[Federal Register Volume 79, Number 25 (Thursday, February 6, 2014)]
[Rules and Regulations]
[Pages 7049-7054]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-02556]



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Rules and Regulations
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Federal Register / Vol. 79, No. 25 / Thursday, February 6, 2014 / 
Rules and Regulations

[[Page 7049]]



DEPARTMENT OF AGRICULTURE

Food and Nutrition Service

7 CFR Parts 210 and 245

RIN 0584-AE17


National School Lunch Program: Independent Review of Applications 
Required by the Healthy, Hunger-Free Kids Act of 2010

AGENCY: Food and Nutrition Service, USDA.

ACTION: Final rule.

-----------------------------------------------------------------------

SUMMARY: This final rule requires certain local educational agencies 
participating in the National School Lunch Program to conduct an 
independent review of initial eligibility determinations for free and 
reduced price school meals. Additionally, this final rule requires each 
affected local educational agency to submit to the relevant State 
agency the results of the reviews including the number and percentage 
of reviewed applications for which the eligibility determinations 
changed and the type of change made. State agencies are required to 
submit to the Food and Nutrition Service, a report describing the 
results of the second reviews in their State. These changes respond to 
amendments made to the Richard B. Russell National School Lunch Act by 
section 304 of the Healthy, Hunger-Free Kids Act of 2010 which requires 
that local educational agencies demonstrating high levels of, or a high 
risk for, administrative error associated with certification, 
verification, and other administrative processes, have an individual or 
entity independently review the initial eligibility determinations for 
free and reduced price school meals for accuracy prior to sending out 
household notifications of eligibility or ineligibility. This final 
rule is expected to reduce administrative errors in eligibility 
determinations for free and reduced price school meals.

DATES: This final rule is effective March 10, 2014.

FOR FURTHER INFORMATION CONTACT: William Wagoner or Jessica Saracino, 
School Programs Branch, Child Nutrition Policy and Program Development 
Division, Food and Nutrition Service at (703) 305-2590.

SUPPLEMENTARY INFORMATION: 

I. Background

    The Healthy, Hunger-Free Kids Act of 2010 (Pub. L. 111-296) (the 
HHFKA), enacted December 13, 2010, made changes to the free and reduced 
price process for determining children's eligibility for free and 
reduced price meal benefits in an effort to strengthen rules governing 
certification.
    Section 304 of the HHFKA amended section 22 of the Richard B. 
Russell National School Lunch Act (NSLA) (42 U.S.C. 1769c(b)) to 
require local educational agencies (LEAs) that demonstrate high levels 
of, or a high risk for, administrative error associated with 
certification, verification, and other administrative processes, as 
determined by the Secretary, to have an individual or entity 
independently review the initial eligibility determinations for free 
and reduced price school meals for accuracy prior to notifying 
households of eligibility or ineligibility.
    The Department has determined that, given the results of Food and 
Nutrition Service (FNS) studies demonstrating the presence of 
administrative error during the certification process, this final rule 
should focus on administrative errors that occur during certification 
of eligibility. For purposes of this final rule, certification includes 
both benefit issuance and updating student eligibility for program 
benefits on rosters used to claim meals to the extent the State agency 
identifies problems in the benefit delivery process during an 
administrative review. A subsequent rulemaking may address 
administrative error associated with verification and other 
administrative processes.
    The Department published a proposed rule on September 13, 2012 (77 
FR 56565), which proposed amending 7 CFR parts 210 and 245 to include 
criteria for identifying LEAs that must conduct an independent or 
``second'' review of applications; requirements for the second review 
of applications, including timeframes and duration of second reviews; 
and requirements for reporting review results. The proposed rule 
invited public comment for a 60-day period, beginning September 13, 
2012, and ending November 13, 2012. During the comment period, FNS 
received 65 comments on the proposed rule: 29 comments from LEAs, 27 
comments from individuals, 7 from State agencies and 2 from advocacy 
organizations.

II. Discussion of Public Comments, Policy Changes and FNS Response

    Following an analysis of comments, this rule adopts, as final, the 
provisions of the proposed rule, with revisions as described below. The 
finalized provisions include criteria for identifying LEAs that must 
conduct a second review of applications; requirements for the second 
review of applications, including timeframes and duration of second 
reviews; and requirements for reporting results.

