Special Supplemental Nutrition Program for Women, Infants and Children (WIC): Non-Discretionary Funding Provisions of the William F. Goodling Child Nutrition Reauthorization Act of 1998

DEPARTMENT OF AGRICULTURE

Food and Nutrition Service

7 CFR Part 246

RIN 0584-AC77

Special Supplemental Nutrition Program for Women, Infants and

Children (WIC): Non-Discretionary Funding Provisions of the William F.

Goodling Child Nutrition Reauthorization Act of 1998

AGENCY: Food and Nutrition Service, USDA.

ACTION: Final rule.

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SUMMARY: This final rule incorporates into the WIC program regulations

numerous non-discretionary funding provisions mandated in the William

F. Goodling Child Nutrition Reauthorization Act of 1998. This rule

revises and expands backspend and spendforward authority, conversion of

funds, multipurpose/infrastructure grants and the use of food funds for

the purchase of breast pumps. The rule also revises nutrition services

and administration expenditure standards and expands the timing for the

use of vendor and participant collections. The provisions in this rule

provide greater flexibility for State agencies in the operation of WIC

program relating to funds management.

EFFECTIVE DATE: This rule is effective October 1, 1998.

FOR FURTHER INFORMATION CONTACT: Patricia Daniels, (703) 305-2746.

SUPPLEMENTARY INFORMATION:

Background

On October 31, 1998, the President signed Public Law 105-336, the

William F. Goodling Child Nutrition Reauthorization Act of 1998 (the

Reauthorization Act), which included several non-discretionary funding

provisions pertaining to the WIC program. The Reauthorization Act

expands the use of funds recovered from vendors and participants,

authorizes the use of food funds to purchase or rent breast pumps,

reduces the nutrition services and administration (NSA) expenditure

standard from 15 to 10 percent, provides a new option for converting

food funds to nutrition services and administration funds, and adjusts

the formula for grants for infrastructure, special projects, and

breastfeeding promotion and support activities. The Reauthorization Act

also authorizes back spending NSA funds, eliminates the spend forward

authority for food funds, and expands the spend forward authority for

NSA funds. We have also taken this opportunity to rewrite the affected

provisions in a question and answer format to improve readability.

Good Cause Determination

The provisions in this rule provide greater flexibility for State

agencies in the operation of WIC program relating to funds management.

All of these provisions are also non-discretionary. Because of the non-

discretionary nature of these legislative provisions, the Administrator

of the Food and Nutrition Service (FNS) has determined that, in

accordance with 5 U.S.C. 553, prior notice and comment is unnecessary

and contrary to the public interest.

Effective Date

These provisions of the Reauthorization Act became effective

October 1, 1998. Therefore, we are making this rule effective

retroactively to October 1, 1998.

Use of Recoveries From Vendors and Participants

General appropriations principles permit collected claims to be

used only in the fiscal year in which the initial obligation was made.

In 1994 Public Law 103-448, the Healthy Meals for Healthy Americans Act

of 1994, amended section 17(f)(21) of the Child Nutrition Act of 1966

(CNA) (42 U.S.C. 1786(f)(21)) to permit funds recovered as a result of

violations in the food delivery system to be used in the year in which

they are collected as well. Section 203(d) of the Reauthorization Act

further amended section 17(f)(21) of the CNA to expand this authority

further and to allow funds recovered from vendors and participants as a

result of a claim to be used in the fiscal year in which the claim

arose, the fiscal year in which the funds are collected, or the fiscal

year after collection. This is in addition to the general rule

permitting use in the year in which the initial obligation was made.

This rule amends section 246.14(e) of the WIC regulations to reflect

this change and to make clear that State agencies may not credit funds

recovered from participants until any administrative hearings held

pursuant to section 246.9 have been completed.

Use of Food Funds To Purchase Breast Pumps

Section 203(h) of the Reauthorization Act amended section

17(h)(1)(C) of the CNA (42 U.S.C. 1786(h)(1)(C)) to allow food funds to

be used to purchase breast pumps. State agencies may now use either NSA

or food funds to purchase breast pumps. State and local agencies are

not required to purchase breast pumps as they are not a required

program benefit like supplemental foods or nutrition education.

However, breast pumps are aids that a State or local agency may choose

to offer certain WIC participants to facilitate breastfeeding. The

option now available to State agencies to use food funds to purchase

breast pumps will allow greater flexibility in funding sources for

breast pump purchases.

