[Federal Register Volume 77, Number 178 (Thursday, September 13, 2012)]
[Proposed Rules]
[Pages 56565-56571]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2012-22261]


 ========================================================================
 Proposed Rules
                                                 Federal Register
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 This section of the FEDERAL REGISTER contains notices to the public of 
 the proposed issuance of rules and regulations. The purpose of these 
 notices is to give interested persons an opportunity to participate in 
 the rule making prior to the adoption of the final rules.
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  Federal Register / Vol. 77, No. 178 / Thursday, September 13, 2012 / 
Proposed Rules  

[[Page 56565]]



DEPARTMENT OF AGRICULTURE

Food and Nutrition Service

7 CFR Parts 210 and 245

RIN 0584-AE17


Independent Review of Applications Required by the Healthy, 
Hunger-Free Kids Act of 2010

AGENCY: Food and Nutrition Service, USDA.

ACTION: Proposed rule.

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SUMMARY: In accordance with Section 304 of the Healthy, Hunger-Free 
Kids Act of 2012, this proposed rule would require local education 
agencies participating in the Department's National School Lunch 
Program and demonstrating high levels of, or a high risk for 
administrative error associated with certification, verification, and 
other administrative processes to conduct an independent review of the 
initial eligibility determinations for free and reduced price school 
meals for accuracy prior to notifying households of eligibility or 
ineligibility. Additionally, this proposed rule would require each 
affected local educational agency to submit to the relevant State 
agency the results of the reviews including the number of applications 
subject to a second review, the number and percentage of reviewed 
applications for which the eligibility determinations changed, and a 
summary of the type of changes made. State agencies would be required 
to submit to the Food and Nutrition Service, a report describing the 
results of the second reviews in their State. This proposed rule is 
expected to reduce administrative errors in eligibility determinations 
for free and reduced price school meals.

DATES: To be assured of consideration, written comments must be 
postmarked on or before November 13, 2012.

ADDRESSES: The Food and Nutrition Service, USDA, invites interested 
persons to submit comments on this proposed rule. Comments may be 
submitted through one of the following methods:
     Preferred method: Federal eRulemaking Portal at http://www.regulations.gov. Follow the online instructions for submitting 
comments.
     Mail: Comments should be addressed to Julie Brewer, Chief, 
Policy and Program Development Branch, Child Nutrition Division, Food 
and Nutrition Service, Department of Agriculture, 3101 Park Center 
Drive, Room 640, Alexandria, Virginia 22302-1594.
     Hand Delivery or Courier: Deliver comments to the Food and 
Nutrition Service, Child Nutrition Division, 3101 Park Center Drive, 
Room 640, Alexandria, Virginia 22302-1594, during normal business hours 
of 8:30 a.m.-5 p.m.
    All comments submitted in response to this proposed rule will be 
included in the record and will be made available to the public. 
Duplicate comments are not considered. Therefore, we request that 
commenters submit comments through only one of the methods listed 
above. 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. The Food and Nutrition Service (FNS) will 
make the comments publicly available on the Internet via http://www.regulations.gov.

FOR FURTHER INFORMATION CONTACT: William Wagoner or Jessica Saracino, 
Policy and Program Development Branch, Child Nutrition Division, Food 
and Nutrition Service at (703) 305-2590.

SUPPLEMENTARY INFORMATION:

I. Background

    The National School Lunch Program (NSLP) and School Breakfast 
Program (SBP) reimburse local educational agencies (LEAs) for the cost 
of providing nutritious low-cost or free meals to children in public 
and nonprofit private schools and residential child care institutions. 
Participating schools and institutions receive cash reimbursements and 
U.S. Department of Agriculture (USDA) food assistance for each meal 
served. About 101,000 schools and institutions participate in the NSLP 
and average daily student participation totaled approximately 32 
million in Fiscal Year (FY) 2011. About 88,000 schools participate in 
the SBP and average daily student participation totaled approximately 
11.6 million in FY 2011.
    In exchange for Federal assistance, participating schools and 
institutions serve meals that satisfy Federal nutrition standards. In 
addition, they must offer school meals at no cost, or at reduced price, 
to children from income eligible households. Children from households 
with incomes at or below 130 percent of the Federal poverty level 
($29,055 for a family of four during School Year (SY) 2011-2012) are 
eligible for free meals. Those with incomes between 130 and 185 percent 
of the Federal poverty level ($41,348 for a family of four during SY 
2011-2012) are eligible for reduced price meals.
    Children are determined eligible for free meals through application 
or direct certification; reduced price eligibility is determined by 
application alone. In recent years, FNS research (see below for more 
information) has identified a significant amount of erroneous payments 
associated with administrative errors occurring during the free and 
reduced price eligibility determination process.

