[Federal Register Volume 81, Number 146 (Friday, July 29, 2016)]
[Rules and Regulations]
[Pages 50194-50210]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-17232]


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DEPARTMENT OF AGRICULTURE

Food and Nutrition Service

7 CFR Part 245

[FNS-2011-0027]
RIN 0584-AE16


National School Lunch Program and School Breakfast Program: 
Eliminating Applications Through Community Eligibility as Required by 
the Healthy, Hunger-Free Kids Act of 2010

AGENCY: Food and Nutrition Service, USDA.

ACTION: Final rule.

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SUMMARY: This final rule establishes requirements for State agencies, 
local educational agencies, and schools operating the Community 
Eligibility Provision, a reimbursement option that allows the service 
of school meals to all children at no-cost in high poverty schools 
without collecting household applications. By eliminating the household 
application process and streamlining meal counting and claiming 
procedures through the Community Eligibility Provision, local 
educational agencies may substantially reduce administrative burden 
related to operating the National School Lunch and School Breakfast 
Programs. This rule codifies many requirements that were implemented 
through policy guidance following enactment of the Healthy, Hunger-Free 
Kids Act of 2010, as well as provisions of the proposed rule. These 
requirements will result in consistent, national implementation of the 
Community Eligibility Provision.

[[Page 50195]]


DATES: This rule is effective August 29, 2016. Compliance with the 
provisions of this rule must begin August 29, 2016.

FOR FURTHER INFORMATION CONTACT: Tina Namian, School Programs Branch, 
Policy and Program Development Division, Food and Nutrition Service, at 
(703) 305-2590.

SUPPLEMENTARY INFORMATION:

I. Background

    The Healthy, Hunger-Free Kids Act of 2010 (HHFKA), Public Law 111-
296, required significant changes in the Child Nutrition Programs to 
reduce childhood obesity, increase eligible children's access to school 
nutrition benefits, and improve program integrity. Notably, HHFKA 
mandated the most substantial update to the nutritional requirements of 
the school meal programs in more than 30 years, increasing the amount 
of fruits, vegetables, and whole grain-rich foods served, and limiting 
sodium and trans fats. HHFKA also required USDA to establish hiring and 
training standards for school food service professionals and, for the 
first time, set nutritional standards for snacks sold to students 
throughout the school day.
    Section 104 of the HHFKA amended section 11(a)(1) of the Richard B. 
Russell National School Lunch Act (NSLA) (42 U.S.C. 1759a(a)(1)) by 
adding paragraph (F), ``Universal Meal Service in High Poverty Areas.'' 
This provision resulted in the creation of the Community Eligibility 
Provision (CEP), a reimbursement alternative for eligible, high-poverty 
local educational agencies (LEAs) and schools participating in both the 
National School Lunch Program (NSLP) and School Breakfast Program 
(SBP). CEP aims to combat child hunger in high poverty areas, while 
reducing administrative burden and increasing program efficiency by 
using current, readily available data to offer school meals to all 
students at no cost.
    The Food and Nutrition Service (FNS) of the U.S. Department of 
Agriculture (USDA) published a proposed rule in the Federal Register 
(78 FR 65890) on November 4, 2013, seeking to amend the regulations 
governing the determination of eligibility for free and reduced price 
meals and free milk in schools (7 CFR 245) consistent with amendments 
made to the NSLA by the HHFKA. FNS drew on a range of information to 
develop the proposed rule, including the statutory language in the NSLA 
and knowledge gained through the phased-in implementation of CEP in 
pilot States (school years (SYs) 2011-12 through 2013-14).
    The proposed rule sought to establish the following:
     Limit eligibility for CEP to those LEAs and schools that 
have an identified student percentage (ISP) of at least 40 percent 
based on data as of April 1 of the school year preceding CEP election. 
The term ``identified students'' refers to students directly certified 
for free school meals based on their participation in other means-
tested assistance programs, such as the Supplemental Nutrition 
Assistance Program (SNAP), Temporary Assistance for Needy Families 
(TANF), or the Food Distribution Program on Indian Reservations 
(FDPIR). Identified students also are those who are categorically 
eligible for free school meals without an application, and not subject 
to verification, including:
    [ssquf] Homeless children as defined under section 725(2) of the 
McKinney-Vento Homeless Assistance Act (42 U.S.C. 11434a(2));
    [ssquf] Runaway and homeless youth served by programs established 
under the Runaway and Homeless Youth Act (42 U.S.C. 5701);
    [ssquf] Migrant children as defined under section 1309 of the 
Elementary and Secondary Education Act of 1965 (20 U.S.C. 6399);
    [ssquf] Foster children certified through means other than a 
household application;
    [ssquf] Children enrolled in a Federally-funded Head Start Program 
or a comparable State-funded Head Start Program or pre-kindergarten 
program;
    [ssquf] Children enrolled in an Even Start Program; and
    [ssquf] Non-applicant students approved by local education 
officials, such as a principal, based on available information.
     Require LEAs opting to elect CEP for the following school 
year to submit (by June 30) to the State agency documentation to 
support the ISP.
     Require participating schools to offer breakfasts and 
lunches at no cost to all students, and count the number of 
reimbursable breakfasts and lunches served to students daily.
     Prohibit LEAs from collecting free and reduced price meal 
applications on behalf of children in CEP schools.
     Establish procedures to determine the percentages of meals 
to be claimed at the free and paid rates at CEP schools.
     Require LEAs to pay, with non-Federal funds, the 
difference (if any) between the cost of serving meals at no cost to all 
students and the Federal reimbursement.
     Specify that participating LEAs and schools that are still 
eligible for CEP at the end of the 4-year cycle may, with the State 
agency's concurrence, immediately start a new 4-year cycle in the next 
school year using ISP data as of the most recent April 1 (year 4 of the 
current cycle). Alternatively, participating LEAs and schools in year 4 
of a CEP cycle with an ISP below 40 percent, but at least 30 percent, 
may continue to operate CEP for a ``grace year.''
     Require State agencies to notify LEAs of district-wide 
eligibility status by April 15 annually and to provide guidance and 
information to eligible LEAs on how to elect CEP.
     Require LEAs to submit school-level eligibility 
information to the State agency annually by April 15.
     Require State agencies to publish lists of eligible LEAs 
and schools on a public Web site and submit the link to FNS annually by 
May 1.
     Clarify that the ISP multiplied by 1.6 may be used for CEP 
schools in lieu of the free or free and reduced-price percentage when 
this data is used to determine eligibility for other Child Nutrition 
Programs (e.g., Fresh Fruit and Vegetable Program, Child and Adult Care 
Food Program, Summer Food Service Program, NSLP Afterschool Snacks, and 
NSLP Seamless Summer Option).
     Require participating LEAs and schools to retain 
documentation and records (e.g., direct certification lists) used for 
the ISP calculation.
     Specify that LEAs and schools operating CEP may stop 
operating CEP and return to standard certification and counting and 
claiming procedures at any time during the school year or for the 
following school year.
     Require that students receiving meals at a school using 
special assistance certification and reimbursement alternatives under 7 
CFR 245.9 (hereafter referred to as Provision schools) continue to 
receive reimbursable meals at no charge for up to 10 operating days 
when they transfer to a school using standard counting and claiming 
procedures (hereafter referred to as non-Provision schools) in the same 
LEA during the school year. For student transfers involving different 
LEAs, the receiving LEA would have discretion to provide such students 
free meals for up to 10 operating days.
    Prior to national implementation in SY 2014-15, CEP was gradually 
phased in over a three-year period. Prior to each school year of the 
phase-in, FNS solicited applications from State agencies that were 
interested in CEP early implementation and made selections based on 
State and local support, eligibility of schools within the State, and 
the State's overall level of readiness for CEP. In SY 2011-12, 
Illinois, Kentucky, and Michigan

[[Page 50196]]

became the first three States: 665 schools participated in the initial 
year of CEP implementation. For SY 2012-13, New York, Ohio, West 
Virginia, and the District of Columbia joined the three initial States, 
making CEP available in a total of six States and the District of 
Columbia. In SY 2013-14, the final year of the phase-in, CEP was 
expanded to Florida, Georgia, Maryland, and Massachusetts. By the end 
of the pilot phase, CEP was operating in more than 4,000 schools and 
serving more than 1.5 million students in 10 States and the District of 
Columbia.
    Throughout the CEP phase-in period, FNS provided technical 
assistance through a webinar series and monthly conference calls with 
State agencies. FNS also presented information about CEP at an array of 
national conferences and received feedback from key stakeholders, 
including State child nutrition directors, school food service staff, 
the Council of Great City Schools, and several professional 
organizations, including the National Association of State Title I 
Directors, the Council of Chief State School Officers, the National 
Association of Federal Education Program Administrators, the National 
Parent Teacher Association, the National School Boards Association, and 
the National Association of Elementary School Principals.
    During the phase-in, FNS also conducted a formal program evaluation 
of CEP. This evaluation and addendum (published in February 2014 and 
January 2015, respectively) assessed the experiences and performance of 
the pilot States, and included an implementation analysis and an impact 
analysis. Specifically, the evaluation study sought to identify and 
assess the attractiveness of CEP to LEAs, possible barriers for LEAs 
that might discourage their adoption of CEP, operational issues that 
LEAs encountered in administering CEP, and the overall impact of CEP in 
participating LEAs. The evaluation study found positive outcomes for 
CEP schools, providing further credibility to many anecdotal narratives 
collected by FNS from State and local officials that were 
overwhelmingly supportive of CEP. In addition to demonstrating high CEP 
uptake and popularity among eligible LEAs, the study indicated that CEP 
schools experienced significant participation growth in their school 
meal programs. On average, CEP schools saw a 5 percent increase in 
their NSLP participation rate, and a 9 percent increase in their SBP 
participation rate. This finding confirmed that CEP was achieving its 
primary objective to expand access to school meals for low income 
students. Furthermore, the study found that the first seven pilot 
States experienced sustained, rapid second year growth in the number of 
eligible districts participating in CEP. Lastly, the study results 
demonstrated that CEP was consistently achieving a second objective: 
Reducing administrative burden and improving the efficiency of school 
meal program operations. Among the related findings, CEP was shown, on 
average, to:
     Result in net increases or have no adverse effect on 
school food service revenues,
     reduce the overall rate of certification errors, and
     generate time savings for LEA foodservice administrative 
staff, school food service workers, and school administrators.
    The evaluation study also identified potential barriers. States 
expressed a desire for more time to make election decisions. States and 
LEAs also expressed concerns regarding the loss of free and reduced 
price meal application data as a measure of socioeconomic status and 
the impact that loss could have on other programs and funding streams. 
Because CEP is a novel way of operating the school meal programs, 
States and LEAs were also concerned about the financial impact of CEP 
in general. As a result, FNS developed extensive guidance and technical 
assistance tools, such as reimbursement calculators, and worked closely 
with other agencies administering programs that have traditionally 
relied on household application data (e.g., Title I, E-Rate) to produce 
timely joint guidance and facilitate CEP implementation.
    Overall, the evaluation study indicated that CEP was working well 
and fulfilling its promised benefits in the pilot States and LEAs. CEP 
was demonstrated to have a clear and positive impact on participation 
and school food service administration, and participating LEAs were 
highly satisfied with the provision and likely to continue 
participating in CEP.
    In SY 2014-15, CEP's first year of nationwide availability, State 
and local officials in all parts of the country enthusiastically 
embraced the new provision, resulting in explosive participation 
growth. As of September 2014, almost 14,000 schools in more than 2,000 
school districts located in 49 States and the District of Columbia were 
participating in CEP. Together, these schools were offering free meals 
to about 6.4 million students daily. Significantly, these data 
indicated that a broad range of LEAs were choosing to elect CEP. About 
two thirds of the 75 largest highly eligible school districts 
identified by FNS elected CEP for at least some of their schools in SY 
2014-15. Conversely, about half of electing LEAs had enrollments of 500 
or less. These figures indicated that CEP was working for schools and 
districts of all sizes and characteristics. During this time, FNS 
continued to provide extensive guidance and technical assistance 
through conference calls, public speaking appearances, webinars, 
guidance publications, in-person visits, collaboration with partner 
organizations, and focused contact with States and LEAs.
    Building on the successes of the previous school year, CEP 
participation continued to grow in SY 2015-16. In the second year of 
nationwide implementation, more than 18,000 schools in almost 3,000 
school districts elected CEP. Participating schools are located in all 
50 States, the District of Columbia, and Guam, and are serving healthy 
school meals to more than 8.5 million children daily, ensuring that 
students in high poverty communities can enter the classroom well-
nourished and ready to learn.
    Furthermore, because of its widespread popularity and strong 
success record, CEP has already increased access to nutritious school 
meals for millions of low income children, while simultaneously 
reducing administrative burden for local school food service operators 
across the country.

