# Requirements for the Distribution and Control of Donated Foods > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/fr%3A2014-24613 ## Record - **Collection:** Federal Register - **Document type:** Proposed Rule - **Published:** October 22, 2014 - **Citation:** 79 FR 63224 ## Text DEPARTMENT OF AGRICULTURE Food and Nutrition Service 7 CFR Parts 250 and 251 RIN 0584-AE29 Requirements for the Distribution and Control of Donated Foods AGENCY: Food and Nutrition Service, USDA. ACTION: Proposed rule. SUMMARY: This rule proposes to revise and clarify requirements to ensure that USDA donated foods are distributed, stored, and managed in the safest, most efficient, and cost-effective manner, at State and recipient agency levels. The rule would also reduce administrative and reporting requirements for State distributing agencies, revise or clarify regulatory provisions relating to accountability for donated foods, and rewrite much of the regulations in a more user-friendly, “plain language,” format. Lastly, the rule proposes to revise and clarify specific requirements to conform more closely to related requirements elsewhere in the Code of Federal Regulations. In formulating the proposals, the Food and Nutrition Service (FNS) has utilized input received from program administrators, industry representatives, and other organizations at national conferences and other meetings, and through email or other routine communications with such parties. DATES: To be assured of consideration, comments must be received on or before January 20, 2015. ADDRESSES: The Food and Nutrition Service invites interested persons to submit comments on this proposed rule. You may submit comments, identified by RIN number 0584-AE29, by any of the following methods: Email: Send written comments to Dana.Rasmussen@fns.usda.gov. Include RIN number 0584-AE29 in the subject line of the message. Mail: Send written comments to Dana Rasmussen, Branch Chief, Policy Branch, Food Distribution Division, Food and Nutrition Service, U.S. Department of Agriculture, Room 500, 3101 Park Center Drive, Alexandria, Virginia 22302-1594. Hand Delivery or Courier: Deliver written comments to the above address. Federal eRulemaking Portal: Go to http://www.regulations.gov. Follow the online instructions for submitting comments. Further information on the submission of comments or the review of comments submitted may be found under Part III, Procedural Matters, under SUPPLEMENTARY INFORMATION . FOR FURTHER INFORMATION CONTACT: Dana Rasmussen at the above address or telephone (703) 305-2662, or by email at Dana.Rasmussen@fns.usda.gov. SUPPLEMENTARY INFORMATION: I. Background The Department of Agriculture's (the Department or USDA) Food and Nutrition Service (FNS) provides food to State distributing agencies for use in food assistance programs as authorized in the Richard B. Russell National School Lunch Act (42 U.S.C. 1751 et seq.), the Emergency Food Assistance Act of 1983 (7 U.S.C. 7501, et seq.), the Food and Nutrition Act of 2008 (7 U.S.C. 2011, et seq.), the Agriculture and Consumer Protection Act of 1973 (7 U.S.C. 612c note), the Older Americans Act of 1965 (42 U.S.C. 3001, et seq.), and the Robert T. Stafford Disaster Relief and Emergency Assistance Act (42 U.S.C. 5121, et seq.). State distributing agencies, in turn, distribute the donated foods (which are also referred to as USDA Foods) to recipient agencies (such as school food authorities, food banks, and food pantries) which provide assistance to eligible persons or households in specific food assistance programs, to needy persons served by charitable institutions, or to persons victimized by a disaster or situation of distress. The general regulations for the storage, distribution, and control of donated foods by State distributing agencies and recipient agencies are included in 7 CFR part 250. Other Federal regulations include requirements specific to particular food assistance programs that receive donated foods—e.g., 7 CFR part 251 for The Emergency Food Assistance Program (TEFAP) and 7 CFR part 210 for the National School Lunch Program (NSLP). Following the enactment of the Commodity Distribution Reform Act and WIC Amendments of 1987, (7 U.S.C. 612c note), hereinafter referred to as the Commodity Distribution Reform Act, a final rule was issued in October 1989 amending 7 CFR part 250 to require State distributing agencies to evaluate the efficiency and cost-effectiveness of their method of distribution of donated foods to recipient agencies (54 FR 42476). The amended regulations required distributing agencies to utilize a commercial storage and distribution system, if such system was determined to be more cost-effective. As a result, most State distributing agencies currently procure the services of commercial storage facilities to store donated foods and distribute them to recipient agencies, or permit direct shipments from vendors of donated foods to recipient agencies, the contracted commercial storage facilities of such agencies, or to processors for processing of donated foods into end products. However, for donated foods distributed in NSLP, most school food authorities must pay a charge to help meet storage and distribution costs for donated foods. The charge imposed on school food authorities varies widely from State to State. This rule proposes to revise current requirements in 7 CFR part 250 to ensure that State distribution systems provide the most efficient and cost-effective service for school food authorities in provision of donated foods, while reducing the administrative burden on distributing agencies in providing such service. In 2002, the Department, in collaboration with State agencies and school food authorities, developed procedures and instructions for responding to donated foods subject to a food recall. Such procedures and instructions ensure that donated foods subject to a food recall are isolated, inspected, and recovered in an expeditious manner. This rule proposes to include a section on donated food safety and disposition, and to require that State distributing agency agreements and contracts include provisions to ensure compliance with all applicable Federal, State or local requirements relating to food safety and food recalls. In October 2002, 7 CFR part 250 was amended to permit school food authorities in NSLP, as well as other recipient agencies that use donated foods, to provide meals to recipients, store donated foods together with commercially purchased foods, and maintain a single inventory record of the donated and purchased foods (67 FR 65015). The single inventory management option reduced the workload for school food authorities in control and monitoring of their food inventories. In August 2008, 7 CFR part 250 was amended to further clarify the single inventory management option for school food authorities, and to revise other requirements to ensure that such entities receive the full benefit of the donated foods provided in NSLP (73 FR 46189). However, some confusion still exists regarding the application of the single inventory management option. This rule proposes to further clarify storage and inventory management requirements at the distributing and recipient agency levels. In order to ensure compliance with requirements for the processing of donated foods, the State distributing agency must currently conduct an on-site review of in-State processors at least once every two years. This rule proposes to remove this requirement, which is burdensome and costly for distributing agencies, and to require instead that in-State processors obtain independent Certified Public Accountant (CPA) audits, as currently required of multi-State processors. The rule would also remove requirements for the distributing agency in verification of sales of processed end products, and in reporting acceptability of donated foods to FNS. The Department has developed instructions and guidance in areas of donated food distribution related to food recalls, the use of donated foods in disaster situations, ensuring that restitution is made for donated food losses, shipment and receipt of donated foods, and options in the processing of donated foods. This rule proposes to include references to these materials to help the reader better understand standards and procedures relating to specific aspects of the distribution and control of donated foods. This rule also proposes to provide references to other applicable Federal regulations to help the reader identify Federal requirements affecting the distribution and control of donated foods that are beyond the scope of this proposed rule. Lastly, the rule proposes to rewrite and restructure much of 7 CFR part 250 in a more user-friendly, “plain language,” format. Specific proposals for change or clarification are discussed more fully in the next section of the preamble. II. Discussion of the Rule's Provisions 7 CFR Part 250 A. Subpart A—General Purpose and Administration We propose to completely revise current Subpart A of 7 CFR part 250 to more clearly present the general purpose and use of donated foods, the definitions applicable to 7 CFR part 250, the responsible administrative agencies in the distribution and control of donated foods at Federal and State levels, and civil rights requirements. Some of these requirements are located in current Subpart B. Accordingly, we propose to change the heading of Subpart A to General Purpose and Administration, with new sections as described in the following paragraphs. 1. Purpose and Use of Donated Foods, § 250.1 In § 250.1, we propose to describe the purpose of donated foods, the general requirements for their use, and the legislative sanctions that apply in the event that they are used improperly. In § 250.1(a), we indicate that the Department purchases foods for donation in specific food assistance programs or to provide assistance to needy persons, in accordance with legislation authorizing such assistance in specific programs or providing for removal of market surpluses and support of food prices. In § 250.1(b), we propose to include the stipulation, in current § 250.13(a)(1), that donated foods must be distributed and used in accordance with the requirements of 7 CFR part 250. We propose to indicate that other Federal regulations also apply to specific programs (e.g., 7 CFR part 251 includes requirements for donated foods provided in TEFAP). We propose to include the provision, in current § 250.13(a)(7), that permits donated foods to be used in activities designed to test their effective use in specific programs (e.g., in nutrition classes or cooking demonstrations). However, we propose to remove the need for prior approval to permit such use. In accordance with current § 250.13(a)(1)(ii), donated foods may not be sold, exchanged, or otherwise disposed of without prior approval of the Department. And, in accordance with current § 250.15(a)(3), recipients may not be required to make any payments, or perform any services, in connection with the receipt of donated foods. We propose to include these requirements in § 250.1(b) of this proposed rule, with some clarification. We propose to prohibit the sale, exchange, or other disposition of donated foods, or their use to require recipients to make any payments, or perform any services, except as specifically permitted in 7 CFR part 250, or in other Federal regulations. We also propose to include the requirement, in current § 250.15(a)(3), that donated foods may not be used to solicit voluntary contributions, except for donated foods provided in the Nutrition Services Incentive Program (NSIP), which was formerly called the Nutrition Program for the Elderly. In § 250.1(c), we propose to include, in streamlined form, the sanctions established under the Richard B. Russell National School Lunch Act (42 U.S.C. 1760) and the Agriculture and Consumer Protection Act of 1973 (7 U.S.C. 612c note) for persons who embezzle, willfully misapply, steal, or obtain by fraud, donated foods, or funds deriving from donated foods. These sanctions are included in current § 250.13(i). 2. Definitions, § 250.2 In § 250.2, we propose to include the definitions applicable to 7 CFR part 250, which are included in current § 250.3. Although most of the definitions are included without change, we have chosen to set out all definitions in this rule, in the interest of clarity. However, this preamble addresses only those current definitions that we are proposing to remove or revise and the definitions that we are proposing to add. We propose to remove the definitions of “Commodities”, “Disaster victims”, “Discount system”, “FNSRO”, “Nonprofit school food service account”, “Refund application”, “Refund system”, “School”, “Secretary”, “State and United States”, “Substituted food”, and “Welfare agency”. The term “commodities” is no longer commonly used, as it has been replaced by “donated foods” or “USDA Foods,” both of which are included in § 250.2 of this proposed rule. The Federal Emergency Management Agency (FEMA) now commonly refers to survivors of a disaster or emergency, rather than to disaster victims, and we propose to use the same reference in 7 CFR part 250. In this proposed rule, we refer simply to FNS actions or requirements, without specifying FNSRO (i.e., FNS Regional Offices) or FNS Headquarters. FNS guidance indicates which FNS office is responsible for specific procedures. The definitions of “Discount system”, “Refund”, “Refund application”, “Refund system”, and “Substituted food”, are unnecessary, as their meaning is clear in current Subpart C of 7 CFR part 250, which includes requirements in the processing of donated foods. The definition of “Nonprofit school food service account” is included in 7 CFR part 210, and we propose to include references to that part, as appropriate, rather than repeat the definition in 7 CFR part 250. Similarly, the definition of “School” is included in § 210.2, and we refer invariably to the school food authority, rather than to individual schools, in 7 CFR part 250. In this proposed rule, we refer to the Department or USDA, rather than to the Secretary. The term “Welfare agency” is no longer in use, and such agencies would fall under the term “Recipient agencies” in this proposed rule. The current definition of “State and United States” would be replaced by a new definition of “State”. We propose to revise current definitions of “Adult care institution”, “CACFP”, “Charitable institutions”, “Department”, “Disaster”, “Disaster organizations”, “Distributing agency”, “Donated foods”, “Elderly nutrition project”, “Household”, “In-kind replacement”, “Multi-State processor”, “National per-meal value”, “Needy persons”, “NSIP”, “NSLP”, “Recipient agencies”, “SBP”, “Section 4(a)”, “Section 6”, “Section 14”, “Section 32”, “Section 311”, “Section 416”, “Section 709”, “SFSP”, “Similar replacement”, “Situation of distress”, “Storage facility”, “State Agency on Aging”, and “Subdistributing