Administrative Error

    When households submit applications for free or reduced price 
meals, the LEA staff review these applications and make determinations 
of eligibility by comparing household size and income information with 
the guidelines published by FNS, or by assessing categorical 
eligibility based on a household's indication of meeting a categorical 
standard (homeless, migrant, runaway or foster child) or participation 
in certain means-tested programs (Supplemental Nutrition Assistance 
Program, Temporary Assistance for Needy Families, etc.). During the 
eligibility determination process, administrative errors can occur in 
determining gross monthly income, household family size, or assignment 
of benefit level based on household size and income specific (or 
relevant) information. Inaccurate certifications may result in 
assignment of a higher or lower amount of benefits than children are 
eligible to receive. For example, a child could incorrectly be 
certified for free lunches when they should be certified for reduced 
price lunches.
    Common administrative errors in determining gross monthly income 
may involve computation errors. Such errors include not converting 
multiple income

[[Page 56566]]

sources to annual income, incorrectly determining the frequency of 
receipt of household income, and/or incorrect addition or 
multiplication. In determining household size, common errors include 
not counting the children in the list of all household members or 
counting a child twice.
    Approved but incomplete applications (e.g., missing adult 
signature, missing last four digits of social security number, missing 
amount of income of the adult signing the application, etc.) also 
constitute administrative errors. In some instances, an administrative 
error may not have any impact on a benefit decision, and therefore 
would not translate into an error in the benefit level provided to a 
child.

Research Findings

    In 2007, FNS released the Access, Participation, Eligibility, and 
Certification (APEC) study, which included national estimates of the 
amounts and rates of erroneous payments in the NSLP and SBP. Erroneous 
payments may arise because LEAs claim reimbursement at the free or 
reduced price rate for meals served to children who are not eligible 
for these benefits. Alternatively, erroneous payments may occur because 
LEAs fail to claim reimbursement at the free or reduced price rate for 
children who have applied for and are eligible for these benefits.
    Using a nationally-representative sample for SY 2005-06, the APEC 
study found that 4.2 percent of applications were misclassified due to 
administrative error. This resulted in $129 million in net loss ($158 
million in overpayments less $29 million in underpayments), for the 
NSLP and SBP combined. The most common administrative error was 
certification of students whose applications were incomplete; this most 
frequently occurred because the application lacked a signature. Other 
types of administrative errors were missing applications, assessment 
errors and transmittal errors.
    In addition to the APEC study, FNS annually conducts the Regional 
Office Review of Applications (RORA) for School Meals. This annual 
report examines administrative error made during LEA approval of 
applications for free and reduced price meals in the NSLP and SBP. The 
most recent report, published in July 2011, found that LEA eligibility 
determinations were incorrect for 2.3 percent of students applying for 
free and reduced price meals in SY 2009-2010. About two-thirds (63 
percent) of the incorrect determinations certified households for more 
benefits than were justified based on the documentation available, 
while roughly one-third (37 percent) of the students certified in error 
were certified for a lesser benefit than was justified. Errors were 
most commonly made processing income-based applications, with most 
errors associated with the determination of a household's gross income.
    In response to concerns raised by APEC and RORA and the Department, 
the Healthy, Hunger-Free Kids Act of 2010, Public Law 111-296, (the 
HHFKA), modified the free and reduced price process for determining 
children's eligibility for free and reduced price meal benefits. The 
HHFKA strengthened rules governing certification.

II. Overview of the Proposed Rule

    Section 304 of the HHFKA amended section 22 of the Richard B. 
Russell National School Lunch Act (NSLA) 42 U.S.C. to require LEAs that 
demonstrate high levels of, or a high risk for, administrative error 
associated with certification, verification, and other administrative 
processes, as determined by the Secretary, to have an individual 
independently review the initial eligibility determinations for free 
and reduced price school meals for accuracy prior to notifying 
households of eligibility or ineligibility. This independent review of 
eligibility determinations is hereafter referred in this preamble and 
the proposed regulation as ``second review'' of applications.
    The Department has determined that given the results of the APEC 
and RORA, this proposed rule should focus on administrative errors that 
occur during certification of eligibility. For purposes of this 
proposed rule, certification includes both benefit issuance and 
updating student eligibility for program benefits on rosters used to 
claim meals to the extent the State agency identifies problems in the 
benefit delivery process during an administrative review. Subsequent 
rulemaking may address administrative error associated with 
verification and other administrative processes.
    This proposed rule addresses requirements for both State agencies 
and LEAs, including criteria for identifying LEAs that must conduct a 
second review of applications; requirements for the second review of 
applications process, including timeframes and duration of second 
reviews; and requirements for reporting review results. With these new 
requirements, this proposed rule would create a new section 7 CFR 
245.11 entitled ``Second review of applications'' and would redesignate 
the current 7 CFR 245.11 through 245.13 as 7 CFR 245.12 through 245.14, 
respectively.
    These requirements are discussed in more detail below.