II. Public Comments and FNS Response

    The proposed rule aimed to increase access to school meals in high-
poverty areas, reduce administrative burden, and increase operational 
efficiency by using readily available and current data to offer meals 
to all students at no-cost through implementation of CEP. The rule was 
posted for comment and the public had the opportunity to submit 
comments on the proposal during a 60-day period that ended January 3, 
2014. FNS received 78 public comments, 71 of which were germane. 
Commenters included State educational agencies, child nutrition 
advocates, food banks and anti-hunger groups, local school districts, 
school food service managers, community groups, charter schools, law 
students, K-12 students, and interested individuals. To view all public 
comments on the proposed rule, visit www.regulations.gov and search for 
public submissions under docket number FNS-2011-0027. FNS greatly 
appreciates the valuable comments provided. These comments were 
essential in developing a final rule that is expected to expand access 
to healthy school meals for students in high

[[Page 50197]]

poverty communities, and streamline requirements for Program operators.
    Overall, commenters were generally more supportive of the proposed 
rule than opposed. Sixty-five public comments, including a form letter 
submitted by 29 program operators and advocates, supported the 
proposal. Three submissions were neutral, and three expressed general 
opposition without commenting on specific proposed provisions. Neutral 
commenters were not clearly in favor of, or opposed to, the proposal 
but requested clarification on specific provisions.
    Commenters supporting the rule recognized the correlation between 
access to healthy school meals and academic success. Many commenters 
noted that the rule reduces the stigma sometimes associated with eating 
school meals, thereby increasing the likelihood that students will 
participate in the meal programs and benefit from the nutritious meals 
offered at school. Additionally, commenters noted that providing meals 
at no-cost also increases meal participation and enhances child 
nutrition. Combined with recent updates to the school meal pattern, 
increased participation means that high-need students have more 
opportunities to consume fruits, vegetables, and whole grain-rich 
foods. Commenters also praised CEP's reduction of administrative 
burden: Specifically, the use of readily available data from other 
assistance programs to determine eligibility in lieu of household 
applications, eliminating the need for low-income households to 
complete paperwork, and the streamlined counting and claiming for 
program operators. Additionally, many commenters suggested ways to 
strengthen the proposed rule, citing CEP's role in expanding access for 
children whose only reliable source of nutrition may be school meals.
    While most commenters generally agreed with the provisions of the 
proposed rule, commenters also expressed concerns regarding the impact 
that CEP might have on the financial integrity of the school meal 
programs. Commenters noted that CEP could cause financial distress to 
school districts and schools in cases where Federal reimbursements were 
unable to meet program costs due to lower than expected savings or 
revenues. An education advocacy group also noted that CEP may have an 
unintended, unequal impact on private schools that may have limited 
resources. However, CEP remains an option for private, nonprofit 
schools and, like all schools, the financial viability of participation 
in the program must be evaluated based on the circumstances of the 
individual school.
    FNS carefully considered the views expressed by commenters, 
especially those responsible for the oversight and day-to-day 
operations of the school meal programs. At the same time, FNS is 
mindful that CEP is uniquely positioned to both increase food security 
among vulnerable children and reduce program operators' administrative 
burden. Therefore, this final rule includes several amendments to the 
provisions of the proposed rule based on public comments. The goal of 
the rule remains expansion of children's access to school meals and 
streamlining Program operations.
    The following is a summary of the key public comments, focused on 
the most frequent comments and those that contributed toward USDA 
revisions to the provisions of the proposed rule.

Terms

    Proposed Rule: The proposed rule at 7 CFR 245.9(f)(1) would 
establish terms and definitions as they relate to CEP. This paragraph 
identified the LEA as the administrative body that may be eligible for 
and elect CEP. The proposed rule would not make any change to the 
definitions of ``local educational agency'' or ``school,'' which apply 
broadly to the school meal programs and for which definitions were 
previously established at 7 CFR 245.2 and 210.2, respectively. The 
proposed rule would further remove the words ``school food authority'' 
wherever they appear in Sec.  245.9 and replace them with the words 
``local educational agency.''
    Comments: Two commenters were confused by the use of the terms LEA, 
school food authority (SFA), and school and the responsibilities of 
each with regard to CEP. Commenters suggested that FNS develop one term 
in all program regulations to define the legal entity responsible for 
meeting all program requirements.
    FNS Response: The terms local educational agency, school food 
authority, and school are codified and apply broadly to local program 
operators. Section 11(a)(1)(F) of the NSLA, 42 U.S.C. 1759a(a)(1)(F), 
as amended by Section 104 of HHFKA, uses the term ``LEA'' in connection 
with CEP; therefore, the CEP proposed and final rules are consistent 
with the NSLA. For consistency among the special assistance 
certification and reimbursement alternatives, the final rule uses the 
term ``LEA'' in Sec.  245.9 with regard to CEP and Provisions 1, 2, and 
3. LEAs are broader entities in a school district that typically 
perform SFA functions, in addition to those unrelated to administration 
of the Child Nutrition Programs. This editorial change, made for 
internal consistency and agreement with the NSLA, does not indicate a 
change in the regulatory requirements for the Provisions 1, 2 and 3, 
nor how these special assistance provisions are monitored.
    Accordingly, this final rule replaces the term ``school food 
authority'' with the term ``local educational agency'' throughout Sec.  
245.9.

Grouping

    Proposed Rule: The proposed rule at 7 CFR 245.9(f)(1)(iii) would 
permit the ISP to be determined by an individual participating school, 
a group of participating schools in the LEA, or in the aggregate for 
the entire LEA if all schools participate. The proposed rule at 7 CFR 
245.9(f)(3)(i) would establish a minimum ISP of 40 percent as of April 
1 of the school year prior to participating in CEP, though does not 
detail specific requirements based on how schools are grouped.
    Comments: Thirty-three commenters recommended clarifying how LEAs 
may group schools. Specifically, the commenters recommended 
incorporating into the regulatory language the policy of allowing 
groups within an LEA to be formed based on any criteria, and explaining 
that individual schools within the group may have less than 40 percent 
identified students, as long as the group meets the minimum 40 percent 
ISP and other criteria.
    Two commenters recommended adding guidance for LEAs on how to 
manage groups of schools. For example, commenters suggested that FNS 
develop guidance for CEP schools that consolidate with non-CEP schools 
(e.g., CEP schools that take in students from non-CEP schools that are 
closing) and for situations in which some schools are removed from a 
CEP group during the school year.
    One commenter stated that it is not advantageous for schools with a 
higher ISP to be grouped with schools with a lower ISP. Another 
commenter suggested giving LEAs discretion to use an average claiming 
percentage for schools in a CEP group.
    FNS Response: FNS appreciates that grouping is a flexible 
characteristic of CEP that may be used to maximize Federal 
reimbursements and administrative efficiencies. As such, school 
grouping under CEP represents a strategic decision for some LEAs. 
Because Federal reimbursements are made at the LEA level, rather than 
at the individual school level, the final rule

[[Page 50198]]

provides LEAs flexibility to group schools to maximize benefits, based 
on the unique characteristics of each LEA.
    To facilitate the use of grouping, and in response to requests from 
several commenters, FNS has provided extensive technical assistance on 
grouping through multiple guidance documents. These include the CEP 
Planning and Implementation Guidance and SP 19-2016, Community 
Eligibility Provision: Guidance and Updated Q&As (both available at: 
http://www.fns.usda.gov/school-meals/community-eligibility-provision-resource-center). These resources respond to several real and 
hypothetical grouping scenarios posed by State agencies and LEAs.
    Accordingly, this final rule retains in Sec.  245.9(f)(3) the 
requirement for a school or group of schools in an LEA to have a 
minimum ISP of 40 percent to elect CEP for a 4-year cycle. In response 
to comments, FNS also added language Sec.  245.9(f)(3)(i) to clarify 
that LEAs have discretion in how to group schools to optimize CEP 
benefits and operational ease. This includes explaining that individual 
schools in a CEP group may have an ISP less than 40 percent, as long as 
the ISP of the group is at least 40 percent.

Eligibility Criteria

Minimum Identified Student Percentage
    Proposed Rule: The proposed rule at 7 CFR 245.9(f)(3)(i) would 
require an LEA, group of schools, or individual school electing CEP to 
have an ISP of at least 40 percent, as of April 1 of the school year 
prior to participating in CEP, unless otherwise specified by FNS.
    Comments: FNS received 37 comments requesting greater flexibility 
to determine the timing of the ISP. Some commenters requested that the 
ISP be established ``on or before'' rather than ``as of'' April 1. 
Three additional individual commenters suggested that the rule should 
be expanded to provide meals at no cost to all children in all schools, 
instead of only schools that have an ISP of at least 40 percent.
    FNS Response: The final rule maintains the requirement for the ISP 
to be generated using data as of April 1 in the school year preceding 
CEP implementation, as well as the requirement for the ISP used by an 
individual school, group of schools, or entire school district to be at 
least 40 percent. The April 1 date is a statutory requirement in 
section 11(a)(1)(F)(iii) and (iv) of the NSLA, 42 U.S.C. 
1759a(a)(1)(F)(iii) and (iv), and must be maintained in this final 
rule.
    The requirement to ensure that all data is reflective of April 1 is 
intended to accurately capture the composition of the student 
population to form the basis of the reimbursement rate the LEA, group 
of schools, or school may receive throughout the 4-year CEP cycle. 
Using the phrase ``as of'' ensures that identified student data 
generally reflects April 1, but also can accommodate variation in State 
direct certification systems. This allows States to use the best 
available data that reflects April 1, without creating additional 
administrative burden. For example, if a State conducts direct 
certification monthly on the fifth day of each month, the term ``as 
of'' allows the State to use data from April 5 to generate the ISP, 
rather than March 5. The suggested phrase ``on or before'' is more 
restrictive because it would not permit a State to use data from April 
5, if that is when the State usually conducts direct certification. It 
also would permit any data drawn prior to April 1 to be used, which may 
not accurately reflect the student population as well as data drawn 
later in the school year. The ISP is the basis for the Federal 
reimbursement for an entire 4-year CEP cycle, so it is important that 
the ISP accurately reflects the student population in participating 
schools.
    Although the statute permits FNS to employ a threshold of less than 
40 percent in section 11(a)(1)(F)(viii) of the NSLA, the 40 percent ISP 
threshold for CEP eligibility is intended to best ensure that 
participating schools are able to maintain the financial integrity of 
their school meal programs. CEP is specifically designed to improve 
access to the school meal programs for students in high poverty 
schools, where hunger may be a barrier to academic achievement. As 
such, CEP is most financially viable at schools with an ISP of at least 
40 percent because these schools are better able to maximize Federal 
reimbursements through a high claiming percentage. It is important to 
note that through grouping, LEAs still have discretion to include 
schools with ISPs lower than 40 percent as long as the group's 
aggregate ISP meets the 40 percent threshold.
    Accordingly, this final rule retains in Sec.  245.9(f)(3) the 
requirement to have an ISP of at least 40 percent as of April 1.
Breakfast and Lunch Participation
    Proposed Rule: The proposed rule at 7 CFR 245.9(f)(3)(ii) would 
require an LEA or school to participate in both the NSLP and SBP to 
elect CEP.
    Comments: One commenter requested clarity about the requirement for 
CEP schools to serve both breakfast and lunch, and asked whether an LEA 
that currently offers only lunch may elect CEP if the LEA plans to 
offer breakfast after CEP election. Another commenter recommended that 
FNS exempt charter schools and alternative schools from the requirement 
to offer both breakfast and lunch.
    FNS Response: The NSLA, in section 11(a)(1)(F)(ii)(I)(aa), requires 
that LEAs and schools participating in CEP must participate in both the 
NSLP and SBP. LEAs and schools that participate in only one Program--
either the NSLP or SBP--may elect CEP for the next school year if an 
agreement is established with the State agency to operate both Programs 
by the time CEP is implemented. Because participation in both the NSLP 
and SBP is required by statute, this final rule does not exempt charter 
or alternative schools from the requirement to offer both breakfast and 
lunch. However, schools that operate on a limited schedule (e.g., half-
day kindergarten buildings) where it is not operationally feasible to 
offer both lunch and breakfast may elect CEP with FNS approval.
    Accordingly, the final rule retains in Sec.  245.9(f) the 
requirement to offer breakfasts and lunches at no cost to students 
under CEP.