agency”. The proposed revisions of “Adult care institution”, “CACFP”, “Charitable institutions”, “Department”, “Donated foods”, “Elderly nutrition project”, “Multi-State processor”, “National per-meal value”, “Needy persons”, “NSIP”, “NSLP”, “SBP”, “Section 4(a)”, “Section 6”, “Section 14”, “Section 32”, “Section 311”, “Section 416”, “Section 709”, “SFSP”, “State Agency on Aging”, and “Storage facility” would simply streamline the current definitions. The proposed revision of “Disaster” would also streamline the current definition, and would include the Presidential declaration of a disaster or emergency (e.g., a pandemic), as either event would trigger the provision of donated foods, in accordance with section 413 of the Robert T. Stafford Disaster Relief and Emergency Assistance Act, as amended (42 U.S.C. 5180). The proposed revision of “Situation of distress” would simply indicate that it is a natural catastrophe or other event that does not meet the definition of disaster, but that, in the determination of the distributing agency or FNS, warrants the use of donated foods to assist persons in need of food assistance as a result of such catastrophe or event. Further explanation relating to contingencies for the provision of donated food assistance in such an event is included in § 250.70 of this proposed rule. The proposed revision of “Disaster organizations” would include reference to such organizations authorized to provide assistance to survivors of a disaster or a situation of distress, rather than to disaster victims. The proposed revision of “Distributing agency” would clarify the current definition by indicating that it is a State agency selected by the appropriate authorities in the State to distribute donated foods in the State, in accordance with 7 CFR part 250 and other Federal regulations, as applicable. We also propose to clarify that Indian Tribal Organizations may act as distributing agencies in the administration of the Food Distribution Program on Indian Reservations (FDPIR) or other programs on, or near, Indian reservations, as currently provided for in Federal regulations. We propose to remove the inclusion of a Federal agency or private agency under the definition. A Federal agency may distribute donated foods in a State, but would not do so as a distributing agency subject to the requirements in this part. A private nonprofit agency may distribute donated foods in the State, but only as a subdistributing agency, under an agreement with the distributing agency. A private for-profit entity (i.e., commercial enterprise) may also distribute donated foods in the State, but only under contract with the distributing agency (or subdistributing agency), and subject to Federal procurement requirements. The proposed revision of “Recipient agencies” would clarify their function in providing assistance directly to needy persons. It would also clarify that local agencies in the Commodity Supplemental Food Program (CSFP), and Indian Tribal Organizations distributing donated foods to needy persons through FDPIR in a State in which the State government administers FDPIR, are considered recipient agencies in 7 CFR part 250. The proposed revision of “Subdistributing agency” would clarify that it is a State agency, public agency, or a nonprofit organization selected by the distributing agency to perform one or more donated food activities required of the distributing agency. It would remove the current designation of State agencies, local agencies, and Indian Tribal Organizations that administer TEFAP, FDPIR, or CSFP as subdistributing agencies. State agencies and Indian Tribal Organizations administering such programs meet the definition of distributing agency. Local agencies in CSFP may function as subdistributing agencies if they receive donated foods for further distribution to other recipient agencies. However, in most cases, they function only as recipient agencies in that they provide assistance directly to needy persons. The proposed revisions of “In-kind replacement” and “Similar replacement” would clarify that such replacement must be with the same (i.e., in-kind) or similar foods of a quality and value at least equal to the lost donated foods. The proposed revision of “Similar replacement” also clarifies that the replacement food must be from the same food category (e.g., meat, vegetable, grains) as the lost donated food. The proposed revision of “Household” clarifies the individuals or the groups of individuals which may be considered a household in this part. We propose to add definitions of “7 CFR Part 3052”, “Administering agency”, “Carrier”, “Consignee”, “CSFP”, “Distribution charge”, “FDPIR”, “Food recall”, “Household programs”, “In-State processor”, “Multi-food shipment”, “Out-of-condition donated foods”, “SAE funds”, “Section 27”, “SNAP”, “Split shipment”, “State”, “TEFAP”, “USDA foods”, and “Vendor”. The addition of “Administering agency” would clarify its function in the overall administration of a food assistance program in the State, rather than just the distribution of donated foods, which is the function of the distributing agency. While the administering agency may also be the distributing agency in a State, that is not always the case. The addition of “CSFP”, “FDPIR”, “Household programs”, “SNAP”, and “TEFAP” would help the reader identify food assistance programs referred to in 7 CFR part 250. The addition of “7 CFR Part 3052” would alert the reader to the Departmental regulations relating to audits of public and nonprofit agencies receiving Federal grants. The additions of “Carrier” and “Consignee” would identify entities that transport donated foods from one location to another, and that receive shipments of donated foods, respectively. The addition of “Distribution charge” would identify the total charge or fee that the distributing agency may impose on recipient agencies in child nutrition programs to help defray costs of storing and distributing donated foods, and associated administrative costs. The addition of “Multi-food shipment” would identify shipments of donated foods from a Federal storage facility, rather than directly from a vendor. The addition of “Food recall” would identify an action necessary to protect public health, which is further addressed in § 250.15(c) of this proposed rule. The addition of “In-State processor” would help the reader distinguish such an entity from a multi-State processor. The addition of “Out-of-condition donated foods” would identify those donated foods that are no longer fit for human consumption. The addition of “SAE funds” would identify the Federal funds provided to State agencies to pay for administrative expenses in NSLP and other child nutrition programs, in accordance with 7 CFR part 235. The addition of “Section 27” would identify the section of the Food and Nutrition Act of 2008 that authorizes funds for food purchases in TEFAP. The addition of “Split shipment” would identify a shipment of donated food that is divided among two or more distributing or recipient agencies. The addition of “State” would streamline the current definition of “State and United States”, which we are proposing to remove. It would also exclude the Trust Territory of the Pacific Islands, which is no longer a recipient of donated foods. The addition of “USDA Foods” would alert the reader to another commonly-used term for donated foods. The addition of “Vendor” would identify a commercial enterprise from which the Department purchases food for donation. 3. Administration at the Federal Level, § 250.3 In § 250.3, we propose to include the actions that may be undertaken by FNS, as the Federal administering agency for USDA food assistance programs, in ensuring the effective distribution and control of donated foods. In § 250.3(a), we propose to describe the role of FNS in administering USDA food assistance programs at the Federal level, including the distribution of donated foods to State distributing agencies for further distribution and use, in accordance with the requirements in this part. In § 250.3(b), we propose to include the authority, in current § 250.18(a), for the Department, Comptroller General, or any of their authorized representatives, to conduct audits or inspections of any agency, or contracted commercial entity, in order to determine compliance with the requirements of this part, or with other applicable Federal regulations. In § 250.3(c), we propose to include FNS's authority, in current § 250.20, to terminate the distribution of donated foods, or the provision of administrative funds, to a distributing agency for its failure to comply with the requirements of 7 CFR part 250, or with other applicable Federal regulations. However, we propose to clarify that FNS may also choose to suspend such activities, rather than terminate them, as provided for in 7 CFR 3016.43. We also propose to clarify that FNS must provide written notification to the distributing agency of such termination or suspension of assistance, and that such action is subject to an appeal if recourse to an appeal is provided for in Federal regulations applicable to specific programs (e.g., as provided for in FDPIR, in accordance with 7 CFR part 253) . Lastly, we include the stipulation that FNS may also take other actions, as appropriate, including prosecution under applicable Federal statutes. 4. Administration at the State Level, § 250.4 In § 250.4, we propose to include the responsibility of the distributing agency in administering the distribution of donated foods at the State level. In § 250.4(a), we propose to require the distributing agency to ensure compliance with requirements in 7 CFR part 250, and in other Federal regulations referenced in this part. We propose to include the requirement, in current § 250.12(a), that the distributing agency enter into a written agreement with FNS (i.e., the Federal-State agreement) to receive, store, and distribute donated foods in the State. We propose to retain the current provision that makes the agreement permanent, but to permit it to be amended or terminated with the concurrence of both parties. We also indicate that FNS may terminate the Federal-State agreement for the distributing agency's failure to ensure compliance with requirements. Lastly, we propose to retain the provision, in current § 250.2(b), that the distributing agency may impose additional requirements relating to the distribution and control of donated foods in the State, as long as such requirements are not inconsistent with the requirements of 7 CFR part 250 or other Federal regulations referenced in this part. We propose to remove the provision, in current § 250.2(c), that the distributing agency must provide adequate personnel to administer the program, as the need to comply with requirements for effective administration would necessitate the employment of adequate personnel to do so. In § 250.4(b), we propose to include the option, in current §§ 250.3 and 250.12(b), for the distributing agency to select a subdistributing agency (as defined in this proposed rule) to perform specific activities relating to donated foods for which the distributing agency is responsible, in accordance with a written agreement between the parties. We propose to retain the provision, in current § 250.10(c), that prohibits the distributing agency from delegating its overall responsibility to ensure compliance with requirements in 7 CFR part 250 to a subdistributing agency or to any other organization. We also propose to prohibit the distributing agency from delegating its responsibility to ensure compliance with the performance standards included in § 250.22 of this proposed rule. In § 250.4(c), we propose to include the requirement, in current §§ 250.11(b) and 250.13(d)(1), that the distributing agency select recipient agencies to receive donated foods for distribution to needy persons, or for inclusion in meals provided to needy persons. We propose to clarify that such selection must be in accordance with eligibility criteria applicable to specific programs or outlets. We also propose to retain the requirement, in current § 250.12(b), that the distributing agency enter into a written agreement with a recipient agency prior to distribution of donated foods to it. We propose to clarify that, for child nutrition programs, the distributing agency must enter into agreements with recipient agencies selected by the State administering agency (which may be different from the distributing agency) for participation in such programs, before distribution of donated foods to such recipient agencies. The distributing agency must verify such recipient agencies' participation in child nutrition programs with the State administering agency. We propose to include the requirement in current § 250.11(b) that the distributing agency consider past performance in selecting recipient agencies to receive donated foods, but specify that this requirement only applies to household programs. We propose to remove the current provision that the distributing agency ensure that welfare agencies determine the eligibility of program participants. Requirements relating to the determination by recipient agencies of participant eligibility are included in regulations appropriate to specific programs or outlets. We also propose to include the required provisions of agreements with recipient agencies and subdistributing agencies in § 250.4(c) of this proposed rule. We propose to retain the provision, in current § 250.12(b)(1), that ensures compliance with the requirements of 7 CFR part 250, and propose to also include assurance of compliance with other Federal regulations, as referenced in 7 CFR part 250 and with the distributing agency's written agreement with FNS. We propose to include a provision for compliance with all Federal, State or local requirements relating to food safety and food recalls. In § 250.15(c) of this proposed rule, we are proposing to require distributing and recipient agencies to follow all applicable Federal, State or local requirements for donated foods subject to a food recall. As discussed in Section I of this proposed rule, in 2002, the Department, in collaboration with State agencies and school food authorities, developed procedures and instructions for responding to donated foods subject to a food recall. These procedures and instructions are provided to assist distributing and recipient agencies in ensuring that donated foods subject to a food recall are isolated, inspected, and recovered in an expeditious manner. In accordance with current § 250.12(c), distributing agency agreements with recipient agencies are permanent, with amendments to be made as necessary. However, the distributing agency's agreement with a subdistributing agency is limited to one year, and may be extended for two additional one-year periods. We propose to require that the duration of agreements with recipient agencies and subdistributing agencies be