The option to use food funds to rent breast pumps was not

specifically mentioned in the Reauthorization Act. However, State and

local agencies frequently find that renting breast pumps is more cost

effective than purchasing them. Representative Goodling, Chairman on

the House Committee on Education and the Workforce, has indicated that

the omission of specific mention of breast pump rental was not intended

to preclude the use of food funds for this purpose. Consequently, in

drafting this provision we have interpreted the word ``purchase'' in

section 203(h) of the Reauthorization Act to include both the

acquisition of an absolute ownership interest in breast pumps by State

agencies and the securing by State agencies of the contractual right to

the exclusive use of breast pumps for a finite period of time (i.e.,

the rental of breast pumps). In both situations, a State agency

``purchases'' the exclusive right to use a breast pump, either forever

or for a limited time period. Therefore,

[[Page 67998]]

this rule amends section 246.14(b) of the WIC program regulations to

permit both the purchase and the rental of breast pumps with food

funds.

State agencies should note that any food funds expended to purchase

or rent breast pumps will not count towards a State agency's nutrition

education and breastfeeding promotion and support expenditure

requirement. Although sections 17(h)(3) (B) and (C) continue to provide

that a State agency may request approval to count the expenditure of

other funds for the purpose of meeting the nutrition education and

breastfeeding promotion and support activities, we do not interpret the

phrase ``other funds'' to include food funds used to purchase or rent

of breast pumps. This view is supported by the Senate report for the

Reauthorization Act that states: ``the Committee intends that food

funds used to provide breast pumps shall be in addition to a State's

minimum required nutrition services and administration expenditure for

breast-feeding support and promotion.'' (Senate Report Number 105-243,

p. 35.) NSA grant expenditures for breast pumps continue to count

towards these expenditure requirements.

However, we recently discovered that the November 18, 1998 final

rule concerning the non-discretionary provisions of Public Law 103-448

and Public Law 103-227 (63 FR 63969) inadvertently removed the

regulatory provisions in section 246.14(c)(1) concerning the use of

other funds to meet the nutrition education and breastfeeding promotion

and support expenditure requirements. This rule amends section

246.14(c)(1) to reinstate these provisions and to make clear that food

costs to purchase or rent breast pumps may not be counted toward the

expenditure requirements.

Nutrition Services and Administration Expenditure Standard

Section 203(i)(3) of the Reauthorization Act amended section

17(h)(2)(B)(ii) of the CNA (42 U.S.C. 1786(h)(2)(B)(ii)) by lowering

from 15 percent to 10 percent the maximum allowable percent a State

agency's per participant NSA expenditures may exceed its per

participant NSA grant without potentially suffering a reduction in its

NSA grant. Prior to the Reauthorization Act, State agencies were held

to the 15 percent standard. Section 17(h)(2)(B)(ii) of the CNA

continues to permit the Secretary to lower a State agency's NSA grant

if the State agency's per participant NSA expenditure exceeds the per

participant NSA grant without good cause. This rule amends section

246.16(e)(2)(ii) of the WIC program regulations to reflect this change.

One of the primary reasons for this change was the revision of the

conversion authority by the Reauthorization Act. Under the revised

conversion authority, a State agency may now convert food funds to NSA

funds based on projected increases in participation instead of just

actual participation increases. The NSA expenditure standard was

reduced to 10 percent to improve accountability for the new conversion

authority and to prevent this expanded conversion authority from being

used to substantially shift food money to NSA spending without

increased cost containment savings and participation. We discuss this

change to the conversion authority in more detail below.

Conversion of Food Funds to Nutrition Services and Administration

Funds

Section 203(i)(5) of the Reauthorization Act amended section

17(h)(5)(A) of the CNA (42 U.S.C. 1786(h)(5)(A)) to allow a State

agency to convert food funds to NSA funds in any fiscal year in which

it submits a plan to reduce average food costs per participant and to

increase participation above the FNS-projected level for the State

agency. Before converting any funds, the State agency must obtain the

Secretary's approval of the plan. The CNA continues to require that a

State agency may convert food funds to NSA funds only to the extent

necessary to (1) cover allowable expenditures in the fiscal year in

which the conversion takes place, and (2) ensure that the State agency

maintains the level established for the per participant NSA grant for

that fiscal year.

Prior to the Reauthorization Act, State agencies were allowed to

convert food funds to NSA funds only after participation increases were

actually achieved through acceptable measures. (``Acceptable measures''

is defined in section 17(h)(5)(C) of the CNA and section 246.16(f) of

the current WIC regulations.) If actual participation levels exceeded

the FNS-projected level, the State agency was permitted to convert a

corresponding amount of food funds to cover actual NSA expenditures.

The Reauthorization Act provides greater flexibility to State agencies

by allowing conversion based on projected increases in participation.