Community Eligibility Provision Procedures

Election Deadline
    Proposed Rule: The proposed rule at 7 CFR 245.9(f)(4)(i) would 
require that LEAs intending to elect CEP for the following school year 
must submit to the State agency no later than June 30 documentation 
demonstrating that the LEA, school, or group(s) of schools meet(s) all 
eligibility requirements.
    Comments: Two commenters recommended that schools be permitted to 
enroll in CEP at any time prior to the start of the applicable 
school(s) academic year.
    FNS Response: The NSLA, in section 11(a)(1)(F)(x)(I), requires that 
LEAs electing CEP notify the State agency and provide documentation 
establishing eligibility by the June 30 prior to the applicable school 
year. To facilitate election of CEP during the first three years of 
nationwide availability, FNS published guidance extending the deadline 
for CEP elections to August 31 for SYs 2014-15, 2015-16, and 2016-17. 
For SY 2016-17, this flexibility was detailed in SP 30-2016, Extension 
of the Deadline for Local Educational Agencies to Elect the Community 
Eligibility Provision for School Year 2016-17 (available at: http://
www.fns.usda.gov/extension-deadline-leas-elect-cep-

[[Page 50199]]

sy2016-17). These guidance documents also granted further discretion to 
State agencies, permitting them to allow CEP elections to occur in the 
middle of a school year, provided that doing so would be logistically 
and administratively feasible.
    These deadline extensions were offered as flexibilities to 
facilitate the initial implementation of CEP. As a new counting and 
claiming option, many State and local officials were initially 
unfamiliar with CEP's operational requirements and requested that FNS 
extend the election window to allow for careful decision-making. In SY 
2014-15, the deadline extension to August 31 facilitated a 22 percent 
overall increase in CEP elections, significantly increasing children's 
access to nutritious meals in high-need schools.
    However, because the June 30 deadline is required by statute, FNS 
is maintaining this deadline in the final rule. Additionally, it should 
be noted that CEP now has been available on a nationwide basis for 
multiple school years and State and local officials have gained a 
better understanding of the provision through experience and the 
availability of FNS-published guidance. As such, FNS does not 
anticipate granting permanent flexibility on the election deadline. 
Instead, FNS will evaluate the need for an extension of the June 30 
deadline and provide guidance, as appropriate.
    Accordingly, this final rule retains in Sec.  245.9(f)(4)(i) the 
requirement to elect CEP by submitting required documentation no later 
than June 30 of the prior school year.
State Agency Concurrence
    Proposed Rule: The proposed rule at 7 CFR 245.9(f)(4)(ii) would 
require an LEA seeking to elect CEP to obtain concurrence from the 
State agency that election documentation submitted is complete and 
accurate, and that the LEA meets all eligibility requirements.
    Comments: Two commenters, a program operator and an advocacy group, 
recommended allowing State agencies to shift administrative 
responsibility for reviewing the accuracy of LEA-submitted election 
documentation and confirming CEP eligibility status to the LEA level. 
These commenters also suggested changing the word ``concurrence'' at 7 
CFR 245.9(f)(4)(ii) in the proposed rule to ``confirmation,'' in 
addition to incorporating clarifying language into the preamble of the 
final rule.
    Thirty-two commenters, including advocates and State agencies, 
asked FNS to clarify the criteria to be used when State agencies review 
LEAs seeking to implement CEP. One commenter suggested allowing State 
agencies a window of up to 30 days following an LEA's notification of 
intent to elect CEP to confirm that the LEA in question is eligible.
    FNS Response: The intent of the statute, detailed throughout 
section 11(a)(1)(F) of the NSLA, is for State agencies to serve in a 
supervisory capacity when identifying and confirming documentation from 
LEAs eligible to elect CEP. State agencies must collect and compile LEA 
and school-level eligibility lists as part of the CEP public 
notification process. Section 11(a)(1)(F)(x)(I) of the NSLA requires 
LEAs to submit documentation supporting the ISP to the State agency to 
establish CEP eligibility and the claiming percentages. This 
documentation is subject to review by the State agency upon election, 
and as part of the Administrative Review process. Considering the 
mandated and overarching responsibilities of the State agency in these 
regards, this final rule maintains the requirement for State agencies 
to review CEP elections made by LEAs. However, FNS agrees with and 
accepts commenters' recommended change in language from ``concur'' to 
``confirm.'' The use of the word ``confirm'' more accurately reflects 
the State responsibilities to ensure that the ISP and claims for 
reimbursement are accurate. This change is reflected in the regulatory 
text of the final rule in Sec.  245.9(f)(4)(ii).
    Required criteria for State agency review of CEP documentation were 
not detailed in the proposed rule and an informal FNS inquiry revealed 
that policies varied greatly among State agencies. In some cases, 
initial reviews were being conducted at or around the time of election 
for all or a substantial portion of ISP records. Alternatively, some 
States conducted less thorough reviews or did not associate 
``concurrence'' with a review of election documents, waiting until the 
LEA's next administrative review before checking the accuracy of ISP 
documentation.
    State agencies are required to confirm the eligibility status of 
any school or LEA seeking to claim meals under CEP, and must 
substantiate any documentation submitted to ensure the accuracy of the 
ISP. Doing so mitigates the subsequent risk of inaccurate claims for 
reimbursement and/or fiscal action. This final rule retains the State 
agency's responsibility to confirm an electing LEA's eligibility for 
CEP and the ISP that is the statutory basis of the Federal 
reimbursement.
    To clarify the State agency's responsibilities during the CEP 
election process, FNS issued detailed guidance in policy memo SP 15-
2016, Community Eligibility Provision: State Agency Procedures to 
Ensure Identified Student Percentage Accuracy (available at: http://www.fns.usda.gov/sites/default/files/cn/SP15-2016os.pdf), and in 
comprehensive CEP Planning and Implementation Guidance (available at: 
http://www.fns.usda.gov/school-meals/community-eligibility-provision-resource-center), which provides in-depth information on this topic. To 
facilitate this process, FNS made available sample checklist worksheets 
for both LEAs and State agencies to use when determining or confirming 
an ISP (available at: http://www.fns.usda.gov/school-meals/community-eligibility-provision-resource-center). Regardless of the initial 
review process, State agencies must confirm eligibility before LEAs are 
permitted to claim meals under CEP. Accordingly, the regulatory text of 
the final rule, in Sec.  245.9(f)(4)(ii), requires State agencies to 
``confirm'' an LEA's eligibility to elect CEP.
Meals at No Cost
    Proposed Rule: The proposed rule at 7 CFR 245.9(f)(4)(iii) would 
require an LEA to ensure that participating schools offer no-cost 
reimbursable breakfasts and lunches to all students during the 4-year 
cycle, and count the number of reimbursable breakfasts and lunches 
served each school day.
    Comment: One commenter requested clarity on whether the count of 
reimbursable meals represented a count of meals served or a count of 
students served, and suggested that there may be a conflict between 
counting reimbursable meals versus counting students served.
    FNS Response: Schools participating in CEP must have an adequate 
point of sale system to ensure that reimbursable breakfasts and lunches 
served are separately and accurately counted each day. These counts are 
needed because the free and paid claiming percentages are applied to 
the total number of reimbursable breakfasts and lunches served each 
month to determine the reimbursement under CEP.
    Accordingly, this final rule retains the meal counting requirement 
in Sec.  245.9(f)(4)(iii).
Household Applications
    Proposed Rule: The proposed rule at 7 CFR 245.9(f)(4)(iv) would 
prohibit an LEA from collecting applications for free and reduced price 
school meals on behalf of children in schools participating in CEP. Any 
LEA seeking to obtain socioeconomic data from children receiving free 
meals under this

[[Page 50200]]

section must develop, conduct, and fund that effort totally separate 
from, and not under the auspices of, the NLSP or SBP.
    Comments: Six commenters, including individuals, program operators, 
and advocates, recognized that, because of widespread reliance on free 
and reduced price data as a poverty measure, the loss of this data in 
CEP schools could impact the delivery of benefits to high poverty 
schools and students. Additionally, six commenters suggested that, in 
the absence of household applications, FNS develop an alternative 
method for assessing the socioeconomic status of student populations. 
One commenter recommended multiplying TANF data by the CEP multiplier 
to determine Federal Title I funding.
    Two commenters requested that FNS publish specific language 
reminding LEAs transitioning to CEP to consider, and plan for, 
potential issues surrounding the loss of traditional free and reduced 
price application data. These commenters indicated that advance 
planning and communication with other stakeholders might better ensure 
a fully successful implementation of CEP, while preventing unnecessary 
paperwork for families and schools.
    FNS Response: The definition of ``identified students,'' which 
serves as the basis for assessing socioeconomic status under CEP, is 
expressly established in section 11(a)(1)(F)(i) of the NSLA as 
``students certified based on documentation of benefit receipt or 
categorical eligibility as described in section 245.6a(c)(2) of title 
7, Code of Federal Regulations (or successor regulations).'' This 
provision is a key component of CEP in that it leads directly to the 
reduction in administrative burden and program integrity by relying on 
existing information obtained through the direct certification process.
    One of the most important benefits of CEP election is the potential 
to substantially reduce administrative paperwork related to the Federal 
school meal programs by eliminating the household application process. 
This message has been communicated extensively to stakeholders, and 
State agencies have been encouraged to minimize paperwork burdens for 
households and school officials wherever possible. The USDA's creation 
of a separate method for assessing the socioeconomic status of student 
populations would not be consistent with the intent of the HHFKA 
amendments, which eliminated the collection of household applications 
under CEP as part of a broad effort to enhance the administrative 
efficiency of the school meal programs in high poverty LEAs. HHFKA did 
not amend the NSLA with any provision for the replacement at CEP 
schools of the socioeconomic data that would have been collected 
previously by way of household applications. As a result, the cost of 
any such data collection would not be an allowable program cost since 
no purpose related to the NSLP and SBP is served.
    To facilitate funding in Federal, State, and local education 
programs, some States have chosen to replicate free and reduced price 
data by way of an alternate income form developed with non-program 
funds. Many States and LEAs have historically used school meals 
application data as a poverty measure. FNS recognizes that, to 
facilitate CEP implementation, some States may require LEAs to collect 
household income information to maintain education funding and/or 
benefits to low-income schools and students. However, any such 
collections may not be conducted under the auspices of the NSLP or SBP. 
Furthermore, participation in these collections may never be presented 
to the household as a condition for receiving a school meal, or present 
a real or perceived barrier to participation in any of the school meal 
programs. FNS encourages States to develop alternative measures of 
income that do not involve the reintroduction of paperwork that is 
eliminated by CEP participation. FNS cannot limit or prohibit the use 
of such alternative measures of income if the State agency or LEA has 
determined that such a method is needed, other than, as noted above.
    While FNS is unable to specifically require or endorse any other 
approach to collecting socioeconomic data, we understand that the loss 
of free and reduced price meal application data may present a barrier 
for some LEAs to electing CEP. FNS has worked extensively to ensure 
that State agencies and eligible LEAs are aware of alternative means of 
assessing socioeconomic status. FNS has coordinated meetings and 
webinars to share best practices related to assessing socioeconomic 
status in the absence of household applications. In addition, FNS 
worked with the National Forum on Education Statistics to develop a 
guide on alternative measures of socioeconomic status for use in 
education data systems \1\ (available at: http://nces.ed.gov/pubs2015/2015158.pdf).
---------------------------------------------------------------------------