included in provisions of such agreements, but propose to remove the current durational requirements in order to allow distributing agencies to determine the duration that will best meet the needs of the program. The distributing agency may choose to enter into permanent agreements with recipient agencies or subdistributing agencies, unless other regulations applicable to specific programs limit such duration. In accordance with current § 250.12(c)(3), agreements may be terminated for cause by either party upon 30 days notice. We propose to revise this provision to permit termination of the agreement by the distributing agency for noncompliance with its provisions or with other applicable requirements, upon written notification to the applicable party, but without specifying a notification period. This will permit the distributing agency to take immediate action in the event that noncompliance on the part of a recipient agency or subdistributing agency would result in interruption of services to program participants or other serious program disruptions. We also propose to include a provision that permits termination of the agreement by either party, upon written notification to the other party at least 60 days prior to the effective date of termination. This change will allow distributing agencies the time needed to secure new contracts, alter distribution schedules, and move existing inventories, as necessary, without negatively impacting program operations. We propose to remove agreement provisions in current § 250.12(b) that specifically address the responsibility for donated food losses and claims against other parties. Responsibility of each party in such instance is provided for in 7 CFR part 250 and FNS instructions and guidance, and the agreement must provide for adherence to all such requirements. Lastly, we propose to remove the requirement, in current § 250.11(a), that the distributing agency verify registration of recipient agencies to participate in the National Commodity Processing Program, as this program is no longer active. Recipients of Federal grants must ensure compliance with Departmental procurement requirements in 7 CFR parts 3016 or 3019, as applicable, in obtaining the services of a commercial enterprise to conduct activities under the grant. In § 250.4(d), we propose to clarify that such procurement requirements are applicable to distributing and recipient agencies in obtaining such services. We also propose to indicate that such procurement must also ensure compliance with other applicable Departmental requirements—e.g., a school food authority must ensure compliance with requirements in 7 CFR part 210, and in Subpart D of 7 CFR part 250, in obtaining the services of a food service management company to manage the school food service. 5. Civil Rights, § 250.5 In § 250.5, we propose to include civil rights requirements. In accordance with current § 250.21, distributing, subdistributing, and recipient agencies must comply with the Department's regulations pertaining to nondiscrimination, as well as with FNS civil rights instructions. Such regulations and instructions ensure that no person is discriminated against in the receipt or distribution of donated foods. We propose to include such requirements in § 250.5. B. Subpart B—Delivery, Distribution, and Control of Donated Foods We propose to completely revise current Subpart B of 7 CFR part 250 to more clearly present the specific requirements in the ordering and delivery of donated foods, the distribution of donated foods to recipient agencies, and the control of donated foods at the distributing and recipient agency levels. To this end, we propose to restructure this subpart into 13 new sections, and to change the heading to Delivery, Distribution, and Control of Donated Foods, with new sections as described in the following paragraphs. 1. Availability and Ordering of Donated Foods, § 250.10 In § 250.10, we propose to include requirements to ensure that recipient agencies may order donated foods that are most useful to them, and that may be utilized efficiently and without waste. We also propose to assure that recipient agencies have the information necessary to order and utilize such foods effectively. FNS offers a wide variety of donated foods and continually updates the foods offered to ensure that distributing and recipient agencies are able to order the products which will best meet the needs of their programs. As new foods become available, and as needs of an individual program or recipient agency change, it is important that distributing agencies facilitate ordering and use of the foods which will be most advantageous to recipient agencies. In § 250.10(a), we propose to require the distributing agency to utilize a request-driven ordering system in submitting orders for donated foods to FNS, which must provide recipient agencies the opportunity to provide input at least annually in determining the donated foods from the full list that are made available to them for ordering. We propose to require that the distributing agency use the input provided to ensure that the types and forms of donated foods that recipient agencies may best utilize are made available to them for ordering. FNS has developed guidance to assist distributing agencies in implementing a request-driven ordering system that meets the requirements of this section. Lastly, we propose to include the requirement, in current § 250.13(a), that the distributing agency ensure donated foods are ordered and distributed in quantities that may be utilized efficiently and without waste. However, we propose to remove the specific stipulation, in current § 250.13(d)(2), that Section 416 bonus foods may not be distributed to recipient agencies if normal food expenditures would be reduced. The provision of donated foods is meant, in part, to assist recipient agencies in meeting their food assistance needs in a cost-effective manner. In § 250.10(b), we propose to require the distributing agency to ensure that recipient agencies have information on the types and quantities of donated foods that may be ordered, donated food specifications and nutritional value, and procedures for the disposition of donated foods that are out-of-condition or that are subject to a food recall. 2. Delivery and Receipt of Donated Food Shipments, § 250.11 In § 250.11, we propose to include requirements for the receipt of donated food shipments from USDA vendors or from a Federal storage facility, and the conditions for the replacement of donated foods that have been delivered unsafe or out-of-condition by such entities. In § 250.11(a), we propose to indicate that the Department arranges for the delivery of donated foods from vendors or Federal storage facilities to distributing or recipient agencies or other entities designated by such agencies (i.e., the consignee). However, we propose to remove the provision, in current § 250.13(a), that refers to the Department's responsibility to conform to scheduled delivery periods. While the Department strives to ensure timely deliveries to distributing and recipient agencies, such deliveries are subject to vendor and storage facility contracts and performance. In § 250.11(b), we propose to require that the distributing or recipient agency, or other consignee, comply with all applicable Federal requirements in the receipt of donated food shipments. Procedures are contained in FNS Instruction 709-5, Shipment and Receipt of Donated Foods, which include those for donated foods that have been delivered out-of-condition. We also propose to require that the distributing or recipient agency, or other consignee, provide notification of receipt of donated food shipments to FNS through electronic means, and retain an electronic record of receipt of all donated food shipments. Implementation of an electronic donated foods ordering system has allowed distributing or recipient agencies to notify FNS of receipt of donated foods more efficiently than through previous ordering systems, resulting in faster payment for vendors, and more efficient tracking of donated foods, which is important in the event of food recalls or product complaint investigations. In § 250.11(c), we propose to include requirements for the replacement of donated foods that are delivered out-of-condition by the vendor. In accordance with current § 250.13(g), the Department arranges for vendor replacement of donated foods that are delivered out-of-condition. Vendor responsibility for replacement of such foods may extend up to six months after their delivery, if there is documentation indicating that the foods were out-of-condition at the time of delivery. We propose to retain the current requirement for vendor replacement of donated foods that are delivered out-of-condition. However, we propose to require that vendor responsibility for such replacement extend up until the time of expiration of the product use-by or best-if-used-by date or, if no such date is included on the product label, until expiration of the vendor warranty period. The warranty period is the minimum acceptable shelf life established in the USDA contract with the vendor. In all cases, responsibility for such replacement is contingent on determination that the foods were out-of-condition at the time of delivery. The proposed time periods would be more practical than the current ones, as they bear a closer relationship to the actual shelf life of the foods. In accordance with current § 250.13(g)(3), the vendor must provide for in-kind replacement of donated foods, unless FNS approves replacement with another type of food in the same food category (i.e., similar replacement). We propose to retain this requirement, and to indicate that the terms in-kind and similar replacement are defined in § 250.2 of this proposed rule. In accordance with current § 250.13(g), if physical replacement of donated foods would not be cost-effective or efficient, FNS may approve payment by the vendor to the distributing or recipient agency, or may credit the distributing agency's entitlement or assistance level. We propose to retain these options in § 250.11(c). In § 250.11(d), we propose to include the information, in current § 250.13(b), that the Department is responsible for payment of the cost of delivering donated foods from vendors or Federal storage facilities to consignees, as well as any processing or handling costs incurred up to the time of delivery, as is deemed in the best interest of the Department. In accordance with current § 250.15(d), the distributing agency is responsible for payment of any charges accruing as a result of a delay in unloading a donated food shipment after arrival at the designated location, unless the Department is responsible for such delay. We propose to retain such obligation, but to clarify that the distributing agency, recipient agency, or other consignee, as appropriate, is responsible for the payment of any delivery charges that accrue as a result of such consignee's failure to comply with procedures in FNS instructions. We propose to include the failure to provide for the unloading of a shipment of donated foods within a designated time period as an example of such noncompliance. In § 250.11(e), we propose to include the provisions, in current § 250.13(c), relating to transfer of title to donated foods. However, we propose to clarify that title transfers to the distributing or recipient agency, as appropriate (i.e., whichever agency receives the donated food shipment). We also propose to clarify that, notwithstanding transfer of title, distributing and recipient agencies must ensure compliance with the requirements of 7 CFR part 250 in the control and use of donated foods. 3. Storage and Inventory Management at the Distributing Agency Level, § 250.12 In § 250.12, we propose to describe the requirements for the storage and management of donated food inventories at storage facilities used by the distributing agency or subdistributing agency, which may include commercial storage facilities under contract with either the distributing or the subdistributing agency. In § 250.12(a), we propose to essentially retain the requirements in current § 250.14(b), which require that distributing agency facilities for the storage and control of donated foods protect against theft, spoilage, damage, or other loss, and obtain the required Federal, State, or local health inspections. However, we propose to revise this latter provision to require that the distributing agency ensure that storage facilities comply with all Federal, State, or local requirements relating to food safety and health, as applicable, and obtain all required health inspections. In § 250.12(b), we propose to include the requirement, in current § 250.14(b), that the distributing agency ensure that donated foods at any storage facility used by the distributing or subdistributing agency are stored in a manner that permits them to be distinguished from other foods, and must ensure that a separate inventory record of such donated foods is maintained. Such requirements ensure distribution of donated foods to the appropriate recipient agencies. We also propose to require that the distributing agency's system of inventory management ensure that donated foods are distributed in a timely manner and in optimal condition. FNS offers guidance that includes further direction on effective inventory management practices and the need to consider product dates in distribution of donated foods. We propose to retain the requirement, in current § 250.14(e), that the distributing agency conduct a physical review of such donated food inventories, and reconcile physical and book inventories, on an annual basis. We propose to include the requirement in current § 250.15(c) that the distributing agency report donated food losses to FNS, and ensure restitution for such losses. FNS provides guidance for complying with these requirements in FNS Instruction 410-1, Claims for Losses of Donated Foods and Related Administrative Losses—Procedures for the State Distributing Agency, and in FNS Instruction 420-1, Managing Agency Debts. In § 250.12(c), we propose to include the limitations on the amount of donated food inventories on-hand. In accordance with current § 250.14(f)(2), donated food inventories at the distributing agency level may not exceed a six-month supply, unless justification is submitted, and FNS approval obtained, to maintain larger inventories. The inventory amount must be based on the amount of food that the distributing agency can reasonably utilize for the six-month period. We propose to retain the current inventory limitation for donated foods received in NSLP or other child nutrition programs, and in TEFAP. However, for donated foods received in CSFP or FDPIR, which offer defined food packages, we propose to limit inventory on-hand for each food category to an amount needed for a three-month period. The more restrictive