[Federal Register Volume 60, Number 57 (Friday, March 24, 1995)]
[Rules and Regulations]
[Pages 15457-15463]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-7310]
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Rules and Regulations
Federal Register
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Federal Register / Vol. 60, No. 57 / Friday, March 24, 1995 / Rules
and Regulations
[[Page 15457]]
DEPARTMENT OF AGRICULTURE
Food and Consumer Service
7 CFR Part 235
RIN 0584-AB31
State Administrative Expense Funds: National School Lunch
Program, Special Milk Program for Children, School Breakfast Program,
Child and Adult Care Food Program, Food Distribution Program
AGENCY: Food and Consumer Service, USDA.
ACTION: Final rule.
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SUMMARY: This rulemaking incorporates in the regulations the
requirements in the Child Nutrition and WIC Reauthorization Act of
1989, which concern State Administrative Expense (SAE) funds. SAE funds
are Federal funds provided to State agencies to assist with the
administrative costs of the National School Lunch Program (NSLP), the
School Breakfast Program (SBP), the Special Milk Program for Children
(SMP) and the Child and Adult Care Food Program (CACFP) and the
administrative costs of the Food Distribution Program (FDP) in
conjunction with these programs. The SAE provisions of the 1989
legislation included in this final rulemaking do the following:
Establish limits on the level of SAE funds that may be retained by the
State from one fiscal year to another and specify how SAE funds that
are returned by the State are to be redistributed. Finally, the
legislation provides that alternate State agencies which administer the
CACFP receive the funds to which they are entitled. In practical
effect, this provision concerns the ``adult care component'' of the
CACFP since the Department already provides funds directly to the State
agencies administering the CACFP. This final regulation reflects this
statutory provision. These changes to the SAE provisions are designed
to ensure that adequate funds are available for the purposes specified.
EFFECTIVE DATE: This final regulation is effective April 24, 1995.
FOR FURTHER INFORMATION CONTACT: Mr. Robert Eadie, Chief, Policy and
Program Development Branch or Mr. Charles Heise, Child Nutrition
Division, Food and Consumer Service, USDA, 3101 Park Center Drive,
Alexandria, Virginia 22302 or by telephone at (703) 305-2620.
SUPPLEMENTARY INFORMATION:
Executive Order 12866
This rule has been determined to be not significant for purposes of
Executive Order 12866 and, therefore, has not been reviewed by the
Office of Management and Budget.
Regulatory Flexibility Act
This final rule has been reviewed with regard to the requirements
of the Regulatory Flexibility Act (5 U.S.C. 601-612). The Administrator
of the Food and Consumer Service (FCS) has certified that this final
rule will not have a significant economic impact on a substantial
number of small entities, since the regulation pertains entirely to the
funding of State agencies, and these are not small entities.
Paperwork Reduction Act
The proposed rule contained information collections. However, the
provisions that contained reporting and recordkeeping burdens are not
included in this final rule. Therefore, this final rule does not
contain information collections which are subject to review by the
Office of Management and Budget (OMB) under the Paperwork Reduction Act
of 1980 (44 U.S.C. Chapter 35).
Executive Order 12778
This final rule has been reviewed under Executive Order 12778,
Civil Justice Reform. This rule is intended to have preemptive effect
with respect to any State or local laws, regulations or policies which
conflict with its provisions or which would otherwise impede its full
implementation. This rule is not intended to have retroactive effect
unless so specified in the ``Effective Date'' section of this preamble.
Prior to any judicial challenge to the provisions of this rule or the
application of the provision, all applicable administrative procedures
must be exhausted. In the National School Lunch Program, the
administrative procedures for State agency appeals of State
Administrative Expense funds sanctions (7 CFR 235.11(b)) are set forth
in 7 CFR 235.11(f).
Executive Order 12372
The FDP, SBP, NSLP, SMP, CACFP, and SAE are listed in the Catalog
of Federal Domestic Assistance under No. 10.550, No. 10.553, No.
10.555, No. 10.556, No. 10.558, and No. 10.560, respectively. These
programs are subject to the provisions of Executive Order 12372, which
requires intergovernmental consultation with State and local officials.
(See 7 CFR part 3015, subpart V, and final rule related to notice
published at 49 FR 29114, June 24, 1983.)
Background
Public Law 101-147, entitled the Child Nutrition and WIC
Reauthorization Act of 1989 (103 Stat. 877), was enacted on November
10, 1989. Section 122 of this legislation included changes to some of
the statutory provisions governing the use of State Administrative
Expense (SAE) funds provided by the Federal government to assist States
with meeting the administrative costs of many of the programs
authorized under the National School Lunch Act (NSLA) and the Child
Nutrition Act of 1966 (CNA).
