[Federal Register Volume 59, Number 9 (Thursday, January 13, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-838]
[[Page Unknown]]
[Federal Register: January 13, 1994]
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DEPARTMENT OF AGRICULTURE
Food and Nutrition Service
7 CFR Parts 210, 215 and 220
National School Lunch Program, Special Milk Program for Children
and School Breakfast Program: Finalization of Coordinated Review Effort
Interim Rule
AGENCY: Food and Nutrition Service, USDA.
ACTION: Final rule.
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SUMMARY: On July 17, 1991, the Department published a final rule in the
Federal Register which set forth the Coordinated Review Effort, a
unified accountability system required by the Child Nutrition and WIC
Reauthorization Act of 1989. On August 26, 1992, the Department
published an interim rule in the Federal Register which became
effective on September 25, 1992, and which modified a number of
provisions contained in the 1991 final rule. This rulemaking responds
to the comments received during the interim rule comment period and
adopts as final, with changes, the provisions which were set forth in
the August 26, 1992 interim rule. These revisions are a part of the
Coordinated Review Effort and are intended to facilitate the review
activities of the State agencies.
EFFECTIVE DATE: February 14, 1994.
FOR FURTHER INFORMATION CONTACT: Robert M. Eadie or Charles Heise,
Policy and Program Development Branch, Child Nutrition Division, FNS,
USDA, 3101 Park Center Drive, room 1007, Alexandria, Virginia 22302,
Phone: 703-305-2620.
SUPPLEMENTARY INFORMATION:
Classification
This final rule is issued in conformance with Executive Order
12866.
This rule has been reviewed with regard to the requirements of the
Regulatory Flexibility Act (5 U.S.C. 601 through 612). The Acting
Administrator of the Food and Nutrition Service has certified that this
rule will not have a significant economic impact on a substantial
number of small entities. This rule will affect State agencies and
school food authorities since this rule is expected to clarify
regulatory requirements and facilitate the review activities of State
agencies. However, the effect of these modifications will not be
significant since State agencies and school food authorities already
conduct review activities under the Coordinated Review Effort and this
rule will not increase their current Coordinated Review Effort
activities.
The National School Lunch Program, Special Milk Program for
Children and the School Breakfast Program are listed in the Catalog of
Federal Domestic Assistance under Nos. 10.555, 10.566, and 10.553,
respectively, and are subject to the provisions of Executive Order
12372 which requires intergovernmental consultation with State and
local officials. (7 CFR part 3015, subpart V and final rule-related
notice at 48 FR 29112, June 24, 1983.)
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 provisions, all applicable administrative procedures
must be exhausted. In the National School Lunch Program, the
administrative procedures are set forth under the following
regulations: (1) School food authority appeals of State agency findings
as a result of a Coordinated Review must follow State agency hearing
procedures as established pursuant to 7 CFR 210.18(q); (2) school food
authority appeals of FNS findings as a result of a Coordinated Review
must follow FNS hearing procedures as established pursuant to 7 CFR
210.30(d)(3); and (3) State agency appeals of State Administrative
Expense fund sanctions (7 CFR 235.11(b)) must follow the FNS
Administrative Review Process as established pursuant to 7 CFR
235.11(f).
Information Collection
The reporting and recordkeeping requirements identified in this
rule have been approved by the OMB for use through September 30, 1994.
The OMB control number is 0584-0006.
Background
Legislative History
Section 110 of Public Law 101-147, enacted November 10, 1989,
amended the National School Lunch Act (42 U.S.C. 1751-1769c) by adding
a new section 22 which states: ``There shall be a unified system
prescribed and administered by the Secretary for ensuring that local
food service authorities that participate in the school lunch program
under this Act comply with the provisions of this Act * * *. [E]ach
State educational agency shall--(A) require that local food service
authorities comply with the provisions of this Act; and (B) ensure such
compliance through reasonable audits and supervisory assistance
reviews. * * * In carrying out this section, the Secretary shall--(1)
assist the State educational agency in the monitoring of programs
conducted by local food service authorities; and (2) through management
evaluations, review the compliance of the State educational agency and
the local school food service authorities with regulations issued under
this Act * * *.''