    \1\ National Forum on Education Statistics. (2015). Forum Guide 
to Alternative Measures of Socioeconomic Status in Education Data 
Systems. (NFES 2015-158). U.S. Department of Education. Washington, 
DC: National Center for Education Statistics.
---------------------------------------------------------------------------

    Funding allocations under the U.S. Department of Education's (DoED) 
Title I program do not fall under the jurisdiction of USDA; therefore, 
FNS does not have authority to establish requirements related to how 
this funding is distributed. DoED has published comprehensive Title I 
guidance for State and local agencies to clarify options and program 
requirements for CEP schools (available at http://www.fns.usda.gov/updated-title-i-guidance-schools-electing-community-eligibility). FNS 
has worked extensively with DoED to develop this guidance and has 
provided technical assistance to various stakeholders as needed.
    Accordingly, this final rule does not authorize alternative methods 
to assess socioeconomic status in the absence of household applications 
which would in any way relate to the NSLP or SBP. Furthermore, the 
final rule states in Sec.  245.9(f)(4)(iv) that household applications 
may not be used under CEP, and that other alternative measures of 
income developed by a State agency or LEA may not be developed, 
conducted, or funded with NSLP or SBP funds.
Direct Certification
    Proposed Rule: The proposed rule at 7 CFR 245.6(b)(1)(v) would 
require LEAs or schools electing CEP under Sec.  245.9(f) to conduct 
direct certification only in the year prior to the first year of a CEP 
cycle or, if seeking to update the ISP, in the second, third, or fourth 
year of a cycle.
    Comments: Two advocacy organizations requested that FNS require 
LEAs to conduct a student data match between SNAP and student 
enrollment records each year while enrolled in CEP to ensure that LEAs 
have the opportunity to update their ISP in the event that match rates 
improve from one year to the next.
    FNS Response: FNS agrees that there is significant value to be 
gained from requiring a student data match with SNAP at least once each 
year. Conducting this match with SNAP will enable schools to take 
advantage of any increases in ISPs and examine trends to facilitate 
planning for upcoming school years. To this end, this final rule 
requires LEAs to conduct a data match between SNAP records and student 
enrollment records at CEP schools at least once annually. The rule 
further

[[Page 50201]]

specifies that State agencies may conduct SNAP data matching on behalf 
of LEAs and exempt LEAs from the requirement. This final rule also 
extends this requirement to Provision 2 and Provision 3 schools to 
ensure consistency among schools operating special assistance 
certification and reimbursement alternatives. It should be noted, 
however, that this data matching process may not be used to assess 
individual student eligibility for free or reduced price school meals 
at CEP schools, or at schools operating Provisions 2 or 3. All students 
in CEP and Provision 2 and 3 schools already have access to meals at no 
cost.
    Because student data matching with SNAP will be required annually, 
States will retain two options for reporting Data Element #3 on the 
FNS-834, State Agency (NSLP/SNAP) Direct Certification Rate Data 
Element Report. States may report data matching efforts between SNAP 
records and student enrollment records from October each year or, 
alternatively, may choose to include, for CEP schools, the count from 
the SNAP match conducted as of April 1 of the same calendar year, 
whether or not it was used in the CEP claiming percentages.
    Accordingly, FNS has modified the proposed language in Sec.  
245.6(b)(1)(v) to require LEAs to conduct a data match between SNAP 
records and student enrollment records at CEP schools, and schools 
operating Provision 2 or Provision 3 special assistance certification 
and reimbursement alternatives, at least once annually. Additionally, 
FNS has modified the language in Sec.  245.13(c)(3) to specify options 
State agencies have for reporting data matching efforts.
Free and Paid Claiming Percentages
    Proposed Rule: The proposed rule at 7 CFR 245.9(f)(4)(v) would 
require Federal reimbursements for CEP schools to be based on free and 
paid claiming percentages applied to the total number of reimbursable 
lunches and breakfasts served each month. Reduced price students are 
accounted for in the free claiming percentage, eliminating the need for 
a third claiming rate. The free claiming percentage would be calculated 
by multiplying the ISP by a factor of 1.6. The paid claiming percentage 
would be represented by any remaining share of students, up to 100 
percent.
    Comments: One State agency recommended that the share of meals 
reimbursed at the paid rate at CEP schools be calculated by subtracting 
the number of meals served at no cost (calculated by applying the free 
claiming percentage) from the total number of meals served, because it 
is similar to how claiming percentages are calculated for Provision 2 
schools. Two additional commenters suggested that rounding rules be 
applied when determining free and paid claiming percentages.
    FNS Response: Section 11(a)(1)(F)(iii) of the NSLA establishes that 
special assistance payments under CEP must be calculated on a 
percentage basis. When claiming percentages are applied as specified in 
the statute, the result should not be substantively different from the 
methodology described by the commenter (subtracting free meals served 
from total meals served), and is consistent with Provision 2. The total 
number of meals reimbursed at the free and paid rates must equal the 
total number of breakfasts and lunches served.
    Since publication of the proposed rule, FNS issued guidance to 
clarify rounding rules for calculating claiming percentages (see 
Question #52 in SP 19-2016, Community Eligibility Provision: Guidance 
and Updated Q&As, available at: http://www.fns.usda.gov/school-meals/community-eligibility-provision-resource-center). This is to ensure the 
accuracy of claiming and Federal reimbursements under the school meal 
programs, consistent with existing program requirements. Simple 
rounding is permitted when calculating the number of meals to be 
reimbursed at the free rate to ensure that meals claimed for 
reimbursement are expressed in whole numbers that match daily meal 
counts.
    Accordingly, this final rule retains the proposed calculation and 
rounding methodology for determining the free and paid claiming 
percentages and codifies it in Sec.  245.9(f)(4)(v).
Multiplier Factor
    Proposed Rule: The proposed rule at 7 CFR 245.9(f)(4)(vi) would 
require a 1.6 multiplier factor to be used for an entire 4-year cycle 
to calculate the percentage of lunches and breakfasts to be claimed at 
the Federal free rate.
    Comments: Section 11(a)(1)(F)(vii)(II) of the NSLA provides the 
Secretary the option to establish the CEP multiplier between 1.3 and 
1.6. Thirty-two comments were received from various stakeholders 
recommending that FNS retain the 1.6 multiplier permanently in the 
final rule to provide program operators with certainty as to the 
reimbursements that will be received. Some commenters also suggested 
removing the Secretary's discretion to adjust the multiplier. 
Commenters were nearly unanimous in their support for retaining the 
multiplier at 1.6.
    FNS Response: FNS agrees with commenters that providing stability 
around the multiplier factor will minimize administrative uncertainty 
and give program operators greater confidence when planning program 
operations. The 1.6 multiplier is identified in the NSLA as the default 
initial multiplier. An analysis conducted around the time that the 
HHFKA was being drafted showed that, for every 10 children directly 
certified, up to 6 additional children relied on the application 
process to access free or reduced price meal benefits. An evaluation of 
CEP in pilot States also showed that the 1.6 multiplier appears to be 
an accurate reflection of the relationship between the free and 
reduced-price student percentage and the ISP in a typical participating 
LEA.\2\
---------------------------------------------------------------------------

    \2\ Logan, Christopher W., Patty Connor, Eleanor L. Harvill, 
Joseph Harkness, Hiren Nisar, Amy Checkoway, Laura R. Peck, Azim 
Shivji, Edwin Bein, Marjorie Levin, and Ayesha Enver. Community 
Eligibility Provision Evaluation. Project Officer: John R. Endahl. 
Prepared by Abt Associates for the U.S. Department of Agriculture, 
Food and Nutrition Service, February 2014.
---------------------------------------------------------------------------

    Accordingly, Sec.  245.9(f)(4)(vi) of this final rule retains 1.6 
as the multiplier to be used to determine CEP claiming percentages for 
an entire 4-year CEP cycle.
Cost Differential
    Proposed Rule: The proposed rule at 7 CFR 245.9(f)(4)(vii) would 
require the LEA of a CEP school to pay, with funds from non-Federal 
sources, the difference between the cost of serving lunches and 
breakfasts at no charge to all participating children and the Federal 
reimbursement received.
    Comments: Thirty-one comments were received from various 
stakeholders, including individuals, advocates, and program operators, 
requesting that FNS provide a more detailed explanation of the 
requirements surrounding the use of non-Federal dollars in CEP schools 
to cover operating costs that exceed Federal reimbursements. The 
commenters requested specific language to clarify that an additional 
funding stream is not required when Federal reimbursements cover all 
operating costs. In addition, one commenter expressed general concern 
regarding an LEA's ability to cover the cost of meals not reimbursed at 
the free rate.
    FNS Response: Subsequent to publication of the proposed rule, FNS 
published specific guidance related to the use of non-Federal funds as 
part of SP 19-2016, Community Eligibility

[[Page 50202]]