State Agency Requirements

LEA Selection Process

    Proposed 7 CFR 245.11(a) would require each State agency to 
annually identify LEAs that demonstrate high levels of, or a high risk 
for, administrative error associated with the certification process to 
conduct a second review of applications.
    Under the proposal, a State agency would be required to use the 
following criteria when identifying LEAs that are required to conduct a 
second review of applications:
     Criterion 1--Administrative Review Performance Standard 1 
Violation: LEAs subject to a follow-up administrative review due to 
certification, benefit issuance or updating eligibility status 
violations of Performance Standard 1 (7 CFR 210.18(i)(3)(i));
     Criterion 2--At-risk for Administrative Review Performance 
Standard 1 Violation: LEAs at risk for a follow-up administrative 
review due to certification, benefit issuance or updating eligibility 
status violations of Performance Standard 1 (7 CFR 210.18(i)(3)(i));
     Criterion 3--Provision \2/3\ (special assistance 
certification and reimbursement alternatives) base year: LEAs that are 
establishing a new Provision \2/3\ base year in the following school 
year; and
     Criterion 4--State agency discretion: Of the LEAs 
scheduled for an administrative review the following year, the State 
agency may select any LEAs not identified through the above criterion 
that the State agency identifies as at risk for certification error, as 
determined by the State agency.
    Criterion 1--Administrative Review Performance Standard 1 
Violation: On an administrative review, State agencies assess whether a 
LEA and schools under its jurisdiction have a system in place that 
accurately certifies children for free and reduced price meal benefits, 
issues benefits, and updates eligibility status (Performance Standard 
1). Any LEA with an inadequate certification and issuance system is 
required to take corrective action and, depending on the severity of 
the problem, may be subject to a follow-up administrative review. The 
Performance Standard 1 thresholds resulting in a follow-up 
administrative review are found at current 7 CFR 210.18(i)(3)(i). The 
threshold related to certification, benefit issuance and

[[Page 56567]]