On December 6, 1991, the Department published a proposed rulemaking
at 56 FR 63882 to incorporate these statutory changes into the SAE
regulations and to make discretionary changes to the funding of Food
Distribution Programs. This proposal included the following provisions:
(1) The maximum amount of SAE which a State could carry over from one
fiscal year to the next was limited to 25 per cent for Fiscal Year 1991
and 20 per cent for subsequent years; (2) a minimum of $3 million of
any excess SAE funds recovered by the Department in Fiscal Year 1992
and $4 million of SAE recovered in each of the next two years must be
made available to demonstration projects authorized under section 107
of Public Law 101-147 to provide food service to homeless children
under the age of 6 in [[Page 15458]] emergency shelters; (3) if a State
elects to have an agency other than the agency administering the child
care component of the CACFP administer the adult care component of that
Program, the Department will ensure that a share of the SAE funds
generated by the CACFP is made available to this other agency; (4) a
portion of the nondiscretionary SAE funds made available to a State
would be designated exclusively for the Food Distribution Program's
administrative expenses associated with providing commodities to the
NSLP, SBP, and CACFP; and (5) beginning with Fiscal Year 1993,
expenditures from State sources for applicable food distribution
administrative costs would have to be no less than the amount of State
funds expended or obligated in Fiscal Year 1991, in order to ensure
continued State support for food distribution activities. Readers are
referred to the proposed rule for a more complete explanation of these
provisions.
During the official comment period, the Department received 53
comments. Most of these were from State agencies which administer one
or more of the child nutrition programs and/or the Food Distribution
Program, but three comments were received from State or national
associations and one comment was submitted by a State governor's
office. Most of the commenters addressed the provisions relating to the
transfer of funding to food distribution activities and the maintenance
of State funding levels for these activities. The overwhelming majority
opposed these provisions; in fact, only four commenters approved wholly
of the proposed provisions on transfer of funds to the FDP. The major
concerns of those opposed to the transfer/exclusive use provisions were
as follow:
The provision is inconsistent with either the statutory
language or the intent of Congress;
The total prohibition against transferring funds from the
FDP to the other child nutrition programs is inconsistent with the
statutory provision which permits a 10 per cent transfer of
administrative funds among programs;
The proposal would divert administrative funds away from
the child nutrition programs at the same time that additional
administrative requirements such as coordinated review and breakfast
outreach are being imposed;
The requirement that the food distribution portion of
funds be used exclusively for these activities would interfere with
States' flexibility to provide funding where it is most needed,
especially in those States in which one agency administers both the
child nutrition programs and the FDP;
Tracking and accounting for separate funds will create a
burden, especially for those agencies which administer both programs
and must, therefore, document the exclusive use of funds for food
distribution activities;
The FDP already has a source of funding through assessment
fees, and any additional funds should be appropriated separately rather
than transferred at the expense of the child nutrition programs.
Commenters opposed to the maintenance of effort provision raised
the following concerns and issues:
This provision exceeds Congressional intent;
This provision would penalize those States which have been
providing funds voluntarily for food distribution purposes;
Since most States do not currently track food distribution
funds separately, it will be difficult to establish the exact level of
funding to be maintained;
Because of cutbacks in State funding since 1991, some
States will be unable to comply with the maintenance of effort
requirement.
As noted in the preamble to the December 6, 1991 proposed
rulemaking, section 122(a)(1)(D) of Pub. L. 101-147 added a new
paragraph (8) to section 7(a) of the CNA which directs each State to
ensure (in accordance with regulations issued by the Secretary) that
the State agency administering the distribution of donated food (the
``distributing agency'') is provided an appropriate amount of SAE for
the administrative costs incurred in distributing donated commodities
to the NSLP, SBP and CACFP. The law further authorized the Secretary to
consider the value of commodities when developing regulations to
implement this provision. Currently, the Department provides SAE funds
directly to the distributing agency in the State that administers the
FDP for the NSLP, SBP, and CACFP. Therefore, no change to the SAE
regulation was required to implement this provision.
However, in order to further improve the administration of SAE
funds in connection with the FDP, the Department proposed a number of
discretionary changes to the SAE regulations regarding funding of the
FDP. First, the Department proposed a methodology for distributing a
portion of the nondiscretionary SAE allocation for the FDP's
administrative costs. Second, clarifications to the formula for
determining the level of discretionary SAE funds to be used for the FDP
were proposed. Third, since the Department has always intended that SAE
funds designated for food distribution purposes be so used, the
proposed rule prohibited using the food distribution portion of SAE for
any other purposes, even when the same agency administers the FDP and
the child nutrition programs. Finally, the legislative history of
section 122 makes it clear that distributing agencies were expected to
reduce or eliminate current assessment fees, wherever possible, in
response to their receipt of SAE funds. The ``maintenance of effort''
provision of the proposal was designed to promote this goal by ensuring
that States would continue to provide the same level of State funds
derived from sources other than assessment fees. Since the total of
State and Federal funds provided for food distribution would, in many
cases, increase, assessment fees could be reduced or eliminated.