Regulatory History
On July 17, 1991, the Department published a final rule in the
Federal Register (56 FR 32920) which set forth the Coordinated Review
Effort, a unified accountability system required by the Child Nutrition
and WIC Reauthorization Act of 1989. On August 26, 1992, the Department
published an interim rule in the Federal Register (57 FR 38579) which
modified a number of provisions contained in the July 17 final rule.
The interim rulemaking was effective on September 25, 1992 and provided
for a 60-day comment period which ended on October 26, 1992. Fifty-four
comments were received during the comment period. The Department would
like to take this opportunity to thank those individuals who commented
on the interim rulemaking. It was clear that commenters put a great
deal of effort in describing their concerns and offering their
suggestions. The Department is most appreciative of that effort. This
final rule responds to the comments received during the interim rule
comment period and restates, as appropriate, the provisions set forth
in the interim rule. The provisions set forth in the interim rule:
Implementation Dates--Authorized FNS to approve a State
agency's written request showing good cause to delay implementation of
the Coordinated Review Effort from July 1, 1992 to January 1, 1993.
(Sec. 210.18(a))
Residential Child Care Institutions--Excluded residential
child care institutions from the 100/100 school selection criteria.
(Sec. 210.18(e))
Application Review Procedures--Allowed State agencies the
option of reviewing (a) all approved free and reduced price
applications effective for the review period (as required in the July
17, 1991 final Coordinated Review Effort rule) or (b) all approved free
and reduced price applications back to the beginning of the school
year, or (c) all approved free and reduced price applications effective
on the day(s) the review is conducted. (Sec. 210.18(g))
Notice of Fiscal Action or Withholding Payment--Required
State agencies to advise school food authorities in writing of the
grounds for denial of all or a part of a Claim for Reimbursement or
withholding of payment resulting from a review conducted under
Sec. 210.18 and of the appeal rights available to affected school food
authorities. (Sec. 210.18(j))
Withholding Payment--Limited mandatory withholding of
payments on a follow-up review. Specifically, the interim rule limited
mandatory withholding of all Program payments to those school food
authorities with critical area violations which exceed review
threshold(s). In addition, the interim rule required the withholding of
a minimum of 10 percent of Program payments where serious problems
continue to exist in either of two aspects of the general areas of
review, verification and recordkeeping. (Sec. 210.18(l))
Withholding Payment Exception--Allowed State agencies to
reduce the amount withheld from a school food authority which fails to
take corrective action by as much as 60 percent of the total Program
payments when it is determined to be in the best interest of the
Program. Withholding less than 40 percent would continue to require the
approval of FNS. (Sec. 210.18(l))
Fiscal Action--Allowed State agencies to limit fiscal
action from the point corrective action occurs back through the
beginning of the review period for errors of certification, issuance of
benefits and updating eligibility status identified on an
administrative review, provided corrective action occurs.
(Sec. 210.18(m))
Administrative Appeal Process--Established an
administrative appeal procedure which allows school food authorities
the opportunity to appeal the denial of all or a part of a Claim for
Reimbursement or withholding of payments which result from a review
required under Sec. 210.18. (Sec. 210.18(q), Sec. 210.30(d),
Sec. 215.11(b)(2), and Sec. 220.13(f)(2))
Overpayment Disregard--Allowed FNS, the Department's
Office of Inspector General and State agencies to disregard any
overpayment identified by management evaluations, reviews or audits if
the total, in any fiscal year, does not exceed $600. (Sec. 210.19(d),
Sec. 215.13(e) and Sec. 220.15(f))
Commenter concerns, corrections and revisions addressed in this
rulemaking are discussed in this preamble by the pertinent regulatory
citation.
Section 210.18(a) Implementation Dates
Section 210.18(a), Implementation dates, of the interim rule,
authorized FNS to approve a State agency's written request to delay
implementation of the Coordinated Review Effort from July 1, 1992 to
January 1, 1993 if FNS determined that the State agency demonstrated
good cause to delay implementation.
