Food Distribution Programs: Implementation of the Personal Responsibility and Work Opportunity Reconciliation Act of 1996 (Welfare Reform)

DEPARTMENT OF AGRICULTURE

Food and Nutrition Service

7 CFR Parts 250 and 251

RIN 0584-AC49

Food Distribution Programs: Implementation of the Personal

Responsibility and Work Opportunity Reconciliation Act of 1996 (Welfare

Reform)

AGENCY: Food and Nutrition Service, USDA.

ACTION: Final rule.

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SUMMARY: This final rule amends provisions of the Food Distribution

Program regulations and the Emergency Food Assistance Program (TEFAP)

regulations to implement certain provisions of the Personal

Responsibility and Work Opportunity Reconciliation Act of 1996,

commonly known as Welfare Reform, while generally streamlining and

clarifying these regulations. In accordance with the Welfare Reform

legislation, the provisions contained in this rule address various

changes required by the repeal of section 110 of the Hunger Prevention

Act of 1988, which authorized the former Soup Kitchens/Food Banks

Program, the former beneficiaries of which are now served by an

expanded TEFAP. It amends the definitions relating to organizational

eligibility in TEFAP to reflect the program consolidation, and to

achieve consistency with the Emergency Food Assistance Act of 1983 as

amended by Welfare Reform. Changes to these and other definitions also

provide greater clarity to the regulations. As mandated by Welfare

Reform, this rule also changes the required content and frequency of

submission of the TEFAP State plan of operation, and encourages State

agencies to create advisory boards comprised of public and private

entities with an interest in the distribution of TEFAP commodities. In

addition, this rule broadens the allowable uses of TEFAP administrative

funds at the State and local levels, and provides greater flexibility

for State agencies in meeting the TEFAP maintenance-of-effort

[[Page 72899]]

requirement. Finally, in order to reduce the paperwork burden and

afford State agencies greater flexibility, this rule makes

discretionary changes in TEFAP recordkeeping, monitoring, and reporting

requirements.

EFFECTIVE DATE: This final rule is effective February 28, 2000.

FOR FURTHER INFORMATION CONTACT: Lillie Ragan, Assistant Branch Chief,

Household Programs Branch, Food Distribution Division, Food and

Nutrition Service, U.S. Department of Agriculture, Room 612, 4501 Ford

Avenue, Alexandria, Virginia 22302, or telephone (703) 305-2662.

SUPPLEMENTARY INFORMATION:

Executive Order 12866

This rule has been determined to be not significant for purposes of

Executive Order 12866 and, therefore, has not been reviewed by the

Office of Management and Budget.

Regulatory Flexibility Act

This action has been reviewed with regard to the requirements of

the Regulatory Flexibility Act of 1980 (5 U.S.C. 601-612). The

Administrator of the Food and Nutrition Service (FNS) has certified

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

substantial number of small entities. The procedures in this rulemaking

would primarily affect FNS regional offices, and the State distributing

and recipient agencies that administer food distribution programs.

Private enterprises that enter into agreements for the storage of

donated food or meal service management would also be affected. While

some of these entities constitute small entities, a substantial number

will not be affected. Furthermore, any economic impact will not be

significant.

Unfunded Mandate Reform Act

Title II of the Unfunded Mandate Reform Act of 1995, Pub. L. 104-4,

(UMRA), 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, 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 generally requires FNS to identify and consider a reasonable

number of regulatory alternatives and adopt the least costly, more

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, and tribal

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

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

sections 202 and 205 of the UMRA.

Executive Order 12372

These programs are listed in the Catalog of Federal Domestic

Assistance under 10.550, 10.568 and 10.569 and are subject to the

provisions of Executive Order 12372, which requires intergovernmental

consultation with State and local officials (7 CFR part 3015, Subpart V

and final rule-related notices published at 48 FR 29114, June 24, 1983

and 49 FR 22676, May 31, 1984).

Executive Order 12988

This final rule has been reviewed under Executive Order 12988,

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 the preamble.

There are no administrative procedures which must be exhausted prior to

any judicial challenge to the provisions of this rule or the

application of its provisions.

Paperwork Reduction Act

The reporting and recordkeeping requirements included in 7 CFR

parts 250 and 251 have been approved by the Office of Management and

Budget under OMB No. 0584-0293.

Background

On July 8, 1999, the Department of Agriculture (hereinafter

``USDA'' or ``Department'') published a proposed rule in the Federal

Register (64 FR 36978) to amend provisions of the Food Distribution

Program regulations and the TEFAP regulations to reflect changes

brought about in the administration of food distribution programs by

the Personal Responsibility and Work Opportunity Reconciliation Act of

1996, (hereinafter ``Welfare Reform''). The rule also proposed changes

which would clarify existing regulatory requirements and reduce the

burden associated with the administration of TEFAP. The specific

changes made by this rule were discussed in detail in the preamble to

the proposed rule, which provided a 60-day comment period.

Analysis of Comments Received

The Department received a total of 14 comment letters. Comment

letters were submitted by three State TEFAP agencies, one inter-church

local food pantry, seven food banks on the city, regional, state and

national levels, one national commodity distribution association, one

State community action program association, and one local human

resources council. The 14 commenters were generally enthusiastic in

their support for the rule. Seven of them supported implementation of

the proposed rule without change. Comments received are discussed in

detail below. For a complete understanding of the provisions contained

in this final rule, the reader should refer to the preamble of the

proposed rule.

Definition of Eligible Recipient Agency

As discussed in the proposed rule, a definition of ``eligible

recipient agency'' (ERA) as contained in section 251.3(d) of the

proposed rule is not found in current regulations. This definition was

included in the proposed rule to clarify the types of organizations

eligible to receive TEFAP commodities and administrative funds,

provided they meet all pertinent eligibility criteria. Three comments

were received concerning the list of organizations identified in the

definition of ERA under subparagraph (6).

One commenter expressed concern about the inclusion of ``disaster

relief programs'' as a type of ERA. He said that if the new definition

allows provision of food to such organizations on the same basis as

other ERAs, i.e., without USDA approval, then current regulations must

be clarified. The definition of ERA contained in the Emergency Food

Assistance Act of 1983 (EFAA) includes disaster relief programs as a

type of ERA. Therefore, they were included in the proposed regulatory

definition of ERA. However, as stated above, such organizations would

be required to meet TEFAP eligibility criteria (i.e., if the

organization provides commodities to households, it must administer a

means test; if it uses TEFAP commodities to provide prepared meals, it

must serve predominantly needy persons). This contrasts with the

regulatory requirements governing the distribution of commodities to

disaster organizations for use in providing assistance in

Presidentially declared disasters and situations of distress as set

forth in

[[Page 72900]]

section 250.43 and section 250.44 respectively. Under sections 250.43

and 250.44, State agencies must obtain approval from USDA prior to

making commodities available for distribution to households in disaster

or emergency situations. Once approval is obtained, commodities from

TEFAP (and other food distribution programs) can be made available to

disaster organizations and distributed to disaster victims without

regard to TEFAP eligibility requirements.

