circulars, etc.).
    (b) Definitions.
    Acquisition means obtaining supplies or services through a purchase 
or lease, regardless of whether the supplies or services are already in 
existence or must be developed, created, or evaluated.
    Advance Planning Document for project planning or Planning APD (APD 
or PAPD) means a brief written plan of action that requests FFP to 
accomplish the planning activities necessary for a State agency to 
determine the need for, feasibility of, projected costs and benefits of 
an IS equipment or services acquisition, plan the acquisition of IS 
equipment and/or services, and to acquire information necessary to 
prepare an Implementation APD.
    Advance Planning Document Update (APDU) means a document submitted 
annually (Annual APDU) by the State agency to report the status of 
project activities and expenditures in relation to the approved 
Planning APD or Implementation APD; or on an as needed (As Needed APDU) 
basis to request funding approval for project continuation when 
significant project changes occur or are anticipated.
    Commercial Off-the-Shelf (COTS) means proprietary software products 
that are ready-made and available for sale to the general public at 
established catalog or market prices in which the software vendor is 
not positioned as the sole implementer or integrator of the product.
    Enhancement means modifications which change the functions of 
software and hardware beyond their original purposes, not just to 
correct errors or deficiencies which may have been present in the 
software or hardware, or to improve the operational performance of the 
software or hardware. Software enhancements that substantially increase 
risk or cost or functionality will require submission of an IAPD or an 
As Needed IAPDU.
    Implementation Advance Planning Document or Implementation APD 
(IAPD) means a written plan of action requesting FFP to acquire and 
implement information system (IS) services and/or equipment. The 
Implementation APD includes the design, development, testing, and 
implementation phases of the project.
    Information System (IS) means a combination of hardware and 
software, data, and telecommunications that performs specific functions 
to support the State agency, or other Federal, State, or local 
organization.
    Project means a related set of information technology related 
tasks, undertaken by a State, to improve the efficiency, economy and 
effectiveness of administration and/or operation of its human services 
programs. A project may also be a less comprehensive activity such as 
office automation, enhancements to an existing system, or an upgrade of 
computer hardware.
    Request for Proposal or RFP means the document used for public 
solicitations of competitive proposals from qualified sources as 
outlined in Sec.  277.14(g)(3).
    (c) Requirements for FNS prior approval of IS projects.--(1) 
General prior approval requirements. The State agency shall request 
prior FNS approval by submitting the Planning APD, the Implementation 
APD, the draft acquisition instrument, and/or the justification for the 
sole source acquisition if applicable, as specified in paragraph (c)(2) 
of this section. A State agency must obtain written approval from FNS 
to receive federal financial participation of any of the following 
activities:
    (i) When it plans a project to enhance or replace its IS that it 
anticipates will have total project costs in Federal and State funds of 
$6 million or more.
    (ii) Any IS competitive acquisition that costs more than $6 million 
in Federal and State funds.
    (iii) When the State agency plans to acquire IS equipment or 
services non-competitively from a nongovernmental

[[Page 52590]]

source, and the total State and Federal cost is more than $1 million.
    (iv) For the acquisition of IS equipment or services to be utilized 
in an Electronic Benefit Transfer (EBT) system regardless of the cost 
of the acquisition in accordance with 7 CFR 274.12 (EBT issuance system 
approval standards).
    (2) Specific prior approval requirements. (i) For IS projects which 
require prior approval, as specified in paragraph (c)(1) of this 
section, the State agency shall obtain the prior written approval of 
FNS for:
    (A) Conducting planning activities, entering into contractual 
agreements or making any other commitment for acquiring the necessary 
planning services;
    (B) Conducting design, development, testing or implementation 
activities, entering into contractual agreements or making any other 
commitment for the acquisition of IS equipment or services.
    (ii) For IS equipment and services acquisitions requiring prior 
approval as specified in paragraph (c)(1) of this section, prior 
approval of the following documents associated with such acquisitions 
is also required:
    (A) Requests for Proposals (RFPs). Unless specifically exempted by 
FNS, the State agency shall obtain prior written approval of the RFP 
before the RFP may be released. However, RFPs for acquisition estimated 
to cost up to $6 million or competitive procurements from non-
governmental sources and which are an integral part of the approved 
APD, need not receive prior approval from FNS. The State agency shall 
submit a written request to get prior written approval to acquire IS 
equipment or services non-competitively from a nongovernmental source 
when the total State and Federal cost is more than $1 million State 
agencies shall submit RFPs under this threshold amount on an exception 
basis. The State agency shall obtain prior written approval from FNS 
for RFPs which are associated with an EBT system regardless of the 
cost.