updating eligibility is exceeded when: (1) a number of the reviewed 
schools in a LEA (as specified in Table B under Sec.  210.18(i)(3)(i)) 
have an inadequate system for certification, issuing benefits or 
updating eligibility status; and (2) a school or LEA's system for 
certification, issuing benefits or updating eligibility status is 
inadequate, i.e., if 10 percent or more (but not less than 100 lunches) 
of the free and reduced price lunches claimed for the review period 
(for any school reviewed) are claimed incorrectly due to errors of 
certification, benefit issuance or updating of eligibility status.
    For purposes of this proposed rule, a LEA subject to a follow-up 
administrative review due to certification and benefit issuance 
violations of Performance Standard 1 (Sec.  210.18(i)(3)(i)) would be 
subject to a second review of applications beginning the following 
school year.
    Criterion 2--At-risk for Administrative Review Performance Standard 
1 Violation: This proposed rule also would require State agencies to 
identify LEAs that demonstrate a high risk for administrative error 
associated with certification to be required to conduct a second review 
of applications. For purposes of this proposed rule, LEAs, as 
determined by an administrative review, which claimed between 5-10 
percent of the free and reduced price lunches incorrectly due to errors 
of certification, benefit issuance or updating of eligibility status 
would be considered at high risk for administrative error associated 
with certification.
    Based on data available through RORA, we expect that LEAs selected 
based on Criterion 1 and 2 will account for approximately 20-25 percent 
of all LEAs nationwide over a three year period.
    Criterion 3--Provision 2/3 (special assistance certification and 
reimbursement alternatives) base year: In an effort to reduce paperwork 
and other administrative burdens at the local level, Congress 
incorporated into Section 11(a)(1) of the NSLA (42 U.S.C. 1759a) 
alternative provisions to the traditional requirements for annual 
determinations of eligibility for free and reduced price school meals 
and daily meal counts by type. A school participating in Provisions 2 
or 3 must serve NSLP and/or SBP meals to all participating children at 
no charge for up to 4 consecutive years. During the first base year, 
there is no change in traditional procedures and administrative burden. 
The school distributes free and reduced price meal applications and 
makes eligibility determinations for participating children, takes 
daily meal counts by type (free, reduced price and paid) at the point 
of service, or approved alternate, reports these counts for claiming 
meal reimbursement, and receives Federal reimbursement based on these 
counts as it normally does. However, regardless of the children's free, 
reduced price or paid eligibility category, all children are served 
meals at no charge. During years 2, 3 and 4 of the cycle, the school 
makes no new eligibility determinations and continues to serve all 
children meals at no charge. The school takes counts of only the total 
number of reimbursable meals served each day, instead of counting meals 
by type. Reimbursement during these years is determined by applying the 
percentages of free, reduced price, and paid meals served during the 
base year to the total meal count for the claiming period in subsequent 
years.
    The APEC study found that schools in Provisions 2 or 3 base years, 
on average, experience higher erroneous payments rates than other 
schools (1.75 times higher for NSLP), making them a high risk for 
administrative error associated with certification. Therefore, this 
proposed rule would require State agencies to require LEAs to conduct a 
second review of applications when the LEA is establishing a new 
Provision \2/3\ base year.
    Criterion 4--State agency discretion: Lastly, this proposed rule 
would allow State agencies to select LEAs that are not identified in 
the above criteria, and that the State identifies are at risk for 
certification error, and are scheduled for an administrative review the 
following year. This selection requirement is intended to ensure that 
when a selected LEA undergoes an administrative review the following 
year, it will already be working towards decreasing the administrative 
error associated with the certification process, thus mitigating the 
potential for fiscal action by the State agency.
    This requirement would give State agencies discretion to decide 
which LEAs are selected to conduct the second review of applications. 
Examples of LEAs that State agencies should include are new entities 
with less experience with the free and reduced price process, LEAs with 
new administrative staff and LEAs in the first year of a new electronic 
system.
    These criteria for selection are included in proposed 7 CFR 
245.11(b).
    FNS asks for commenter input on the above criteria for selecting 
LEAs for the second review of applications. Specifically, we are 
interested in input on how many LEAs would likely be required to 
conduct a second review of applications using these criteria, as well 
as any suggestions for other criteria that could be used for LEA 
selection.

Exemptions

    FNS is also seeking input on whether State agencies should be able 
to exempt LEAs that use computerized free and reduced price 
determination and roster transfer systems, provided that the State 
agency can attest to the efficacy of those systems. While FNS is 
considering this exemption for LEAs that use computerized systems, we 
do not expect that State agencies would use the exemption often because 
computerized eligibility determination systems should be more accurate 
than manual determinations, meaning that LEAs using them would not 
likely fall within the criterion for LEA selection. We anticipate that 
this exemption would reduce burden on State agencies.

LEA Requirements

    The proposed rule at 7 CFR 245.11(c) would require LEAs identified 
by their State agency to conduct a second review of applications, to 
ensure that the initial eligibility determination for each application 
is reviewed for accuracy prior to notifying the household of the 
eligibility or ineligibility of the household for free and reduced 
price meals. Under the proposal, the second review would be conducted 
by an individual or entity who did not make the initial eligibility 
determination. This individual or entity is not required to be an 
employee of the LEA but must be trained on how to make application 
determinations as are all individuals who review initial eligibility 
applications, individuals or entities who conduct a second review of 
applications are subject to the disclosure requirements set forth in 
the NSLA and current 7 CFR 245.6(f) through 245.6(k).

Timeframes

    The proposed rule at 7 CFR 245.11(c)(1) would require the second 
review of applications by identified LEAs to be conducted in a timely 
manner and not result in the delay of an eligibility determination. 
Once the review of eligibility has been completed, the household must 
be notified immediately.
    In addition, the proposed rule would make a change to the 
timeframes for application approval for all LEAs, not simply those 
affected by the second review of applications requirements. Under the 
proposal, the Department would establish a regulatory requirement that 
all LEAs notify the household of the children's eligibility

[[Page 56568]]

and provide the eligible children the benefits to which they are 
entitled within 10 operating days of receiving the application. This 
change would conform the regulations with longstanding guidance and is 
intended to make the certification process consistent for both LEAs 
that are required to conduct a second review of applications and those 
that are not. This proposed change is found at 7 CFR 245.6(c)(6)(i).