Nevertheless, the Department recognizes the concerns raised by
commenters and has no desire to adopt provisions that could potentially
have a negative impact on operations in some States. For these reasons,
the Department wishes to reconsider these discretionary issues
regarding FDP funding and review available options, including possible
alternatives to the proposal. Therefore, these provisions are not
included in this final regulation; rather, they will be treated in a
separate, future rulemaking. The Department is, however, proceeding to
finalize those provisions required by Public Law 101-147. The remainder
of this preamble discusses commenters' questions and concerns on these
issues.
Limits on Funds Retained From the Previous Fiscal Year
The Department proposed to amend Sec. 235.5(e) and Sec. 235.6(a) to
incorporate the mandate of section 7(a)(5)(A) of the CNA as amended by
section 122(a)(1)(C) of Public Law 101-147, which limits the amount of
unobligated SAE funds that may be retained and carried over into the
next fiscal year to a maximum of 25 per cent for Fiscal Year 1991 and a
maximum of 20 per cent for subsequent fiscal years. The proposed
amendment also specified how the limit would be calculated and how the
limit would be compared at the end of the first fiscal year to the
amount of unobligated SAE funds. Essentially, the Department would
apply the appropriate percentage to the State's initial allocation to
establish the maximum amount of SAE that may be carried over. To
determine the total amount of unobligated funds, the Department would
subtract the amount reported by the State agency on Line k (Total
Federal share of outlays [[Page 15459]] and unliquidated obligations)
of the fourth quarter Standard Form (SF) 269 from the total amount of
SAE funds granted for the fiscal year. The Department would then
recover any of these funds in excess of the maximum amount of SAE that
can be carried over. For an example of how the process would work,
interested parties should refer to the discussion on page 63885 of the
preamble to the proposed rule.
Twenty-three commenters addressed the limitation provisions of the
proposed rule, with most of them believing that such a limitation would
have a negative impact on Program administration, although one State
agency reported that its carryover has been well below 20 per cent, so
compliance was not perceived to be a problem. One commenter, however,
was concerned that the carryover limit will lead to the elimination of
funds for reallocation, with the result that small States in particular
will have difficulty funding their activities with only the minimum
grant available to them. One commenter suggested that an arbitrary
percentage is inequitable to those States with allocations below the
national mean, and another stated that basing the carryover amount only
on the initial allocation does not conform with the language of the
statute, which allows the carryover of 20 per cent of the funds
available for the fiscal year. Two commenters were concerned about
including reallocated funds as part of the year-end balance subject to
the carryover limitation, since these funds are sometimes received late
in the fiscal year and returning any or all of these monies due to the
carryover limit would defeat the purpose of reallocation. One commenter
believed the carryover limit should apply on an agency-by-agency basis
rather than being calculated using the total amount of SAE allocated to
the State as a whole, and another commenter suggested that States
should be allowed to use excess funds for demonstration projects in
lieu of returning the monies to the Federal Government. Some commenters
requested clarification on whether the carryover limit applies to the
funds designated for food distribution activities, and several
commenters noted that the last word in Sec. 235.5(e)(2) should be
``unobligated'' rather than ``unexpended.''
The Department recognizes commenters' concerns about the impact of
the carryover limitation on their operations. However, section
7(a)(5)(B) of the CNA specifically established carryover limits of 25
per cent for Fiscal Year 1991 and 20 per cent for succeeding fiscal
years, and the Department has no authority to waive or modify this
mandate. Moreover, as discussed in the preamble to the proposed
rulemaking, this limitation is applied to the initial allocation rather
than to the total administrative funds made available during the fiscal
year because the Department wished to simplify the overall process of
calculation and to enable State agencies to know at the beginning of
the fiscal year exactly what the maximum amount of their carryover
would be. To this end, the Department believes Congress' overriding
intent was to reduce the amount of carryover funds available as much as
possible while still allowing States flexibility in obligating and
expending funds. The Department believes that the proposal to base the
carryover limit on the initial allocation is consistent with this
intent.
The Department does not believe this provision will adversely
affect the overall reallocation process. Funds are reallocated to
States on the basis of need. Consequently, States receiving
reallocations should generally have few, if any, unobligated funds
remaining from their initial allocations. Moreover, States will often
request reallocations for specific expenses and can, therefore,
obligate these funds relatively quickly. The Department recognizes that
some small State agencies, particularly those receiving minimum grants,
could receive reallocations which are large relative to the States'
carryover limit, and in these instances a State's reallocation might be
affected. These situations should not be common, however, and the
Department will make every effort to provide reallocations well in
advance of the end of the fiscal year in order to facilitate the
States' ability to obligate a major portion of their reallocations
before the funds become subject to the carryover limit.
This limitation applies to all SAE funds received by any State
agency for the administration of any aspect of the child nutrition
programs. Funding for food distribution activities, therefore, is
subject to the carryover limit, regardless of whether the State
education agency or another State agency performs these activities.