    (B) Contracts. All contracts must be submitted to FNS. Unless 
specifically exempted by FNS, the State agency shall obtain prior 
written approval before the contract may be signed by the State agency. 
However, contracts for competitive procurements costing up to $6 
million and for noncompetitive acquisitions from nongovernmental 
sources costing up to $1 million and which are an integral part of the 
approved APD need not be submitted to FNS. State agencies shall submit 
contracts under this threshold amount on an exception basis. The State 
agency shall obtain prior written approval from FNS for contracts which 
are associated with an EBT system regardless of the cost.
    (C) Contract amendments. All contract amendments must be submitted 
to FNS. Unless specifically exempted by FNS, the State agency shall 
obtain prior written approval from FNS of any contract amendments which 
cumulatively exceed 20 percent of the base contract costs before being 
signed by the State agency. The State agency shall obtain prior written 
approval from FNS for contracts which are associated with an EBT system 
regardless of the cost.
    (iii) Procurement requirements.--(A) Procurements of IS equipment 
and services are subject to Sec.  277.14 (procurement standards) 
regardless of any conditions for prior approval contained in this 
section, except the requirements of Sec.  277.14(b)(1) and (2) 
regarding review of proposed contracts. Those procurement standards 
include a requirement for maximum practical open and free competition 
regardless of whether the procurement is formally advertised or 
negotiated.
    (B) The standards prescribed by Sec.  277.14, as well as the 
requirement for prior approval in this paragraph (c), apply to IS 
services and equipment acquired primarily to support SNAP regardless of 
the acquiring entity.
    (C) The competitive procurement policy prescribed by Sec.  277.14 
shall be applicable except for IS services provided by the agency 
itself, or by other State or local agencies.
    (iv) The State agency must obtain prior written approval from FNS, 
as specified in paragraphs (c)(2)(i) and (ii) of this section, to claim 
and receive reimbursement for the associated costs of the IS 
acquisition.
    (3) Document submission requirements.--(i) For IS projects 
requiring prior approval as specified in paragraphs (c)(1) and (2)of 
this section, the State agency shall submit the following documents to 
FNS for approval:
    (A) Planning APD as described in paragraph (d)(1) of this section.
    (B) Implementation APD as described in paragraph (d)(2) of this 
section.
    (C) Annual APDU as described in paragraph (d)(3) of this section. 
The Annual APDU shall be submitted to FNS 60 days prior to the 
expiration of the FFP approval, unless the submission date is 
specifically altered by FNS. In years where an As Needed APDU is 
required, as described in paragraph (c)(3)(i)(D) of this section, FNS 
may waive or modify the requirement to submit the annual APDU.
    (D) As Needed APDU as described in paragraph (d)(4) of this 
section. As Needed APDU are required to obtain a commitment of FFP 
whenever significant project changes occur. Significant project changes 
are defined as changes in cost, schedule, scope or strategy which 
exceed FNS-defined thresholds or triggers. Without such approval, the 
State agency is at risk for funding of project activities which are not 
in compliance with the terms and conditions of the approved APD and 
subsequently approved APDU until such time as approval is specifically 
granted by FNS.
    (E) Acquisition documents as described in Sec.  277.14(g).
    (F) Emergency Acquisition Requests as described in paragraph (i) of 
this section.
    (ii) The State agency must obtain prior FNS approval of the 
documents specified in paragraph (c)(3)(i) of this section in order to 
claim and receive reimbursement for the associated costs of the IS 
acquisition.
    (4) Approval by the State agency. Approval by the State agency is 
required for all documents and acquisitions specified in Sec.  277.18 
prior to submission for FNS approval. However, the State agency may 
delegate approval authority to any subordinate entity for those 
acquisitions of IS equipment and services not requiring prior approval 
by FNS.
    (5) Prompt action on requests for prior approval. FNS will reply 
promptly to State agency requests for prior approval. If FNS has not 
provided written approval, disapproval or a request for additional 
information within 60 days of FNS' acknowledgment of receipt of the 
State agency's request, the request will be deemed to have 
provisionally met the prior approval requirement in this paragraph (c). 
However, provisional approval will not exempt a State agency from 
having to meet all other Federal requirements which pertain to the 
acquisition of IS equipment and services. Such requirements remain 
subject to Federal audit and review.