Another commenter recommended that the definition be revised to

make summer camps and child nutrition programs which receive assistance

through other Federal nutrition assistance programs ineligible for

TEFAP commodities and administrative funds. As discussed in the

proposed rule, Welfare Reform defines ERA to include summer camps for

children and child nutrition programs. Therefore, the Department does

not have the authority to categorically exclude such organizations from

participation in the program.

The same commenter requested that the definition be revised to

eliminate reference to the Nutrition Program for the Elderly (NPE), and

add ``other nutrition projects that serve on-site or home-delivered

meals to needy elderly people'' since sites participating in NPE

receive Federal support from other sources. As discussed above, the

list of organizations contained in the definition of ERA in the

proposed rule reflects the organizations listed in the definition of

ERA in the EFAA. The Department lacks the authority to exclude a

clearly eligible organizational type from participation in the program.

In addition, revising the definition in the manner suggested would not

make ineligible those NPE sites that meet the eligibility criteria.

Another commenter requested that community action programs be

specifically mentioned as a type of EFO, and noted that they were

mentioned in the preamble of the proposed rule, but not in the

regulatory text. Specific reference to community action programs was

included in the preamble of the proposed rule as an example of the

types of organizations that could be considered an EFO. However, such

reference does not appear in the regulatory text because it is not

included in the definition set forth in the EFAA. Furthermore, it would

be impossible to identify all the different types of organizations that

could be considered an EFO. This in no way, however, affects their

eligibility to participate in the program.

We appreciate the recommendations made by the commenters. However,

for the reasons described above, this final rule retains the definition

of ERA as originally proposed.

Eligible Recipient Agency Eligibility Criteria

Section 251.5(a)(2) of the proposed rule would limit the

eligibility of organizations providing prepared meals to those which

serve ``predominantly needy'' persons. Two commenters, although

enthusiastic supporters of implementation of the proposed rule without

change, expressed concern about the ``new'' standard. They believe that

the new standard will require additional monitoring to ensure that it

does not restrict access of the needy to TEFAP. The EFAA requires that

TEFAP commodities be used to provide assistance to those in need. Prior

to Welfare Reform, TEFAP regulations (7 CFR part 251) only addressed

the distribution of TEFAP commodities to households through

organizations which impose a means test. With the consolidation of the

Soup Kitchen/Food Bank Program (SK/FB) into TEFAP, it became necessary

to establish requirements relative to the distribution of commodities

to organizations which provide prepared meals to ensure that such

organizations are providing nutrition assistance to the needy. Upon

reviewing the provisions relative to the distribution of SK/FB

commodities contained in section 250.52, it was determined that

limiting participation of organizations that provide prepared meals to

those that serve ``predominantly'' needy persons would meet the

requirements of the EFAA. In addition, this limitation is no more

stringent than the limitations that were placed on State agencies in

the distribution of SK/FB commodities. Therefore, the Department does

not expect needy persons to be adversely affected as a result of

establishing this criterion for these types of organizations. Thus,

this provision is retained in section 251.5(a)(2) as proposed.

Another commenter was concerned about the provision contained in

section 251.5(a)(3)(iii) of the proposed rule which states that

organizations ``organized or operated exclusively for religious

purposes'' are automatically tax exempt under Internal Revenue Service

(IRS) rules. The commenter expressed concern that States and ERAs may

be unfamiliar with IRS rules, and asked if organizations would be

allowed to simply self-declare that they meet this definition, or if

they would be required to provide documentation. Under IRS rules, such

organizations effectively self-declare their status, i.e., once having

claimed the tax exemption, they are deemed to possess it unless

successfully challenged by the IRS. Therefore, the rule did not propose

to require State agencies to obtain documentation.

Some of the comments have led the Department to believe that the

language of the proposed rule regarding eligibility of organizations

for TEFAP is in need of further clarification. Section 251.2(c)(2)

states that ``[p]rior to making donated foods or administrative funds

available, State agencies must enter into a written agreement with

eligible recipient agencies to which they plan to distribute donated

foods and/or administrative funds. State agencies must ensure that

eligible recipient agencies in turn enter into a written agreement with

eligible recipient agencies to which they plan to distribute donated

foods and/or administrative funds before donated foods or

administrative funds are transferred between any two eligible recipient

agencies.'' However, section 251.5(a) of the proposed rule speaks only

in terms of commodities and does not mention administrative funds,

leading to possible confusion. Therefore, section 251.5(a) of the

proposed rule is revised to specifically include administrative funds.

Recipient Eligibility Criteria

One commenter recommended that the criteria for recipient

eligibility under section 251.5(b) of the proposed rule be expanded to

include ``needy persons in situations of emergency and distress due to

disasters.'' As discussed in detail above, commodities are made

available for distribution to households in disasters and situations of

emergency and distress in accordance with the provisions contained in

sections 250.43 and 250.44. These provisions permit TEFAP commodities

to be distributed to households without regard to income only after

proper authorization has been obtained.

Two commenters recommended that section 251.5(b)(2), which requires

the use of income-based standards in determining a household's

eligibility to receive TEFAP commodities, be removed and replaced with

language that would permit the use of non-income-based eligibility

criteria. The EFAA does not explicitly require income-based standards

to be met by TEFAP recipients. However, TEFAP regulations have always

required the use of such criteria. This requirement is necessary in

order to ensure that only those households in need of assistance

[[Page 72901]]

receive commodities. In addition, it is consistent with eligibility

requirements for other nutrition assistance programs, as well as other

types of Federal assistance, such as the Temporary Assistance to Needy

Families Program.

Reduction in Administrative Burden (State Agreements with Eligible

Recipient Agencies and TEFAP State Distribution Plan)

Several commenters expressed interest in reductions in

administrative burdens beyond those set forth in the proposed rule. The

Department believes it has come close to the proper balance between

reduced administrative burden and sufficient program accountability.

However, in reviewing the provisions contained in the proposed rule, it

has been determined that the administrative burden can be further

reduced by making minor changes in the following requirements. Section

251.2(d)(1)(iii) of the proposed rule would require the agreement to

include ``the name of the person responsible for administering the

program in the receiving eligible recipient agency.'' With the move to

permanent agreements, it is prudent to avoid requiring information that

could change frequently. Therefore, the final rule is revised to remove

subparagraph (iii) in section 251.2(d)(1) of the proposed rule.