Moreover, under the proposed regulation the limitation would be applied
on an agency-by-agency basis, since the Department receives separate
SF-269's from each administering agency and has no feasible means of
making the necessary year-end comparison for the State as a whole. With
respect to allowing States to retain excess funds for demonstration
projects, the statute is specific about requiring the return of excess
funds and how the recovered funds may be used, and the Department does
not have the authority to authorize alternate uses. Further discussion
of this issue appears later in this preamble.
Finally, proposed Sec. 235.5(e)(2) reads as follows:
(2) At the end of the fiscal year following the fiscal year for
which funds were allocated, each State agency shall return any funds
made available which are unexpended.
Several commenters believed that the last word of this paragraph
should read ``unobligated'' rather than ``unexpended.'' The Department
notes, however, that this provision clearly refers to the recovery made
at the end of the second fiscal year for which SAE has been available,
not the return of funds in excess of the carryover limits. Proposed
Sec. 235.5(e)(2) merely restated the requirement that has always been
in effect. Previously, this requirement for the recovery of unexpended
funds at the end of the second fiscal year was stated in Sec. 235.5(e).
For these reasons, this final rulemaking adopts the provisions
limiting the amount of SAE that may be carried over from one fiscal
year to the next as proposed. The Department emphasizes, however, that
this carryover limit does not apply to funds made available to State
agencies which agree to assume responsibility for programs previously
administered directly by FCS, as authorized under the newly
redesignated Sec. 235.4(d). These funds are intended to assist States
with costs associated with start-up operations when assuming
responsibility for a program formerly administered by FCS.
As such, they are made infrequently and are intended for a specific
purpose. Consequently, the Department does not consider that this
funding is subject to the carryover limit and is amending
Sec. 235.5(e)(1) to specify that start-up funds are excluded from the
amount subject to the retention limit. In addition, the reference in
Sec. 235.5(e) to Sec. 235.4 (a) through (e) is revised from the
proposal to Sec. 235.4 (a) through (c) to reflect the deletion of the
proposed new Sec. 235.4 (d) and (e). These latter paragraphs provided
for pro rata shares of SAE funds for FDP administrative purposes which
are not included in this final regulation. This same change is made to
the references in Sec. 235.6(a).
Use of Returned SAE Funds
The Department proposed to add a new paragraph--Sec. 235.6(h) to
incorporate the mandate of Public Law 101-147 regarding how any excess
carryover funds recovered by the Department were to be used. Section
7(a)(5)(B) as amended by section [[Page 15460]] 122(a)(1)(C) of Public
Law 101-147 stipulated that in Fiscal Year 1992, a minimum of $3
million of recovered monies be made available for the purpose of
providing grants to private nonprofit organizations participating in
demonstration projects to provide food service to homeless children
under the age of 6 in emergency shelters. The law also mandated that a
minimum of $4 million be made available for this purpose in each of the
next two fiscal years. Any funds in excess of the amount made available
to these demonstration projects would be reallocated to States which
need SAE funds. The Department emphasized, however, that any disbursal
of funds to homeless shelters or the States would be subject to
availability of recovered monies.
Commenters did not generally discuss this provision except to
recognize that the use of recovered funds for this purpose is mandated
by the statute. One commenter, however, expressed concern that SAE
plans might be disapproved or significantly modified to ensure that
sufficient funding is available to fund these projects. The Department
wishes to emphasize that there will be no change in the procedures
currently in place to review and approve SAE plans. The Department
acknowledges that the disallowance of outlays stated in the plan could
result in additional funds being carried over and, hence, subject to
the limitation and possible recovery. The Department considers,
however, that the primary purpose of SAE is to ensure that States have
adequate funds available to administer the child nutrition programs
effectively. To this end, the Department will continue to negotiate
these plans with the States to ensure that outlays are appropriate but
has no intention of artificially reducing the funding available to
States in order to provide funds for the homeless demonstration
projects.
Since publication of the proposed rule, additional legislation was
passed which impacts upon the use of recovered SAE funds. On September
30, 1992, Public Law 102-512, the Children's Nutrition Assistance Act
of 1992, was enacted which further amended the provision on the use of
excess carryover funds for demonstration projects for the homeless.
Public Law 102-512 amended section 7(a)(5)(B)(i) of the CNA to require
that a minimum of $1,000,000 in Fiscal Years 1993 and 1994 be available
at the beginning of the fiscal year, based on Departmental estimates of
the funds expected to be recovered as a result of the limit on funds
that can be carried over. The Department is, therefore, incorporating
the language of Public Law 102-512 on the use of returned funds into
Sec. 235.6(h) to comply with this most recent statutory requirement.
Alternate State Agencies for the CACFP
Section 7(a)(3) of the CNA as amended by section 122(a)(1)(A) of
Public Law 101-147 requires that if an agency other than the State
educational agency administers the CACFP, the State must ensure that
such State agency which administers the CACFP is provided an amount
equal to no less than the SAE funds due to the State for the CACFP.
