Food Stamp Program: Automated Data Processing Equipment and Services; Reduction in Reporting Requirements

SUMMARY: This rule: increases the cost thresholds above which prior

written Federal approval is required for Federal financial

participation in State automated data processing (ADP) equipment and

services acquisitions; provides for State requests to be deemed to have

provisionally met the prior approval requirement if the Food and

Consumer Service (FCS) does not approve, disapprove, or request

additional information about the request within 60 days of

acknowledging receipt; and eliminates the requirement that State

agencies submit a written summary pertaining to the State biennial

system security reviews.

EFFECTIVE DATE: This rule is effective July 29, 1996.

FOR FURTHER INFORMATION CONTACT: John H. Knaus, Chief, Quality Control

Branch, Program Accountability Division, Food Stamp Program, 3101 Park

Center Drive, Room 904, Alexandria, Virginia 22302, (703) 305-2474.

SUPPLEMENTARY INFORMATION:

Executive Order 12866

This rulemaking has been determined to be significant and was

reviewed by the Office of Management and Budget under Executive Order

12866.

Executive Order 12372

The Food Stamp Program (FSP) is listed in the Catalog of Federal

Domestic Assistance under 10.551 and information on State agency

administrative matching grants for the FSP is listed under 10.561. For

the reasons set forth in the final rule and related notice to 7 CFR

part 3015, subpart v (48 FR 29115), the FSP is excluded from the scope

of Executive Order 12372 which requires intergovernmental consultation

with State and local officials.

Executive Order 12778

This rule has been reviewed under Executive Order 12778, Civil

Justice Reform. This rule is intended to have preemptive effect with

respect to any State or local laws, regulations or policies which

conflict with its provisions or which would otherwise impede its full

implementation. This rule is not intended to have retroactive effect

unless so specified in the ``Effective Date'' section of this preamble.

Prior to any judicial challenge to the provisions of this rule or the

application of its provisions, all applicable administrative procedures

must be exhausted. In the FSP the administrative procedures are as

follows: (1) For program benefit recipients--State administrative

procedures issued pursuant to 7 U.S.C. 2020(e)(10) and 7 CFR 273.15;

(2) for State agencies--administrative procedures issued pursuant to 7

U.S.C. 2023 set out at 7 CFR 276.7 (for rules related to non-QC

liabilities) or Part 283 (for rules related to QC Liabilities); and (3)

for program retailers and wholesalers--administrative procedures issued

pursuant to 7 U.S.C. 2023 set out at 7 CFR 278.8.

Regulatory Flexibility Act

This rulemaking has been reviewed with regard to the requirements

of the Regulatory Flexibility Act of 1980 (Pub. L. 96-354, 94 Stat.

1164, September 19, 1980, 5 U.S.C. 601-612). Ellen Haas, Under

Secretary for Food, Nutrition, and Consumer Services, has certified

that this rule does not have a significant economic impact on a

substantial number of small entities. This rule will affect State

agencies by reducing the reporting requirements applicable to them.

Paperwork Reduction Act

We anticipate this rule could reduce the actual reporting burden by

twenty percent or more. In accordance with the Paperwork Reduction Act

of 1995 (44 U.S.C. 3507), FCS solicited comment through an April 1,

1996 publication in the Federal Register (61 FR 14288) of a notice on

the information collection requirements relating to automated data

processing and information retrieval systems. The comment period closed

May 31, 1996. There were no comments on the portion of the reporting

burden that this rule concerns. The proposed collection will be

submitted to OMB for review and at that time the Department will

publish a notice which will provide an additional opportunity to

comment.

Background

On July 31, 1995, the Department of Agriculture (the Department)

published in the Federal Register a Notice of Proposed Rulemaking which

proposed changes to the Advance Planning Document (APD) process (60 FR

38,972 (1995)). There was a sixty-day comment period, which ended

September 29, 1995. The Department received six comment letters on the

proposed rule. Commenters represented the States of California,

Louisiana, North Carolina, Pennsylvania and Texas and the National

Association of State Human Services Finance Officers. Commenters

expressed agreement with the proposed rule's objective to reduce

reporting requirements. Two commenters supported the rule changes with

no additional comment. One commenter was positive about the changes but

had technical questions about their application. The three remaining

commenters, while positive about the direction of the rule changes,

felt FCS should take further action to reduce the reporting

requirements.

Increased APD Prior Approval Cost Thresholds - 7 CFR 277.18(c)

The Department proposed to increase the cost thresholds for prior

approval of APDs from $500,000 to $5 million or more in State and

Federal costs for both competitive and noncompetitive acquisitions.