Section 251.6(a)(1) of the proposed rule would require State

agencies to include ``[a] designation of the State agency responsible

for distributing commodities and administrative funds provided under

this part, the address of such agency, and the name of the agency

official entrusted with binding signature authority'' in their

distribution plan. Under Welfare Reform, TEFAP State plans are to be

submitted every four years instead of annually, which was the previous

regulatory requirement. Thus, while TEFAP State plans do not have the

potential to be permanent, as do State agreements with ERAs, the plans

are now of sufficient duration to justify a re-evaluation of this

provision. The Department has determined that the name of the agency

official entrusted with binding signature authority also falls into the

category of information that could change frequently. Therefore, the

final rule is amended to remove this element of the requirement in

section 251.6(a)(1) of the proposed rule.

Disbursement of Administrative Funds

Two commenters, although both generally supporting implementation

of the proposed rule without change, expressed concern that the new

requirements in section 251.8 for documenting the 40 percent pass-

through of administrative funds may require additional monitoring.

Section 251.8(d)(3) of the current regulations requires, as mandated by

the EFAA, that State agencies pass through 40 percent of TEFAP

administrative funds to emergency feeding organizations (EFOs). Current

regulations also restrict the distribution of TEFAP administrative

funds to EFOs. (The proposed rule would amend the definition of EFO in

a way that does not materially affect the pass-through requirement.)

While section 251.8 of the proposed rule retains the 40 percent pass-

through requirement, the rule would permit the distribution of TEFAP

administrative funds to non-EFOs. However, as discussed in the preamble

to the proposed rule, State agencies which pass through 40 percent of

such funds to ERAs that are EFOs, as defined in section 251.3, will be

considered to have met the pass-through requirement. The Department

will continue to monitor the distribution of TEFAP administrative funds

by State agencies to ensure that they are in compliance with this

requirement. Therefore, while TEFAP administrative funds may be

distributed to non-EFOs under the provisions contained in the proposed

rule, monitoring activities at the State or local level will not be

affected.

Allowable Administrative Costs, Non-USDA Commodities

Upon further review of the proposed rule, the Department has

identified a need to revise section 251.8 to clarify provisions

relative to the distribution of TEFAP administrative funds to cover

costs associated with the distribution of non-USDA commodities. Section

251.5(a) of the proposed rule requires that all organizations,

including those that distribute only non-USDA commodities, must qualify

as ERAs in all respects under section 251.3(d) in order to receive

TEFAP administrative funds. Section 251.8(d) of the proposed rule

refers to ``organizations which distribute only non-USDA commodities.''

For the sake of clarity, this rule revises section 251.8(d) to remove

the term ``organizations'' and replaces it with ``ERA.''

Recordkeeping and Reporting Requirements

The proposed rule's reduction in the administrative burden for

TEFAP drew the most praise from commenters. It was the factor most

often noted by those who merely wrote to urge speedy implementation of

the rule. However, one commenter expressed concern about the amendment

to section 251.10(d)(2) which eliminates the requirement that State

agencies report to FNS on a quarterly basis the total number of

households served in TEFAP. While the commenter noted that this

requirement has already been eliminated by TEFAP Policy Memorandum No.

12, dated December 23, 1997, the State agency has continued to collect

and maintain such data. These data have been used to document the

success of the program and for allocating resources at the local level.

The Department is aware that such information is used by some ERAs and

State agencies for various purposes. However, as discussed in the

preamble to the proposed rule, the information is no longer useful to

FNS. Therefore, while section 251.10(d)(2) of the proposed rule would

no longer require that State agencies report such information to FNS,

it does not prohibit State agencies from collecting household

participation data from ERAs.

One commenter recommended that requirements associated with

maintaining inventory records be kept to a minimum. While these

requirements were not addressed in the proposed rule, TEFAP agencies

have raised a number of questions and concerns about this issue. The

Department is in the process of preparing guidance which will clarify

what the Federal requirements are and explain the minimum requirements

a State agency could choose to adopt in order to comply with the

regulations.

Monitoring Requirements

Commenters were all in favor of the proposed rule's reduction in

TEFAP monitoring requirements. However, one commenter recommended that

sections 251.2(d)(2)(i) and 251.10(e) be revised to permit State

agencies to delegate to ERAs with which States have agreements, the

authority to conduct reviews of ERAs with which those ERAs in turn have

agreements. Only in instances in which deficiencies are identified

would the ERA be required to report to the State agency, which would

assist in effecting corrective action. The Department is appreciative

of the need to reduce the administrative burden as much as possible,

but this goal must be balanced with the need for a certain level of

accountability necessary to insure program integrity. The Department

does not believe this balance can be achieved if State agencies are

allowed to delegate authority for conducting reviews of ERAs to other

ERAs. There must be a unified, independent and objective review

authority. Therefore, the

[[Page 72902]]

Department cannot adopt this recommendation.

The commenter also expressed concern about the burden associated

with selecting ERAs for review based on the dollar value of TEFAP

commodities distributed or deficiencies that have been identified

through various means. As discussed in the preamble to the proposed

rule, State agencies would be afforded flexibility to develop a system

for selecting ERAs for review. No selection criteria are mandated. The

criteria listed in the preamble are merely suggestions regarding how to

select sites for review. The only requirement is that the system must

ensure that deficiencies in program administration are detected and

resolved in an effective and efficient manner.

In reviewing the provisions contained in section 251.10, the

Department has determined the following changes are necessary for

clarification purposes. First, section 251.10(e)(3) of the proposed

rule is being revised to include civil rights in the list of areas to

be covered during a review, given the fact the revised FNS Instruction

113-3 will specify that on-site civil rights reviews be conducted at

the frequency established in section 251.10(e). Since these reviews

must be conducted at the same frequency, State agencies will likely

consolidate civil rights and program reviews into one effort. Second,

section 251.2(d)(2)(i) of the proposed rule would prohibit State

agencies from delegating the authority to establish eligibility

criteria for organizations or recipients, or for conducting reviews of

ERAs. The prohibitions on delegating authority to establish eligibility

criteria are then repeated in section 251.5(c). For the sake of

consistency, section 251.10(e)(1) of the proposed rule is being revised

to include the prohibition on the delegation of authority to conduct

reviews.

Maintenance of Effort

Two commenters, although both generally supporting implementation

of the proposed rule without change, were concerned about the new

requirements for documenting the State maintenance-of-effort

requirement, in section 251.10(h). The commenters suggested

``additional monitoring'' would be needed to insure compliance. This

requirement is applied to State agencies, and compliance is monitored

by the Department. Therefore, it will have no impact on monitoring

activities at the State or local level.