    (d) APD content requirements--(1) Planning APD (PAPD). The PAPD is 
a written plan of action to acquire proposed services or equipment and 
to perform necessary activities to investigate the feasibility, system 
alternatives, requirements and resources needed to replace, modify or 
upgrade the State agency's IS. The PAPD shall contain adequate 
documentation to demonstrate the need to undertake a planning process, 
as well as a thorough description of the proposed planning activities, 
and estimated costs and

[[Page 52591]]

timeline, as specified by FNS in Handbook 901.
    (2) Implementation APD (IAPD). The IAPD is a written plan of action 
to acquire the proposed IS services or equipment and to perform 
necessary activities to design, develop, acquire, install, test, and 
implement the new IS. The Implementation APD shall contain detailed 
documentation of planning and preparedness for the proposed project, as 
enumerated by FNS in Handbook 901, demonstrating the feasibility of the 
project, thorough analysis of system requirements and design, a 
rigorous management approach, stewardship of Federal Funds, a realistic 
schedule and budget, and preliminary plans for key project phases.
    (3) Annual APDU content requirements. The Annual APDU is a yearly 
update to ongoing IS projects when planning or implementation 
activities occur. The Annual APDU shall contain documentation on the 
project activity status and a description of major tasks, milestones, 
budget and any changes, as specified by FNS in Handbook 901.
    (4) As Needed APDU content requirements. The As Needed APDU 
document shall contain the items as defined in paragraph (c)(3)(i)(D) 
of this section with emphasis on the area(s) where changes have 
occurred or are anticipated that triggered the submission of the APDU, 
as detailed by FNS in Handbook 901.
    (e) Service agreements. The State agency shall execute service 
agreements when IS services are to be provided by a State central IT 
facility or another State or local agency. Service Agreement means the 
document signed by the State or local agency and the State or local 
central IT facility whenever an IT facility provides IT services to the 
State or local agency. Service agreements shall:
    (1) Identify the IS services that will be provided;
    (2) Include a schedule of rates for each identified IS service, and 
a certification that these rates apply equally to all users;
    (3) Include a description of the method(s) of accounting for the 
services rendered under the agreement and computing services charges;
    (4) Include assurances that services provided will be timely and 
satisfactory;
    (5) Include assurances that information in the IS as well as 
access, use and disposal of IS data will be safeguarded in accordance 
with provisions of Sec.  272.1(c) (disclosure) and Sec.  277.13 
(property);
    (6) Require the provider to obtain prior approval from FNS pursuant 
to paragraph (c)(1) of this section for IS equipment and IS services 
that are acquired from commercial sources primarily to support 
federally aided public assistance programs and require the provider to 
comply with Sec.  277.14 (procurement standards) for procurements 
related to the service agreement. IS equipment and services are 
considered to be primarily acquired to support federally aided public 
assistance programs when the Programs may reasonably be expected to 
either be billed for more than 50 percent of the total charges made to 
all users of the IS equipment and services during the time period 
covered by the service agreement, or directly charged for the total 
cost of the purchase or lease of IS equipment or services;
    (7) Include the beginning and ending dates of the period of time 
covered by the service agreement; and
    (8) Include a schedule of expected total charges to the Program for 
the period of the service agreement.
    (9) State Agency Maintenance of Service Agreements. The State 
agency will maintain a copy of each service agreement in its files for 
Federal review upon request.
    (f) Conditions for receiving Federal financial participation 
(FFP).--(1) A State agency may receive FFP at the 50 percent 
reimbursement rate for the costs of planning, design, development or 
installation of IS and information retrieval systems if the proposed 
system will:
    (i) Assist the State agency in meeting the requirements of the Food 
and Nutrition Act of 2008, as amended;
    (ii) Meet the Automation of Data Processing/Computerization of 
Information Systems Model Plan program standards specified in Sec.  
272.10(b)(1) through (3) of this chapter, except the requirements in 
Sec.  272.10(b)(2)(vi), (b)(2)(vii), and (b)(3)(ix) of this chapter to 
eventually transmit data directly to FNS;
    (iii) Be likely to provide more efficient and effective 
administration of the program; and
    (iv) Be compatible with such other systems utilized in the 
administration of other State agency programs including the program of 
Temporary Assistance for Needy Families (TANF).