Noncompetitive acquisitions from a non-governmental source that have

total State and Federal acquisition costs of more than $1 million but

no more than $5 million would need prior approval of the

[[Page 33642]]

justification for the sole source purchase. The previous threshold for

such acquisitions was $100,000. Three commenters thought the proposed

increases were too small to reduce the reporting burden for their

States. Two recommended that thresholds be scaled according to the

total or client populations of a State. One commenter recommended that

thresholds be raised to $25 million for larger States; another

recommended an increase to $30 million. The theory behind these

comments was that relatively minor projects in larger States, because

of their costs, would receive disproportionate Federal attention and

require continued reporting.

The Department is attempting to achieve a reasonable balance

between greater State flexibility and prudent oversight of Federal

investments. The thresholds were increased ten-fold in the proposed

rule. While automation projects costing from $5 million to $25 million

or $30 million may not always be critical projects in larger States,

they represent sizeable investments of Federal money. Introduction of a

sliding scale for thresholds according to State population or caseload

introduces an unnecessary complication to the APD process. At this time

the Department believes a reasonable balance has been proposed.

However, the Department will continue efforts to further streamline the

APD process. After some experience with the new thresholds, further

increases in or changes to the thresholds can be considered.

One commenter suggested that the Department limit its review of

State ADP acquisitions to new development and that standard upgrades of

existing equipment, replacement of obsolete or depreciated equipment,

and normal growth (equipment for new staff) be exempt from Federal

review. This commenter asserted there was rarely doubt as to the

eventual approval of most of these requests and this action would

permit further Federal focus on new automation initiatives. The

Department is responsible for overseeing Federal investments and

ensuring Federal requirements are met. At this time the Department

believes these acquisitions, when in excess of the proposed thresholds,

should receive continued Federal oversight. However, this suggestion

will be part of considerations in continuing efforts to streamline the

APD process and provide reporting relief to State agencies.

One commenter proposed that electronic benefit transfer (EBT)

systems be subject to the higher APD thresholds. However, given the

critical stage of development of a large number of EBT projects, the

Department believes it is in the mutual interest of States and the

Federal government to continue reviewing EBT projects under standards

that are specific to them.

Finally, one commenter wanted to know whether an APD would need to

be submitted for a project if it unexpectedly exceeds the threshold at

some point during its development or during its life cycle through

enhancements. The proposed rule did not affect existing policy for

underestimated projects. When State officials first realize that a

project under development is likely to exceed the threshold, an APD

should be submitted. After system implementation is complete, future

enhancements during the system life cycle would need prior approval if

their costs will exceed the threshold.

Reviews of Requests for Proposals (RFPs), Contracts and Contract

Amendments--7 CFR 277.18(c)(2)(ii)

The Department proposed to increase thresholds for prior approval

of RFPs and Contracts to $5 million or more for competitive

procurements and to more than $1 million for non-competitive

procurements. The proposed rule also would increase the threshold for

prior Federal approval for contract amendments to those involving cost

increases greater than $1 million or contract time extensions of more

than 120 days. FCS could review Requests for Proposals (RFPs),

contracts and contract amendments under the threshold amounts on an

exception basis or if the procurement was not adequately described in

the APD.

Two commenters recommended that RFPs, contracts and contract

amendments no longer be subject to review. According to one commenter,

Federal review of these documents causes delays, duplicates State

processes and represents Federal micro-management of State projects.

The other commenter recommended elimination of these reviews since RFPs

and contracts would have been already justified by an approved APD.

While the Department substantially increased the thresholds for

submitting these documents, the approval of RFPs, contracts and

contract amendments was not eliminated. The Department is responsible

for ensuring that Federal requirements are met for ADP acquisitions.

Although an approved APD may provide for the eventual release of an RFP

and signing of a contract, these documents are not necessarily

identical in content and legal significance. Prior approval for these

documents will be retained in the final rule. However, the Department

will reexamine these recommendations in upcoming efforts to further

streamline the APD process and reduce State reporting requirements.

Two commenters believe the proposed rule is unclear about when

RFPs, contracts and contract amendments which fall under the thresholds

for submitting these documents will need prior approval. These

commenters thought the rule could require States to submit RFPs,

contracts or contract amendments when the ADP equipment or services

acquisition did not need prior approval of either an APD or the sole

source justification. The proposed rule did not change FCS' ongoing

policy of subjecting these documents to review only if prior approval

of the ADP acquisition was required in accordance with

Sec. 277.18(c)(1). As provided by Sec. 277.18(c)(2)(ii), FCS will

require prior approval of RFPs, contracts and contract amendments only

if prior approval of an APD or the justification for a sole source

procurement was required. Prior approval for RFPs, contracts and

contract amendments under the applicable thresholds would be reviewed

on an exception basis (such as if innovative automation is used) or if

the procurement strategy was not adequately described or justified in

the APD. If approval of these documents is needed, and they are under

the thresholds, FCS will notify States to submit them. No substantive

changes are made to the provisions at Sec. 277.18(c)(2)(ii) (A), (B) or

(C). However, wording in the provisions will be modified in the final

rule to make the language more similar to language in DHHS' rule. The

word ``justified'' is added to (A) and (B) and the word ``described''

is added to part (C).