Alien Provisions

Two commenters requested that the rule make clear that

organizations are not required to determine the citizenship status of

any recipient pursuant to the Illegal Immigration Reform and Immigrant

Responsibility Act of 1996 (Pub. L. 104-208). As noted in the preamble

to the proposed rule, the provisions of Welfare Reform affecting aliens

do not require that States in any way restrict access of aliens to

TEFAP. Welfare Reform gives States the option to provide, or not

provide, program benefits to any individual who is not a citizen or a

qualified alien. As discussed in the preamble to the proposed rule, the

Department intends to publish a separate rulemaking to incorporate the

provisions of Welfare Reform regarding eligibility of aliens for TEFAP

and other food distribution programs.

Miscellaneous Comments

One commenter expressed concerns about the various problems

involved in dealing with commodity losses and the procedures involved

in establishing claims for those losses. The Department appreciates the

comments provided and will consider them in developing proposals for a

separate rulemaking aimed at addressing issues associated with

commodity losses and claims.

Another commenter requested that an indemnification for product

liability be granted by USDA to States and ERAs, referencing the Good

Samaritan Act. Such language could also be included in all agreements

between States and ERAs and between ERAs. As praiseworthy as this

recommendation is, unfortunately the Good Samaritan Food Donation Act

(Pub. L. 101-610) applies to donors of food only. Therefore, USDA lacks

the authority to extend its protections to distributors of such food.

List of Subjects

7 CFR Part 250

Aged, Agricultural commodities, Business and industry, Food

assistance programs, Food donations, Food processing, Grant programs-

social programs, Indians, Infants and children, Commodity loan

programs, Reporting and recordkeeping requirements, School breakfast

and lunch programs, Surplus agricultural commodities.

7 CFR Part 251

Aged, Agricultural commodities, Business and industry, Food

assistance programs, Food donations, Grant programs-social programs,

Indians, Infants and children, Commodity loan programs, Reporting and

recordkeeping requirements, School breakfast and lunch programs,

Surplus agricultural commodities.

Accordingly, 7 CFR parts 250 and 251 are amended as follows:

PART 250--DONATION OF FOODS FOR USE IN THE UNITED STATES, ITS

TERRITORIES AND POSSESSIONS AND AREAS UNDER ITS JURISDICTION

1. The authority citation for part 250 continues to read as

follows:

Authority: 5 U.S.C. 301; 7 U.S.C. 612c, 612c note, 1431, 1431b,

1431e, 1431 note, 1446a-1, 1859, 2014, 2025; 15 U.S.C. 713c; 22

U.S.C. 1922; 42 U.S.C. 1751, 1755, 1758, 1760, 1761, 1762a, 1766,

3030a, 5179, 5180.

Sec. 250.3 [Amended]

2. In Sec. 250.3, the definitions of Food bank and Soup kitchen are

removed.

Sec. 250.13 [Amended]

3. In Sec. 250.13:

a. Paragraph (a)(1)(iv) is amended by removing the words

``emergency feeding organizations'' wherever they appear and adding the

words ``eligible recipient agencies'' in their place.

b. The last sentence of paragraph (k)(2) is amended by removing the

words ``, including, for example, State Food Distribution Advisory

Council Reports''.

Sec. 250.24 [Amended]

4. In Sec. 250.24, paragraph (b)(4) is removed, and paragraphs

(b)(5) and (b)(6) are redesignated as paragraphs (b)(4) and (b)(5),

respectively.

Sec. 250.41 [Amended]

5. In Sec. 250.41, the first sentence of paragraph (a)(1) is

amended by removing the words ``With the exception of section 110

commodities, which are to be distributed in accordance with the

provisions of Sec. 250.52, the'' and adding in their place ``The''.

Sec. 250.52 [Removed]

6. Section 250.52 is removed.

PART 251--THE EMERGENCY FOOD ASSISTANCE PROGRAM

1. The authority citation for part 251 continues to read as

follows:

Authority: 7 U.S.C. 7501-7516.

Sec. 251.1 [Amended]

2. In Sec. 251.1, the word ``Temporary'' is removed.

3. In Sec. 251.2:

a. Paragraph (a) is amended by adding the heading ``Food and

Nutrition Service.'';

[[Page 72903]]

b. Paragraph (b) is amended by adding the heading ``State

Agencies.'', by removing the words ``emergency feeding organizations''

and by adding the words ``eligible recipient agencies'' in their place;

c. Paragraph (c) is revised; and

d. Paragraph (d) is added.

The revision and addition read as follows:

Sec. 251.2 Administration.

* * * * *

(c) Agreements. (1) Agreements between Department and States. Each

State agency that distributes donated foods to eligible recipient

agencies or receives payments for storage and distribution costs in

accordance with Sec. 251.8 must perform those functions pursuant to an

agreement entered into with the Department. This agreement will be

considered permanent, with amendments initiated by State agencies, or

submitted by them at the Department's request, all of which will be

subject to approval by the Department.

(2) Agreements between State agencies and eligible recipient

agencies, and between eligible recipient agencies. Prior to making

donated foods or administrative funds available, State agencies must

enter into a written agreement with eligible recipient agencies to

which they plan to distribute donated foods and/or administrative

funds. State agencies must ensure that eligible recipient agencies in

turn enter into a written agreement with any eligible recipient

agencies to which they plan to distribute donated foods and/or

administrative funds before donated foods or administrative funds are

transferred between any two eligible recipient agencies. All agreements

entered into must contain the information specified in paragraph (d) of

this section, and be considered permanent, with amendments to be made

as necessary, except that agreements must specify that they may be

terminated by either party upon 30 days' written notice. State agencies

must ensure that eligible recipient agencies provide, on a timely

basis, by amendment to the agreement, or other written documents

incorporated into the agreement by reference if permitted under

paragraph (d) of this section, any information on changes in program

administration, including any changes resulting from amendments to

Federal regulations or policy.

(d) Contents of agreements between State agencies and eligible

recipient agencies and between eligible recipient agencies. (1)

Agreements between State agencies and eligible recipient agencies and

between eligible recipient agencies must provide:

(i) That eligible recipient agencies agree to operate the program

in accordance with the requirements of this part, and, as applicable,

part 250 of this chapter; and

(ii) The name and address of the eligible recipient agency

receiving commodities and/or administrative funds under the agreement.