inventory amounts would allow for more efficient use of limited program resources, and permit FNS to provide, to the greatest extent practical within available resources, a full variety of foods needed to meet monthly food package benefit levels in CSFP and FDPIR. In addition, implementation of more frequent deliveries in recent years has allowed distributing agencies in CSFP and FDPIR to more effectively manage donated food inventories. We propose to retain the option for the distributing agency to request FNS approval to maintain donated food inventories in excess of the established limits. In § 250.12(d), we propose to require that the distributing agency obtain insurance to protect the value of donated food inventories at its storage facilities. Many distributing agencies currently have such protection, which better ensures that restitution can be made for donated food losses, in the event of a disaster or management error, and that recipients continue to receive program benefits. We also propose to require the distributing agency to ensure that subdistributing agencies, and recipient agencies in household programs that have agreements with the distributing agency or subdistributing agency, obtain such insurance for donated foods at their storage facilities. Lastly, we propose to require the distributing agency to ensure that commercial storage facilities under contract with the distributing agency, the subdistributing agency, or with the recipient agencies cited above, obtain insurance to protect the value of donated food inventories. We propose to require that, in all cases, the amount of the required insurance be at least equal to the average monthly value of donated food inventories at such facilities in the previous fiscal year. These minimum insurance requirements will help ensure that distributing agencies and recipient agencies receive the full benefit of the donated foods entitled to them in the event that donated foods are lost or damaged. The above entities are those that are most likely to have large inventories of donated foods, as well as the means to obtain protection for such foods. Smaller recipient agencies that do not have direct agreements with a distributing or subdistributing agency, but provide food packages directly to recipients, such as food pantries or community action agencies, would not be required to obtain insurance. In § 250.12(e), we propose to include requirements for the transfer of donated foods from the distributing agency to another distributing agency or to another program. In accordance with current § 250.13(h), the distributing agency must request FNS approval to “redonate” donated foods that it cannot efficiently utilize. Additionally, current § 250.13(a)(1) includes requirements for the “transfer” of donated foods from one recipient agency to another. In practice, the terms “redonation” and “transfer” are often used interchangeably. To clarify, we propose to use the term “transfer” to refer to any redistribution of donated foods from one agency to another, or from one program to another, at the distributing or recipient agency level, and to cease using the term “redonation”. We propose to clarify that the distributing agency may transfer donated foods from its inventories to another distributing agency or to another program, in order to ensure that such foods may be utilized in a timely manner and while in optimal condition. We propose to permit the distributing agency to transfer donated foods to another agency within the same program without FNS approval. However, we propose to require that the distributing agency request FNS approval to transfer donated foods from one program to another—e.g., from NSLP to TEFAP—whether the transfer is in the same or a different State, as these foods would be used in a program other than the program for which they were originally intended. We propose to stipulate that FNS may also require a distributing agency to transfer donated foods at the distributing agency's storage facilities or at a processor's facility, if inventories of donated foods are excessive or may not be efficiently utilized, so that such foods may be used to the benefit of recipients receiving donated foods through another agency or program. We propose to require the distributing agency to obtain an inspection of donated foods by State or local health officials before transferring them, if there is a question of food safety, or at the direction of FNS, to ensure that only foods that are still safe and not out-of-condition are transferred. We also propose to retain the requirement in current § 250.15(e) that the distributing agency is responsible for meeting any transportation or inspection costs in transferring donated foods, unless the transfer is clearly not the result of negligence or improper action of the distributing agency. Lastly, we propose to require that the distributing agency maintain a record of all transfers and inspections of donated foods from its inventories. Transfer of donated foods at the recipient agency level is discussed in section II.B.5, Storage and Inventory Management at the Recipient Agency Level, § 250.14, of this preamble. In § 250.12(f), we propose to indicate that the distributing agency may obtain the services of a commercial storage facility to store and distribute donated foods, or a carrier to transport such foods, but must ensure compliance with Departmental procurement requirements in 7 CFR part 3016. We propose to retain the requirement, in current § 250.14(d), that the distributing agency also enter into a written contract with such commercial storage facility, and that such contract not exceed five years in duration, including option years for extension or renewal. Because carriers assume similar responsibility for donated foods under their control, we propose to include the same requirements in contracting with a carrier. We also propose to retain the required contract provisions in current § 250.14(d) relating to safe and secure storage conditions, inventory management, insurance, reviews, contract duration and extension, and termination for noncompliance. We propose to add provisions to assure compliance with Federal, State or local requirements relative to food safety and health. We also propose to add a provision to assure that donated foods will be distributed to eligible recipient agencies in a timely manner and in optimal condition, and in amounts for which such recipient agencies are eligible. Lastly, we propose to revise the current provision providing for termination of the contract by either party (except as a result of noncompliance with regulatory provisions) by requiring notification of such termination at least 60 days in advance, rather than the current 30 days. This change will allow distributing agencies the time needed to secure new contracts, alter distribution schedules, and move existing inventories, as necessary, without negatively impacting program operations. We propose to require the same provisions in a contract with a carrier, as such provisions are necessary to ensure the safe and effective transport of foods from one location to another. 4. Efficient and Cost-Effective Distribution of Donated Foods, § 250.13 In § 250.13, we propose to include requirements to ensure the distribution of donated foods to recipient agencies in the most efficient and cost-effective manner. In § 250.13(a), we propose to retain the requirements, in current §§ 250.14(a) and 250.24(e), that the distributing agency distribute donated foods to recipient agencies in the most efficient and cost-effective manner, and that such distribution is responsive to the needs of recipient agencies, as feasible. In meeting this requirement, we propose to require the distributing agency, to the extent practical, to provide for shipment of donated foods directly from the USDA vendor to the recipient agency, or (at the recipient agency's request) directly to a processor for processing into end products. We also propose to require that the distributing agency provide for split shipments between two or more recipient agencies, if such agencies are unable to accept a full truckload. Split shipments allow recipient agencies, particularly small recipient agencies, to receive donated foods in the forms and quantities that are most useful to them and on a schedule that will permit them to store and distribute the foods in the most efficient and cost-effective manner possible. In § 250.13(b), we propose to require that, if the distributing agency determines that direct shipments are impractical (even after taking into account split shipments), it must provide for storage of donated foods at the distributing agency level, and subsequent distribution to recipient agencies. Such storage and distribution must be provided in the most efficient and cost-effective manner possible in order to minimize the cost to the recipient agency of receiving donated foods. We propose to clarify that the distributing agency must use State Administrative Expense (SAE) funds, as available, to meet costs of storing and distributing donated foods, or related administrative costs, for school food authorities or other recipient agencies in child nutrition programs, or must use other Federal or State administrative funds received for such purpose. SAE funds are provided to State agencies administering NSLP or other child nutrition programs, in accordance with 7 CFR part 235, and distributing agencies receive SAE funds specifically to cover the costs of storing and distributing donated foods and related administrative costs for such programs. However, as SAE funds, or State funds, are limited, distributing agencies may also assess fees on school food authorities to help defray such costs. Under 7 CFR part 250, such fees are included under the term “Distribution charge”. We propose to retain the provision, in current § 250.15(a)(1), that permits the distributing agency to impose a distribution charge on school food authorities, but with the clarification that such charge may be imposed only if SAE funds, or other funds available from State or local sources, are insufficient to fully meet the costs of storing donated foods and distributing them to such agencies, and of administrative costs relating to such activities. We also propose to clarify that the distribution charge may cover only allowable costs, in accordance with 7 CFR part 3016 and with OMB guidance. The Departmental and OMB guidance provide for allowable costs for Federal grant expenditures. Lastly, we propose to require that the distributing agency maintain a record of costs incurred in storing and distributing donated foods and related administrative costs, and the source of funds used to pay such costs. We propose to retain the requirement in current § 250.14 that the distributing agency use a commercial storage facility to store and distribute donated foods, in accordance with requirements in § 250.12(f) of this proposed rule, if a commercial system is determined to be the most efficient and cost-effective. However, we propose to remove the requirement, in current § 250.14(a)(2), that a distributing agency utilizing a noncommercial system of storage and distribution evaluate such system by comparing its costs with the cost of obtaining a commercial system, at 3-year intervals, and submit such cost evaluation to FNS. State distributing agencies performed such an evaluation and cost comparison, as directed in the Commodity Distribution Reform Act and, as a result, either changed to a commercially contracted distribution system, or determined that other storage and distribution options were more cost-effective. Subsequent periodic evaluations have been required, however, only through the regulations. We have determined that the use of such evaluations is no longer necessary for Program integrity. Consequently, we also propose to remove the requirement, in current § 250.14(a)(5), that the distributing agency request a waiver to continue using a noncommercial system. In § 250.13(c), we propose to retain the requirement, in current § 250.14(a)(7), that the distributing agency obtain FNS approval to increase the distribution charge beyond normal inflationary adjustments or to change the level of service provided under a distribution charge. We also propose to require FNS approval of the amount of a newly established distribution charge (some States do not currently impose a distribution charge on school food authorities). We propose to clarify that such requirement also applies to any charge imposed on school food authorities by a distributing agency's commercially contracted storage facility. We propose to retain the current requirement that such request be submitted for approval at least 90 days in advance of its projected implementation. We also propose to retain the requirement, in current § 250.15(a)(1), that the request include justification for the new or increased amount, and the specific costs to be covered by the distribution charge. However, we propose to add a requirement that the request include justification for any change in the level of service provided under an existing distribution charge. Distributing agencies may use SAE funds to meet the costs of storing and distributing donated foods, and other Federal or State funds may also be available for this purpose. The use of such funds should allow distributing agencies to provide for storage and distribution costs of donated foods with minimal, if any, charge to recipient agencies. Therefore, any new or increased charge, or change in the level of services associated with a charge, must be necessary to provide recipient agencies with donated foods in the most efficient and cost-effective manner possible, as determined by FNS. In § 250.13(d), we propose to indicate that FNS may disapprove the distributing agency's proposed new distribution charge or changes to an existing distribution charge, if FNS determines that such amount would not provide for the most cost-effective distribution of donated foods, or would otherwise impact recipient agencies negatively. We propose to clarify that, in such case, the distributing agency would be required to adjust the distribution charge or the level of service provided under the distribution charge, or to consider other storage and distribution options. We also propose to retain the provision, in current § 250.14(a)(6)(ii), that FNS may, at any time, require the distributing agency to submit documentation to justify the cost-effectiveness of its distribution system, and to re-evaluate such system, if it is determined to be out of compliance with the requirements in this section, as proposed. We propose to remove the requirement, in current § 250.15(a), that the distributing agency submit to FNS a description of its system for assessing its distribution charge every three years. However, FNS may require the distributing agency to submit information