LEA Selection Criteria

Criteria in the Proposed Rule
    The proposed rule at 7 CFR 245.11(a) would have required State 
agencies to annually identify LEAs that demonstrate high levels of, or 
a high risk for, administrative error associated with the certification 
process and to notify those LEAs that they must conduct a second review 
of applications.
    Proposed 7 CFR 245.11(b) would have established four criteria to 
assist State agencies in identifying LEAs with high levels of, or high 
risk for, administrative error. The proposed criteria follow:
    1. All LEAs subject to a follow-up administrative review due to 
certification, benefit issuance, or updating eligibility status 
violations of Performance Standard 1.
    2. All LEAs at risk for a follow-up administrative review because 
they claim between 5-10 percent of the free and reduced price lunches 
incorrectly for the review period due to errors of certification, 
benefit issuance or updating of eligibility status.
    3. All LEAs establishing a new Provision 2 or 3 base year in the 
following school year.
    4. Of the LEAs scheduled for an administrative review the following 
year, the State agency must select those LEAs not selected under 
criteria 1-3

[[Page 7050]]

that are at risk for certification error, as determined by the State 
agency.
    The final rule makes a number of revisions to the proposed criteria 
as described below.
Public Comments and Policy Changes Related to Proposed LEA Criteria
Criterion 1
    Under the proposed Criterion 1, a second review of applications 
would have been required for all LEAs subject to a follow-up 
administrative review due to certification, benefit issuance, or 
updating eligibility status violations of Performance Standard 1. Under 
the administrative review process in effect at the time the proposed 
rule was issued, the Coordinated Review Effort, a follow-up 
administrative review was required if the LEA exceeded the follow-up 
review thresholds. For Performance Standard 1, a follow up review was 
required if 10 percent or more of the free and reduced price lunches 
claimed for the review period were claimed incorrectly due to errors of 
certification, benefit issuance or updating eligibility status.
    Since publication of the proposed rule, FNS has updated the 
administrative review process, as required by amendments to the NSLA by 
section 207 of the HHFKA. The updated administrative review streamlines 
and makes a number of changes to the administrative review, including 
eliminating the requirement to conduct a follow-up review and the 
corresponding follow-up review thresholds upon which Criterion 1 was 
based. FNS will issue a proposed rulemaking to address the changes in 
the administrative review process. However, most State agencies have 
been approved to follow the requirements of the updated administrative 
review process for School Year 2013-14, in advance of the formal 
rulemaking. A few State agencies are still following the Coordinated 
Review Effort process.
    To accommodate the anticipated elimination of the follow-up review/
review threshold for States under the updated administrative review 
process, the final rule requires a second review of applications in all 
LEAs with 10 percent or more of the certification/benefit issuances in 
error, as determined by the State agency under an administrative 
review. This change is expected to update Criterion 1 while identifying 
those LEAs with essentially the same level of errors in the 
certification and benefit issuance process, as proposed. Both State 
agencies currently following the new administrative review procedures 
and those under the Coordinated Review Effort are able to identify 
these error levels through their reviews.
    FNS received one comment regarding the needs of small LEAs under 
Criterion 1. The comment noted that a small LEA with only 10 
certifications would be required to conduct a second review if only one 
certification/benefit issuance is in error.
    While FNS understands the concern of this comment, the second 
review requirements are not expected to place an undue burden on LEAs 
with a small number of applications. The second review requirement is 
expected to result in better outcomes during an administrative review 
for these LEAs. Therefore, the final rule does not exempt any LEAs from 
the second review requirement.
Criterion 2
    Under the proposed Criterion 2, a second review of applications 
would have been required for all LEAs which claimed between 5-10 
percent of the free and reduced price lunches incorrectly due to errors 
of certification, benefit issuance or updating eligibility status, as 
determined by an administrative review.
    Several commenters expressed confusion about which LEAs were to be 
selected under criterion 2. One State suggested that this LEA selection 
criterion be folded into criterion 4 and that selecting at-risk LEAs 
should be left to State discretion.
    FNS agrees with comments that proposed criterion 2 may be confusing 
for States and can be folded into criterion 4, State discretion. 
Therefore, this final rule at 7 CFR 245.11(b)(1)(ii) leaves the 
determination of which LEAs are ``at risk'' for certification errors to 
the discretion of the State agency. In identifying at-risk LEAs, State 
agencies are strongly encouraged to include those LEAs with between 5-
10 percent of the certification/benefit issuances in error, as 
determined by the State agency under an administrative review.
Criterion 3
    Proposed Criterion 3 would have required a second review of 
applications in LEA's establishing a new Provision 2 or 3 base year. 
The proposal responded to findings from FNS' 2007 Access, 
Participation, Eligibility, and Certification (APEC) study, which 
included national estimates of the amounts and rates of erroneous 
payments in the NSLP and SBP. The APEC study found that schools in 
Provisions 2 or 3 base years, on average, experience higher erroneous 
payments rates than other schools (1.75 times higher for NSLP), making 
them at high-risk for administrative error associated with 
certification.
    However, since publication of the proposed rule, FNS issued 
guidance on Provision 2 and 3 base years, SP 59-2013, ``Review of 
Provision 2/3 Base Year''. The guidance requires State agencies to 
conduct a review of base year certification and benefit issuance 
documentation for any LEA requesting approval to participate in the 
NSLP using Provision 2 or 3.
    The new requirement contained in SP 59-2013 makes a criterion 
singling out Provision 2/3 base year schools unnecessary, and for this 
reason Criterion 3 is not included in the final rule. It should be 
noted that Provision 2/3 schools in their base year could still be 
subject to a second review of applications if their LEA is selected 
under other criteria. This would be in addition to the State review of 
all base year applications.
Criterion 4
    Proposed Criterion 4 would have allowed State agencies to select 
LEAs that are not identified in the above criteria, and that the State 
agency identifies as at risk for certification error, and are scheduled 
for an administrative review the following year.
    In regards to criterion 4, it was suggested that FNS eliminate the 
limitation on State agency discretion that would require LEAs to be 
selected to conduct the second review only if they are scheduled for an 
administrative review the following year. The comments argued that if a 
State agency determines that an LEA is at risk for certification error, 
the State agency should be permitted to require a second review of 
applications regardless of the LEA's position in the review cycle.
    FNS agrees that criterion 4 should be expanded to capture all at 
risk LEAs, not just those LEAs that are scheduled for an administrative 
review the following year, and this final rule removes the limitation 
from Criterion 4 at 7 CFR 245.11(b)(1)(ii).
Finalized LEA Selection Criteria
    In summary, in response to comments on the proposed criteria and 
changes to the administrative review process, this rule finalizes at 7 
CFR 245.11(b)(1) two criteria for the selection of LEAs demonstrating a 
high level of, or at risk for, certification errors:
    1. All LEAs with 10 percent or more of the certification/benefit 
issuances in error as determined by the State agency during an 
administrative review; and