Provision: Guidance and Updated Q&As (available at: http://www.fns.usda.gov/school-meals/community-eligibility-provision-resource-center). This guidance clarifies that the use of non-Federal funds is 
not required if all operating costs are covered by the Federal 
reimbursement and other assistance provided under the NSLA and the 
Child Nutrition Act of 1966. It is important to remember that 
participation in CEP is a local-level decision that requires LEAs to 
evaluate their financial capacity to operate successfully. When 
deciding whether to elect CEP, eligible schools must consider their 
ability to cover their operating costs with the Federal reimbursement 
and any other available funds, including those provided by the State 
agency either to meet revenue matching requirements outlined in Section 
7 of the NSLA or additional funds provided by State or local 
authorities on a separate, discretionary basis. To assist LEAs with 
making sound financial decisions related to CEP participation, FNS has 
provided extensive guidance and technical assistance to State and local 
agencies. FNS has also developed practical tools to assist LEAs in 
estimating the level of Federal reimbursement under CEP. These 
resources are available online at the FNS CEP Resource Center: http://www.fns.usda.gov/school-meals/community-eligibility-provision-resource-center.
    Accordingly, Sec.  245.9(f)(4)(vii) of this final rule retains the 
cost differential requirement but includes new language to clarify that 
the use of non-Federal funds is not required if all operating costs are 
covered by the Federal assistance received.
New 4-Year Cycle
    Proposed Rule: The proposed rule at 7 CFR 245.9(f)(4)(viii) would 
require that, to begin a new 4-year cycle, LEAs or schools must 
establish a new ISP as of April 1 of the fourth year of the previous 
cycle. If the LEA or school meets all eligibility criteria, it may 
begin a new 4-year cycle, subject to State agency confirmation.
    Comments: Thirty-two comments from various stakeholders, including 
individuals, program operators, and advocates, recommended that LEAs be 
permitted to begin a new 4-year cycle for any school year, to avoid 
creating a disincentive to immediate enrollment among LEAs that have 
reason to believe that their ISP may increase in a future school year.
    FNS Response: Section 11(a)(1)(F)(iv) of the NSLA permits LEAs to 
recalculate their ISP each school year. FNS agrees with commenters that 
ensuring LEAs are able to begin a new 4-year cycle when a higher ISP 
may be selected is an important element of CEP, and also serves as an 
incentive for LEAs to continue participating in CEP over time.
    Accordingly, Sec.  245.9(f)(4)(viii) of this final rule allows for 
the recalculation of the ISP and the start of a new 4-year cycle each 
school year.
Grace Year
    Proposed Rule: The proposed rule at 7 CFR 245.9(f)(4)(ix) would 
permit a LEA or school in the fourth year of a CEP cycle with an ISP of 
less than 40 percent but equal to or greater than 30 percent as of 
April 1 to continue using CEP for one additional year, referred to as a 
grace year.
    Comments: One comment requested additional information on how to 
calculate the ISP accurately during the fourth year of the cycle and 
requested clarification on whether the 1.6 multiplier is guaranteed to 
carry forward into a fifth year if an LEA takes advantage of the CEP 
grace year.
    FNS Response: Schools and LEAs in the fourth year of a 4-year CEP 
cycle will compile new identified student data reflective of April 1 of 
the cycle's fourth year to: (1) Support a new 4-year CEP cycle with a 
new ISP; and (2) meet the following school year's publication and 
notification requirements as outlined in the final rule at Sec.  
245.9(f)(5). Should the LEA determine that a new 4-year cycle may not 
be immediately elected because their ISP is less than 40 percent but at 
least 30 percent, the LEA may elect to participate in CEP for an 
additional grace year using the ISP as of April 1 of the fourth year of 
their current CEP cycle. The Federal reimbursement in the grace year is 
based on the ISP as of April 1 in the fourth year of the CEP cycle 
multiplied by 1.6. If the ISP as of April 1 of the grace year does not 
meet the 40 percent ISP requirement, the LEA must return to standard 
counting and claiming, or enroll in another special provision option 
for the following school year.
    Accordingly, this final rule retains the grace year provision in 
Sec.  245.9(f)(4)(ix) and clarifies that the 1.6 multiplier is used in 
the grace year to determine the claiming percentage.

Identification of Potential CEP LEAs and Schools

    Proposed Rule: The proposed rule at 7 CFR 245.9(f)(5) would require 
that, no later than April 15 of each school year, each State agency 
must notify LEAs of district-wide eligibility, including LEAs: (1) With 
a district-wide ISP of at least 40 percent; (2) with a district-wide 
ISP of less than 40 percent but at least 30 percent: (3) Currently 
operating CEP district-wide; and (4) LEAs operating CEP district-wide 
in the fourth year of the CEP cycle and eligible for a grace year. In 
addition, annually by April 15, LEAs must submit to the State agency a 
list(s) of schools: (1) With an ISP of at least 40 percent; (2) an ISP 
less than 40 percent but at least 30 percent; and (3) schools in the 
fourth year of a CEP cycle eligible for a grace year. The State agency 
may exempt LEAs from this requirement if the State agency already 
collects the required information.
    Comments: One commenter requested that FNS change the notification 
requirements so two requirements do not share an April 15 deadline.
    FNS Response: Section 11(a)(1)(F)(x) of the NSLA requires that 
States publish, annually by May 1, lists of LEAs and schools eligible 
and nearly eligible to elect CEP for the next school year. To meet this 
requirement, States must notify LEAs of eligibility, and LEAs must 
notify State agencies of school-level eligibility. Requiring this 
exchange of information by April 15 allows States to meet the May 1 
publication deadline. States and LEAs may share the required 
information with each other prior to the April 15 deadline. Further, 
State agencies that have access to school-level eligibility information 
may exempt LEAs from this requirement.
    Accordingly, this final rule retains in Sec.  245.9(f)(5) and (6) 
the requirements that LEAs and State agencies, respectively, must 
exchange, by April 15, lists of LEAs and schools potentially eligible 
to elect CEP. Further, State agencies must publish the lists online and 
submit the information to FNS.

Public Notification Requirements

    Proposed Rule: The proposed rule at 7 CFR 245.9(f)(7) would require 
State agencies, by May 1 of each school year, to make available 
comprehensive and readily accessible information, in a format 
prescribed by FNS, regarding the eligibility status of LEAs and schools 
to participate in CEP in the next school year.
    Comments: Thirty-one commenters recommended that FNS ensure that 
State agencies publicly post the lists of eligible and nearly eligible 
LEAs and schools by the May 1 deadline to allow adequate time for 
outreach and to give LEAs time to make an election decision before the 
traditional school year ends. One commenter suggested that FNS develop 
guidelines for the length of time that State agencies must post the 
required lists. Another commenter

[[Page 50203]]

requested clarification on the public notification requirements.
    FNS Response: Section 11(a)(1)(F)(x)(III) of the NSLA requires, 
annually by May 1, State agencies to submit to FNS lists of LEAs 
eligible to elect CEP. This final rule requires States to publish lists 
of eligible and nearly eligible LEAs and schools on the Stage agency's 
Web site in a readily accessible format prescribed by FNS. To 
facilitate outreach, FNS publishes links to each State's lists at: 
http://www.fns.usda.gov/school-meals/community-eligibility-provision-status-school-districts-and-schools-state. FNS maintains a map linking 
to each State's lists for the duration of the school year, until new 
lists are published for the forthcoming school year. Since publishing 
the proposal, FNS has provided technical assistance to clarify the 
notification and publication requirements for State agencies and LEAs, 
including addressing frequently asked questions, issuing policy memos, 
developing a template to organize eligibility information, and 
conducting multiple webinars to explain the publication and 
notification requirements.
    Accordingly, Sec.  245.9(f)(7)(iii) of this final rule maintains 
the requirement for State agencies to publish lists of eligible and 
nearly eligible LEAs and schools on the State agency Web site and 
includes additional language requiring States to maintain eligibility 
lists on their Web site until the following May 1, when new eligibility 
lists are published.

Notification Data

    Proposed Rule: The proposed rule at 7 CFR 245.9(f)(8) would require 
that data compiled by the State agency for the purposes of fulfilling 
annual CEP notification requirements be representative of the current 
school year and reflective of April 1, and use the ISP as a basis for 
determining the projected eligibility status. If data reflective of 
April 1 are not available for the notification process, the State 
agency would be required to ensure the presence of a notation that 
indicates the data are intended for informational purposes and do not 
confer eligibility for community eligibility.
    Comments: One commenter recommended using ISP data from October to 
meet notification requirements because it is more accurate and less 
burdensome. Another commenter expressed concern that direct 
certification data may not be used in lieu of the ISP. In contrast to 
those comments, one commenter recommended that no proxy data be allowed 
to meet notification requirements and, instead, that eligibility lists 
reflect only data documenting the actual numbers of identified 
students.
    FNS Response: To ease administrative burden, October data reported 
on the FNS-742, School Food Authority Verification Summary Report, and 
data used to complete the FNS-834, State Agency (NSLP/SNAP) Direct 
Certification Rate Data Element Report (for current Provision schools), 
may be used to meet the CEP notification requirements only. If school-
specific identified student data is not readily available, State 
agencies or LEAs may use the number of directly certified students 
(e.g., with SNAP and/or with other assistance programs, as applicable) 
as a proxy for the number of identified students. If direct 
certification data is used, it must be clearly noted on the eligibility 
lists that the data does not fully reflect the number of identified 
students. Further, if data used to generate notification lists are not 
reflective of April 1 of the current school year, the lists must 
include a notation that the data are intended for informational 
purposes only and do not confer eligibility to elect CEP.
    Accordingly, Sec.  245.9(f)(8) of this final rule retains the 
flexibility for State agencies and LEAs to meet notification 
requirements and generate CEP eligibility lists using direct 
certification data. However, data not reflective of April 1 may not be 
used to elect CEP and may not be used as the basis for determining the 
ISP/claiming percentages, unless approved by FNS.

Transfer and Carryover of Free Meal Eligibility

    Proposed Rule: The proposed rule at 7 CFR 245.9(l) would require 
that a student's access to free meals be extended for up to 10 
operating school days when transferring from a CEP to a non-CEP school 
within the same LEA. For student transfers between two separate LEAs, 
free meals may be offered for up to 10 operating school days at the 
discretion of the receiving LEA.
    Comments: FNS received 32 similar comments from advocates and State 
agencies recommending greater protection for students from low-income 
households who transfer from CEP schools to non-CEP schools during the 
school year. Commenters highlighted the importance of ensuring that 
these students have continuous access to no-cost school meals when 
changing schools, particularly because households accustomed to CEP may 
not know they need to complete an application for children to receive 
school meal benefits. Specifically, commenters recommended providing up 
to 30 days of meals at no cost to students who transfer from a CEP to a 
non-CEP school, both within an LEA and between LEAs.
    FNS Response: FNS acknowledges that changing schools may be a 
significant transition for students and households. Adjusting to a new 
school environment can present unique challenges, particularly for low-
income households whose circumstances may have necessitated the 
transfer. FNS agrees with commenters and seeks to ensure that 
vulnerable children have uninterrupted access to healthy school meals 
during these critical transitions.
    FNS discussions around transfer (within the school year) and 
carryover (between school years) eligibility when students move from 
CEP to non-CEP schools unveiled policy inconsistencies among CEP and 
other alternative reimbursement options: Provision 2 and Provision 3 
(described in Sec. Sec.  245.9(b) and (d), respectively). Conversations 
with State agencies at national and regional meetings emphasized the 
need for consistent policies and operational ease related to the 
transfer of students from Provision to non-Provision schools. These 
conversations also revealed possible gaps in benefits when students 
from low-income households move to new schools, particularly between 
LEAs, both during and between school years. While many students are 
likely to change schools at least once, data from the DoED shows that 
poor and minority students change schools more often than their peers. 
Research suggests that mobility has a negative impact on academic 
achievement, leading to lower test scores and higher dropout rates. 
Supporting low-income, highly-mobile students by providing them access 
to school meals during a transition is an important, practical 
investment in our high-need communities, and in our nation's future.\3\
---------------------------------------------------------------------------

    \3\ U.S. Government Accountability Office. (2010). Many 
Challenges Arise in Educating Students Who Change Schools 
Frequently. (GAO Publication No. 11-40). Washington, DC: U.S. 
Government Printing Office.
---------------------------------------------------------------------------

    Schools face a range of challenges in meeting the academic, social, 
and emotional needs of students who change schools. Teachers report 
that new and transfer students often have difficulty coping with 
changes in curriculum content and instruction. Teachers and principals 
also report that schools have to address the needs of these students' 
households and the circumstances which often underlie frequent school 
changes.\4\ Further, students may arrive

[[Page 50204]]

without records or with incomplete records, making it difficult for 
school food service staff to immediately determine eligibility for 
school meals. Given the many challenges involved with school transfers 
and moves, it is crucial to ensure that students from low-income 
households have consistent access to school meals during these 
transitions.
---------------------------------------------------------------------------

    \4\ Id.
---------------------------------------------------------------------------