Second Review Duration

    The proposed rule at Sec.  245.11(c)(2) would require LEAs 
identified under Criterion 1 (Administrative Review Performance 
Standard 1 Violation), Criterion 2 (At-risk for Administrative Review 
Performance Standard 1 Violation), or Criterion 4 (State agency 
discretion) to conduct a second review of applications until such time 
as the required LEA documentation demonstrates no more than 5 percent 
of the applications reviewed in the second review have changes to the 
eligibility determination.
    Documentation means the required LEA annual report (described 
below) detailing the number of free and reduced price applications 
subject to a second review and the number and percentage of reviewed 
applications for which the eligibility determination was changed and a 
summary of the type of changes made.
    LEAs identified under Criterion 3 (Provision 2/3 base year) are 
required to conduct a second review of applications during every base 
year. These LEAs are considered at-risk for administrative error 
associated with certification because of the infrequency (every 4 
years) that they perform the certification process.

Reporting Requirements

    As required by the HHFKA, this proposed rule would establish 
reporting requirements for State agencies and LEAs. These proposed 
reporting requirements would allow the State agency and the Department 
to monitor the potential decrease in administrative error associated 
with certification created by the second review of applications 
requirement.
    Under the proposal at Sec.  245.11(b)(2), State agencies would be 
required to submit an annual report, as specified by FNS, detailing the 
number of free and reduced price applications subject to a second 
review, the number and percentage of reviewed applications for which 
the eligibility was changed and a summary of the type of changes that 
were made for all the LEAs that were required to conduct a second 
review of applications. In addition, this proposed rule would require 
at Sec.  245.11(c)(3) that LEAs subject to conduct a second review of 
applications be required to submit to the appropriate State agency, the 
number of applications reviewed, the results of the second reviews 
including the number and percentage of reviewed applications for which 
the eligibility determination was changed and a summary of the type of 
changes that were made.

Verification for Cause

    The intended effect of this proposed rule is to help reduce 
administrative error during the application review process. The 
Department would also like to point out that in addition to decreasing 
the types of administrative error described above, the second review of 
applications requirement could provide an opportunity to allow an LEA 
to identify applications that should be verified for cause. Currently, 
7 CFR 245.6a(c)(7) requires LEAs to verify any questionable application 
and encourages them, on a case-by-case basis, to verify any application 
for cause when the LEA is aware of additional income or persons in the 
household. LEAs must first complete the certification process prior to 
conducting verification.

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 determined to be not 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 (RFA) of 1980, (5 U.S.C. 601-612). Pursuant 
to that review, it has been certified that this rule will not have a 
significant impact on a substantial number of small entities.
    While there may be some LEA burden associated with the second 
review of applications required in this proposed rule, the burden will 
not be significant and will be outweighed by the benefits of decreased 
administrative error associated with certification. Additionally, only 
LEAs that fall under the established criteria would be required to 
conduct the second review of applications.

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 by State, local or tribal 
governments, in the aggregate, or 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 Department to identify 
and consider a reasonable number of regulatory alternatives and adopt 
the most cost effective or least burdensome alternative that achieves 
the objectives of the rule.
    This proposed rule does not contain Federal mandates (under the 
regulatory provisions of Title II of the UMRA) for State, local and 
tribal governments or the private sector of $100 million or more in any 
one year. Thus, the rule is not subject to the requirements of sections 
202 and 205 of the UMRA.

Executive Order 12372

    The National School Lunch Program is listed in the Catalog of 
Federal Domestic Assistance Programs under 10.555. For the reasons set 
forth in the final rule in 7 CFR part 3015, subpart V, and related 
Notice (48 FR 29115, June 24, 1983), this program is included in the 
scope of Executive Order 12372 which requires intergovernmental 
consultation with State and local officials.

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 13121.
    Prior Consultation With State Officials: Prior to drafting this 
proposed rule, FNS staff received informal input

[[Page 56569]]

from various stakeholders while participating in various State, 
regional, national, and professional conferences. Numerous 
stakeholders, including State and local program operators, also 
provided input at public meetings held by the School Nutrition 
Association.
    Nature of Concerns and the Need to Issue This Rule: State agencies 
and LEAs want to provide the best possible school meals through the 
NSLP but are concerned about the costs and administrative burden 
associated with increased program oversight. While FNS is aware of 
these concerns, the National School Lunch Act, 42 U.S.C. 1769c(b)(6), 
as amended by the HHFKA, requires that LEAs that demonstrate a high 
level of, or a high risk for, administrative error associated with 
certification have an individual or entity review the initial 
eligibility determinations for free and reduced price school meals for 
accuracy prior to sending out household notifications of eligibility or 
ineligibility.
    Extent to Which We Meet Those Concerns: FNS has considered the 
impact of this proposed rule on State and local operators and has 
developed a rule that would implement the second review of applications 
requirement in the most effective and least burdensome manner.