(2) The following information must also be identified, either in

the agreement or other written documents incorporated by reference in

the agreement:

(i) If the State agency delegates the responsibility for any aspect

of the program to an eligible recipient agency, each function for which

the eligible recipient agency will be held responsible; except that in

no case may State agencies delegate responsibility for establishing

eligibility criteria for organizations in accordance with

Sec. 251.5(a), establishing eligibility criteria for recipients in

accordance with Sec. 251.5(b), or conducting reviews of eligible

recipient agencies in accordance with Sec. 251.10(e);

(ii) If the receiving eligible recipient agency is to be allowed to

further distribute TEFAP commodities and/or administrative funds to

other eligible recipient agencies, the specific terms and conditions

for doing so, including, if applicable, a list of specific

organizations or types of organizations eligible to receive commodities

or administrative funds;

(iii) If the use of administrative funds is restricted to certain

types of expenses pursuant to Sec. 251.8(e)(2), the specific types of

administrative expenses eligible recipient agencies are permitted to

incur;

(iv) Any other conditions set forth by the State agency.

4. Section 251.3 is revised to read as follows:

Sec. 251.3 Definitions.

(a) The terms used in this part that are defined in part 250 of

this chapter have the meanings ascribed to them therein, unless a

different meaning for such a term is defined herein.

(b) Charitable institution (which is defined differently in this

part than in part 250 of this chapter) means an organization which--

(1) Is public, or

(2) Is private, possessing tax exempt status pursuant to

Sec. 251.5(a)(3); and

(3) Is not a penal institution (this exclusion also applies to

correctional institutions which conduct rehabilitation programs); and

(4) Provides food assistance to needy persons.

(c) Distribution site means a location where the eligible recipient

agency actually distributes commodities to needy persons for household

consumption or serves prepared meals to needy persons under this part.

(d) Eligible recipient agency means an organization which--

(1) Is public, or

(2) Is private, possessing tax exempt status pursuant to

Sec. 251.5(a)(3); and

(3) Is not a penal institution; and

(4) Provides food assistance--

(i) Exclusively to needy persons for household consumption,

pursuant to a means test established pursuant to Sec. 251.5 (b), or

(ii) Predominantly to needy persons in the form of prepared meals

pursuant to Sec. 251.5(a)(2); and

(5) Has entered into an agreement with the designated State agency

pursuant to Sec. 251.2(c) for the receipt of commodities or

administrative funds, or receives commodities or administrative funds

under an agreement with another eligible recipient agency which has

signed such an agreement with the State agency or another eligible

recipient agency within the State pursuant to Sec. 251.2(c); and

(6) Falls into one of the following categories:

(i) Emergency feeding organizations (including food banks, food

pantries and soup kitchens);

(ii) Charitable institutions (including hospitals and retirement

homes);

(iii) Summer camps for children, or child nutrition programs

providing food service;

(iv) Nutrition projects operating under the Older Americans Act of

1965 (Nutrition Program for the Elderly), including projects that

operate congregate Nutrition sites and projects that provide home-

delivered meals; and

(v) Disaster relief programs.

(e) Emergency feeding organization means an eligible recipient

agency which provides nutrition assistance to relieve situations of

emergency and distress through the provision of food to needy persons,

including low-income and unemployed persons. Emergency feeding

organizations have priority over other eligible recipient agencies in

the distribution of TEFAP commodities pursuant to Sec. 251.4(h).

(f) Food bank means a public or charitable institution that

maintains an established operation involving the provision of food or

edible commodities, or the products of food or edible commodities, to

food pantries, soup kitchens, hunger relief centers, or other food or

feeding centers that, as an

[[Page 72904]]

integral part of their normal activities, provide meals or food to feed

needy persons on a regular basis.

(g) Food pantry means a public or private nonprofit organization

that distributes food to low-income and unemployed households,

including food from sources other than the Department of Agriculture,

to relieve situations of emergency and distress.

(h) Formula means the formula used by the Department to allocate

among States the commodities and funding available under this part. The

amount of such commodities and funds to be provided to each State will

be based on each State's population of low-income and unemployed

persons, as compared to national statistics. Each State's share of

commodities and funds shall be based 60 percent on the number of

persons in households within the State having incomes below the poverty

level and 40 percent on the number of unemployed persons within the

State. The surplus commodities will be allocated to States on the basis

of their weight (pounds), and the commodities purchased under section

214 of the Emergency Food Assistance Act of 1983 will be allocated on

the basis of their value (dollars). In instances in which a State

determines that it will not accept the full amount of its allocation of

commodities purchased under section 214 of the Emergency Food

Assistance Act of 1983, the Department will reallocate the commodities

to other States on the basis of the same formula used for the initial

allocation.

(i) State agency means the State government unit designated by the

Governor or other appropriate State executive authority which has

entered into an agreement with the United States Department of

Agriculture under Sec. 251.2(c).

(j) Soup kitchen means a public or charitable institution that, as

an integral part of the normal activities of the institution, maintains

an established feeding operation to provide food to needy homeless

persons on a regular basis.

(k) Value of commodities distributed means the Department's cost of

acquiring commodities for distribution under this part.

5. In Sec. 251.4:

a. The words ``emergency feeding organization'', ``emergency

feeding organizations'' and ``emergency feeding organization's'' are

removed wherever they appear in the section, and the words ``eligible

recipient agency'', ``eligible recipient agencies'' and ``eligible

recipient agency's'' respectively are added in their place;

b. Paragraph (c)(1) is amended by removing the reference to

``Sec. 251.3(d)'' and adding a reference to ``Sec. 251.3(h)'' in its

place;

c. Paragraph (d)(3) is removed;

d. Paragraph (f)(5) is amended by removing the reference

``Sec. 250.15'' and adding in its place the reference ``Sec. 250.30'';

e. Paragraphs (g) and (h) are revised;

f. Paragraph (j) is amended by adding the words ``that has signed

an agreement with the respective State agencies'' after the words

``eligible recipient agency'';

The revisions read as follows:

Sec. 251.4 Availability of commodities.

* * * * *

(g) Availability and control of donated commodities. Donated

commodities will be made available to State agencies only for

distribution and use in accordance with this part. Except as otherwise

provided in paragraph (f) of this section, donated commodities not so

distributed or used for any reason may not be sold, exchanged, or

otherwise disposed of without the approval of the Department. However,

donated commodities made available under section 32 of Pub. L. 74-320

(7 U.S.C. 612c) may be transferred by eligible recipient agencies

receiving commodities under this part, or recipient agencies, as

defined in Sec. 250.3 of this chapter, to any other eligible recipient

agency or recipient agency which agrees to use such donated foods to

provide without cost or waste, nutrition assistance to individuals in

low-income groups. Such transfers will be effected only with prior

authorization by the appropriate State agency and must be documented.

Such documentation shall be maintained in accordance with

Sec. 251.10(a) of this part and Sec. 250.16 of this chapter by the

distributing agency and the State agency responsible for administering

TEFAP and made available for review upon request.