Nineteen commenters to the interim rule expressed concerns
regarding the start of the staggered review cycles which resulted from
the delayed start option. In general, commenters sought to standardize
the review cycle so that all State agencies are on the same cycle. A
number of beginning and ending dates were suggested; however, there was
no consensus of opinion.
Two commenters, on behalf of the same State agency, requested that
FNS allow a 5-year review cycle for those State agencies which review
all other school related programs on a 5-year cycle.
The Department concurs that a standardized cycle of review is in
the best interest of the Program. To protect the interests of both
those State agencies beginning on July 1, 1992 and of those beginning
on January 1, 1993, the Department has determined to extend the first
year of the first 4-year cycle. Thus, paragraph (a) is unchanged and
the first sentence of introductory paragraph (c) has been revised to
read: ``The first year of the first 4-year review cycle began on July
1, 1992, or as otherwise authorized under paragraph (a) of this section
and shall end on June 30, 1994. For each State agency, the first 4-year
review cycle shall end on June 30, 1997.''
Given the commenter concerns regarding standardization of the
review cycle in this final rule, the Department has determined to
retain the 4-year cycle, thus making no provision for the 5-year cycle
sought by two commenters. However, the Department will continue to
consider this issue for possible future revision.
Section 210.18(e) Residential Child Care Institutions
Section 210.18(e), Number of schools to review, as amended by the
interim rule, limited the number of multi-site residential child care
institutions a State agency needs to review to the minimum number
identified in Table A. Paragraph (e)(1) of the interim rule stated
``Except for residential child care institutions, the State agency
shall review all schools with a free average daily participation of 100
or more and a free participation factor of 100 percent or more. In no
event shall the State agency review less than the minimum number of
schools in Table A.'' (Table A was not changed.)
Generally, residential child care institutions are single unit
institutions; however, in some cases, the residential child care
institution has a number of units that report to a single governing
body, (e.g., State administered juvenile detention centers). The term
``multi-site residential child care institution'' is intended to refer
to those institutions which have a number of units that report to a
single governing body.
Six commenters to the interim rule, all representing State
agencies, addressed this provision. All were in complete support of the
interim provision to limit the number of multi-site residential child
care institutions a State agency needed to review to the minimum number
identified in Table A. For this reason, the provisions set forth in
paragraph (e)(1) of the interim rule are adopted without change.
Section 210.18(g) Application Review Procedures
Section 210.18(g), Critical areas of review, as amended by the
interim rule, expanded the methodology for the review of the free and
reduced price applications. Rather than limiting the review of the free
and reduced price applications to those applications effective for the
review period, paragraph (g)(1) of the interim rule allowed the State
agency to review (a) all approved free and reduced price applications
effective for the review period; or (b) all approved free and reduced
price applications back to the beginning of the school year; or (c) all
approved free and reduced price applications effective on the day(s)
the review is conducted.
Thirteen commenters addressed this provision of the interim rule.
Virtually all commenters were supportive of this provision; however, a
number of commenters requested expanding the provision to include
specific procedures to facilitate implementation of this provision.
Some commenters questioned implementation of this provision, as well as
what is meant by ``statistically valid sample'' and how potential
reclaims (overpayment of Federal funds) would be calculated. Some
commenters were confused about references to an abbreviated application
provision and whether it became effective on September 25, 1992, as did
the other provisions of the interim rule.
This final rule leaves unchanged the provisions of paragraph (g)(1)
as presented in the interim rule. The Department would like to assure
commenters that instructions for implementation of this provision, for
implementation of the statistical sampling provision and for
information on how to calculate potential reclaims are addressed in the
guidance materials prepared for the Coordinated Review Effort. These
materials were developed by FNS, with the help of State agency and
local personnel. The materials were distributed to State agencies in
the Spring of 1993. Thus, all of the questions raised by commenters can
be resolved through reference to these materials.
The Department would like to take this opportunity to clarify a
misunderstanding regarding an abbreviated review of the free and
reduced price applications. The development of procedures which would
enable State agencies to conduct an abbreviated review of free and
reduced price applications is currently underway. However, it is the
Department's position that these procedures would benefit from the
solicitation of public comment. Thus, the Department is also developing
a proposed rulemaking which will set forth the proposed procedures and
request comments from the public. Since the Department intends to
pursue a proposed rulemaking, these procedures will not become
effective until such time as the proposal is issued, comments are
received and analyzed, and a final rule is published in the Federal
Register.