    (2) State agencies seeking FFP for the planning, design, 
development or installation of IS shall develop State wide systems 
which are integrated with TANF. In cases where a State agency can 
demonstrate that a local, dedicated, or single function (issuance or 
certification only) system will provide for more efficient and 
effective administration of the program, FNS may grant an exception to 
the State wide integrated requirement. These exceptions will be based 
on an assessment of the proposed system's ability to meet the State 
agency's need for automation. Systems funded as exceptions to this 
rule, however, should be capable to the extent necessary, of an 
automated data exchange with the State agency system used to administer 
TANF. In no circumstances will funding be available for systems which 
duplicate other State agency systems, whether presently operational or 
planned for future development.
    (g) Basis for continued Federal financial participation (FFP).--(1) 
FNS will continue FFP at the levels approved in the Planning APD and 
the Implementation APD provided that project development proceeds in 
accordance with the conditions and terms of the approved APD and that 
IS resources are used for the purposes authorized. FNS will use the 
APDU to monitor IS project development. The submission of the Update as 
prescribed in Sec.  277.18(d) for the duration of project development 
is a condition for continued FFP. In addition, periodic onsite reviews 
of IS project development and State and local agency IS operations may 
be conducted by or for FNS to assure compliance with approved APDs, 
proper use of IS resources, and the adequacy of State or local agency 
IS operations.
    (2) Pre-implementation. The State agency must demonstrate through 
thorough testing that the system meets all program functional and 
performance requirements. FNS may require a pre-implementation review 
of the system to validate system functionality prior to State agency 
testing.
    (i) Testing. The State agency must provide a complete test plan 
prior to the start of the testing phase. The State agency must provide 
documentation to FNS of the results of performance and User Acceptance 
Testing (UAT) before the system is piloted in a production environment. 
FNS concurrence to advance from testing to pilot is a condition for 
continued FFP. All aspects of program eligibility must be tested to 
ensure that the system makes accurate eligibility determinations in 
accordance with federal regulations and approved state policies, and 
that system functionality meets the required functional specifications. 
The State agency shall describe how all system testing will be 
conducted and the resources to be utilized in order to verify the 
system complies with SNAP requirements, system design specifications, 
and performance standards including responsiveness,

[[Page 52592]]

usability, capacity, and security. Testing includes but is not limited 
to unit testing, integration testing, performance testing, end-to-end 
testing, UAT, and regression testing. During UAT detailed scripts 
covering all areas of program functionality shall be used so that any 
errors identified can be replicated, corrected, and re-tested.
    At a minimum, the Test Plan shall address:
    (A) The types of testing to be performed;
    (B) The organization of the test team and associated 
responsibilities;
    (C) Test database generation;
    (D) Test case development;
    (E) Test schedule;
    (F) Documentation of test results;
    (G) Acceptance testing shall include functional requirements 
testing, error condition handling and destructive testing, security 
testing, recovery testing, controls testing, stress and throughput 
performance testing, and regression testing;
    (H) The decision criteria, including specific test results which 
must be met before the State may exit the testing phase, the roles or 
titles of the individuals responsible for verifying that these criteria 
have been met, and the sign-off process which will document that the 
criteria have been met.
    (I) FNS may require any or all of these tests to be repeated in 
instances where significant modifications are made to the system after 
these tests are initially completed or if problems that surfaced during 
initial testing warrant a retest. FNS reserves the right to participate 
and conduct independent testing, as necessary, during UAT and at 
appropriate times during system design, development, implementation, 
and operations.
    (ii) Pilot. Prior to statewide rollout of the system there must be 
a test of the fully operational system in a live production 
environment. Pilots must operate until a state of routine operation is 
reached with the full caseload in the pilot area. The design of this 
pilot shall provide an opportunity to test all components of the system 
as well as the data conversion process and system performance. The 
duration of the pilot must be for a sufficient period of time to 
thoroughly evaluate the system (usually a minimum duration of three 
months). The State agency must provide documentation to FNS of the 
pilot evaluation. FNS approval to implement the system more broadly is 
a condition for continued FFP.
    (iii) Post-implementation Review. After the system is fully 
implemented FNS may conduct a review to validate that program policy is 
correctly applied, whether project goals and objectives were met, that 
IS equipment and services are being properly used and accurate 
inventory records exist, and the actual costs of the project.
    (h) Disallowance of Federal financial participation (FFP). If FNS 
finds that any acquisition approved under the provisions of Sec.  
277.18(c) fails to comply with the criteria, requirements, and other 
undertakings described in the approved or modified APD, payment of FFP 
may be suspended or may be disallowed in whole or in part.