Executive Order 12988

    This proposed rule has been reviewed under Executive Order 12988, 
Civil Justice Reform. This proposed rule is not 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 and timely implementation. This rule is not intended to 
have retroactive effect unless so specified in the Effective Dates 
section of the final rule. Prior to any judicial challenge to the 
provisions of the final rule, all applicable administrative procedures 
under Sec.  210.18(q) or Sec.  235.11(f) must be exhausted.

Civil Rights Impact Analysis

    FNS has reviewed this proposed rule in accordance with the 
Department Regulation 4300-4, ``Civil Rights Impact Analysis,'' and 
1512-1, ``Regulatory Decision Making Requirements,'' to identify and 
address any major civil rights impacts the rule might have on 
minorities, women, and persons with disabilities. After a careful 
review of the rule's intent and provisions, FNS has determined that 
this rule is not intended to limit or reduce in any way the ability of 
protected classes of individuals to receive benefits on the basis of 
their race, color, national origin, sex, age, or disability, nor is it 
intended to have a differential impact on minority owned or operated 
business establishments, and women-owned or operated business 
establishments that participate in the Child Nutrition Programs. The 
proposed rule is technical in nature, and it affects only the State 
agencies and the local educational agencies operations.

Paperwork Reduction Act

    The Paperwork Reduction Act of 1995 (44 U.S.C. Chap. 35; see 5 CFR 
part 1320), requires that the Office of Management and Budget (OMB) 
approve all collections of information by a Federal agency from the 
public before they can be implemented. Respondents are not required to 
respond to any collection of information unless it displays a current, 
valid OMB control number. This is a new collection. The proposed 
provisions in this rule create new burden which will be merged into a 
currently approved information collection titled ``Determining 
Eligibility for Free and Reduced Price Meals,'' OMB Control 
0584-0026, expiration date March 31, 2013. The current 
collection burden inventory for the Determining Eligibility for Free 
and Reduced Price Meals (7 CFR part 245) is 960,367. 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.
    Comments on the information collection in this proposed rule must 
be received by November 13, 2012. 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 
Jon Garcia, Chief, Program Analysis and Monitoring Branch, Child 
Nutrition Division, 3101 Park Center Drive, Alexandria, VA 22302. For 
further information, or for copies of the information collection 
requirements, please contact Jon Garcia 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 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.
    Title: Independent Review of Applications Required by the Healthy, 
Hunger-Free Kids Act of 2010.
    OMB Number: 0584-NEW.
    Expiration Date: Not Yet Determined.
    Type of Request: New Collection.
    Abstract: Section 304 of the Healthy, Hunger-Free Kids Act of 2010 
amended Section 22(b) of the Richard B. Russell National School Lunch 
Act (42 U.S.C. 1769c(b)). The new requirements necessitate the 
submission of a report to the State agency from each local educational 
agency that is required by the State agency to conduct a second review 
of eligibility determinations based on demonstrating high levels of, or 
a high risk for, administrative error associated with the certification 
process. This report must describe the results of the second review of 
applications, including the number and percentage of reviewed 
applications for which the eligibility determinations changed and a 
summary of the types of changes made. State agencies are required to 
submit this information in a report to the USDA. USDA must publish 
annually the results of the reviews of initial eligibility 
determinations by State, number, percentage, and type of error.
    This proposed rule would increase the recordkeeping and reporting 
burden for local educational agencies and State agencies on the current 
collection burden inventory for Determining Eligibility for Free and 
Reduced Price Meals, OMB Control 0584-0026. The average burden 
per response and the annual burden hours are explained below and 
summarized in the charts which follow.

Estimated Annual Burden for 0584-NEW, Independent Review of 
Applications, 7 CFR Part 245

    Respondents for This Proposed Rule: State Agencies and Local 
Educational Agencies.
    Estimated Number of Respondents for This Proposed Rule: 1,456.
    Estimated Number of Responses per Respondent for This Proposed 
Rule: 1.
    Estimated Total Annual Responses: 1,456.
    Estimated Total Annual Burden on Respondents for This Proposed 
Rule: 378.