Section 210.18(j) Notice of Fiscal Action or Withholding Payment
Section 210.18(j), Exit conference and notification, as amended by
the interim rule, required the State agency to notify school food
authorities in writing of the grounds for denial of all or a part of a
Claim for Reimbursement resulting from a review conducted under
Sec. 210.18. The notice, ``which shall be sent by certified mail,
return receipt requested, shall also include a statement indicating
that the school food authority may appeal the denial of all or a part
of a Claim for Reimbursement or withholding payment and the entity
(i.e., FNS or State agency) to which the appeal should be directed.''
Only one commenter, a State agency, addressed this provision. While
agreeing that the information should be made available to the school
food authority, the commenter observed that the information could be
provided at the entrance or exit conference. Requiring a certified
letter was seen as ``overkill''.
Since only one commenter found these provisions burdensome, the
Department leaves unchanged the provision as set forth in the interim
rule. The Department believes the ``certified'' letter requirement is
necessary to document that the State agency has met the required
timeframes.
Section 210.18(l)(1) Withholding Payment
Section 210.18(l)(1), Withholding payment, as amended by the
interim rule, limited the mandatory withholding provision to those
school food authorities with critical area violations which exceed the
review threshold(s) and/or where serious problems continue to exist in
either of two aspects of the general areas of review, verification and
recordkeeping. In addition, rather than withholding all Program
payments for serious violations of the verification or recordkeeping
requirements, paragraph (l)(1)(iv) required the State agency to
withhold a minimum of 10 percent of the Program payments if the State
agency finds, on a follow-up review, that serious problems continue to
exist in the school food authority's verification or recordkeeping
activities.
Of the 13 commenters addressing this provision, two commenters
disapproved of withholding payment for any reason whereas one commenter
approved of the interim rule provision. Other commenters offered
suggestions to modify the interim provisions. For example, four
commenters suggested limiting mandatory withholding to critical areas,
one commenter suggested limiting mandatory withholding for both the
critical and general areas to 10 percent of the Program payments, and
one commenter suggested withholding only those payments related to
critical area violations in the specific schools which caused a
threshold to be exceeded.
Several commenters opposed the 10 percent withholding provision
because it was perceived as burdensome and too complex to administer.
Commenters argued that more guidance will be needed to implement this
provision. Two commenters asked for a definition of ``serious
problems''.
This final rule limits the mandatory withholding provision to those
school food authorities with critical area violations which exceed the
review threshold(s). State agencies are encouraged to withhold payments
for serious problems in the areas of verification and recordkeeping;
however, the mandatory minimum withholding for serious verification and
recordkeeping problems has been removed.
Section 210.18(l)(3) Withholding Payment Exception
Section 210.18(l)(3), Exceptions, as amended by the interim rule,
allowed the State agency to withhold as little as 40 percent of total
program payments. To withhold less than 40 percent continued to require
the approval of FNS.
Of the three commenters addressing this provision, two commenters
supported the flexibility of this provision and one commenter argued
that withholding 40 percent is too burdensome and too complex to
administer. It was suggested that where funds for an individual school
can be separately identified, their claim for reimbursement be withheld
instead of that of the entire school food authority.
This final rule makes no change to the exception authorized under
paragraph (l)(3) in the interim rule. Commenter suggestions are being
taken under advisement pending a review of withholding situations as
they arise.
Section 210.18(m) Fiscal Action
Section 210.18(m), Fiscal action, as amended by the interim rule,
allowed a State agency to limit fiscal action for errors found on a
first review related to certification, updating eligibility and issuing
benefits. For first review errors related to certification, issuance of
benefits and updating eligibility status, the State agency was
authorized to limit fiscal action to the period from the point
corrective action occurs back through the beginning of the review
period, provided corrective action occurs.