    Based on the public comments received and information gained from 
national implementation and internal policy analysis, Sec.  245.9(l) of 
this final rule requires that a receiving LEA provides free meals to 
students transferring from Provision schools to non-Provision schools 
for up to 10 operating days or until a new eligibility determination is 
made. For student transfers within an LEA, this requirement is 
effective upon implementation of the final rule. FNS recognizes the 
logistical challenges traditionally associated with the transfer of 
student records between LEAs, where systems allowing for the sharing of 
information may not be in place. Therefore, for student transfers 
between different LEAs, this requirement will apply no later than July 
1, 2019. This provides program operators time to establish procedures 
for ensuring that students transferring from a Provision school in 
another LEA during the school year are promptly identified.
    Further, for transfers within and between LEAs, the receiving LEA 
may, at the State agency's discretion, provide the transferred student 
free reimbursable meals for up to 30 operating days or until a new 
eligibility determination is made, whichever comes first. This 
discretion is effective upon implementation of the final rule.
    Additionally, section 245.6(c) of this final rule protects students 
from low-income households moving from a Provision school to a non-
Provision school between school years. At the discretion of the State 
agency, all LEAs receiving students who had access to free meals in the 
prior year at a Provision school may be offered free reimbursable meals 
for up to 30 operating days or until a new eligibility determination is 
made in the current school year, whichever comes first. This 
discretion, effective upon implementation of the final rule, is 
intended to protect students who move to a non-Provision school within 
the same LEA or in a different LEA between school years by giving them 
access to what is commonly referred to as carryover eligibility.
    Accordingly, Sec.  245.9(l) of this final rule retains the 
requirement that students who transfer from CEP to non-CEP schools 
during the school year must receive up to 10 days of free meals. 
Additionally, this requirement (i.e., up to 10 days of free meals) is 
expanded to benefit students transferring from Provision schools under 
Sec.  245.9 to non-Provision schools both within and between LEAs 
during the school year. Delayed implementation (not later than July 1, 
2019) is included for student transfers between LEAs. Finally, 
Sec. Sec.  245.9(l) and 245.6(c)(2) have been modified to give States 
discretion to allow LEAs to provide up to 30 days of meals at no cost 
to students moving from a Provision school to a non-Provision school 
during and between school years.

III. Implementation Resources

    FNS promotes ongoing implementation of CEP nationwide, fortifying 
it as an established model for operating the Federal school meal 
programs and strives to ensure that all eligible school districts are 
well informed about CEP and its benefits. Accordingly, FNS provides 
resources to help school districts make sound decisions when 
considering CEP elections, and collaborates with State and local 
partners and their stakeholders in providing this technical assistance. 
This technical assistance has consisted of a variety of activities to 
promote CEP that include: Collaborating with partners and stakeholders; 
executing outreach plans; conducting trainings; and delivering 
presentations to diverse audiences, particularly targeting education 
program administrators.
    In addition to these activities, FNS has established an online 
resource center (http://www.fns.usda.gov/school-meals/community-eligibility-provision-resource-center) that provides extensive 
resources for parents, teachers, and school officials at the local, 
State, and Federal level to better understand CEP and its positive 
benefits, along with useful tools to help facilitate successful 
implementation. FNS also developed an estimator tool to help LEAs 
determine if CEP is financially viable, and to help assess LEA 
groupings to optimize the Federal reimbursement.
    Additionally, FNS has conducted numerous CEP webinars for State and 
local program operators on a wide range of topics that include: CEP 
Basics; Outreach to Eligible Districts; Title I and E-Rate Funding; 
Allocating State and Local Funding without Applications; Administrative 
Reviews; Successful Implementation Strategies; How to Partially 
Implement CEP (in some, but not all, schools in an LEA); Direct 
Certification and Reporting; Publication and Notification Requirements; 
and Financial Considerations for CEP. Recordings of all webinars are 
available online at the CEP Resource Center.
    FNS will continue to provide technical assistance, work to 
eliminate barriers to participation and share best practices for 
implementation in an effort to reach children in every school that 
stands to benefit from CEP.

IV. Procedural Matters

Executive Orders 12866 and 13563

    Executive Orders 12866 and 13563 direct Federal 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 final rule has been determined to be not significant 
and was not reviewed by the Office of Management and Budget (OMB) in 
conformance with Executive Order 12866.

Regulatory Impact Analysis

    This rule has been designated as not significant by the Office of 
Management and Budget; therefore, a Regulatory Impact Analysis is not 
required.

Regulatory Flexibility Act

    The Regulatory Flexibility Act (5 U.S.C. 601-612) requires Federal 
agencies to analyze the impact of rulemaking on small entities and 
consider alternatives that would minimize any significant impacts on a 
substantial number of small entities. Pursuant to that review, it has 
been determined that this final rule will not have a significant impact 
on a substantial number of small entities. The final rule will 
establish requirements for LEAs and schools operating the CEP. The 
provisions of this final rule were developed with stakeholders' input, 
and are intended to reflect the operational needs of LEAs of all sizes. 
Furthermore, the final rule is largely consistent with existing sub-
regulatory guidance issued by FNS to assist State and local agencies 
with CEP implementation. No specific additional burdens are placed on 
small LEAs seeking to operate CEP.
    It should be noted that small LEAs generally employ fewer staff in 
the operation of their school meal programs; many of these individuals 
may fill

[[Page 50205]]

multiple roles for a given school or district. As such, the predicted 
impact of the final rule on small LEAs is expected to be positive in 
terms of reducing the paperwork burden. The administrative efficiencies 
offered by CEP through the elimination of the application process saves 
officials at small LEAs hours of paperwork that would normally need to 
be completed each school year. Currently, many small LEAs participate 
in CEP; in SY 2014-15, about half of the more than 2,000 school 
districts electing CEP had enrollments of 500 or less.

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 $146 million 
or more (when adjusted for 2015 inflation; GDP deflator source: Table 
1.1.9 at http://www.bea.gov/iTable) 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 final 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 $146 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 NSLP, SBP, SAE, SMP, CACFP and SFSP are listed in the Catalog 
of Federal Domestic Assistance Programs under NSLP No. 10.555, SBP No. 
10.553, SAE No. 10.560, SMP No. 10.556, CACFP No. 10.558, and SFSP No. 
10.559, respectively and are subject to Executive Order 12372 which 
requires intergovernmental consultation with State and local officials 
(See 2 CFR chapter IV).

Federalism Summary Impact Statement

    Executive Order 13132 requires Federal agencies to consider the 
impact of their regulatory actions on State and local governments. 
Where such actions have federalism implications, agencies are directed 
to provide a statement for inclusion in the preamble to the regulations 
describing the agency's considerations in terms of the three categories 
called for under Section (6)(b)(2)(B) of Executive Order 13121.
Prior Consultation With State Officials
    FNS National and Regional Offices have ongoing, formal and informal 
discussions with State agency officials regarding the Child Nutrition 
Programs and policy issues. FNS specifically delayed publication of 
this final rule to allow for at least one full year of nationwide CEP 
implementation, so as to consult with State and local officials and 
better inform the rulemaking process. Prior to this rulemaking, FNS 
interacted extensively with State agencies throughout the Provision's 
phased-in implementation, and worked collaboratively to determine which 
State agencies would participate for each of the three phase-in years. 
Once selected, FNS consulted regularly with the pilot States to solicit 
feedback and better inform the process of developing sub-regulatory 
guidance. More broadly, in an effort to inform stakeholders and solicit 
feedback, FNS held several conference calls and meetings with State 
agencies to discuss the statutory requirements that would serve as the 
foundation for this rule. FNS also discussed CEP statutory requirements 
with program operators at State and national conferences.
    To facilitate nationwide CEP implementation in SY 2014-15, FNS held 
periodic State agency conference calls that included all State 
agencies. These cross-regional gatherings served as an opportunity to 
share and discuss concerns, and for the former pilot States to share 
their valuable implementation experience. Furthermore, FNS Regional 
Office staff assisted State agencies with targeted technical assistance 
where needed, and served as a liaison for policy and implementation 
questions. FNS outreach has also extended to State education officials, 
including those administering State and Federal education funding. In 
addition, FNS received 78 public comments in response to the proposed 
rule (78 FR 65890), including comments from State agency officials. 
These various forms of consultation produced valuable input that has 
been considered in drafting this final rule.
Nature of Concerns and the Need To Issue This Rule
    The key concern raised by State agencies and LEAs was the general 
feasibility of implementing CEP without established regulatory and sub-
regulatory guidance. Furthermore, many State agency officials were 
concerned that the elimination of the household application process 
would limit their ability to collect data on students from low-income 
households. Traditionally, free and reduced price school meal data, 
which is at least partially collected through the household application 
process, has served as an important proxy for poverty status, and has 
been used as a basis to distribute other forms of funding and benefits.
Extent To Which We Meet Those Concerns
    FNS has considered the impact of this final rule on State and local 
operators, and has developed a rule that will guide CEP implementation 
in the most effective and least burdensome manner. The final rule has 
been informed by the feedback received from State and local officials 
through this rulemaking process, and through extended consultations 
with participating and prospective States and LEAs. In an effort to 
assist State and local agencies prior to the publication of this final 
rule, FNS published comprehensive sub-regulatory guidance, including 
memoranda and a CEP Planning and Implementation Guidance Manual, which 
are consistent with the provisions of the final rule. In addition, the 
final rule will help to alleviate data concerns by requiring States/
LEAs to conduct at least one SNAP data match per year.

Executive Order 12988, Civil Justice Reform

    This final 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 
and timely implementation. However, FNS does not expect significant 
inconsistencies between this final rule and existing State or local 
regulations regarding the provision of school food service operations 
under CEP. The final rule was developed with input from State and local 
agencies and was based, in part, on their experience with CEP 
implementation. CEP has been available as a pilot program since SY 
2011-12 and nationwide since SY 2014-15, with successful implementation 
in all 50 States, the District of Columbia, and Guam. Per statutory 
requirements outlined in the NSLA, State agencies operating the Federal 
school meal programs are unable to bar an eligible

[[Page 50206]]

LEA from CEP participation. FNS has produced extensive guidance in 
addition to this rulemaking to ensure a sound operational environment 
exists for LEAs electing CEP. 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 final 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 final rule might have on minorities, 
women, and persons with disabilities. After a careful review of the 
proposed rule's intent and provisions, FNS has determined that this 
final 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 
requirements established in this final rule are intended to improve 
access to school meals, and support academic achievement for all 
students in high-poverty LEAs and schools. The requirements are not 
expected to negatively impact the protected classes.

Executive Order 13175

    Executive Order 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. FNS provides regularly 
scheduled quarterly consultation sessions as a venue for collaborative 
conversations with Tribal officials or their designees. The most recent 
quarterly consultation sessions were held on August 19, 2015; November 
18, 2015; February 17, 2016; and May 18, 2016. FNS provided a review of 
the most recent CEP guidance at the August 2015 consultation. At the 
November 2013 consultation, FNS discussed the proposed rule with Tribal 
officials and encouraged them to submit public comments. At the 
November 2015 consultation, FNS advised Tribal officials that the final 
rule was under development. No questions related to CEP arose. FNS will 
respond in a timely and meaningful manner to any Tribal government 
request for consultation concerning CEP. At the February 17, 2016 
consultation, FNS asked Tribal officials to share best practices for 
conducting CEP outreach to eligible Tribal schools. FNS is unaware of 
any current Tribal laws that could be in conflict with this final rule.

Paperwork Reduction Act

    A 60-day notice embedded in the proposed rule, ``National School 
Lunch Program and School Breakfast Program: Eliminating Applications 
through Community Eligibility as Required by the Healthy, Hunger-Free 
Kids Act of 2010'' published in the Federal Register at 78 FR 65890 on 
November 4, 2013 and provided the public an opportunity to submit 
comments on the proposed information collection burden resulting from 
this rule. No changes have been made to the proposed requirements in 
this final rulemaking. Thus, in accordance with the Paperwork Reduction 
Act of 1995, the information collection requirements associated with 
this final rule, which were filed under 0584-0026, have been submitted 
for approval to OMB. When OMB notifies FNS of its decision, FNS will 
publish a notice in the Federal Register of the action.