relating to its assessment of the distribution charge, or to any other aspect of its distribution system, in accordance with § 250.18(d) of this proposed rule. 5. Storage and Inventory Management at the Recipient Agency Level, § 250.14 In § 250.14, we propose to include requirements for the storage and management of donated foods at the recipient agency level, including commercial storage facilities or other entities under contract with the recipient agency. In § 250.14(a), we propose to require recipient agencies to meet the same requirements for food safety and health at their storage facilities as those proposed for the distributing agency in § 250.12(a) of this rule. In § 250.14(b), we propose to require that recipient agencies in household programs store donated foods in a manner that permits them to be distinguished from other foods at their storage facilities, and to maintain a separate inventory record of donated foods. Recipient agencies in household programs are currently subject to the requirement to maintain storage and inventories of donated foods separately from other foods in accordance with their designation as “subdistributing agencies”, in current § 250.3. However, as described in section II.A.2 of the preamble, we are proposing to remove the current designation of such recipient agencies as subdistributing agencies. We also propose to require that such recipient agencies' system of inventory management ensure that donated foods are distributed to recipients in a timely manner that permits use of such foods while still in optimal condition. Lastly, we propose to clarify that recipient agencies in household programs must notify the distributing agency of any donated food losses, and take further actions with respect to such donated foods, as directed by the distributing agency. In § 250.14(c), we propose to clarify the requirement in current § 250.59(c) that recipient agencies in child nutrition programs, and those receiving donated foods as charitable institutions (in accordance with current § 250.67), are not required to store donated foods in a manner that distinguishes them from purchased foods or other foods, or to maintain a separate inventory record of donated foods. Such recipient agencies may utilize single inventory management, in which donated foods are commingled with purchased foods or other foods in storage, and a single inventory record is maintained. Under single inventory management, all foods are subject to the same safeguards regarding food safety and health. As a result, we propose to clarify that all recipient agencies in child nutrition programs, and those receiving donated foods as charitable institutions, are not required to separately monitor and report donated food use, distribution, or loss to the distributing agency, unless there is evidence indicating that donated food loss has occurred as a result of theft or fraud. This is true regardless of the inventory management system actually utilized by such recipient agencies. In § 250.14(d), we propose to include requirements in current § 250.13(a)(1)(iii) for the transfer of donated foods from one recipient agency to another recipient agency and to clarify the types of transfers to which these requirements apply. We propose to clarify that a recipient agency operating a household program request approval from the distributing agency to transfer donated foods to another recipient agency in the same program. We propose to clarify that transfer of donated foods from such recipient agency to a recipient agency in another program receive FNS approval (i.e., through the distributing agency). We propose to indicate that a recipient agency operating a child nutrition program, or one receiving donated foods as a charitable institution (in accordance with current § 250.67), may transfer donated foods to another recipient agency or charitable organization without prior approval from the distributing agency or FNS. This is in accordance with single inventory management, in which donated foods are commingled with other foods, and often may not be distinguished from them. In § 250.14(e), we propose to indicate that recipient agencies may obtain the services of a commercial storage facility to store and distribute donated foods, but must ensure compliance with Departmental procurement requirements in 7 CFR parts 3016 or 3019, as applicable. We also propose to clarify that recipient agencies must ensure that such commercial storage facilities comply with the applicable requirements in 7 CFR part 250 for the storage and inventory management of donated foods. 6. Out-of-Condition Donated Foods, Food Recalls, and Complaints, § 250.15 In § 250.15, we propose to include requirements for the disposition of donated foods that are out-of-condition, or that are subject to a food recall, and requirements for the resolution of recipient complaints relating to donated foods. In § 250.15(a), we propose to require the distributing agency to ensure that out-of-condition donated foods at its storage facilities are destroyed, or otherwise disposed of, in accordance with State or local requirements pertaining to food safety and health. We propose to retain the contingency for sale of out-of-condition donated foods (e.g., to a salvage company) in accordance with current § 250.13(f), if such sale is permitted by State laws or regulations, rather than contingent on FNS approval. We also propose to require the distributing agency to obtain an inspection of donated foods by State or local health authorities to determine their safety and condition, as necessary, or as directed by FNS. In § 250.15(b), we propose to require that recipient agencies in household programs report out-of-condition donated foods at their storage facilities to the distributing agency, and ensure that such donated foods are destroyed, or otherwise disposed of, in accordance with State or local requirements pertaining to food safety and health. We propose to require the distributing agency to ensure that such recipient agencies obtain an inspection of donated foods by State or local health authorities to determine their safety and condition, as necessary, or as directed by FNS. We propose to indicate that, for recipient agencies in child nutrition programs, and those receiving donated foods as charitable institutions (in accordance with § 250.67), donated foods must be treated as other foods when safety is in question. Consequently, such recipient agencies must comply with State or local requirements in determining the safety of donated foods and other foods, and in their destruction or other disposition, but are not required to report such actions to the distributing agency. In § 250.15(c), we propose to require that the distributing agency or recipient agency, as appropriate, follow all applicable Federal, State or local requirements for donated foods subject to a food recall. Departmental guidance is also provided to assist distributing and recipient agencies in ensuring that donated foods subject to a food recall are isolated, inspected, and recovered in an expeditious manner, and that the appropriate parties are reimbursed for costs associated with such actions. In § 250.15(d), we propose to indicate that the distributing agency must inform recipient agencies of the preferred method for receiving donated food complaints and resolve complaints received from recipients, recipient agencies, or other entities relating to donated foods in an expeditious manner, and in accordance with applicable requirements in 7 CFR part 250. We propose to require the distributing agency to submit any complaints regarding product quality or specifications, or suggested products improvements, to FNS through the established FNS donated foods complaint system for tracking and evaluation purposes. If resolution of the complaint at the State level is not feasible, we propose to indicate that the distributing agency must provide information regarding the complaint to FNS for resolution. Guidance on meeting these requirements is included on the FNS Web site. We also propose to prohibit the distributing agency from disposing of any donated food that is the subject of a complaint prior to guidance and authorization from FNS. Lastly, we propose to include the requirement, in current § 250.22, that the distributing agency maintain a record of its investigations and other actions with respect to any complaints relating to donated foods. Resolving and tracking product complaints, either at the Federal or State level, is critical to ensuring that recipient agencies are receiving replacement products, as appropriate, and that donated foods meet the standards established by the Department. 7. Claims and Restitution for Donated Food Losses, § 250.16 In § 250.16, we propose to include requirements to ensure that restitution is made for donated food losses, including claims against parties responsible for such losses. In § 250.16(a), we propose to require that the distributing agency ensure that restitution is made for donated food losses, and for the loss or improper use of funds provided for, or obtained incidental to donated food distribution (e.g., in salvage of donated foods or sale of pallets). We propose to clarify that, in making restitution for losses, the distributing agency must identify, and seek restitution from, parties responsible for the loss, and implement corrective actions to prevent future losses. Guidance for distributing agencies is included in FNS Instruction 410-1, Claims for Losses of Donated Foods and Related Administrative Losses—Procedures for the State Distributing Agency. We propose to remove the actions required of the distributing agency in making restitution for donated food losses in current § 250.15(c). We also propose to remove the provision, in current § 250.15(c)(2), that inventory loss of a donated food that does not exceed one percent of the total inventory of that food may, under certain conditions, be exempt from recovery through claims. Although some losses that meet such conditions may be exempted with FNS approval, as indicated above, a blanket exemption for inventory loss does not encourage efficient inventory management. Current provisions in § 250.15(c)(2) also exempt losses in amounts that do not exceed thresholds established in State laws or regulations. We propose to remove this exemption as well, as all distributing agencies should be held to the same standards with respect to accountability for Federal resources provided. In § 250.16(b), we propose to clarify that FNS may initiate and pursue a claim against the distributing agency or other entities for the loss of donated foods, and for the loss or improper use of funds provided, or obtained incidental to donated food distribution. We also propose to clarify that FNS may initiate and pursue a claim if the distributing agency fails to take required claim actions against other parties. These requirements incorporate requirements in current § 250.15(c). FNS guidance on taking action on a claim is included in FNS Instruction 420-1, Managing Agency Debts. Lastly, we propose to clarify that FNS may, on behalf of the Department, compromise, forgive, suspend, or waive a claim. Such actions would also be taken in accordance with FNS Instruction 420-1. 8. Use of Funds Obtained Incidental to Donated Food Distribution, § 250.17 In § 250.17, we propose to include requirements for the use of funds obtained incidental to donated food distribution—e.g., through the distribution charge, the salvage of out-of-condition donated foods, the sale of pallets used for donated foods, or rebates from processors for the value of donated foods processed into end products. In § 250.17(a), we propose to clarify requirements in current § 250.15(f)(2) relating to the use of funds obtained from the distribution charge imposed on recipient agencies in child nutrition programs, in accordance with § 250.13(b) of this proposed rule. We propose to require that such funds be used to meet costs of storing and distributing donated foods or related administrative costs, consistent with limitations on the use of Federal grant funds in 7 CFR part 3016, and with OMB guidance. We also propose to specifically prohibit the use of such funds to purchase foods to replace donated food losses or to pay claims resulting from donated food losses. We also propose to include in § 250.17(a) the requirement, in current § 250.15(f)(3), that the distributing agency maintain funds obtained from the distribution charge in an operating account, separate from other funds, as well as the current limitation on the amount of funds that may be maintained in such account. We also propose to retain the current requirement that, unless FNS approval is requested and granted, funds in excess of this amount must be used to reduce the distribution charge imposed on recipient agencies, or to provide appropriate reimbursement to such agencies. However, we propose to remove the contingency in current § 250.15(f)(2) that such funds be returned to the Department. In § 250.17(b), we propose to require that school food authorities use funds obtained from processors in the processing of donated foods into end products (e.g., through rebates for the value of such processed donated foods, in accordance with Subpart C of 7 CFR part 250), or from food service management companies in crediting for the value of donated foods (in accordance with Subpart D of 7 CFR part 250), in support of the nonprofit school food service. This aligns 7 CFR part 250 with § 210.14 which provides that school food authorities must use revenues received in the operation of the nonprofit school food service, as defined in § 210.2 and in § 250.2 of this proposed rule, only for that food service. We propose to require that other recipient agencies use such funds to meet the costs of storing and distributing donated foods or related administrative costs, as proposed in § 250.17(c) of this rule. In § 250.17(c), we propose to clarify requirements in current §§ 250.15(f)(1) and (f)(2) relating to funds collected in claims for donated food losses, and funds obtained from other sources incidental to donated food distribution. Donated foods are made available to distributing agencies to support the participants of each respective program. Any loss of donated foods means fewer foods will be available through the affected program unless replacement foods are purchased. Therefore, we propose to require that funds collected in payment of claims for donated food losses be used to purchase replacement foods for use in the program in which the losses occurred unless the distributing agencies receives FNS approval to use the funds for other program purposes. Guidance for use of funds collected in payment of a claim are included in FNS Instruction 410-1, Claims for Losses of Donated Foods and Related Administrative Losses—Procedures for the State Distributing Agency, and in FNS