Since the Department already provides funds directly to State agencies
administering the CACFP, the practical effect of the applicability of
this provision concerns the ``adult care component'' of the CACFP.
Accordingly, the Department proposed to add a new paragraph, to be
designated as Sec. 235.4(c), to allow a prorated portion of the State's
SAE allocation for the CACFP to be made available directly to another
agency in the State when that agency administers the adult care
component of the CACFP. The Department further proposed to calculate
the prorated share by determining what percentage of total CACFP monies
expended by that State in the second preceding fiscal year was
generated by the adult care component of the CACFP and applying that
percentage to the State's total SAE allocation for the CACFP. To
accommodate this change, the Department also proposed a number of
technical amendments and proposed to delete the word ``agency'' where
it appears in Sec. 235.4 (b)(1) and (4) to clarify that it is the State
which earns the total CACFP grant.
The Department received eight comments on this proposal. Three of
the commenters argued that the $30,000 discretionary grant made
available to assist in administering the CACFP should be redirected to
help fund the monitoring requirements of the NSLP. Three commenters
from one State (which has designated an alternate agency to administer
the adult care component of the CACFP) maintained that the prorated
share is insufficient and recommended a minimum level of $50,000 per
year, while another State suggested that the provision be eliminated
entirely, since redirecting of finite SAE funds would weaken overall
Program administration. Finally, one commenter recommended adjusting
the SAE nondiscretionary allocation for the CACFP based on growth in
the Program between the second preceding year and the current year.
As noted in the preamble to the proposed rule, the Department
believes this amendment to section 7(a)(3) of the CNA must be read in
the context of section 17(p)(6) of the National School Lunch Act as
amended by section 105(b)(3)(B) of Public Law 101-147, which authorizes
governors to designate alternate agencies to administer the adult care
component of the CACFP. In those instances in which a governor decides
that an agency other than the CACFP agency is better able to serve the
adult community, the Department believes it is consistent with the
alternate State agency legislation to ensure that a portion of SAE
funds is provided to that agency. However, the Department continues to
stress that the total SAE allocation is earned by the CACFP as a whole.
Moreover, the total amount of SAE available for all of the child
nutrition programs is limited. Consequently, if the Department were to
guarantee a minimum level of funding for the adult care component of
the CACFP, the amount of funds available to administer the other child
nutrition programs would be diminished. Finally, the Department notes
that nationally, the adult care component accounts for only slightly
more than 1 per cent of the total funding for the CACFP, and
designating a large pool of administrative funding strictly for this
purpose would not be justified. Therefore, it would not be reasonable
to provide a minimum grant of $50,000 to an alternate agency solely to
administer the adult care component of the CACFP. The Department does
wish to emphasize, however, that in those States which do elect to
administer the adult care component through an alternate agency, the
agency administering the child care component of the CACFP may elect to
transfer a portion of its SAE funds to the alternate agency in
accordance with established FCS procedures. This would be in addition
to the amount required by the regulations to be provided the agency
administering the adult care component of the CACFP.
Secondly, the Department does not agree with those commenters who
wish to redirect the CACFP discretionary grant to cover the costs of
monitoring the school nutrition programs. The Department makes these
grants available to CACFP agencies in recognition of the fact that this
Program has heavy monitoring responsibilities, which actually exceed
the requirements for monitoring of schools, as well as other
administrative requirements, such as the oversight of approval when
licensing or approval is not otherwise available, [[Page 15461]] which
are unique to the CACFP. If States could redirect the entire
discretionary money from the CACFP to school programs, the overall
management of the CACFP could be weakened. The Department also provides
States with $4 million for the specific purpose of conducting reviews
of the NSLP. For these reasons, the Department could not justify
redirecting monies from the CACFP to NSLP.
The Department recognizes the concern about possible fragmentation
of the SAE grant for the CACFP if funding is made available to an
alternate agency to administer the adult care component. As the above
discussion makes clear, the Department is anxious to maintain
sufficient funding to ensure proper management of the Program. Under
the proposal, a portion of the SAE grant is designated for an alternate
agency only when the State, itself, has decided to split the
administration of the CACFP. Since this action would be voluntary on
the part of the State, the Department assumes that the State has
determined that the advantages, both financial and administrative, of
shifting the adult care component outweigh any reduction the agency
administering the CACFP may experience in its SAE grant. For these
reasons, the Department is adopting as proposed the provision to
designate a pro rata share of the CACFP's SAE grant for an alternate
agency administering the adult care component.
The final comment to address on this provision is the
recommendation that the SAE nondiscretionary allocation for the CACFP
be adjusted based on growth in the Program between the second preceding
year and the current year. The Department is unable to adopt this
recommendation because the time frame for determining the level of
nondiscretionary funds for the CACFP is statutory.