(h) Distribution to eligible recipient agencies--priority system

and advisory boards. (1) State agencies must distribute commodities

made available under this part to eligible recipient agencies in

accordance with the following priorities:

(i) First priority. When a State agency cannot meet all eligible

recipient agencies' requests for TEFAP commodities, the State agency

must give priority in the distribution of such commodities to emergency

feeding organizations as defined under Sec. 251.3(e). A State agency

may, at its discretion, concentrate commodity resources upon a certain

type or types of such organizations, to the exclusion of others.

(ii) Second priority. After a State agency has distributed TEFAP

commodities sufficient to meet the needs of all emergency feeding

organizations, the State agency must distribute any remaining program

commodities to other eligible recipient agencies which serve needy

people, but do not relieve situations of emergency and distress. A

State agency may, at its discretion, concentrate commodity resources

upon a certain type or types of such organizations, to the exclusion of

others.

(2) Delegation. When a State agency has delegated to an eligible

recipient agency the authority to select other eligible recipient

agencies, the eligible recipient agency exercising this authority must

ensure that any TEFAP commodities are distributed in accordance with

the priority system set forth in paragraphs (h)(1)(i) and (h)(1)(ii) of

this section. State agencies and eligible recipient agencies will be

deemed to be in compliance with the priority system when eligible

recipient agencies distribute TEFAP commodities to meet the needs of

all emergency feeding organizations under their jurisdiction prior to

making commodities available to eligible recipient agencies which are

not emergency feeding organizations.

(3) Existing networks. Subject to the constraints of paragraphs

(h)(1)(i) and (h)(1)(ii) of this section, State agencies may give

priority in the distribution of TEFAP commodities to existing food bank

networks and other organizations whose ongoing primary function is to

facilitate the distribution of food to low-income households, including

food from sources other than the Department.

(4) State advisory boards. Each State agency receiving TEFAP

commodities is encouraged to establish a State advisory board

representing all types of entities in the State, both public and

private, interested in the distribution of such commodities. Such

advisory boards can provide valuable advice on how resources should be

allocated among various eligible outlet types, what areas have the

greatest need for food assistance, and other important issues that will

help States to use their program resources in the most efficient and

effective manner possible. A State agency may expend TEFAP

administrative funds to support the activities of an advisory board in

accordance with Sec. 251.8 of this part.

* * * * *

6. Section 251.5 is revised to read as follows:

[[Page 72905]]

Sec. 251.5 Eligibility determinations.

(a) Criteria for determining eligibility of organizations. Prior to

making commodities or administrative funds available, State agencies,

or eligible recipient agencies to which the State agency has delegated

responsibility for the distribution of TEFAP commodities or

administrative funds, must ensure that an organization applying for

participation in the program meets the definition of an ``eligible

recipient agency'' under Sec. 251.3(d). In addition, applicant

organizations must meet the following criteria:

(1) Agencies distributing to households. Organizations distributing

commodities to households for home consumption must limit the

distribution of commodities provided under this part to those

households which meet the eligibility criteria established by the State

agency in accordance with paragraph (b) of this section.

(2) Agencies providing prepared meals. Organizations providing

prepared meals must demonstrate, to the satisfaction of the State

agency, or eligible recipient agency to which they have applied for the

receipt of commodities or administrative funds, that they serve

predominantly needy persons. State agencies may establish a higher

standard than ``predominantly'' and may determine whether organizations

meet the applicable standard by considering socioeconomic data of the

area in which the organization is located, or from which it draws its

clientele. State agencies may not, however, require organizations to

employ a means test to determine that recipients are needy, or to keep

records solely for the purpose of demonstrating that its recipients are

needy.

(3) Tax-exempt status. Private organizations must--

(i) Be currently operating another Federal program requiring tax-

exempt status under the Internal Revenue Code (IRC), or

(ii) Possess documentation from the Internal Revenue Service (IRS)

recognizing tax-exempt status under the IRC, or

(iii) If not in possession of such documentation, be automatically

tax exempt as ``organized or operated exclusively for religious

purposes'' under the IRC, or

(iv) If not in possession of such documentation, but required to

file an application under the IRC to obtain tax-exempt status, have

made application for recognition of such status and be moving toward

compliance with the requirements for recognition of tax-exempt status.

If the IRS denies a participating organization's application for

recognition of tax-exempt status, the organization must immediately

notify the State agency or the eligible recipient agency, whichever is

appropriate, of such denial, and that agency will terminate the

organization's agreement and participation immediately upon receipt of

such notification. If documentation of IRS recognition of tax-exempt

status has not been obtained and forwarded to the appropriate agency

within 180 days of the effective date of the organization's approval

for participation in TEFAP, the State agency or eligible recipient

agency must terminate the organization's participation until such time

as recognition of tax-exempt status is actually obtained, except that

the State agency or eligible recipient agency may grant a single

extension not to exceed 90 days if the organization can demonstrate, to

the State agency's or eligible recipient agency's satisfaction, that

its inability to obtain tax-exempt status within the 180 day period is

due to circumstances beyond its control. It is the responsibility of

the organization to document that it has complied with all IRS

requirements and has provided all information requested by IRS in a

timely manner.

(b) Criteria for determining recipient eligibility. Each State

agency must establish uniform Statewide criteria for determining the

eligibility of households to receive commodities provided under this

part for home consumption. The criteria must:

(1) Enable the State agency to ensure that only households which

are in need of food assistance because of inadequate household income

receive TEFAP commodities;

(2) Include income-based standards and the methods by which

households may demonstrate eligibility under such standards; and

(3) Include a requirement that the household reside in the

geographic location served by the State agency at the time of applying

for assistance, but length of residency shall not be used as an

eligibility criterion.

(c) Delegation of authority. A State agency may delegate to one or

more eligible recipient agencies with which the State agency enters

into an agreement the responsibility for the distribution of

commodities and administrative funds made available under this part.

State agencies may also delegate the authority for selecting eligible

recipient agencies and for determining the eligibility of such

organizations to receive commodities and administrative funds. However,

responsibility for establishing eligibility criteria for organizations

in accordance with paragraph (a) of this section, and for establishing

recipient eligibility criteria in accordance with paragraph (b) of this

section, may not be delegated. In instances in which State agencies

delegate authority to eligible recipient agencies to determine the

eligibility of organizations to receive commodities and administrative

funds, eligibility must be determined in accordance with the provisions

contained in this part and the State plan. State agencies will remain

responsible for ensuring that commodities and administrative funds are

distributed in accordance with the provisions contained in this part.

7. Section 251.6 is revised to read as follows:

Sec. 251.6 Distribution plan.