    (i) Emergency acquisition requirements. The State agency may 
request FFP for the costs of IS equipment and services acquired to meet 
emergency situations in which:
    (1) The State agency can demonstrate to FNS an immediate need to 
acquire IS equipment or services in order to continue operation of 
SNAP; and the State agency can clearly document that the need could not 
have been anticipated or planned for and precludes the State from 
following the prior approval requirements of paragraph (c) of this 
section. FNS may provide FFP in emergency situations if the following 
conditions are met:
    (2) The State agency must submit a written request to FNS prior to 
the acquisition of any IS equipment or services. The written request 
shall include:
    (i) A brief description of the IS equipment and/or services to be 
acquired and an estimate of their costs;
    (ii) A brief description of the circumstances which result in the 
State agency's need to proceed with the acquisition prior to fulfilling 
approval requirements at paragraph (c) of this section; and
    (iii) A description of the adverse impact which would result if the 
State agency does not immediately acquire the IS equipment and/or 
services.
    (3) Upon receipt of a written request for emergency acquisition FNS 
shall provide a written response to the State agency within 14 days. 
The FNS response shall:
    (i) Inform the State agency that the request has been disapproved 
and the reason for disapproval; or,
    (ii) FNS recognizes that an emergency situation exists and grants 
conditional approval pending receipt of the State agency's formal 
submission of the IAPD information specified at paragraph (d)(2) of 
this section within 90 days from the date of the State agency's initial 
written request.
    (iii) If FNS approves the request submitted under paragraph (i)(1) 
of this section, FFP will be available from the date the State agency 
acquires the IS equipment and services.
    (iv) If the complete IAPD submission required by paragraph (d)(2) 
of this section is not received by FNS within 90 days from the date of 
the initial written request, costs may be subject to disallowance.
    (j) General cost requirements.--(1) Cost determination. Actual 
costs must be determined in compliance with OMB Circular A-87 (2 CFR 
225) and an FNS approved budget, and must be reconcilable with the 
approved FNS funding level. A State agency shall not claim 
reimbursement for costs charged to any other Federal program or uses of 
IS systems for purposes not connected with SNAP. The approved APD cost 
allocation plan includes the methods which will be used to identify and 
classify costs to be claimed. This methodology must be submitted to FNS 
as part of the request for FNS approval of funding as required in 
paragraph (d) of this section. Operational costs are to be allocated 
based on the statewide cost allocation plan rather than the APD cost 
plan. Approved cost allocation plans for ongoing operational costs 
shall not apply to IS system development costs under this section 
unless documentation required under paragraph (c) of this section is 
submitted to and approvals are obtained from FNS. Any APD-related costs 
approved by FNS shall be excluded in determining the State agency's 
administrative costs under any other section of this part.
    (2) Cost identification for purposes of FFP claims. State agencies 
shall assign and claim the costs incurred under an approved APD in 
accordance with the following criteria:
    (i) Development costs. Using its normal departmental accounting 
system, in accordance with the cost principles set forth in OMB 
Circular A-87 (2 CFR 225), the State agency shall specifically identify 
what items of costs constitute development costs, assign these costs to 
specific project cost centers, and distribute these costs to funding 
sources based on the specific identification, assignment and 
distribution outlined in the approved APD. The methods for distributing 
costs set forth in the APD should provide for assigning identifiable 
costs, to the extent practicable, directly to program/functions. The 
State agency shall amend the cost allocation plan required by Sec.  
277.9 (administrative cost principles) to include the approved APD 
methodology for the identification, assignment and distribution of the 
development costs.

[[Page 52593]]

    (ii) Operational costs. Costs incurred for the operation of an IS 
shall be identified and assigned by the State agency to funding sources 
in accordance with the approved cost allocation plan required by Sec.  
277.9 (administrative cost principles).
    (iii) Service agreement costs. States that operate a central data 
processing facility shall use their approved central service cost 
allocation plan required by OMB Circular A-87 (2 CFR part 225) to 
identify and assign costs incurred under service agreements with the 
State agency. The State agency shall then distribute these costs to 
funding sources in accordance with paragraphs (j)(2)(i) and (ii) of 
this section.
    (3) Capital expenditures. The State agency shall charge the costs 
of IT equipment having unit acquisition costs or total aggregate costs, 
at the time of acquisition, of more than $25,000 by means of 
depreciation or use allowance, unless a waiver is specifically granted 
by FNS. If the equipment acquisition is part of an APD that is subject 
to the prior approval requirements of paragraph (c)(2) of this section, 
the State agency may submit the waiver request as part of the APD.