Miscellaneous Provisions
In addition to the changes described above, the Department proposed
a number of amendments intended to remove obsolete references, provide
clarification and incorporate the provision in Public Law 101-147
mandating cooperation with studies authorized by the Secretary. In
Sec. 235.1 and Sec. 235.2(s), the references to the Food Service
Equipment Assistance Program were deleted, as were references to Fiscal
Year 1986 in Sec. 235.5(b) and Fiscal Year 1980 in Sec. 235.7(c). Also,
the definition of ``State'' in Sec. 235.2(r) was revised by deleting
references to the Trust Territories and American Samoa and replacing
them with references to the Commonwealth of the Northern Marianas
Islands and the Republic of Palau, respectively. The Department notes
that separate SAE funds are no longer made available to the
Commonwealth of the Northern Marianas Islands; it is not necessary,
therefore, to include that entity in the definition at all.
Consequently, in this final regulation, the old references are replaced
by the single reference to the Republic of Palau.
To distinguish more clearly between nondiscretionary and
discretionary SAE funding, the proposed rule amended Sec. 235.4 by
redesignating paragraph (a) as paragraph (a)(1), adding new
introductory text to paragraph (a), redesignating paragraph (b) as
paragraph (a)(2) and adding new introductory text to paragraph (b) to
indicate the additional discretionary SAE funding designations. The
Department also proposed to delete the second sentence of
Sec. 235.4(b)(3)(iv) and add a new paragraph (i) to Sec. 235.4 to
clarify that funds allotted to State agencies under Sec. 235.4 are
subject to the reallocation provisions in Sec. 235.5(d).
Finally, the Department proposed changes to Sec. 235.7(c) to comply
with section 122(a)(2) of Public Law 101-147, which amended section
7(g) of CNA to require that SAE funds cannot be distributed unless the
State agrees to participate fully in any studies authorized by the
Secretary. The proposal deleted the phrase ``studies directed by
Congress and requested'' (by the Secretary) and replaced it with the
word ``authorized'' as well as deleted the reference to Fiscal Year
1980.
The Department received only one comment on these provisions, and
that commenter observed that the requirement to participate in studies
authorized by the Secretary should not be imposed unless there is
specific authorizing legislation. As noted in the preamble to the
proposed rule and in this preamble above, the change was in response to
the specific mandate of Public Law 101-147. Therefore, the Department
is adopting this provision and the other miscellaneous amendments as
proposed. However, because of changes in the final rule in Sec. 235.4,
the proposed new Sec. 235.4(i) is now designated as Sec. 235.4(g).
The Department is also taking this opportunity to correct an
erroneous reference which was discovered subsequent to the publication
of the proposed rule. Section 235.7(b) contains a reference to
Sec. 235.4(c). In the proposed rule, Sec. 235.4(c) was redesignated
Sec. 235.4(f) because three new paragraphs were being inserted after
Sec. 235.4(b), and the reference was changed in Sec. 235.7(b) to
accommodate this redesignation. The Department notes, however, that the
original reference was incorrect, since Sec. 235.4(c) did not address
carryover. The correct reference should have been Sec. 235.6(a), and
this reference is being incorporated into Sec. 235.7(b) of this final
rule.
Changes are also made to Sec. 235.4(b)(4) to revise references to
reflect other changes made by this regulation and to correct an
obsolete reference to Sec. 235.4(f) which was renamed Sec. 235.4(c) by
an earlier regulation. This paragraph is also changed to clarify that
funds provided under this paragraph are allocated on a State basis for
the CACFP and the FDP, not for each State agency that administers these
programs.
Implementation
The provisions of section 122 affecting SAE funds were effective
October 1, 1989. Accordingly, the Department has already implemented
these requirements, and this rule is made effective 30 days after
publication.
List of Subjects in 7 CFR Part 235
Administrative practice and procedure, Child and Adult Care Food
Program, Food assistance programs, Grant administration,
Intergovernmental relations, National School Lunch Program, Reporting
and recordkeeping requirements, School Breakfast Program, Special Milk
Program.
Accordingly, 7 CFR part 235 is amended as follows:
PART 235--STATE ADMINISTRATIVE EXPENSE FUNDS
1. The authority citation for part 235 continues to read as
follows:
Authority: Secs. 7 and 10 of the Child Nutrition Act of 1966, 80
Stat. 888, 889, as amended (42 U.S.C. 1776, 1779).
Sec. 235.1 [Amended]
2. In Sec. 235.1, the second sentence is amended by removing the
words ``the Food Service Equipment Assistance Program (7 CFR Part
230)''.
Sec. 235.2 [Amended]
3. In Sec. 235.2:
a. Paragraph (r) is amended by removing the words ``American Samoa,
or the Trust Territory of the Pacific Islands'' and adding in their
place the words ``or the Republic of Palau''.
b. Paragraph (s)(2) is amended by removing the reference to part
230 in the first sentence.