We will also continue to allow conversions based on actual

participation increases. In these cases, State agencies do not need to

submit a plan. This rule amends section 246.16(f) of the WIC

regulations to reflect this change.

Grants for Infrastructure, Special Projects, and Breastfeeding

Promotion and Support Activities

Section 203(n)(2)(A) of the Reauthorization Act amended section

17(h)(10)(A) of the CNA (42 U.S.C. 1786 (h)(10)(A)) to require that the

amount of funding for infrastructure, special projects, and

breastfeeding promotion and support activities equal the total amount

of NSA and food funds for the prior fiscal year that has not been

obligated or $10 million, whichever is less. In the past, the amount of

funding available for this purpose was equal to the lesser of $10

million or the amount of unobligated NSA funds from the prior fiscal

year. This provision helps to ensure the earlier identification of the

total amount of funds available for this purpose because the total

amount of unobligated funds has traditionally exceeded $10 million.

The current regulations do not contain the formula for these grants

and we do not see the need to add the revised formula to the

regulations now. However, we did want to inform interested parties of

the statutory change in methodology made by the Reauthorization Act.

NSA Back Spend Provisions

Section 203(n)(1)(B) of the Reauthorization Act amended section

17(i)(3)(A) of the CNA (42 U.S.C. 1786(i)(3)(A)) to allow a State

agency to back spend NSA funds in an amount not more than one percent

of the amount allocated for NSA from the current fiscal year to cover

allowable expenses incurred in the prior fiscal year. To allow for

greater flexibility, the law permits NSA funds spent back under this

provision to be used for either food or NSA costs incurred in the prior

year. There was no change in the provision allowing food funds to be

spent back to cover allowable food expenses (but not NSA expenses)

incurred in the prior year. State agencies may now back spend funds

equal to one percent of their respective food grant and/or NSA grant.

This rule amends section 246.16(b)(3) of the WIC regulations to

reflect these changes. This rule also amends section 246.16(b)(3) to

delete the cap on the combined amount of funds that could be spent

forward and back in any fiscal year, consistent with the change made by

section 203(n)(1)(B) of the Reauthorization Act.

Spend Forward Provisions

Section 203(n)(1)(B) of the Reauthorization Act also amended

section 17(i)(3)(A) of the CNA (42 U.S.C.

[[Page 67999]]

1786(i)(3)(A)) to (1) expand the spend forward authority for NSA funds,

and (2) eliminate the spend forward authority for food funds. Under

this provision, State agencies may spend forward NSA funds up to an

amount equal to one percent of their total grant for each fiscal year

to cover allowable NSA expenses in the next fiscal year. Additionally,

the Reauthorization Act permits State agencies, with prior approval, to

spend forward NSA funds up to an amount equal to one-half of one

percent of their total grant for the development of management

information systems, including electronic benefit transfer systems.

Therefore, State agencies may now spend forward NSA funds up to an

amount equal to one and one-half percent of their total grant (NSA plus

food grants).

State agencies may both back spend and spend forward funds in any

given fiscal year. Therefore, both one percent of the total grant may

be back spent and one and one-half of the total grant may be spent

forward. State agencies should note varying limitations on the amount,

the type of funds that may be spent back (both NSA and food funds) or

spent forward (NSA funds only), and the use of the funds that are spent

back or spent forward.

This rule amends sections 246.16(b)(3)(ii) of the WIC regulations

to reflect these changes in the spend forward authority.

Executive Order 12866

This final rule has been determined to be not significant for

purposes of Executive Order 12866 and therefore has not been reviewed

by the Office of Management and Budget.

Public Law 104-4

Title II of the Unfunded Mandates Reform Act of 1995 (UMRA) (2

U.S.C. 1531 et seq.) establishes requirements for Federal agencies to

assess the effects of their regulatory actions on State, local, and

tribal governments and the private sector. Under section 202 of the

UMRA (2 U.S.C. 1532), FNS generally must prepare a written statement,

including a cost-benefit analysis, for proposed and final rules with

``Federal mandates'' that may result in expenditures to State, local,

or tribal governments, in the aggregate, or to the private sector, of

$100 million or more in any one year. When such a statement is needed

for a rule, section 205 of the UMRA (2 U.S.C. 1535) generally requires

FNS to identify and consider a reasonable number of regulatory

alternatives and adopt the least costly, most cost-effective or least

burdensome alternative that achieves the objectives of the rule.

This rule contains no Federal mandates (under the regulatory

provisions of Title II of the UMRA) for State, local, or tribal

governments or the private sector of $100 million or more in any one

year. Thus, this rule is not subject to the requirements of sections

202 and 205 of the UMRA.