Prompt Action on Requests for Prior Approval--7 CFR 277.18(c)(5)

Two commenters asked about the meaning of provisional approval,

whether this approval could be withdrawn, and under what circumstances.

One commenter wanted to know whether interest would be charged if a

project was denied funding after it was begun. Provisional approval

permits States to go forward with their automation projects after the

Federal time-limit expires without penalty for not receiving prior

Federal approval. Under previous policy, a project could be denied full

funding if it was begun before Federal approval was received. However,

provisional approval is distinct from formal approval and does not

waive Federal requirements for these acquisitions. FCS' practice has

[[Page 33643]]

been not to establish claims if a State has acted in good faith. In the

event FCS determines that the actions taken by the State are not

approvable, notification in writing is provided, and funding approval

is suspended pending corrective action. The State would be at financial

risk if the State continues to draw funds for these charges after this

notification. A claim would be established for funds drawn after the

suspension and the State would again be notified in writing of the

disallowance for all funds improperly drawn and any interest accrued on

those funds. These charges would not be eligible for reimbursement by

FCS. If FCS determines that the planned project does not meet the

requirements for approval, no further funding would be approved and all

approval action would be terminated.

One commenter was concerned that the date starting the count of the

sixty-day Federal time-limit for responding to State requests is the

date of the Department's acknowledgement letter. This commenter

suggested the Department could delay State projects by delaying the

mailing of the acknowledgement letter. The Department intends to

acknowledge State requests promptly. If State agencies believe

acknowledgement of their requests have been purposely delayed, a

complaint should be filed with the appropriate FCS Regional

Administrator.

APD Update (APDU)--7 CFR 277.18(e)

The Department proposed to raise the reporting threshold for

submitting an annual APD Update (APDU) from $1 million to $5 million.

The threshold for submittal of an APDU as needed was proposed for

increases of $1 million or more. The previous threshold was $300,000 or

10 percent of the project cost, whichever is less.

According to two commenters, the threshold for annual APD updates

is still too low to give their States reporting relief. These

commenters recommended increases to $25 million and $30 million

respectively. One commenter thought this increase was necessary since

EBT projects will increase the amount of annual APD reporting required.

In addition, one commenter thought the threshold for as needed APDUs

should be raised from $1 million or more to $2.5 million or 10 percent,

whichever is more. The Department believes a reasonable threshold

increase for submittal of annual APDUs and the as needed APDUs is

embodied in the proposed regulation. Since the thresholds for APDUs do

not apply to EBT systems, these provisions will not affect annual

reporting for EBT systems. The thresholds for submitting APDUs will

become final as proposed. However, APDU requirements will be reexamined

in upcoming streamlining efforts.

Biennial System Security Reviews--7 CFR 277.18(p)(3)

The proposed rule eliminated the requirement that States submit

summary information about the biennial ADP system security review to

FCS. Instead, States are to retain copies of these reports and other

pertinent supporting documentation for Federal on-site review. One

commenter asked how long the biennial security review report should be

kept by the State, who would be conducting reviews of these materials

and how often they would be reviewed. States should keep a copy of

their latest biennial security review report and pertinent supporting

documentation (such as a summary of findings regarding compliance with

security requirements and the corrective action plan with dated

milestones) on file for Federal review. State record retention

requirements would apply to these documents. FCS or agents acting on

FCS' behalf will examine State security review reports on a periodic

basis, as needed.

Miscellaneous

The Department is making a minor technical change to the section

heading of Sec. 277.18 by replacing the word ``Automatic'' with the

word ``Automated.'' This change is being made to make word usage in the

section heading consistent with word usage in the rule's text.

Implementation--272.1(g)

All provisions in this final rule become effective July 29, 1996.

List of Subjects

7 CFR Part 272

Alaska, Civil rights, Food stamps, Grant programs--social programs,

Reporting and recordkeeping requirements.

7 CFR Part 277

Food stamps, Government procedure, Grant programs--social programs,

Investigations, Records, Reporting and recordkeeping requirements.