(a) Contents of the plan. The State agency must submit for approval

by the appropriate FNS Regional Office a plan which contains:

(1) A designation of the State agency responsible for distributing

commodities and administrative funds provided under this part, and the

address of such agency;

(2) A plan of operation and administration to expeditiously

distribute commodities received under this part;

(3) A description of the standards of eligibility for recipient

agencies, including any subpriorities within the two-tier priority

system; and

(4) A description of the criteria established in accordance with

Sec. 251.5(b) which must be used by eligible recipient agencies in

determining the eligibility of households to receive TEFAP commodities

for home consumption.

(b) Plan submission. A complete plan will be required for Fiscal

Year 2001, to be submitted no later than August 15, 2000. Thereafter, a

complete plan must be submitted every 4 years, due no later than August

15 of the fiscal year prior to the end of the 4 year cycle.

(c) Amendments. State agencies must submit amendments to the

distribution plan to the extent that such amendments are necessary to

reflect any changes in program operations or administration as

described in the plan, or at the request of FNS, to the appropriate FNS

Regional Office.

8. Section 251.7 is revised to read as follows:

Sec. 251.7 Formula adjustments.

(a) Commodity adjustments. The Department will make annual

adjustments to the commodity allocation for each State, based on

updated unemployment statistics. These adjusted allocations will be

effective for

[[Page 72906]]

the entire fiscal year, subject to reallocation or transfer in

accordance with this part.

(b) Funds adjustments. The Department will make annual adjustments

of the funds allocation for each State based on updated unemployment

statistics. These adjusted allocations will be effective for the entire

fiscal year unless funds are recovered, withheld, or reallocated by FNS

in accordance with Sec. 251.8(f).

9. In Sec. 251.8:

a. Paragraph (a) is amended by removing the reference

``Sec. 251.3(d)'' and adding in its place the reference

``Sec. 251.3(h)'';

b. Paragraph (b) is amended by removing the reference ``part 3015''

and adding in its place the reference ``part 3016 or part 3019, as

applicable.'';

c. Paragraph (c)(1) is amended by removing the words ``U.S.

Treasury Department checks or'';

d. Paragraph (c)(2) is amended by:

1. removing the words ``FNS Instruction 407-3 (Grant Award

Process)'' and adding in their place the words ``procedures established

by FNS'';

2. removing from the first sentence the words ``either'' and ``or a

U.S. Treasury check pursuant to submission of the SF-270, Request for

Advance or Reimbursement'';

3. removing the second sentence; and

4. removing reference to ``Sec. 251.8(e)'' and in its place adding

reference to ``paragraph (f) of this section'';

e. Paragraphs (d) and (e) are redesignated as paragraphs (e) and

(f), and new paragraph (d) is added; and

f. Newly redesignated paragraph (e) is revised.

The addition and revision read as follows:

Sec. 251.8 Payment of funds for administrative costs.

* * * * *

(d) Priority for eligible recipient agencies distributing USDA

commodities. State agencies and eligible recipient agencies

distributing administrative funds must ensure that the administrative

funding needs of eligible recipient agencies which receive USDA

commodities are met, relative to both USDA commodities and any non-USDA

commodities they may receive, before such funding is made available to

eligible recipient agencies which distribute only non-USDA commodities.

(e) Use of funds. (1) Allowable administrative costs. State

agencies and eligible recipient agencies may use funds made available

under this part to pay the direct expenses associated with the

distribution of USDA commodities and commodities secured from other

sources to the extent that the commodities are ultimately distributed

by eligible recipient agencies which have entered into agreements in

accordance with Sec. 251.2. Direct expenses include the following,

regardless of whether they are charged to TEFAP as direct or indirect

costs:

(i) The intrastate and interstate transport, storing, handling,

repackaging, processing, and distribution of commodities; except that

for interstate expenditures to be allowable, the commodities must have

been specifically earmarked for the particular State or eligible

recipient agency which incurs the cost;

(ii) Costs associated with determinations of eligibility,

verification, and documentation;

(iii) Costs of providing information to persons receiving USDA

commodities concerning the appropriate storage and preparation of such

commodities;

(iv) Costs involved in publishing announcements of times and

locations of distribution; and

(v) Costs of recordkeeping, auditing, and other administrative

procedures required for program participation.

(2) State restriction of administrative costs. A State agency may

restrict the use of TEFAP administrative funds by eligible recipient

agencies by disallowing one or more types of expenses expressly allowed

in paragraph (e)(1) of this section. If a State agency so restricts the

use of administrative funds, the specific types of expenses the State

will allow eligible recipient agencies to incur must be identified in

the State agency's agreements with its eligible recipient agencies, or

set forth by other written notification, incorporated into such

agreements by reference.

(3) Agreements. In order to be eligible for funds under paragraph

(e)(1) of this section, eligible recipient agencies must have entered

into an agreement with the State agency or another eligible recipient

agency pursuant to Sec. 251.2(c).

(4) Pass-through requirement-local support to emergency feeding

organizations. (i) Not less than 40 percent of the Federal Emergency

Food Assistance Program administrative funds allocated to the State

agency in accordance with paragraph (a) of this section must be:

(A) Provided by the State agency to emergency feeding organizations

that have signed an agreement with the State agency as either

reimbursement or advance payment for administrative costs incurred by

emergency feeding organizations in accordance with paragraph (e)(1) of

this section, except that such emergency feeding organizations may

retain advance payments only to the extent that they actually incur

such costs; or

(B) Directly expended by the State agency to cover administrative

costs incurred by, or on behalf of, emergency feeding organizations in

accordance with paragraph (e)(1) of this section.

(ii) Any funds allocated to or expended by the State agency to

cover costs incurred by eligible recipient agencies which are not

emergency feeding organizations shall not count toward meeting the

pass-through requirement.

(iii) State agencies must not charge for commodities made available

under this part to eligible recipient agencies.

* * * * *

10. In Sec. 251.9:

a. The words ``emergency feeding organization'' and ``emergency

feeding organizations'' are removed wherever they appear in the

section, and added in their place are the words ``eligible recipient

agency'' and ``eligible recipient agencies'' respectively;

b. Paragraph (a) is revised;

c. Paragraph (c) introductory text and paragraph (c)(2)(i) are

amended by removing the references ``3016.24(b)(1)'' and ``3016.24(c)

through 3016.24(f)'' and adding the reference ``part 3016 or 3019, as

applicable'' in their place;

d. Paragraph (e) is removed, and paragraphs (f) and (g) are

redesignated as paragraphs (e) and (f), respectively;

e. Newly redesignated paragraph (e) is amended by removing the

words ``SF-269, Financial Status Report'' and adding the words ``FNS-

667, Report of TEFAP Administrative Costs'' in their place.

f. Newly redesignated paragraph (f) is amended by removing the

reference ``SF-269'' wherever it appears and adding the reference

``FNS-667'' in its place.