Of the 14 commenters addressing this interim provision all
expressed varying degrees of support. Two commenters representing the
same State agency suggested that while limiting fiscal action to the
review period is appropriate, this change, when taken together with the
expanded application review methodology allowing options for the review
period and the increased overpayment disregard threshold, may result in
future increased error rates since there is less likelihood of having
to repay funds which were incorrectly claimed. These commenters
questioned whether it is appropriate to have all three changes.
Five commenters argued that the interim rule changes were not
sufficient to improve fiscal action requirements set forth in the final
rule. These commenters opposed fiscal action back to the beginning of
the year for ``non-correctable'' errors. Several of these commenters
suggested that there must be an error tolerance in the evaluation of
the eligibility procedures and in the evaluation of meal components.
Another concern related to allowing underclaims to offset fiscal
action.
This final rule adopts the provision as set forth in the interim
rule. As with the withholding of payments provisions, the commenter
suggestions are being taken under advisement pending a review of the
implementation of the fiscal action requirements. The Department would
like to take this opportunity to point out that existing policy
authorizes State agencies to allow underclaims to offset overclaims.
Section 210.18(q) and Sec. 210.30(d) Administrative Appeal Process
Sections 210.18(q), School food authority appeal of State agency
findings, and Sec. 210.30(d), School food authority appeal of FNS
findings, as set forth in the interim rule, established appeal
procedures so that school food authorities could appeal the denial of
all or a part of a Claim for Reimbursement or withholding of payments
resulting from a review under the Coordinated Review Effort.
Of the 10 commenters addressing this provision, six commenters were
supportive although several observed that the procedures were somewhat
cumbersome. Two commenters representing the same State agency believed
the appeal procedures were unnecessary, very cumbersome and overly
prescriptive. These commenters observed that school food authorities
presently have the opportunity to provide documentation to reduce
fiscal action. Two commenters expressed concerns about the timeframes
specified.
This final rule leaves unchanged the appeal procedures as stated in
Sec. 210.18(q) and Sec. 210.30(d) of the interim rule and the authority
for such appeals as set forth in 7 CFR 215.11(b)(2) and 7 CFR
220.13(f)(2). The appeal procedures were modeled after those used in
the Child and Adult Care Food Program and, as such, have been tested
over the years. As these procedures are implemented in the National
School Lunch Program, the Department would be willing to consider
modifications which would expedite the process. The Department intends
to take commenter concerns under advisement until such time.
Section 210.19(d), Sec. 215.13(e) and Sec. 220.15(f) Overpayment
Disregard
Section 210.19(d), Management evaluations, as amended by the
interim rule, raised the overpayment disregard from $250 to $600. The
interim rule made similar changes to 7 CFR 215.13(e) and 7 CFR
220.15(f). As a result of this change, State agencies, FNS, and the
Department's Office of the Inspector General were authorized to
disregard any overpayment if the total overpayment does not exceed $600
for any fiscal year.
Eleven commenters supported the increased overpayment disregard;
however, several commenters suggested that the disregard should be
greater than $600. Examples of $1,000 and $750 were provided. On behalf
of Arizona, two commenters pointed out that the State Attorney
General's Office has indicated that Arizona prohibits disregarding any
overpayment. The Arizona State agency suggested language which would
enable the State agency to employ the $600 disregard.
The final rule adopts the interim provision with only a minor
technical change until such time as data is available to re-evaluate
the $600 figure. In the case of the Arizona State agency, the State's
rule of disregard does not authorize an amount in excess of the Federal
minimum amount set forth in this final rule, but rather, sets a more
stringent monetary standard. Because an overpayment disregard is
discretionary on the part of the evaluating entity (unless there is
evidence of violations of criminal law or civil fraud statutes), the
prohibition in Arizona which prevents the State agency from
disregarding any overpayment discovered during an evaluation does not
conflict with this final rule. The Department will not, therefore,
revise the final provision to allow the Arizona State agency to employ
the $600 disregard.
Miscellaneous Correction
Section 210.19(c)(2)(ii), Fiscal action, as amended by the interim
rule, required fiscal action to be extended back to that point in time
during the current school year when the infraction first occurred,
``[u]nless otherwise specified under Sec. 210.18(m) * * *.'' The
wording ``[u]nless otherwise specified under Sec. 210.18(m)'' was a
technical change to accommodate the limitation on fiscal action
authorized under Sec. 210.18(m) of the interim rule.