    (4) Claiming costs. Prior to claiming funding under this section 
the State agency shall have complied with the requirements for 
obtaining approval and prior approval of paragraph (c) of this section.
    (5) Budget authority. FNS approval of requests for funding shall 
provide notification to the State agency of the budget authority and 
dollar limitations under which such funding may be claimed. FNS shall 
provide this amount as a total authorization for such funding which may 
not be exceeded unless amended by FNS. FNS's determination of the 
amount of this authorization shall be based on the budget submitted by 
the State agency. Activities not included in the approved budget, as 
well as continuation of approved activities beyond scheduled deadlines 
in the approved plan, shall require FNS approval of an As Needed APD 
Update as prescribed in paragraphs (c)(3)(i)(D) and (d)(4) of this 
section, including an amended State budget. Requests to amend the 
budget authorization approved by FNS shall be submitted to FNS prior to 
claiming such expenses.
    (k) Access to the system and records. Access to the system in all 
aspects, including but not limited to design, development, and 
operation, including work performed by any source, and including cost 
records of contractors and subcontractors, shall be made available by 
the State agency to FNS or its authorized representatives at intervals 
as are deemed necessary by FNS, in order to determine whether the 
conditions for approval are being met and to determine the efficiency, 
economy and effectiveness of the system. Failure to provide full access 
to all parts of the system may result in suspension and/or termination 
of SNAP funds for the costs of the system and its operation.
    (l) Ownership rights--(1) Software.--(i) The State or local 
government shall include a clause in all procurement instruments which 
provides that the State or local government shall have all ownership 
rights in any software or modifications thereof and associated 
documentation designed, developed or installed with FFP under this 
section.
    (ii) FNS reserves a royalty-free, nonexclusive, and irrevocable 
license to reproduce, publish, or otherwise use and to authorize others 
to use for Federal Government purposes, such software, modifications, 
and documentation.
    (iii) Proprietary operating/vendor software packages which meet the 
definition of COTS at paragraph 277.18(b) shall not be subject to the 
ownership provisions in paragraphs (l)(1)(i) and (ii) of this section. 
FFP is not available for development costs for proprietary application 
software developed specifically for SNAP.
    (2) Information Systems equipment. The policies and procedures 
governing title, use and disposition of property purchased with FFP, 
which appear at Sec.  277.13 (property) are applicable to IS equipment.
    (m) Information system security requirements and review process--
(1) Information system security requirements. State and local agencies 
are responsible for the security of all IS projects under development, 
and operational systems involved in the administration of SNAP. State 
and local agencies shall determine appropriate IS security requirements 
based on recognized industry standards or compliance with standards 
governing security of Federal information systems and information 
processing.
    (2) Information security program. State agencies shall implement 
and maintain a comprehensive IS Security Program for IS and 
installations involved in the administration of the SNAP. IS Security 
Programs shall include the following components:
    (i) Determination and implementation of appropriate security 
requirements as prescribed in paragraph (m)(1) of this section.
    (ii) Establishment of a security plan and, as appropriate, policies 
and procedures to address the following areas of IS security:
    (A) Physical security of IS resources;
    (B) Equipment security to protect equipment from theft and 
unauthorized use;
    (C) Software and data security;
    (D) Telecommunications security;
    (E) Personnel security;
    (F) Contingency plans to meet critical processing needs in the 
event of short- or long-term interruption of service;
    (G) Emergency preparedness; and
    (H) Designation of an Agency IS Security Manager.
    (iii) Periodic risk analyses. State agencies shall establish and 
maintain a program for conducting periodic risk analyses to ensure that 
appropriate, cost-effective safeguards are incorporated into new and 
existing systems. In addition, risk analyses shall be performed 
whenever significant system changes occur.
    (3) IS security reviews. State agencies shall review the security 
of IS involved in the administration of SNAP on a biennial basis. At a 
minimum, the reviews shall include an evaluation of physical and data 
security, operating procedures, and personnel practices. State agencies 
shall maintain reports of their biennial IS security reviews, together 
with pertinent supporting documentation, for Federal review upon 
request.
    (4) Applicability. The security requirements of this section apply 
to all IS systems used by State and local governments to administer 
SNAP.

    Dated: August 10, 2011.
Audrey Rowe,
Administrator, Food and Nutrition Service.
[FR Doc. 2011-20796 Filed 8-22-11; 8:45 am]
BILLING CODE 3410-30-P