Accordingly, 7 CFR parts 272 and 277 are amended as follows:

1. The authority citation for parts 272 and 277 continues to read

as follows:

Authority: 7 U.S.C. 2011-2032

PART 272--REQUIREMENTS FOR PARTICIPATING STATE AGENCIES

2. In Sec. 272.1, a new paragraph (g)(146) is added to read as

follows:

272.1 General terms and conditions.

* * * * *

(g) Implementation. * * *

(146) Amendment No. 368. The provisions of Amendment No. 368 are

effective on July 29, 1996.

PART 277--PAYMENTS OF CERTAIN ADMINISTRATIVE COSTS OF STATE

AGENCIES

3. In Sec. 277.18,

a. The section heading is amended by removing the word

``Automatic'' and adding in its place the word ``Automated'';

b. Paragraph (c)(1) is revised;

c. The second sentence in paragraph (c)(2)(ii)(A) is removed and

two sentences are added in its place;

d. The second sentence in paragraph (c)(2)(ii)(B) is removed and

two sentences are added in its place;

e. The second sentence in paragraph (c)(2)(ii)(C) is removed and

two sentences are added in its place;

f. Paragraph (c)(5) is added;

g. Paragraph (e)(1) is amended by removing the words ``$1 million''

and adding in their place the words ``$5 million'';

h. Paragraph (e)(3)(i) is amended by removing the words ``($300,000

or 10 percent, whichever is less)'' and adding in their place the words

``($1 million or more)'';

i. The third and fourth sentences of paragraph (p)(3) are removed

and one sentence is added in their place. The revision and additions

read as follows:

Sec. 277.18 Establishment of an Automated Data Processing (ADP) and

Information Retrieval System.

* * * * *

(c) General acquisition requirements.--(1) Requirement for prior

FCS approval. A State agency shall obtain prior written approval from

FCS as specified in paragraph (c)(2) of this section when it plans to

acquire ADP equipment or services with proposed FFP that it anticipates

will have total acquisition costs of $5 million or more in Federal and

State funds. This applies to both competitively bid and sole source

acquisitions. A State agency shall also obtain prior written approval

from FCS of its justification for a sole source acquisition when it

plans to acquire ADP equipment or services non-competitively from a

nongovernmental source which has a total State and Federal acquisition

cost of more than $1

[[Page 33644]]

million but no more than $5 million. The State agency shall request

prior FCS approval by submitting the Planning APD, the Implementation

APD or the justification for the sole source acquisition signed by the

appropriate State official to the FCS Regional Office. However, a State

agency shall obtain prior written approval from FCS for the acquisition

of ADP equipment or services to be utilized in an EBT system regardless

of the cost of the acquisition.

(2) Specific prior approval requirements. * * *

(ii) * * *

(A) * * * However, RFPs costing up to $5 million for competitive

procurements and up to $1 million for noncompetitive acquisitions from

non-governmental sources and which are an integral part of the approved

APD need not be submitted to FCS. States will be required to submit

RFPs under this threshold amount on an exception basis or if the

procurement strategy is not adequately described and justified in an

APD. * * *

(B) * * * However, contracts costing up to $5 million for

competitive procurements and up to $1 million for noncompetitive

acquisitions from nongovernmental sources, and which are an integral

part of the approved APD need not be submitted to FCS. States will be

required to submit contracts under this threshold amount on an

exception basis or if the procurement strategy is not adequately

described and justified in an APD. * * *

(C) * * * However, contract amendments involving cost increases of

up to $1 million or time extensions of up to 120 days, and which are an

integral part of the approved APD need not be submitted to FCS. States

will be required to submit contract amendments under these threshold

amounts on an exception basis or if the contract amendment is not

adequately described and justified in an APD. * * *

* * * * *

(5) Prompt action on requests for prior approval. FCS will reply

promptly to State requests for prior approval. If FCS has not provided

written approval, disapproval or a request for additional information

within 60 days of FCS' letter acknowledging receipt of the State's

request, the request will be deemed to have provisionally met the prior

approval requirement in paragraph (c) of this section. However,

provisional approval will not exempt a State from having to meet all

other Federal requirements which pertain to the acquisition of ADP

equipment and services. Such requirements remain subject to Federal

audit and review.

* * * * *

(p) * * *

(3) * * * State agencies shall maintain reports of their biennial

ADP system security reviews, together with pertinent supporting

documentation, for Federal on-site review.

* * * * *

Dated: June 24, 1996.

Ellen Haas,

Under Secretary, Food, Nutrition, and Consumer Services.

[FR Doc. 96-16596 Filed 6-27-96; 8:45 am]

BILLING CODE 3410-30-P