E-Government Act Compliance

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

List of Subjects in 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 part 245 is amended as follows:

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

0
1. The authority citation for part 245 continues to read as follows:

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


0
2. In Sec.  245.6, revise paragraphs (b)(1)(v) and (c)(2) to read as 
follows:


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

* * * * *
    (b) * * *
    (1) * * *
    (v) Local educational agencies and schools currently operating 
Provision 2 or Provision 3 in non-base years, or the community 
eligibility provision, as permitted under Sec.  245.9, are required to 
conduct a data match between Supplemental Nutrition Assistance Program 
records and student enrollment records at least once annually. State 
agencies may conduct data matching on behalf of LEAs and exempt LEAs 
from this requirement.
* * * * *
    (c) * * *
    (2) Use of prior year's eligibility status. Prior to the processing 
of applications or the completion of direct certification procedures 
for the current school year, children from households with approved 
applications or documentation of direct certification on file from the 
preceding year, shall be offered reimbursable free and reduced price 
meals or free milk, as appropriate. The local educational agency must 
extend eligibility to newly enrolled children when other children in 
their household (as defined in Sec.  245.2) were approved for benefits 
the previous year. However, applications and documentation of direct 
certification from the preceding year shall be used only to determine 
eligibility for the first 30 operating days following the first 
operating day at the beginning of the school year, or until a new 
eligibility determination is made in the current school year, whichever 
comes first. At the State agency's discretion, students who, in the 
preceding school year, attended a school operating a special assistance 
certification and reimbursement alternative (as permitted in Sec.  
245.9)) may be offered free reimbursable meals for up to 30 operating 
days or until a new eligibility determination is made in the current 
school year, whichever comes first.
* * * * *

0
3. In Sec.  245.9:
0
a. Remove ``paragraph (k)'' and add in its place ``paragraph (m)'' in 
paragraphs (c)(2)(iii)(A) and (B) and (e)(2)(iii)(A) and (B);
0
b. Remove the words ``school food authority's'' and add in their place 
the words ``local educational agency's'' in

[[Page 50207]]

paragraphs (b)(5), (d)(3) introductory text, and (d)(7);
0
c. Remove ``paragraph (g)'' and add in its place ``paragraph (h)'' in 
paragraph (d)(3) introductory text;
0
d. Revise paragraphs (f) through (j);
0
e. Redesignate paragraph (k) as paragraph (m);
0
f. Add new paragraph (k);
0
g. Add paragraph (l)
0
h. Remove the words ``School Food Authority'' and ``school food 
authority'' and add in their place the words ``local educational 
agency'' and remove the words ``School food authority'' and add in 
their place the words ``Local educational agency'' wherever they 
appear; and
0
i. Remove the words ``school food authorities'' and add in their place 
the words ``local educational agencies'' and remove the words ``School 
food authorities'' and add in their place the words ``Local educational 
agencies'' wherever they appear.
    The revisions and additions read as follows:


Sec.  245.9  Special assistance certification and reimbursement 
alternatives.

* * * * *
    (f) Community eligibility. The community eligibility provision is 
an alternative reimbursement option for eligible high poverty local 
educational agencies. Each CEP cycle lasts up to four years before the 
LEA or school is required to recalculate their reimbursement rate. LEAs 
and schools have the option to recalculate sooner, if desired. A local 
educational agency may elect this provision for all of its schools, a 
group of schools, or an individual school. Participating local 
educational agencies must offer free breakfasts and lunches for the 
length of their CEP cycle, not to exceed four successive years, to all 
children attending participating schools and receive meal reimbursement 
based on claiming percentages, as described in paragraph (f)(4)(v) of 
this section.
    (1) Definitions. For the purposes of this paragraph,
    (i) Enrolled students means students who are enrolled in and 
attending schools participating in the community eligibility provision 
and who have access to at least one meal service (breakfast or lunch) 
daily.
    (ii) Identified students means students with access to at least one 
meal service who are not subject to verification as prescribed in Sec.  
245.6a(c)(2). Identified students are students approved for free meals 
based on documentation of their receipt of benefits from SNAP, TANF, 
the Food Distribution Program on Indian Reservations, or Medicaid where 
applicable (where approved by USDA to conduct matching with Medicaid 
data to identify children eligible for free meals). The term identified 
students also includes homeless children, migrant children, runaway 
children, or Head Start children (approved for free school meals 
without application and not subject to verification), as these terms 
are defined in Sec.  245.2. In addition, the term includes foster 
children certified for free meals through means other than an 
application for free and reduced price school meals. The term does not 
include students who are categorically eligible based on submission of 
an application for free and reduced price school meals.
    (iii) Identified student percentage means a percentage determined 
by dividing the number of identified students as of a specified period 
of time by the number of enrolled students as defined in paragraph 
(f)(1)(i) of this section as of the same period of time and multiplying 
the quotient by 100. The identified student percentage may be 
determined by an individual participating school, a group of 
participating schools in the local educational agency, or in the 
aggregate for the entire local educational agency if all schools 
participate, following procedures established in FNS guidance.
    (2) Implementation. A local educational agency may elect the 
community eligibility provision for all schools, a group of schools, or 
an individual school. Community eligibility may be implemented for one 
or more 4-year cycles.
    (3) Eligibility criteria. To be eligible to participate in the 
community eligibility provision, a local educational agency (except a 
residential child care institution, as defined under the definition of 
``School'' in Sec.  210.2), group of schools, or school must meet the 
eligibility criteria set forth in this paragraph.
    (i) Minimum identified student percentage. A local educational 
agency, group of schools, or school must have an identified student 
percentage of at least 40 percent, as of April 1 of the school year 
prior to participating in the community eligibility provision, unless 
otherwise specified by FNS. Individual schools participating in a group 
may have less than 40 percent identified students, provided that the 
average identified student percentage for the group is at least 40 
percent.
    (ii) Lunch and breakfast program participation. A local educational 
agency, group of schools, or school must participate in the National 
School Lunch Program and School Breakfast Program, under parts 210 and 
220 of this title, for the duration of the 4-year cycle. Schools that 
operate on a limited schedule, where it is not operationally feasible 
to offer both lunch and breakfast, may elect CEP with FNS approval.
    (iii) Compliance. A local educational agency, group of schools, or 
school must comply with the procedures and requirements specified in 
paragraph (f)(4) of this section to participate in the community 
eligibility provision.
    (4) Community eligibility provision procedures--(i) Election 
documentation and deadline. A local educational agency, group of 
schools, or school that intends to elect the community eligibility 
provision for the following year for one or more schools must submit to 
the State agency documentation demonstrating the LEA, group of schools, 
or school meets the identified student percentage, as specified under 
paragraph (f)(3)(i) of this section. Such documentation must be 
submitted no later than June 30 and must include, at a minimum, the 
counts of identified students and enrolled students as of April 1 of 
the school year prior to CEP implementation.
    (ii) State agency review of election documentation. The State 
agency must review the identified student percentage documentation 
submitted by the local educational agency to confirm that the local 
educational agency, group of schools, or school meets the minimum 
identified student percentage, participates in the National School 
Lunch Program and School Breakfast Program, and has a record of 
administering the meal program in accordance with program regulations, 
as indicated by the most recent administrative review.
    (iii) Meals at no cost. A local educational agency must ensure 
participating schools offer reimbursable breakfasts and lunches at no 
cost to all students attending participating schools during the 4-year 
cycle, and count the number of reimbursable breakfasts and lunches 
served to students daily.
    (iv) Household applications. A local educational agency, group of 
schools, or school must not collect applications for free and reduced 
price school meals on behalf of children in schools participating in 
the community eligibility provision. Any local educational agency 
seeking to obtain socioeconomic data from children receiving free meals 
under this section must develop, conduct, and fund this effort entirely 
separate from, and not under the auspices of, the National School Lunch 
Program or School Breakfast Program.

[[Page 50208]]

    (v) Free and paid claiming percentages. Reimbursement is based on 
free and paid claiming percentages applied to the total number of 
reimbursable lunches and breakfasts served each month, respectively. 
Reduced price students are accounted for in the free claiming 
percentage, eliminating the need for a separate percentage.
    (A) To determine the free claiming percentage, multiply the 
applicable identified student percentage by a factor of 1.6. The 
product of this calculation may not exceed 100 percent. The difference 
between the free claiming percentage and 100 percent represents the 
paid claiming percentage. The applicable identified student percentage 
means:
    (1) In the first year of participation in the community eligibility 
provision, the identified student percentage as of April 1 of the prior 
school year.
    (2) In the second, third, and fourth year of the 4-year cycle, LEAs 
may choose the higher of the identified student percentage as of April 
1 of the prior school year or the identified student percentage as of 
April 1 of the year prior to the current 4-year cycle. LEAs and schools 
may begin a new 4-year cycle with a higher identified student 
percentage based on data as of the most recent April 1, as specified in 
paragraph (viii).
    (B) To determine the number of lunches to claim for reimbursement, 
multiply the free claiming percentage as described in this paragraph by 
the total number of reimbursable lunches served to determine the number 
of free lunches to claim for reimbursement. The paid claiming 
percentage is multiplied by the total number of reimbursable lunches 
served to determine the number of paid lunches to claim for 
reimbursement. In the breakfast meal service, the free and paid 
claiming percentages are multiplied by the total number of reimbursable 
breakfasts served to determine the number of free and paid breakfasts 
to claim for reimbursement. For any claim, if the total number of meals 
claimed for free and paid reimbursement does not equal the total number 
of meals served, the paid category must be adjusted so that all served 
meals are claimed for reimbursement.
    (vi) Multiplier factor. A 1.6 multiplier must be used for an entire 
4-year cycle to calculate the percentage of lunches and breakfasts to 
be claimed at the Federal free rate.
    (vii) Cost differential. If there is a difference between the cost 
of serving lunches and breakfasts at no cost to all participating 
children and the Federal assistance provided, the local educational 
agency must pay such difference with non-Federal sources of funds. 
Expenditure of additional non-federal funds is not required if all 
operating costs are covered by the Federal assistance provided.
    (viii) New 4-year cycle. To begin a new 4-year cycle, local 
educational agencies or schools must establish a new identified student 
percentage as of April 1 prior to the 4-year cycle. If the local 
educational agency, group of schools, or school meet the eligibility 
criteria set forth in paragraph (f)(3) of this section, a new 4-year 
cycle may begin.
    (ix) Grace year. A local educational agency, group of schools, or 
school with an identified student percentage of less than 40 percent 
but equal to or greater than 30 percent as of April 1 of the fourth 
year of a community eligibility cycle may continue using community 
eligibility for a grace year that continues the 4-year cycle for one 
additional, or fifth, year. If the local educational agency, group of 
schools, or school regains the 40 percent threshold as of April 1 of 
the grace year, the State agency may authorize a new 4-year cycle for 
the following school year. If the local educational agency, group of 
schools, or school does not regain the required threshold as of April 1 
of the grace year, they must return to collecting household 
applications in the following school year in accordance with paragraph 
(j) of this section. Reimbursement in a grace year is determined by 
multiplying the identified student percentage at the local educational 
agency, group of schools, or school as of April 1 of the fourth year of 
the 4-year CEP cycle by the 1.6 multiplier.
    (5) Identification of potential community eligibility schools. No 
later than April 15 of each school year, each local educational agency 
must submit to the State agency a list(s) of schools as described in 
this paragraph. The State agency may exempt local educational agencies 
from this requirement if the State agency already collects the required 
information. The list(s) must include:
    (i) Schools with an identified student percentage of at least 40 
percent;
    (ii) Schools with an identified student percentage that is less 
than 40 percent but greater than or equal to 30 percent; and
    (iii) Schools currently in year 4 of the community eligibility 
provision with an identified student percentage that is less than 40 
percent but greater than or equal to 30 percent.
    (6) State agency notification requirements. No later than April 15 
of each school year, the State agency must notify the local educational 
agencies described in this paragraph about their community eligibility 
status. Each State agency must notify:
    (i) Local educational agencies with an identified student 
percentage of at least 40 percent district wide, of the potential to 
participate in community eligibility in the subsequent year; the 
estimated cash assistance the local educational agency would receive; 
and the procedures to participate in community eligibility.
    (ii) Local educational agencies with an identified student 
percentage that is less than 40 percent district wide but greater than 
or equal to 30 percent, that they may be eligible to participate in 
community eligibility in the subsequent year if they meet the 
eligibility requirements set forth in paragraph (f)(3) of this section 
as of April 1.
    (iii) Local educational agencies currently using community 
eligibility district wide, of the options available in establishing 
claiming percentages for next school year.
    (iv) Local educational agencies currently in year 4 with an 
identified student percentage district wide that is less than 40 
percent but greater than or equal to 30 percent, of the grace year 
eligibility.
    (7) Public notification requirements. By May 1 of each school year, 
the State agency must make the following information readily accessible 
on its Web site in a format prescribed by FNS:
    (i) The names of schools identified in paragraph (f)(5) of this 
section, grouped as follows: Schools with an identified student 
percentage of least 40 percent, schools with an identified student 
percentage of less than 40 percent but greater than or equal to 30 
percent, and schools currently in year 4 of the community eligibility 
provision with an identified student percentage that is less than 40 
percent but greater than or equal to 30 percent.
    (ii) The names of local educational agencies receiving State agency 
notification as required under paragraph (f)(6) of this section, 
grouped as follows: Local educational agencies with an identified 
student percentage of at least 40 percent district wide, local 
educational agencies with an identified student percentage that is less 
than 40 percent district wide but greater than or equal to 30 percent, 
local educational agencies currently using community eligibility 
district wide, and local educational agencies currently in year 4 with 
an identified student percentage