Instruction 420-1, Managing Agency Debts. We propose to require that funds obtained from other sources, except as otherwise indicated in this section, be used to pay administrative costs of storing and distributing donated foods, consistent with the limitations on the use of funds provided under a Federal grant in 7 CFR parts 3016 or 3019, as applicable, and OMB guidance, as applicable. Using such funds in this manner will permit distributing agencies to reduce or eliminate the charges imposed on recipient agencies for storage, distribution and administration related to donated foods. Sources of such funds may include, for example, the sale of donated food containers or pallets, the salvage of out-of-condition donated foods, or payments by processors for failure to meet processing yields. The Departmental and OMB regulations provide guidance for allowable costs in Federal grant expenditures for State and local government entities, and for private nonprofit organizations. We propose to remove the contingency, in current § 250.15(f)(2), that such funds be returned to the Department. We propose to retain the requirement, in current § 250.15(f)(3), that the distributing agency maintain funds obtained from claims or other sources indicated in this section in a separate salvage account. However, we propose to rename this account the “donated food account.” We also propose to revise upward the threshold for which deposits into, and expenditures from, such account must receive FNS approval. We propose to require that the distributing agency receive FNS approval for a deposit into, or expenditure from, the donated food account in excess of $25,000, instead of the $2,500 threshold in current § 250.15(f)(4). Regardless, such funds must be used in accordance with the requirements in proposed 250.17(c). Lastly, we propose to require that the distributing or recipient agency maintain a record of all funds obtained and expended in accordance with this proposed § 250.17(c). In § 250.17(d), we propose to clarify that the distributing agency is prohibited from using funds obtained incidental to donated food distribution to meet State matching requirements for other Federal grants received—e.g., for FDPIR or TEFAP. We also propose to clarify that such funds may not be used in place of State Administrative Expense (SAE) funds available to meet costs relating to storage and distribution of donated foods. In § 250.17(e), we propose to clarify the “Buy American” requirement, in current § 250.23, for the purchase of foods with funds obtained incidental to donated food distribution. In accordance with the current requirement, recipient agencies must use Federal funds to purchase only foods that are produced, or processed, in the United States, with certain exceptions. We propose to clarify that, when funds obtained in accordance with this section, as proposed, are used to purchase foods in the commercial market, a distributing or recipient agency in the continental United States, and in Hawaii, must, to the maximum extent practical, purchase only domestic foods or food products. This clarification of the “Buy American” requirement is consistent with the requirement for school food authority purchases in § 210.21(d), and in Section 12(n) of the Richard B. Russell National School Lunch Act (42 U.S.C. 1760). We also propose to include the definition of domestic foods or food products used in § 210.21(d). Lastly, we propose to clarify that the “Buy American” requirement is also applicable to the cash-in-lieu-of-donated foods provided to school food authorities in NSLP and to child and adult care institutions in CACFP, in accordance with §§ 250.56(e) and 250.61(c), respectively. 9. Reporting Requirements, § 250.18 In § 250.18, we propose to include requirements for submission of reports relating to the distribution and control of donated foods. In § 250.18(a), we propose to retain the requirement, in current § 250.17(a), that the distributing agency submit form FNS-152, Monthly Distribution of Donated Foods to Family Units, to report donated food inventories and distribution in FDPIR. However, we propose to remove reference to form FNS-153, Monthly Report of the Commodity Supplemental Food Program and Quarterly Administrative Financial Status Report, as the requirement for submission of this report is included in 7 CFR part 247. We propose instead to indicate that the distributing agency must submit reports included in regulations for specific food assistance programs. We also propose to indicate that such reports must be submitted in accordance with the timeframes established for each respective report, rather than include specific timeframes for submission in 7 CFR part 250. We propose to retain the requirement, in current § 250.17(a), that the distributing agency report excessive donated food inventories in TEFAP, NSLP, and other child nutrition programs to FNS, on a semiannual basis, utilizing form FNS-155, the Inventory Management Register. We propose to remove the requirement, in current §§ 250.13(k) and 250.17(d), that the distributing agency report commodity acceptability information to FNS, utilizing information collected from recipient agencies in NSLP, CACFP, NSIP, CSFP, and FDPIR, and submitted on form FNS-663, the Commodity Acceptability Report. Technological advances, including the evolution of request-driven ordering systems, over the last several years have made the collection and reporting of such information by the distributing agency unnecessary. FNS now receives information on donated food acceptability from diverse parties on a routine basis, through electronic communication, national conferences and other meetings with program operators, as well as through periodic reviews of its donated food offerings. In § 250.18(b), we propose to include the requirement, in current § 250.30(m), that processors submit monthly performance reports to the distributing agency to report donated food inventories, processing of donated foods, and sale and delivery of end products. However, we propose to remove the requirement that the distributing agency submit a report of processors' inventories to the FNS Regional Office, in current § 250.17(b). Processors are required to submit monthly performance reports to FNS, eliminating the need for distributing agencies to submit such information to FNS. In § 250.18(c), we propose to include the requirement, in §§ 250.69(f) and 250.70(f) of this proposed rule, that the distributing agency submit to FNS a report of the amounts of donated foods used in disasters and situations of distress, utilizing electronic form FNS-292A, Report of Commodity Distribution for Disaster Relief. This form is also used to request replacement of donated foods used in disasters and situations of distress. In § 250.18(d), we propose to retain the requirement, in current § 250.17(e), that the distributing agency submit other information relating to the distribution of donated foods that may be requested by FNS on a periodic basis. For example, FNS may require that the distributing agency provide information relating to the distribution charge, or to support the efficiency and cost-effectiveness of its storage and distribution system, in accordance with § 250.13 of this proposed rule. 10. Recordkeeping Requirements, § 250.19 In § 250.19, we propose to include recordkeeping requirements relating to the distribution and control of donated foods. In § 250.19(a), we propose to require that distributing and recipient agencies, and other entities, maintain records of agreements and contracts, reports, audits, and claim actions, funds obtained incidental to donated food distribution, and other records required in this part or in other Departmental regulations, as applicable. In addition to these requirements, we propose to require distributing agencies to keep a record of the value of donated foods received by each of its school food authorities in order to assist in monitoring distributing agency compliance with the requirement that school food authorities in NSLP are offered, at a minimum, the commodity offer value of donated foods, in accordance with § 250.58; and records to demonstrate compliance with the professional standards for State directors of distributing agencies in § 235.11(g) of the proposed rule Professional Standards for State and Local School Nutrition Programs Personnel as Required by the Healthy, Hunger-Free Kids Act of 2010 (79 FR 6503 (Feb. 4, 2014)). We also propose to require that processors maintain records documenting the sale of end products to recipient agencies, including the sale of such end products by distributors. Specific recordkeeping requirements relating to the use of donated foods in contracts with food service management companies are included in § 250.54. Lastly, we propose to include the provision, in current § 250.16(a)(6), that failure to maintain required records must be considered prima facie evidence of improper distribution or loss of donated foods and may result in a claim against the responsible party for the loss of donated foods, or may result in other sanctions or corrective actions. We propose to remove the requirement, in current § 250.16(a)(3), that the distributing agency maintain records of refusal of donated foods by school food authorities. In accordance with a final rule published in the Federal Register on August 8, 2008 at 73 FR 46169, the “offer and refusal” system of ordering donated foods was removed. We also propose to remove the requirement, in current § 250.16(a)(5), that recipient agencies maintain records of the data and method used to determine the number of eligible persons served. Recordkeeping requirements relating to the determination of eligibility, or the number of eligible persons served, are included in regulations applicable to specific programs (e.g., 7 CFR part 247 for CSFP). In § 250.19(b), we propose to retain, without change, requirements in current § 250.16(b) relating to the length of time that records must be retained. 11. Audit Requirements, § 250.20 In § 250.20, we propose to include reference to Federal audit requirements for distributing and recipient agencies, and audit requirements for processors. In § 250.20(a), we propose to reference audit requirements in 7 CFR part 3052 for State or local government agencies and nonprofit organizations that receive Federal grants, as such requirements apply to distributing and recipient agencies. In accordance with such requirements, the value of Federal grants or awards expended in a fiscal year determine if the distributing or recipient agency must obtain an audit in that year. We propose to clarify that the value of donated foods must be considered as part of the total value of the Federal grant, and to reference FNS guidance in valuing donated foods for audit purposes, and in determining if an audit is required. In § 250.20(b), we propose to include requirements for processors to obtain an independent CPA audit to determine compliance with processing requirements for donated foods. In accordance with current § 250.18(b), multi-State processors must obtain an independent CPA audit at a frequency determined by the value of the donated foods they receive for processing in a year. Currently, a multi-State processor must obtain an independent CPA audit for any year in which it receives more than $250,000 in donated foods; every two years, if it receives $75,000 to $250,000 in donated foods each year; and every three years, if it receives less than $75,000 in donated foods each year. Such audits must be paid for by the processor. We propose to amend the current audit requirement for multi-State processors by requiring that a multi-State processor obtain an independent CPA audit in each of the first two years that it receives donated foods for processing, regardless of the value of donated foods received, to ensure that new processors receive appropriate oversight as they establish their processing programs. After the first two years, we propose to require a multi-State processor to obtain such an audit at a frequency determined by the average value of donated foods received for processing per year, as currently required. However, we propose to revise upward the current thresholds for determining the required frequency of such audits to reflect the much larger volume of donated foods provided to such processors for processing over the last several years. Hence, we propose to require a multi-State processor to obtain an independent CPA audit: (1) Annually, if it receives, on average, more than $5,000,000 in donated foods for processing per year; (2) Every two years, if it receives, on average, between $1,000,000 and $5,000,000 in donated foods for processing per year; and (3) Every three years, if it receives, on average, less than $1,000,000 in donated foods for processing per year. In-State processors are not currently required to obtain an independent CPA audit. In order to ensure compliance with program requirements, the distributing agency must conduct an on-site review of in-State processors at least once every two years, in accordance with current § 250.19(b)(1)(iii). However, the performance of on-site reviews is a costly and time-consuming exercise for distributing agencies, and we are proposing to remove this requirement, as discussed in section II.B.13 of the preamble. We propose, instead, to require that an in-State processor obtain an independent CPA audit to determine compliance with processing requirements for donated foods in the first year that it receives donated foods for processing. After the first year, we propose to require an in-State processor to obtain such an audit at a frequency determined by the average value of donated foods received for processing per year, using the same thresholds for determining such frequency as we are proposing for multi-State processors. Due to the lower volume of donated foods received by in-State processors, we expect that, after the first year, in-State processors would be subject to the audit requirement every three years. As currently required for multi-State processors, we propose to require that in-State processors pay the cost of the audit. We propose to require that the donated food value utilized must be the contract value of the donated foods, as defined in § 250.2 of this proposed rule. We also propose to clarify that audits must determine processor compliance with the requirements in this part, and must be conducted in accordance with the FNS Audit Guide for Processors. However, we propose to remove the current stipulation that FNS may require auditors to attend training sessions conducted by the Department. Although training may still be provided, FNS provides written guidance and technical assistance for auditors on an ongoing basis. In § 250.20(c), we propose to include the actions required of processors resulting from the audits. We propose to require that in-State processors submit a copy of the audit to the distributing agency for review by December 31 of each year in which an audit is required. We propose to require the distributing agency to ensure that in-State processors provide a corrective action plan with timelines for correcting deficiencies identified in the audit, and that such deficiencies are corrected. We propose to include the requirement in current § 250.18(b) that multi-State processors submit a copy of the audit, and a corrective action plan with timelines to correct deficiencies identified in the audit, as appropriate, to FNS for review by December 31 of each year in which an audit is required. This will permit FNS and distributing agencies to review audit findings, follow up on required corrective actions, and monitor noncompliance issues for the purpose of identifying trends and implementing program improvements. In § 250.20(d), we propose to indicate that a distributing or recipient agency is subject to sanctions for failure to obtain the required audit, or for failure to correct deficiencies identified in audits. Such sanctions may include the withholding, suspension, or termination of a Federal award. We propose to indicate that, if a processor fails to obtain the required audit, or to correct deficiencies identified in audits, a distributing or recipient agency may terminate the processing contract or agreement, and may not extend or renew such a contract or agreement. We also propose to include the stipulation, in current § 250.18(b)(5), that FNS may prohibit the further distribution of donated foods to a processor for its failure to comply with audit requirements. 