The interim rule made an inadvertent change to this provision.
Under the 1991 final rule, fiscal action was required ``back to the
beginning of the school year or that point in time during the current
school year when the infraction first occurred, as applicable.'' The
interim rule incorrectly restated this provision, by replacing the
words ``as applicable'' with the words ``whichever is earlier.'' This
change had the effect of making the fiscal action provision more
stringent; this was unintentional. For this reason, this final rule
replaces the words ``whichever is earlier'' with the words ``as
applicable'' to ensure that it is correctly stated.
List of Subjects
7 CFR Part 210
Children, Commodity School Program, Food assistance programs,
Grants programs--social programs, National School Lunch Program,
Nutrition, Reporting and recordkeeping requirements, Surplus
agricultural commodities.
7 CFR Part 215
Children, Food assistance programs, Grant programs--social
programs, Milk, Nutrition, Reporting and recordkeeping requirements,
Special Milk Program for Children.
7 CFR Part 220
Children, Food assistance programs, Grant programs--social
programs, Nutrition, Reporting and recordkeeping requirements, School
Breakfast Program.
Accordingly, the interim rule amending 7 CFR parts 210, 215 and 220
which was published at 57 FR 38579 on August 26, 1992, and became
effective on September 25, 1992, is adopted as final, with the
following changes:
PART 210--NATIONAL SCHOOL LUNCH PROGRAM
1. The authority citation for 7 CFR part 210 is revised to read as
follows:
Authority: 42 U.S.C. 1751-1760, 1779.
2. In Sec. 210.18,
a. The first sentence of the introductory text of paragraph (c) is
removed, and two new sentences are added in its place to read as set
forth below.
b. The semicolon and the words ``and/or'' at the end of paragraph
(l)(1)(iii) are removed and replaced with a period; paragraph
(l)(1)(iv) is removed, and paragraph (l)(1)(v) is redesignated as
paragraph (l)(1)(iv).
The addition reads as follows:
Sec. 210.18 Administrative reviews.
* * * * *
(c) * * * The first year of the first 4-year review cycle began on
July 1, 1992, or as otherwise authorized under paragraph (a) of this
section and shall end on June 30, 1994. For each State agency, the
first 4-year review cycle shall end on June 30, 1997. * * *
* * * * *
3. In Sec. 210.19,
a. The first sentence of paragraph (c)(2)(ii) is revised to read as
set forth below.
b. The fourth sentence of paragraph (d) is amended by removing the
word ``and'' between the words ``reviews'' and ``audits'' and adding
the word ``or'' in its place.
The revision reads as follows:
Sec. 210.19 Additional responsibilities.
* * * * *
(c) * * *
(2) * * *
(ii) Unless otherwise specified under Sec. 210.18(m) of this part,
fiscal action shall be extended back to the beginning of the school
year or that point in time during the current school year when the
infraction first occurred, as applicable.* * *
* * * * *
7 CFR PART 215--SPECIAL MILK PROGRAM FOR CHILDREN
1. The authority citation is revised to read as follows:
Authority: 42 U.S.C. 1772, 1779.
Sec. 215.13 [Amended]
2. In Sec. 215.13, the first sentence of paragraph (e) is amended
by removing the word ``and'' between the words ``reviews'' and
``audits'' and adding the word ``or'' in its place.
PART 220--SCHOOL BREAKFAST PROGRAM
1. The authority citation is revised to read as follows:
Authority: 42 U.S.C. 1773, 1779, unless otherwise noted.
Sec. 220.15 [Amended]
2. In Sec. 220.15, the first sentence of paragraph (f) is amended
by removing the word ``and'' between the words ``reviews'' and
``audits'' and adding the word ``or'' in its place.
Dated: January 3, 1994.
George A. Braley,
Acting Administrator.
[FR Doc. 94-838 Filed 1-12-94; 8:45 am]
BILLING CODE 3410-30-U