The revision reads as follows:

Sec. 251.9 Matching of funds.

(a) State matching requirement. The State must provide a cash or

in-kind contribution equal to the amount of TEFAP administrative funds

received under Sec. 251.8 and retained by the State agency for State-

level costs or made available by the State agency directly to eligible

recipient agencies that are not emergency feeding organizations as

defined in Sec. 251.3(e). The State agency will not be required to

match any portion of the Federal grant passed through for

administrative costs incurred by emergency feeding organizations or

directly expended by the State agency for such costs in

[[Page 72907]]

accordance with Sec. 251.8(e)(4) of this part.

* * * * *

11. In Sec. 251.10:

a. Paragraph (a) is revised;

b. Paragraph (b) is amended by adding the words ``commodities

distributed for home consumption and meals prepared from'' after the

word ``law,'';

c. Paragraph (c) is amended by adding the words ``for home

consumption or availability of meals prepared from commodities'' after

the word ``foods''.

d. Paragraphs (d) and (e) are revised;

e. Paragraph (f) is amended by:

1. removing the words ``emergency feeding organizations and

distribution sites'', ``emergency feeding organization or distribution

site'' and ``emergency feeding organization's or distribution site's''

wherever they appear, and adding in their place the words ``eligible

recipient agencies'', ``eligible recipient agency'' and ``eligible

recipient agency's'' respectively;

2. adding the words ``or meal service'' after the word ``foods'' in

paragraph (f)(1) introductory text;

3. adding the words ``for home consumption or prepared meals

containing TEFAP commodities'' after the word ``commodities'' in

paragraph (f)(1)(ii);

4. adding the words ``or meal service'' at the end of paragraph

(f)(1)(iii);

5. adding the words ``or meal service'' after the word ``foods'' in

paragraph (f)(2); and

6. removing the words ``the distribution of commodities by'' in

paragraph (f)(4);

f. Paragraph (g) is amended by removing the words ``emergency

feeding organizations'' and adding in their place ``eligible recipient

agencies'';

g. Paragraph (h) is revised.

The revisions read as follows:

Sec. 251.10 Miscellaneous provisions.

(a) Records. (1) Commodities. State agencies, subdistributing

agencies (as defined in Sec. 250.3 of this chapter), and eligible

recipient agencies must maintain records to document the receipt,

disposal, and inventory of commodities received under this part that

they, in turn, distribute to eligible recipient agencies. Such records

must be maintained in accordance with the requirements set forth in

Sec. 250.16 of this chapter. Eligible recipient agencies must sign a

receipt for program commodities which they receive under this part for

distribution to households or for use in preparing meals, and records

of all such receipts must be maintained.

(2) Administrative funds. In addition to maintaining financial

records in accordance with 7 CFR part 3016, State agencies must

maintain records to document the amount of funds received under this

part and paid to eligible recipient agencies for allowable

administrative costs incurred by such eligible recipient agencies.

State agencies must also ensure that eligible recipient agencies

maintain such records.

(3) Household information. Each distribution site must collect and

maintain on record for each household receiving TEFAP commodities for

home consumption, the name of the household member receiving

commodities, the address of the household (to the extent practicable),

the number of persons in the household, and the basis for determining

that the household is eligible to receive commodities for home

consumption.

(4) Record retention. All records required by this section must be

retained for a period of 3 years from the close of the Federal Fiscal

Year to which they pertain, or longer if related to an audit or

investigation in progress. State agencies may take physical possession

of such records on behalf of their eligible recipient agencies.

However, such records must be reasonably accessible at all times for

use during management evaluation reviews, audits or investigations.

* * * * *

(d) Reports. (1) Submission of Form FNS-667. Designated State

agencies must identify funds obligated and disbursed to cover the costs

associated with the program at the State and local level. State and

local costs must be identified separately. The data must be identified

on Form FNS-667, Report of Administrative Costs (TEFAP) and submitted

to the appropriate FNS Regional Office on a quarterly basis. The

quarterly report must be submitted no later than 30 calendar days after

the end of the quarter to which it pertains. The final report must be

submitted no later than 90 calendar days after the end of the fiscal

year to which it pertains.

(2) Reports of excessive inventory. Each State agency must complete

and submit to the FNS Regional Office reports to ensure that excessive

inventories of donated foods are not maintained, in accordance with the

requirements of Sec. 250.17(a) of this chapter.

(e) State monitoring system. (1) Each State agency must monitor the

operation of the program to ensure that it is being administered in

accordance with Federal and State requirements. State agencies may not

delegate this responsibility.

(2) Unless specific exceptions are approved in writing by FNS, the

State agency monitoring system must include:

(i) An annual review of at least 25 percent of all eligible

recipient agencies which have signed an agreement with the State agency

pursuant to Sec. 251.2(c), provided that each such agency must be

reviewed no less frequently than once every four years; and

(ii) An annual review of one-tenth or 20, whichever is fewer, of

all eligible recipient agencies which receive TEFAP commodities and/or

administrative funds pursuant to an agreement with another eligible

recipient agency. Reviews must be conducted, to the maximum extent

feasible, simultaneously with actual distribution of commodities and/or

meal service, and eligibility determinations, if applicable. State

agencies must develop a system for selecting eligible recipient

agencies for review that ensures deficiencies in program administration

are detected and resolved in an effective and efficient manner.

(3) Each review must encompass, as applicable, eligibility

determinations, food ordering procedures, storage and warehousing

practices, inventory controls, approval of distribution sites,

reporting and recordkeeping requirements, and civil rights.

(4) Upon concurrence by FNS, reviews of eligible recipient agencies

which have been conducted by FNS Regional Office personnel may be

incorporated into the minimum coverage required by paragraph (e)(2) of

this section.

(5) If deficiencies are disclosed through the review of an eligible

recipient agency, the State agency must submit a report of the review

findings to the eligible recipient agency and ensure that corrective

action is taken to eliminate the deficiencies identified.

* * * * *

(h) Maintenance of effort. The State may not reduce the expenditure

of its own funds to provide commodities or services to organizations

receiving funds or services under the Emergency Food Assistance Act of

1983 below the level of such expenditure existing in the fiscal year

when the State first began administering TEFAP, or Fiscal Year 1988,

which is the fiscal year in which the maintenance-of-effort requirement

became effective, whichever is later.

Dated: December 21, 1999.

Samuel Chambers, Jr.,

Administrator.

[FR Doc. 99-33619 Filed 12-28-99; 8:45 am]

BILLING CODE 3410-30-U