12. Distributing Agency Reviews, § 250.21 In § 250.21, we propose to include the requirements for the distributing agency to review subdistributing agencies, recipient agencies, and other entities to ensure compliance with requirements relating to the distribution and control of donated foods. In § 250.21(a), we propose to clarify and streamline review requirements in current § 250.19. We propose to require that the distributing agency ensure compliance with requirements in 7 CFR part 250, and in other Federal regulations as applicable, through its review of required reports, and through on-site reviews of the recipient agencies and other entities indicated in § 250.21(b) of this proposed rule. The required reports for review may include audit reports, processors' monthly performance reports, and inventory reports submitted in CSFP and FDPIR. We also propose to clarify that the distributing agency is not required to review school food authorities and other recipient agencies in child nutrition programs. The State administering agency (which may be different from the distributing agency) is responsible for the review of such recipient agencies in accordance with review requirements of Part 210. Lastly, we propose to remove specific review procedures included in current § 250.19(b)(1), such as the review of recipient agency eligibility and civil rights requirements, as they do not apply to all programs, and are included in Federal regulations for specific programs in which they do apply. We propose to include current on-site review requirements of charitable institutions, and of storage facilities at the distributing agency level, in § 250.21(b), and to add a reference to the distributing agency's requirement to perform on-site reviews of subdistributing and recipient agencies in CSFP, TEFAP, and FDPIR, in accordance with 7 CFR parts 247, 251, and 253, respectively. However, we propose to remove the requirement, in current § 250.19(b)(1)(iii), that the distributing agency perform on-site reviews of in-State processors. The on-site review would be replaced by review of the audits required of such processors, in accordance with § 250.20 of this proposed rule. We propose to remove the requirement in current § 250.19(b)(2), that the distributing agency develop a system to verify sales of end products when a processor delivers end products to a distributor for sale to recipient agencies under a discount method of sales. Processors receive notification of such end product sales from the distributor, usually by electronic means, and the processor must maintain records of such sales, in accordance with current § 250.30(k)(2), and with § 250.19(a) of this proposed rule. Such records would be reviewed by auditors, in conducting the audits required in accordance with § 250.20(b) of this proposed rule. Consequently, all end product sales may be verified through the review of audit reports, as well as through the distributing agency's review of the processor's monthly performance reports. The distributing agency may also require, at its option, that the processor submit documentation to support information included in the processor's performance report, including sales of end products to recipient agencies. The State administering agency may also review school food authorities' records, in order to ensure receipt of the requisite quantity of end products, in accordance with the administrative review required in 7 CFR part 210. In § 250.21(c), we propose to include the requirement, in current § 250.19(b)(3) and (b)(4), that the distributing agency report deficiencies identified in its review to recipient agencies or other entities, recommend corrective actions, and ensure that such actions are completed. We propose to remove the requirement in current § 250.19(b)(6) that the distributing agency require that subdistributing agencies monitor and review their own operations. Such responsibility must reside with the distributing agency, in accordance with § 250.4(a) of this proposed rule. 13. Distributing Agency Performance Standards, § 250.22 In § 250.22, we propose to include the performance standards that the distributing agency must meet, most of which are included in current § 250.24. Performance standards are meant to highlight the most important areas of oversight for distributing agencies relating to donated foods; however, the current standards cover a wide area. In § 250.22(a), we propose to revise the performance standards to include only those relating to oversight of requirements in the ordering, distribution, processing, and control of donated foods, as such requirements are proposed in this rule. We propose to revise the performance standard relating to the provision for processing of donated foods to clarify that the distributing agency must provide for such processing, at the request of school food authorities, in accordance with the processing requirements in Subpart C of 7 CFR part 250. Most distributing agencies already provide for processing of donated foods into end products, which permit school food authorities to more easily prepare and serve meals in NSLP. We propose to include clarification that some performance standards are applicable only to distributing agencies that distribute donated foods in NSLP or other child nutrition programs. We propose an additional performance standard, ensuring distributing agencies provide recipient agencies information regarding the preferred method for the submission of donated food complaints to the distributing agency and that distributing agencies act expeditiously to resolve submitted complaints. Lastly, we propose to clarify that the identification of specific performance standards does not relieve the distributing agency of the responsibility to meet other requirements in 7 CFR part 250. In § 250.22(b), we propose to include the requirement, in current § 250.19(c), that the distributing agency submit a corrective action plan to FNS if it is found to be substantially out of compliance with the performance standards. We propose to retain the current requirements that the plan identify the corrective actions to be taken, the timeframe for completion of such actions, and that the distributing agency must submit the plan to FNS within 60 days after receiving notification of a deficiency. Failure of a distributing agency to submit a timely corrective action plan to FNS may be considered a violation of this part, and therefore subject to suspension or termination under § 250.3(c). In § 250.22(c), we propose to include the provision, in current § 250.20, that FNS may terminate the distributing agency's participation in the distribution of donated foods, or in a food distribution program, for failure to comply with requirements in 7 CFR part 250, with other applicable Federal regulations, or with its written agreement with FNS. We propose to indicate that FNS may also choose to suspend, rather than terminate, such participation, or may terminate or suspend some, but not all, activities. In certain situations, suspending all or part of a program rather than terminating the program in its entirety will allow FNS to continue serving program participants while pursuing corrective actions. Lastly, we propose to include the stipulation, in current § 250.20, that FNS may also take other actions, as appropriate, including prosecution under applicable Federal statutes. C. Subpart C—Processing and Labeling of Donated Foods We propose to amend current Subpart C of 7 CFR part 250 to reduce reporting requirements relating to the processing of donated foods, and to remove the requirement that the processor make a payment to the distributing agency for the value of excessive donated food inventories at the annual reconciliation. We also propose to update regulatory references to conform to other changes proposed in this rule, and to replace reference to “FNSRO” with “FNS Regional Office” given that the rule proposes to remove the definition of “FNSRO” from the definitions section of the rule, in proposed § 250.2. We propose to remove the requirement, in current § 250.30(k)(3), that the processor submit copies of requests for refunds and refund payments to the distributing agency. We also propose to remove the requirements, in current § 250.30(n)(4) and § 250.30(o), that the distributing agency submit monthly performance reports, or information from such reports, to FNS on a periodic basis. In accordance with the proposal to remove the requirement that the distributing agency develop a sales verification system for end product sales, as described in section II.B.12 of the preamble, we propose to remove the requirement, in current § 250.30(m)(1)(viii), that the processor report sales verification findings to the distributing agency. We also propose to remove current § 250.30(m)(1)(vii), which is reserved. Accordingly, we propose to redesignate § 250.30(m)(1)(ix) as § 250.30(m)(1)(vii). In accordance with current § 250.30(n)(3), as part of the annual reconciliation, a processor that has contracted with the distributing agency for the following year must first reduce any excessive donated food inventories by paying the distributing agency for the value of such donated foods. While such cash-out of donated food inventories may be the best option in certain instances, in other cases a transfer of such inventories to another distributing agency or processor may be the better option. Therefore, we propose to revise current § 250.30(n)(3) to instead require such processor to reduce excessive donated food inventories. Policy Memorandum FD-064, Management of Donated Food Inventories at Processors, which was implemented in revised form on March 20, 2012, provides several options for reduction of excessive donated food inventories at processors. We propose to remove requirements in current § 250.30(q) that the FNS Regional Office review processing contracts and inventory reports, and in current § 250.30(r), which indicates that FNS will provide copies of contracts upon request. Such contracts and inventory reports are currently reviewed by FNS Headquarters staff. In accordance with the removal of paragraphs (o), (q), and (r) of this section, paragraphs (p), (s), and (t) would be redesignated as paragraphs (o), (p), and (q) of this section, respectively. D. Subpart D—Donated Foods in Contracts With Food Service Management Companies We propose to amend current Subpart D of 7 CFR part 250 to clarify requirements in the storage, control, and use of donated foods in contracts with food service management companies. In current § 250.50(a), we propose to clarify that the food service management company must use all donated foods received in the recipient agency's food service, or must use commercial substitutes in place of such donated foods only as permitted in § 250.51(d). We propose to revise current § 250.52(a) to clarify that the food service management company must meet the requirements in § 250.14(a) of this proposed rule for the safe storage and control of donated foods. E. Subpart E—National School Lunch Program (NSLP) and Other Child Nutrition Programs We propose to amend current Subpart E of 7 CFR part 250 to ensure that school food authorities are able to order and receive the donated foods that they may best utilize in the school food service, and to clarify requirements for school food authorities in the storage, inventory management, and use of donated foods. In order to accomplish this, we propose to revise current paragraphs § 250.58(a) and (e), and to consolidate current §§ 250.59 and 250.60 into a revised § 250.59. Current §§ 250.61 and 250.62 would be redesignated as §§ 250.60 and 250.61, respectively. In § 250.58(a), we propose to remove reference to the Electronic Commodity Ordering System (ECOS), as donated food orders are now placed through a new FNS electronic donated foods ordering system, currently named Web Based Supply Chain Management (WBSCM). Although all distributing agencies currently submit orders and other information to FNS through the FNS electronic donated foods ordering system, not all States have rolled down such system to their school food authorities. Nevertheless, we propose to require that the distributing agency ensure that all school food authorities are able to submit orders for donated foods through the FNS electronic donated foods ordering system, or through a comparable electronic ordering system. Direct submission of orders by school food authorities better ensures that they receive the preferred types and forms of donated foods, and at a time when they may best utilize such foods in the school food service. We propose to require that the distributing agency ensure that all school food authorities have the opportunity to provide input on at least an annual basis in determining which donated foods, from the full list of donated foods, will be made available to them for ordering electronically through the FNS electronic donated foods ordering system or another system. Providing school food authorities with the opportunity to order the types and forms of foods that they have expressed a preference for will help them to maximize their use of donated foods to meet the nutrition standards in the National School Lunch Program and to prevent waste. Lastly, we propose to require that