4. In Sec. 235.4:
a. Paragraph (a) is redesignated as paragraph (a)(1), and new
paragraph (a) introductory text is added, the introductory text of
paragraph (b) is redesignated as paragraph (a)(2); and
[[Page 15462]] new paragraph (b) introductory text is added.
b. The first sentence of newly redesignated paragraph (a)(1) is
amended by removing the words ``For each fiscal year, FNS shall
allocate'' and the word ``agency'' the first time it occurs; the first
sentence is further amended by removing the words ``by such agency''
and adding in their place the words ``by such State''.
c. The first sentence of newly redesignated paragraph (a)(2) is
amended by removing the words ``For each fiscal year, FCS shall
allocate'' and by removing the words ``to each State agency'' and
adding in their place the words ``to each State''.
d. Paragraph (b)(1) is amended by removing the words ``For each
fiscal year, FCS shall allocate'' and the word ``agency''.
e. Paragraph (b)(2) is revised in its entirety.
f. The introductory text of paragraph (b)(3) is revised in its
entirety.
g. Paragraph (b)(3)(iv) is amended by removing the second sentence.
h. Paragraph (b)(4) is revised in its entirety.
i. Paragraphs (c) through (e) are redesignated as paragraphs (d)
through (f), respectively; and a new paragraph (c) is added.
j. Newly redesignated paragraphs (d) through (f) are amended by
adding paragraph headings.
k. In newly redesignated paragraph (f), the references to
paragraphs ``(a)'' and ``(b)'' are removed and references to paragraphs
``(a)(1)'' and ``(a)(2)'' are added in their place.
l. A new paragraph (g) is added.
The additions read as follows:
Sec. 235.4 Allocation of funds to States.
(a) Nondiscretionary SAE Funds. For each fiscal year, FCS shall
allocate the following:
* * * * *
(b) Discretionary SAE Funds. For each fiscal year, FCS shall
provide the following additional allocations:
* * * * *
(2) $30,000 to each State which administers the Food Distribution
Program (part 250 of this chapter) in schools and/or institutions which
participate in programs under parts 210, 220, 226 of this chapter.
(3) Amounts derived by application of the following four-part
formula to each State agency which is allocated funds under paragraph
(a) of this section:
* * * * *
(4) Funds which remain after the allocations required in paragraphs
(a)(1), (a)(2), (b)(1), (b)(2) and (b)(3) of this section, and after
any payments provided for under paragraph (c) of this section, as
determined by the Secretary, to those States which administer the Food
Distribution Program (part 250 of this chapter) in schools and/or
institutions which participate in programs under parts 210, 220, or 226
of this chapter and to those States which administer part 226 of this
chapter. The amount of funds to be allocated to each State for the Food
Distribution Program for any fiscal year shall bear the same ratio to
the total amount of funds made available for allocation to the State
for the Food Distribution Program under this paragraph as the value of
USDA donated foods delivered to the State for schools and institutions
participating in programs under parts 210, 220 and 226 of this chapter
during the second preceding fiscal year bears to the value of USDA
donated foods delivered to all the States for such schools and
institutions during the second preceding fiscal year. The amount of
funds to be allocated to each State which administers the Child and
Adult Care Food Program for any fiscal year shall bear the same ratio
to the total amount of funds made available for allocation to all such
States under this paragraph as the amount of funds allocated to each
State under paragraph (a)(2) of this section bears to the amount
allocated to all States under that paragraph.
(c) SAE Funds for the Child and Adult Care Food Program. If a State
elects to have a separate State agency administer the adult care
component of the Child and Adult Care Food Program, such separate State
agency shall receive a pro rata share of the SAE funds allocated to the
State under paragraphs (a)(2), (b)(1), and (b)(4) of this section which
is equal to the ratio of funds expended by the State for the adult care
component of the Child and Adult Care Food Program during the second
preceding fiscal year to the funds expended by the State for the entire
Child and Adult Care Food Program during the second preceding fiscal
year. The remaining funds shall be allocated to the State agency
administering the child care component of the Child and Adult Care Food
Program.
(d) SAE Start-up Cost Assistance for State Administration of Former
ROAPs. * * *
(e) SAE Funding Reduction Upon State Agency Termination of a Food
Service Program. * * *
(f) SAE Funds for ROAPs. * * *
(g) Reallocation. Funds allotted to State agencies under this
section shall be subject to the reallocation provisions of
Sec. 235.5(d).
5. In Sec. 235.5:
a. The first sentence of paragraph (b)(1) is amended by removing
the semicolon following the words ``upcoming fiscal year'' and adding
in its place a period, and by removing the remainder of the sentence.
b. Paragraph (e) is revised in its entirety.
The revision reads as follows:
Sec. 235.5 Payments to States.