[[Page 56570]]



                                Estimated Annual Burden For 0584-New, Independent Review of Applications, 7 CFR Part 245
                                               [Reporting (State agencies and local educational agencies)]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                    Estimated                    Average        Average        Annual
                                                          Section                   number of   Frequency of     annual       burden per       burden
                                                                                   respondents    response      responses      response         hours
--------------------------------------------------------------------------------------------------------------------------------------------------------
State agencies must annually report the   7 CFR 245.11(b)(2)....................            56             1             6             .5             28
 results of the second reviews conducted
 by LEAs each school year.
Local educational agencies must annually  7 CFR 245.11(c)(3)....................         1,400             1         1,400            0.25           350
 report the results of the second
 reviews conducted each school year.
                                         ---------------------------------------------------------------------------------------------------------------
    Total Reporting for Proposed Rule...  ......................................         1,456  ............         1,456  ..............           378
--------------------------------------------------------------------------------------------------------------------------------------------------------


                                Estimated Annual Burden For 0584-New, Independent Review of Applications, 7 CFR Part 245
                                             [Recordkeeping (State agencies and local educational agencies)]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                     Estimated                    Average       Average
                                                           Section                   number of     Frequency      annual       burden per      Annual
                                                                                    respondents   of response    responses      response    burden hours
--------------------------------------------------------------------------------------------------------------------------------------------------------
State agencies...........................  7 CFR 245.11..........................            56             1            56          * 0             * 0
Local educational agencies...............  7 CFR 245.11..........................         1,400             1         1,400          * 0             * 0
                                          --------------------------------------------------------------------------------------------------------------
    Total Recordkeeping for Proposed Rule
--------------------------------------------------------------------------------------------------------------------------------------------------------
* Recordkeeping requirements for State agencies and local educational agencies are included in the burden for the existing requirements for submitting
  data for the FNS-742 form.


           Summary of Burden (OMB 0584-New) 7 CFR 245
------------------------------------------------------------------------
 
------------------------------------------------------------------------
Total No. Respondents.........................................     1,456
Average No. Responses Per Respondent..........................         1
Total Annual Responses........................................     1,456
Average Hours per Response....................................  ........
                                                               ---------
    Total Burden Hours for Proposed Rule......................       378
------------------------------------------------------------------------

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.

List of Subjects

7 CFR Part 210

    Children, Commodity School Program, Food assistance programs, Grant 
programs-social programs, National School Lunch Program, Nutrition, 
Reporting and recordkeeping requirements, Surplus agricultural 
commodities.

7 CFR Part 245

    Civil rights, Food assistance programs, Grant programs-education, 
Grant programs-health, Infants and children, Milk, Reporting and 
recordkeeping requirements, School breakfast and lunch programs.

    Accordingly, 7 CFR parts 210 and 245 are proposed to be amended as 
follows:

PART 210--NATIONAL SCHOOL LUNCH PROGRAM

    1. The authority citation for part 210 continues to read as 
follows:

    Authority: 42 U.S.C. 1751-1760, 1779.

    2. Amend Sec.  210.15 by:
    a. In paragraph (a)(7), removing the word ``and'';
    b. In paragraph (a)(8), removing the period and adding ``; and'' in 
its place;
    c. Adding a new paragraph (a)(9).
    The addition reads as follows:


Sec.  210.15  Reporting and recordkeeping.

    (a) * * *
    (9) For any local educational agency required to conduct a second 
review of free and reduced price applications as required under Sec.  
245.11 of this chapter, the number of free and reduced price 
applications subject to a second review and the number and percentage 
of reviewed applications for which the eligibility determination was 
changed and a summary of the types of changes made.
* * * * *
    3. Amend Sec.  210.20 by:
    a. In paragraph (a)(8), removing the word ``and'';
    b. In paragraph (a)(9), removing the period and adding the word ``; 
and''
    c. Adding a new paragraph (a)(10).
    The addition reads as follows:


Sec.  210.20  Reporting and recordkeeping.

    (a) * * *
    (10) For local educational agencies required to conduct a second 
review of applications under Sec.  245.11 of this chapter, the results 
of the reviews including the number and percentage of reviewed 
applications for which the eligibility determination was changed and a 
summary of the types of changes made.
* * * * *

PART 245--DETERMINING ELIGIBILITY FOR FREE AND REDUCED PRICE MEALS 
AND FREE MILK IN SCHOOLS

    1. The authority citation for part 245 continues to read as 
follows:

    Authority:  42 U.S.C. 1752, 1758, 1759a, 1772, 1773, and 1779.

    2. In Sec.  245.6 revise paragraph (c)(6)(i) to read as follows:


Sec.  245.6  Application, eligibility and certification of children for 
free and reduced price meals and free milk.

* * * * *
    (c) * * *
    (6) * * *

[[Page 56571]]

    (i) Income applications. The local educational agency must notify 
the household of the children's eligibility and provide the eligible 
children the benefits to which they are entitled within 10 operating 
days of receiving the application.
* * * * *
    3. Amend Part 245 by:
    a. Redesignating Sec. Sec.  245.11 through 245.13 as Sec. Sec.  
245.12 through 245.14, respectively;
    b. Adding a new Sec.  245.11 to read as follows:


Sec.  245.11  Second review of applications.