Regulatory Flexibility Act

This final rule has been reviewed with regard to the requirements

of the Regulatory Flexibility Act (5 U.S.C. 601-612). Samuel Chambers,

Jr., Administrator of the Food and Nutrition Service, has certified

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

substantial number of small entities. This rule provides additional

flexibility in funds management and operations for WIC State agencies,

which are not small entities under the Regulatory Flexibility Act.

Paperwork Reduction Act

This final rule does not contain reporting or record keeping

requirements subject to approval by the Office of Management and Budget

under section 3507 of the Paperwork Reduction Act of 1995 (44 U.S.C.

3501-20).

Executive Order 12372

The Special Supplemental Nutrition Program for Women, Infants and

Children (WIC) is listed in the Catalog of Federal Domestic Assistance

Programs under No. 10.557. For the reasons set forth in the final rule

in 7 CFR 3015, Subpart V, and related Notice (48 FR 29114), this

program is included in the scope of Executive Order 12372 which

requires intergovernmental consultation with State and local officials.

Executive Order 12988

This final rule has been reviewed under Executive Order 12988,

Civil Justice Reform. This rule is intended to have a 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'' paragraph of this

preamble. Prior to any judicial challenge to the provisions of this

rule or the applications of its provisions, all applicable

administrative procedures must be exhausted (7 U.S.C 6912(e)).

Executive Order 13132

We have reviewed this final rule under the criteria of Executive

Order 13132, Federalism. As noted above, all of the provisions in this

rule are required by law. Therefore, we have not prepared a federalism

summary impact statement for this rule.

List of Subjects in 7 CFR Part 246

Administrative practice and procedure, Civil Rights, Food and

Nutrition Service, Food assistance programs, Grant programs--health,

Grant programs--Social programs, Indians, Infants and children,

Maternal and child health, Nutrition, Nutrition education, Penalties,

Reporting and recordkeeping requirements, Public assistance programs,

WIC, Women.

For reasons set forth in the preamble, 7 CFR Part 246 is amended as

follows:

PART 246--SPECIAL SUPPLEMENTAL NUTRITION PROGRAM FOR WOMEN, INFANTS

AND CHILDREN

1. The authority citation for part 246 continues to read as

follows:

Authority: 42 U.S. C. 1786.

2. In Sec. 246.14:

a. revise paragraph (b);

b. add four new sentences to paragraph (c)(1) introductory text

after the sixth sentence; and

c. revise paragraph (e).

The revisions and addition read as follows:

Sec. 246.14 Program costs.

* * * * *

(b) What costs may I charge to the food grant?

(1) The State agency may use food funds for costs of:

(i) Acquiring supplemental foods provided to State or local

agencies or participants, whichever receives the supplemental food

first;

(ii) Warehousing supplemental foods; and

(iii) Purchasing and renting breast pumps.

(2) For costs to be allowable, the State agency must ensure that

food costs do not exceed the vendor's customary sales price. For

example, in retail purchase systems, food costs may not exceed the

shelf price of the supplemental food provided.

(c) * * *

(1) * * * If the State agency's total reported nutrition education

and breastfeeding promotion and support expenditures are less than the

required amount of expenditures, FNS will issue a claim for the

difference. The State agency may request prior written

[[Page 68000]]

permission from FNS to spend less than the required portions of its NSA

grant for either nutrition education or for breastfeeding promotion and

support activities. FNS will grant such permission if the State agency

has sufficiently documented that other resources, including in-kind

resources, will be used to conduct these activities at a level

commensurate with the requirements of this paragraph (c)(1). However,

food costs used to purchase or rent breast pumps may not be used for

this purpose. * * *

* * * * *

(e) How and when may I use my funds recovered from vendors and

participants?

(1) The State agency may keep funds collected through the recovery

of claims assessed against food vendors or participants. Recovered

funds include those withheld from a vendor as a result of reviews of

food instruments prior to payment. Recovered funds may be used for

either food or NSA costs.

(2) These recovered funds may be used in the fiscal year:

(i) In which the initial obligation was made;

(ii) In which the claim arose;

(iii) In which the funds are collected; or

(iv) after the funds are collected.

(3) The State agency may not credit any recoveries until:

(i) In the case of a vendor claim, the vendor has had the

opportunity to correct or justify the error or apparent overcharge in

accordance with Sec. 246.12(r)(5)(iii ); or

(ii) In the case of a participant, any administrative hearing

requested in accordance with Sec. 246.9 has been completed.