[[Page 50209]]

district wide that is less than 40 percent but greater than or equal to 
30 percent.
    (iii) The State agency must maintain eligibility lists as described 
in paragraphs (i) and (ii) of this section until such time as new lists 
are made available annually by May 1.
    (8) Notification data. For purposes of fulfilling the requirements 
in paragraphs (f)(5) and (6) of this section, the State agency must:
    (i) Obtain data representative of the current school year, and
    (ii) Use the identified student percentage as defined in paragraph 
(f)(1) of this section. If school-specific identified student 
percentage data are not readily available by school, use direct 
certifications as a percentage of enrolled students, i.e., the 
percentage derived by dividing the number of students directly 
certified under Sec.  245.6(b) by the number of enrolled students as 
defined in paragraph (f)(1) as an indicator of potential eligibility. 
If direct certification data are used, the State agency must clearly 
indicate that the data provided does not fully reflect the number of 
identified students.
    (iii) If data are not as of April 1 of the current school year, 
ensure the data includes a notation that the data are intended for 
informational purposes and do not confer eligibility for community 
eligibility. Local educational agencies must meet the eligibility 
requirements specified in paragraph (f)(3) of this section to 
participate in community eligibility.
    (9) Other uses of the free claiming percentage. For purposes of 
determining a school's or site's eligibility to participate in a Child 
Nutrition Program, a community eligibility provision school's free 
claiming percentage, i.e., the product of the school's identified 
student percentage multiplied by 1.6, serves as a proxy for free and 
reduced price certification data.
    (g) Policy statement requirement. A local educational agency that 
elects to participate in the special assistance provisions or the 
community eligibility provision set forth in this section must:
    (1) Amend its Free and Reduced Price Policy Statement, specified in 
Sec.  245.10 of this part, to include a list of all schools 
participating in each of the special assistance provisions specified in 
this section. The following information must also be included for each 
school:
    (i) The initial school year of implementing the special assistance 
provision;
    (ii) The school years the cycle is expected to remain in effect;
    (iii) The school year the special assistance provision must be 
reconsidered; and
    (iv) The available and approved data that will be used in 
reconsideration, as applicable.
    (2) Certify that the school(s) meet the criteria for participating 
in each of the special assistance provisions, as specified in 
paragraphs (a), (b), (c), (d), (e) or (f) of this section, as 
appropriate.
    (h) Recordkeeping. Local educational agencies that elect to 
participate in the special assistance provisions set forth in this 
section must retain implementation records for each of the 
participating schools. Failure to maintain sufficient records will 
result in the State agency requiring the school to return to standard 
meal counting and claiming procedures and/or fiscal action. 
Recordkeeping requirements include, as applicable:
    (1) Base year records. A school food authority shall ensure that 
records as specified in Sec. Sec.  210.15(b) and 220.7(e) of this 
chapter which support subsequent year earnings are retained for the 
base year for schools under Provision 2 and Provision 3. In addition, 
records of enrollment data for the base year must be retained for 
schools under Provision 3. Such base year records must be retained 
during the period the provision is in effect, including all extensions, 
plus 3 fiscal years after the submission of the last Claim for 
Reimbursement which employed the base year data. School food 
authorities that conduct a streamlined base year must retain all 
records related to the statistical methodology and the determination of 
claiming percentages. Such records shall be retained during the period 
the provision is in effect, including all extensions, plus 3 fiscal 
years after the submission of the last Claim for Reimbursement which 
employed the streamlined base year data. In either case, if audit 
findings have not been resolved, base year records must be retained 
beyond the 3-year period as long as required for the resolution of the 
issues raised by the audit.
    (2) Non-base year records. School food authorities that are granted 
an extension of a provision must retain records of the available and 
approved socioeconomic data which is used to determine the income level 
of the school's population for the base year and year(s) in which 
extension(s) are made. In addition, State agencies must also retain 
records of the available and approved socioeconomic data which is used 
to determine the income level of the school's population for the base 
year and year(s) in which extensions are made. Such records must be 
retained at both the school food authority level and at the State 
agency during the period the provision is in effect, including all 
extensions, plus 3 fiscal years after the submission of the last 
monthly Claim for Reimbursement which employed base year data. If audit 
findings have not been resolved, records must be retained beyond the 3-
year period as long as required for the resolution of the issues raised 
by the audit. In addition, for schools operating under Provision 2, a 
school food authority must retain non-base year records pertaining to 
total daily meal count information, edit checks and on-site review 
documentation. For schools operating under Provision 3, a school food 
authority must retain non-base year records pertaining to total daily 
meal count information, the system of oversight or edit checks, on-site 
review documentation, annual enrollment data and the number of 
operating days, which are used to adjust the level of assistance. Such 
records shall be retained for three years after submission of the final 
monthly Claim for Reimbursement for the fiscal year.
    (3) Records for the community eligibility provision. Local 
educational agencies must ensure records are maintained, including: 
data used to calculate the identified student percentage, annual 
selection of the identified student percentage, total number of 
breakfasts and lunches served daily, percentages used to claim meal 
reimbursement, non-Federal funding sources used to cover any excess 
meal costs, and school-level information provided to the State agency 
for publication, if applicable. Documentation must be made available at 
any reasonable time for review and audit purposes. Such records shall 
be retained during the period the community eligibility provision is in 
effect, including all extensions, plus three fiscal years after the 
submission of the last Claim for Reimbursement which was based on the 
data. In any case, if audit findings have not been resolved, these 
records must be retained beyond the three-year period as long as 
required for the resolution of the issues raised by the audit.
    (i) Availability of documentation. Upon request, the local 
educational agency must make documentation available for review or 
audit to document compliance with the requirements of this section. 
Depending on the certification or reimbursement alternative used, such 
documentation includes, but is not limited to, enrollment data, 
participation data, identified student percentages, available and 
approved socioeconomic data that

[[Page 50210]]

was used to grant an extension, if applicable, or other data. In 
addition, upon request from FNS, local educational agencies under 
Provision 2 or Provision 3, or State agencies must submit to FNS all 
data and documentation used in granting extensions including 
documentation as specified in paragraphs (c) and (e) of this section. 
Data used to establish a new cycle for the community eligibility 
provision must also be available for review.
    (j) Restoring standard meal counting and claiming. Under Provisions 
1, 2, or 3 or community eligibility provision, a local educational 
agency may restore a school to standard notification, certification, 
and counting and claiming procedures at any time during the school year 
or for the following school year if standard procedures better suit the 
school's program needs. If standard procedures are restored during a 
school year, the local educational agency must offer all students 
reimbursable, free meals for a period of at least 30 operating days 
following the date of restoration of standard procedures or until a new 
eligibility determination is made, whichever comes first. Prior to the 
change taking place, but no later than June 30, the local educational 
agency must:
    (1) Notify the State agency of the intention to stop participating 
in a special assistance certification and reimbursement alternative 
under this section and seek State agency guidance and review regarding 
the restoration of standard operating procedures.
    (2) Notify the public and meet the certification and verification 
requirements of Sec. Sec.  245.6 and 245.6a in affected schools.
    (k) Puerto Rico and Virgin Islands. A local educational agency in 
Puerto Rico and the Virgin Islands, where a statistical survey 
procedure is permitted in lieu of eligibility determinations for each 
child, may: Maintain their standard procedures in accordance with Sec.  
245.4, select Provision 2 or Provision 3, or elect the community 
eligibility provision provided the applicable eligibility requirements 
as set forth in paragraphs (a) through (f) of this section are met. For 
the community eligibility provision, current direct certification data 
must be available to determine the identified student percentage.
    (l) Transferring eligibility for free meals during the school year. 
For student transfers during the school year within a local educational 
agency, a student's access to free, reimbursable meals under the 
special assistance certification and reimbursement alternatives 
specified in this section must be extended by a receiving school using 
standard counting and claiming procedures for up to 10 operating school 
days or until a new eligibility determination for the current school 
year is made, whichever comes first. For student transfers between 
local educational agencies, this requirement applies not later than 
July 1, 2019. At the State agency's discretion, students who transfer 
within or between local educational agencies may be offered free 
reimbursable meals for up to 30 operating days or until a new 
eligibility determination for the current school year is made, 
whichever comes first.
* * * * *

0
4. In Sec.  245.13, revise paragraph (c)(3) to read as follows:


Sec.  245.13  State agencies and direct certification requirements.

* * * * *
    (c) * * *
    (3) Data Element #3--The count of the number of children who are 
members of households receiving assistance under SNAP who attend a 
school operating under the provisions of 7 CFR 245.9 in a year other 
than the base year or that is exercising the community eligibility 
provision (CEP). The proxy for this data element must be established 
each school year through the State's data matching efforts between SNAP 
records and student enrollment records for these special provision 
schools that are operating in a non-base year or that are exercising 
the CEP. Such matching efforts must occur in or close to October each 
year, but no later than the last operating day in October. However, 
States that have special provision schools exercising the CEP may 
alternatively choose to include, for these schools, the count from the 
SNAP match conducted as of April 1 of the same calendar year, whether 
or not it was used in the CEP claiming percentages. State agencies must 
report this aggregated data element to FNS by December 1 each year, in 
accordance with guidelines provided by FNS.
* * * * *

    Dated: June 13, 2016.
Yvette S. Jackson,
Acting Administrator, Food and Nutrition Service.
[FR Doc. 2016-17232 Filed 7-28-16; 8:45 am]
 BILLING CODE 3410-30-P