    (a) General. On an annual basis not later than the end of each 
school year, State agencies must identify local educational agencies 
demonstrating a high level of, or risk for, administrative error 
associated with certification processes and notify the affected local 
educational agencies that they must conduct a second review of 
applications beginning in the following school year. The second review 
of applications must be completed prior to notifying the household of 
the eligibility or ineligibility of the household for free or reduced 
price meals.
    (b) State agency requirements.
    (1) Selection criteria. In selecting local educational agencies 
demonstrating a high level of, or risk for, administrative errors 
associated with certification processes, State agencies must use the 
following criteria:
    (i) Administrative Review Performance Standard 1 Violation. All 
local educational agencies subject to a follow-up administrative review 
due to certification, benefit issuance, or updating eligibility status 
violations of Performance Standard 1 under Sec.  210.18(i)(3)(i) of 
this chapter.
    (ii) At-Risk for Administrative Review Performance Standard 1 
Violation. All local educational agencies at risk for a follow-up 
administrative review under Sec.  210.18(i)(3)(i) because they claim 
between 5-10 percent of the free and reduced price lunches incorrectly 
for the review period due to errors of certification, benefit issuance 
or updating of eligibility status.
    (iii) Provision 2 or Provision 3 Base Year. All local educational 
agencies that are establishing a new base year in the following school 
year under the special assistance certification and reimbursement 
alternatives set forth in Sec.  245.9.
    (iv) State agency Discretion. Of the local educational agencies 
scheduled for an administrative review under Sec.  210.18(c) the 
following year, the State agency must select those local educational 
agencies not selected under paragraphs (b)(1)(i) through (b)(1)(iii) 
and that are at risk for certification error, as determined by the 
State agency.
    (2) Reporting Requirement. By February 1 of each year, each State 
agency must submit a report, as specified by FNS, describing the 
results of the second reviews conducted by local educational agencies 
in their State. The report must include:
    (i) The number of free and reduced price applications subject to a 
second review;
    (ii) The number of reviewed applications for which the eligibility 
determination was changed;
    (iii) The percentage of reviewed applications for which the 
eligibility determination was changed; and
    (iv) A summary of the types of changes that were made.
    (c) Local educational agency requirements. Local educational 
agencies selected by the State agency to conduct a second review of 
applications must ensure that the initial eligibility determination for 
each application is reviewed for accuracy prior to notifying the 
household of the eligibility or ineligibility of the household for free 
and reduced price meals. The second review must be conducted by an 
individual or entity who did not make the initial determination. This 
individual or entity is not required to be an employee of the local 
educational agency but must be trained on how to make application 
determinations. All individuals or entities who conduct a second review 
of applications are subject to the disclosure requirements set forth in 
Sec.  245.6(f) through Sec.  245.6(k).
    (1) Timeframes. The second review of initial determinations must be 
completed by the local educational agency in a timely manner and must 
not result in the delay in notifying the household, as set forth in 
Sec.  245.6(c)(6)(i).
    (2) Duration of requirement to conduct a second review of 
applications. Selected local educational agencies must conduct a second 
review of applications until the State agency determines that the local 
educational agency is no longer demonstrating a high level of, or is no 
longer at risk for, administrative error associated with the 
certification process. The State agency makes this determination as 
follows:
    (i) For local educational agencies selected for second review of 
applications using criterion set forth in paragraphs (b)(1)(i), 
(b)(1)(ii), and (b)(1)(iv) of this section, local educational agency 
provided documentation demonstrates that no more than 5 percent of 
reviewed applications required a change in eligibility determination.
    (ii) For local educational agencies selected for second review of 
applications using criterion set forth in paragraph (b)(1)(iii) of this 
section, a second review of applications is required every base year of 
the Provision 2 or Provision 3 cycle.
    (3) Reporting Requirement. Each local educational agency required 
to conduct a second review of applications must annually submit to the 
State agency the following information on a date established by the 
State agency:
    (i) The number of free and reduced price applications subject to a 
second review;
    (ii) The number of reviewed applications for which the eligibility 
determination was changed;
    (iii) The percentage of reviewed applications for which the 
eligibility determination was changed; and
    (iv) A summary of the types of changes that were made.

    Dated: September 5, 2012.
Robin D. Bailey Jr.,
Acting Administrator, Food and Nutrition Service.
[FR Doc. 2012-22261 Filed 9-12-12; 8:45 am]
BILLING CODE 3410-30-P