(4) The State agency must report vendor and participant recoveries

to FNS through the normal reporting process;

(5) The State agency must keep documentation supporting the amount

and use of these vendor and participant recoveries.

3. In Sec. 246.16, revise paragraphs (b)(3), (e)(2)(ii) and (f) to

read as follows:

Sec. 246.16 Distribution of funds.

* * * * *

(b) * * *

(3) When may I transfer funds from one fiscal year to another?

(i) Back spend authority. The State agency may back spend into the

prior fiscal year up to an amount equal to one percent of its current

year food grant and one percent of its current year NSA grant. Food

funds spent back may be used only for food costs incurred during the

prior fiscal year. NSA funds spent back may be used for either food or

NSA costs incurred during the prior fiscal year. With prior FNS

approval, the State agency may also back spend food funds up to an

amount equal to three percent of its current year food grant in a

fiscal year for food costs incurred in the prior fiscal year. FNS will

approve such a request only if FNS determines there has been a

significant reduction in infant formula cost containment savings that

affected the State agency's ability to maintain its participation

level.

(ii) Spend forward authority. (A) The State agency may spend

forward NSA funds up to an amount equal to one percent of their total

grant (NSA plus food grants) in any fiscal year. These NSA funds spent

forward may be used only for NSA costs incurred in the next fiscal

year. Any food funds that the State agency converts to NSA funds

pursuant to paragraph (f) of this section (based on projected or actual

participation increases during a fiscal year) may not be spent forward

into the next fiscal year. With prior FNS approval, the State agency

may spend forward additional NSA funds up to an amount equal to one-

half of one percent of its total grant. These funds are to be used in

the next fiscal year for the development of a management information

system, including an electronic benefit transfer system.

(B) Funds spent forward will not affect the amount of funds

allocated to the State agency for any fiscal year. Funds spent forward

must be the first funds expended by the State agency for costs incurred

in the next fiscal year.

(iii) Reporting requirements. In addition to obtaining prior FNS

approval for certain spend forward/back spending options, the State

agency must report to FNS the amount of all funds it already has or

intends to back spend and spend forward. The spending options must be

reported at closeout.

* * * * *

(e) * * *

(2) * * *

(ii) Reduction of NSA grant. FNS will reduce the State agency's NSA

grant for the next fiscal year if the State agency's current fiscal

year per participant NSA expenditure is more than 10 percent higher

than its per participant NSA grant. To avoid a reduction to its NSA

grant level, the State agency may submit a ``good cause'' justification

explaining why it exceeded the applicable limit on excess NSA

expenditures. This justification must be submitted at the same time as

the close-out report for the applicable fiscal year. Good cause may

include dramatic and unforeseen increases in food costs, which would

prevent a State agency from meeting its projected participation level.

* * * * *

(f) How do I qualify to convert food funds to NSA funds? (1)

Requirements. The State agency qualifies to convert food funds to NSA

funds in any fiscal year in two ways:

(i) Approved plan. A State agency may submit a plan to FNS to

reduce average food costs per participant and to increase participation

above the FNS-projected level for the State agency. If approved, the

State agency may use funds allocated for food costs to pay NSA costs.

(ii) Participation increases achieved. The State agency may also

convert food funds to NSA funds in any fiscal year if it achieves,

through acceptable measures, increases in participation in excess of

the FNS-projected level for the State agency. Acceptable measures

include use of cost containment measures, curtailment of vendor abuse,

and breastfeeding promotional activities. FNS will disallow the State

agency's conversion of food funds to NSA funds in accordance with

paragraph (h) of this section if:

(A) The State agency increases its participation level through

measures that are not in the nutritional interests of participants; or

(B) It is not otherwise allowable under program regulations.

(2) Limitation. The State agency may convert food funds only to the

extent that the conversion is necessary--

(i) To cover NSA expenditures in the current fiscal year; and

(ii) To ensure that the State agency maintains the level

established for the per participant NSA grant for the current fiscal

year.

(3) Maximum amount. The maximum amount the State agency may convert

equals the State agency's conversion rate times the projected or actual

participation increase, as applicable. The conversion rate is the same

as the per participant NSA grant and is determined by dividing the

State agency's NSA grant by the FNS-projected participation level. The

NSA grant used in the calculation equals the initial allocation of

current year funds plus the operational adjustment funding allocated to

the State agency for that fiscal year.

* * * * *

Dated: November 26, 1999.

Samuel Chambers Jr.,

Administrator, Food and Nutrition Service.

[FR Doc. 99-31492 Filed 12-3-99; 8:45 am]

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