the distributing agency ensure distribution to school food authorities of all such ordered donated foods that may be distributed to them in a cost-effective manner (including the use of split shipments, as necessary), and that they may efficiently utilize so as to minimize the cost to school food authorities of receiving donated foods. In § 250.58(e), we propose to require that the distributing agency use either the donated food cost-per-pound prices posted annually by USDA or the most recently published cost-per-pound in the USDA donated foods catalog in offering the school food authority the commodity offer value of donated foods, as required in § 250.58(b). In crediting the school food authority's donated food assistance level, currently the distributing agency may choose among three options in valuing donated foods, including the commodity file cost as of a specified date and the estimated cost-per-pound data included in commodity survey memoranda. Instead, we propose that the distributing agency use the USDA purchase price (cost-per-pound) in crediting the school food authority's donated food assistance level, and that the distributing agency update this price at least semi-annually to reflect the most recent purchase price. This will better reflect the actual benefit received by the school food authority. In § 250.59(a), we propose to reference the storage and inventory requirements in Subpart B of 7 CFR part 250 applicable to distributing agencies to ensure the safe and effective storage and control of donated foods. We propose to indicate that the school food authority must ensure the safe and sanitary storage, inventory management, and use of donated foods and purchased foods, in accordance with requirements in current § 210.13. In accordance with § 250.14(c) of this proposed rule, the school food authority may commingle donated foods and purchased foods in a single inventory management system. We propose to remove the current provision that permits the distributing agency to determine if the school food authority may exercise the single inventory option, or must continue to maintain and track donated food inventories separately from its purchased foods. Separate inventory tracking of donated foods would be an unnecessary burden for school food authorities, and it is important that single inventory management be implemented consistently in all States. In § 250.59(b), we propose to include the requirements in current § 250.60(a) for the use of donated foods in the nonprofit school food service, with only minor clarifications. In § 250.59(c), we propose to include contingencies and requirements in current § 250.60(b) for the use of donated foods outside of the nonprofit school food service, again with only minor clarifications. In § 250.59(d), we propose to include requirements in current § 250.60(c) for donated foods in contracts with food service management companies in a more streamlined form, but without substantive changes. In § 250.59(e), we propose to clarify requirements for two or more school food authorities acting as a collective unit in conducting activities relating to donated foods. School food authorities often perform activities in a collaborative manner through school co-ops or consortia, in order to minimize costs and improve efficiency of operations. We propose to clarify that the school collective unit is subject to the same requirements pertaining to such donated food activities as a single school food authority. For example, the school collective unit may commingle donated foods and purchased foods in a single inventory management system. F. Subpart F—Household Programs We propose to revise current Subpart F to streamline and clarify current descriptions of, and requirements for, the distribution of donated foods in CSFP and FDPIR, and to include such information for TEFAP. We propose to remove reference to the Food Distribution Program in the Trust Territory of the Pacific Islands, as all distribution of donated foods in this program has been cashed out. We also propose to remove reference to the Special Supplemental Nutrition Program for Women, Infants, and Children (i.e., the WIC Program), as donated food distribution in that program was discontinued several years ago. Accordingly, we propose to include the following new sections in the revised Subpart F. 1. Commodity Supplemental Food Program (CSFP), § 250.63 In § 250.63(a), we propose to clarify that the Department distributes donated foods in CSFP to the distributing agency for further distribution in the State, in accordance with 7 CFR part 247. We also propose to clarify that State and recipient agencies must comply with the requirements of 7 CFR part 250 in the distribution, control, and use of donated foods in CSFP, to the extent that such requirements are not inconsistent with the requirements in 7 CFR part 247. In § 250.63(b), we propose to clarify the types of donated foods distributed in CSFP, in accordance with the legislation authorizing the purchase of such foods. 2. The Emergency Food Assistance Program (TEFAP), § 250.64 In § 250.64, we propose to include a description of the distribution of donated foods in TEFAP. In § 250.64(a), we propose to clarify that the Department distributes donated foods in TEFAP to the distributing agency for further distribution in the State, in accordance with 7 CFR part 251. We also propose to clarify that State and recipient agencies must comply with the requirements of 7 CFR part 250 in the distribution, control, and use of donated foods in TEFAP, to the extent that such requirements are not inconsistent with the requirements in 7 CFR part 251. In § 250.64(b), we propose to clarify the types of donated foods distributed in TEFAP, in accordance with the legislation authorizing the purchase of such foods. 3. Food Distribution Program on Indian Reservations (FDPIR), § 250.65 In § 250.65(a), we propose to clarify that the Department distributes donated foods in FDPIR to the distributing agency for further distribution, in accordance with 7 CFR parts 253 and 254. We also propose to clarify that the distributing agency may be a State agency or Indian Tribal Organization, and must comply with the requirements of 7 CFR part 250 in the distribution, control, and use of donated foods in FDPIR, to the extent that such requirements are not inconsistent with the requirements in 7 CFR parts 253 and 254. In § 250.65(b), we propose to clarify the types of donated foods distributed in FDPIR, in accordance with the legislation authorizing the purchase of such foods. G. Subpart G—Additional Provisions We propose to amend current Subpart G of 7 CFR part 250 by revising the Subpart heading to read Additional Provisions, by clarifying requirements for the distribution of donated foods in disasters and situations of distress, and by adding a provision which identifies the OMB assigned information collection and recordkeeping control numbers. In order to accomplish this, we propose to revise the heading of Subpart G, as well as current §§ 250.69 and 250.70, and we propose to add § 250.71. 1. Disasters, § 250.69 We propose to revise current § 250.69 to clarify requirements for the distribution and use of donated foods in a disaster, contingencies for replacement of such foods, and reporting requirements. In accordance with § 250.2 of this proposed rule, the term “disaster” includes a Presidentially declared disaster or emergency (e.g., a pandemic); therefore, we refer simply to a disaster in this section. In § 250.69(a), we propose to retain the current provision that the distributing agency may provide donated foods from current inventories, at the distributing or recipient agency level, to approved disaster organizations for use in providing congregate meal assistance to persons in need of food assistance as a result of a disaster. We propose to retain the current authority for the distributing agency to provide such assistance without FNS approval. However, we propose to clarify that the distributing agency must notify FNS that donated foods will be provided, and the period of time that they are expected to be needed. If such period of time is extended, the distributing agency must notify FNS of the extension. In § 250.69(b), we propose to retain the current provision that the distributing agency may provide donated foods to disaster organizations for distribution to households in need of food assistance once FNS approval has been obtained for such distribution. We propose to clarify that such assistance may continue for the period of time that FNS determines necessary to meet the needs of such households. We propose to retain the prohibition for households to simultaneously receive disaster Supplemental Nutrition Assistance Program (D-SNAP) benefits (formerly disaster food stamps) and donated food assistance. In § 250.69(c), we propose to retain the current requirement that the distributing agency review and approve a disaster organization's application to provide donated food disaster assistance, before distributing donated foods to such organization. We also propose to retain the current requirement that, for distribution of donated foods to households, the application must also be forwarded to FNS for approval. We propose to retain the current required elements of such applications, including those additional elements required for distribution of donated foods to households. In § 250.69(d), we propose to include the current requirement that disaster organizations collect information from households receiving donated foods, if issuance of D-SNAP benefits has also been approved, in order to ensure that households receiving D-SNAP benefits do not also receive donated foods. We propose to retain the current information that must be collected from such households. We also propose to include the current requirements that such household information be reported to the distributing agency, and that the distributing agency maintain a record of such information. In § 250.69(e), we propose to include the provision, in current § 250.13(d)(1), that permits disaster relief workers to receive meals containing donated foods as an incident of their service to eligible recipients. However, we propose to clarify that any emergency relief workers at the congregate feeding site who are directly engaged in providing relief assistance may be served congregate meals containing donated foods. In § 250.69(f), we propose to include the current requirement that the distributing agency report to FNS the number and location of sites where donated foods are used in congregate meals or household distribution, as these sites are established. We also propose to retain the requirement that the distributing agency provide a report of the types and amounts of donated foods used in disaster assistance. However, we propose to require this information to be reported electronically, utilizing form FNS-292A, Report of Commodity Distribution for Disaster Relief. In § 250.69(g), we propose to include the current provision for FNS replacement of donated foods used in disasters, as requested by the distributing agency. However, we propose to require that such information must be reported within 45 days of termination of disaster assistance, rather than the current 30 day period. Also, we propose to require that such replacement be requested electronically, utilizing form FNS-292A, Report of Commodity Distribution for Disaster Relief, along with the report of the donated foods used in the disaster. Lastly, we propose to clarify that, for food diverted from inventories of recipient agencies in child nutrition programs, FNS will replace such food if the recipient agency received the same types of donated food during the year preceding the onset of the disaster assistance. Such recipient agencies may commingle donated foods and commercially purchased foods in a single inventory management system, which makes it difficult to ascertain which foods are actually used. We propose to clarify that such replacement will be in the amount of food used, but not to exceed the amount of like donated food received during the preceding year. In § 250.69(h), we propose to indicate that FNS will, upon receiving a distributing agency request via public voucher, reimburse the distributing agency for any costs incurred in transporting donated foods within the State, or from one State to another, for use in disasters. 2. Situations of Distress, § 250.70 We propose to revise current § 250.70 to clarify requirements for the distribution and use of donated foods in a situation of distress (as defined in § 250.2 of this proposed rule), contingencies for replacement of such foods, and reporting requirements. As in a disaster, donated foods may be used to provide assistance in a situation of distress, but requirements for the use of such foods, and conditions for their replacement, are somewhat different. In § 250.70(a), we propose to retain the current conditions for the distributing agency to provide donated foods to approved disaster organizations for use in providing congregate meals to persons in need of food assistance as a result of a situation of distress. In accordance with current requirements, FNS approval is not required for such use if the situation of distress is the result of a natural event—e.g., a hurricane, flood, or snowstorm—and if its duration will not exceed 30 days. However, we propose to clarify that the distributing agency must notify FNS that donated food assistance is to be provided. FNS approval is required to permit such donated food assistance for a period exceeding 30 days. We propose to clarify that FNS approval is required to permit donated food assistance in providing congregate meals in a situation of distress that is not the result of a natural event (e.g., an explosion), for any period of time. As with disasters, the distributing agency may use donated foods from current inventories at the distributing or recipient agency level. In § 250.70(b), we propose to retain the current requirement that the distributing agency obtain FNS approval to provide donated foods to approved disaster organizations for distribution to households in a situation of distress. We propose to clarify that such assistance may continue for the period of time that FNS determines necessary to meet the needs of such households. In accordance with current restrictions, households receiving D-SNAP benefits are not eligible to also receive donated foods. In § 250.70(c), we propose to retain the current requirement that the disaster organization submit an application to the distributing agency, for its review and approval, to receive donated foods to provide assistance in a situation of distress. For distribution of donated [Text truncated at 120,000 characters. The full text is on the page linked above.] --- Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/fr%3A2014-24613. Public record. Not legal advice.