* * * * *
(e) Return of funds. (1) In Fiscal Year 1991, up to 25 per cent of
the SAE funds allocated to each State agency under Sec. 235.4 may
remain available for obligation and expenditure in the second fiscal
year of the grant. In subsequent fiscal years, up to 20 percent may
remain available for obligation and expenditure in the second fiscal
year. The maximum amount to remain available will be calculated at the
time of the formula allocation by multiplying the appropriate
percentage by each State agency's formula allocation as provided under
Sec. 235.4(a) through (c). At the end of the first fiscal year, the
amount subject to the retention limit is determined by subtracting the
amount reported by the State agency as Total Federal share of outlays
and unliquidated obligations on the fourth quarter Standard Form (SF)
269, Financial Status Report, from the total amount of SAE funds made
available for that fiscal year (i.e., the formula allocation adjusted
for any transfers or reallocations). However, funds provided under
Sec. 235.4(d) are not subject to the retention limit. Any funds in
excess of the amount that remains available to each State agency shall
be returned to FCS.
(2) At the end of the fiscal year following the fiscal year for
which funds were allocated, each State agency shall return any funds
made available which are unexpended.
(3) Return of funds by the State agency shall be made as soon as
practicable, but in any event, not later than 30 days following demand
by FCS.
6. In Sec. 235.6:
a. Paragraph (a) is amended by revising the last sentence.
b. Paragraph (c) is revised in its entirety.
c. Paragraphs (d) and (f), previously reserved, are removed;
paragraphs (e), (g), and (h) are redesignated as (d), (e), and (f),
respectively, and a new paragraph (g) is added.
The revisions and addition read as follows:
Sec. 235.6 Use of funds.
(a) * * * Up to 25 per cent of funds allocated under Sec. 235.4(a)
through (c) [[Page 15463]] for Fiscal Year 1991 and up to 20 per cent
of funds allocated in subsequent fiscal years to a State agency may,
subject to the provisions of Sec. 235.5 of this part, remain available
for obligation and expenditure by such State agency during the
following fiscal year.
* * * * *
(c) The SAE funds allocated under Sec. 235.4(b)(2), (b)(4), and (d)
shall be used exclusively for Food Distribution Program administrative
expenses for the programs under Parts 210, 220, and 226 of this chapter
by any distributing agency which receives such funds. SAE funds
allocated under Sec. 235.4(a)(1), (a)(2), (b)(1), (b)(3) and (f), and
those funds for the Child and Adult Care Food Program under (b)(4)
which are not otherwise redirected for the Food Distribution Program
under Sec. 235.4(d) may be used to assist in the administration of the
Food Distribution Program for such purposes. However, no funds
designated for the exclusive use of the Food Distribution Program may
be transferred by any State agency for other purposes. Furthermore, for
each fiscal year beginning with Fiscal Year 1993, expenditures of funds
from State sources for administrative costs incurred in the
distribution of USDA donated foods to schools and institutions which
participate in programs governed by parts 210, 220, and/or 226 of this
chapter shall not be less than the amount of such funds expended in
Fiscal Year 1991.
* * * * *
(g) FCS shall allocate, for the purpose of providing grants on an
annual basis to public entities and private nonprofit organizations
participating in projects under section 18(c) of the National School
Lunch Act, not more than $4,000,000 in each of Fiscal Years 1993 and
1994. Subject to the maximum allocation for such projects for each
fiscal year, at the beginning of each of Fiscal Years 1993 and 1994,
FCS shall allocate, from funds available under Sec. 235.5(d) that have
not otherwise been allocated to States, an amount equal to the
estimates by FCS of the funds to be returned under paragraph (a) of
this section, but not less than $1,000,000 in each fiscal year. To the
extent that amounts returned to FCS are less than estimated or are
insufficient to meet the needs of the projects, FCS may allocate
amounts to meet the needs of the projects from funds available under
this section that have not been otherwise allocated to States. FCS
shall reallocate any of the excess funds above the minimum level in
accordance with Sec. 235.5(d).
Sec. 235.7 [Amended]
7. In Sec. 235.7,
a. The second sentence of paragraph (b) is amended by removing the
reference to ``Sec. 235.4(c) of this part'' and adding in its place the
reference to ``Sec. 235.6(a)''.
b. The first sentence of paragraph (c) is amended by removing the
words ``directed by Congress and requested'' and adding in their place
the word ``authorized''. Paragraph (c) is further amended by removing
the words ``FY '80'' from the last sentence.
Sec. 235.11 [Amended]
8. In Sec. 235.11:
a. Paragraph (b)(2) is amended by removing the reference to
``Sec. 235.4(a)'' and adding in its place the reference to ``Sec. 235.4
(a)(1)''.
b. Paragraph (b)(3) is amended by removing the reference to
``Sec. 235.4(b)'' and addding in its place the reference to
``Sec. 235.4(a)(2)''.
c. Paragraph (b)(4) is amended by removing the reference to
``Sec. 235.4(a)'' and adding in its place the reference to ``
Sec. 235.4(a)(1)''.
d. Paragraph (b)(7) is amended by removing the reference to
``Sec. 235.4(e)'' and adding in its place the reference to
``Sec. 235.5(d)''.
Dated: March 16, 1995.
William E. Ludwig,
Administrator.
[FR Doc. 95-7310 Filed 3-23-95; 8:45 am]
BILLING CODE 3410-30-U