[[Page 7051]]

    2. LEAs not selected under Criterion 1 that are at risk for 
certification error, as determined by the State agency. State agencies 
are strongly encouraged to include those LEAs with between 5-10 percent 
of the certification/benefit issuances in error, as determined by the 
State agency under an administrative review.

LEAs with Electronic Systems

    In the proposed rule, FNS asked for comment on whether the second 
review of applications requirement should be required of those LEAs 
that have electronic systems to review applications. A majority of 
comments state that these LEAs should be required to conduct a second 
review if they meet the LEA selection criteria, arguing that whether 
the calculations are manual or electronic, if an incorrect amount is 
entered into the system, the potential for error still exists.
    FNS agrees that LEAs that meet the selection criteria should be 
required to conduct a second review of applications, regardless of 
whether the LEA has an electronic system in place to review 
applications. Therefore, an exemption for LEAs with electronic systems 
is not included in this final rule.

LEA Requirements

Timeframes
    As required by amendments made to the NSLA by the HHFKA, the 
proposed rule would have required the second review of applications by 
identified LEAs to be conducted in a timely manner and not result in 
the delay of an eligibility determination for more than 10 operating 
days after the date the application is submitted. Once the review of 
eligibility has been completed, the household must be notified 
immediately.
    FNS received one comment on this requirement from an advocacy 
group. The group argued that a second review of applications will make 
meeting the 10 day timeline for eligibility determinations difficult 
for LEAs. While FNS understands the concerns of this group, FNS does 
not have discretion to modify this requirement specifically imposed 
pursuant to the amendments made by the HHFKA. Therefore, it is 
finalized at 7 CFR 245.11(c)(1).
    In addition, the proposed rule would have changed the timeframes 
for application approval for all LEAs, not simply those affected by the 
second review of applications requirements. Under the proposal, the 
Department would have established a regulatory requirement that all 
LEAs notify the household of the children's eligibility and provide the 
eligible children the benefits to which they are entitled within 10 
operating days of receiving the application. This change would have 
conformed the regulations with longstanding guidance and was intended 
to make the certification process consistent for both LEAs that are 
required to conduct a second review of applications and those that are 
not. FNS did not receive comments on this change, and it will be 
finalized in this rule at 7 CFR 245.6(c)(6)(i).
    One advocate suggested that FNS take this rulemaking as an 
opportunity to allow the certification for free and reduced price meals 
to take effect for claiming and household charging purposes on the date 
on which the application was submitted regardless of when the decision 
is made or family is notified.
    FNS agrees that this is an important clarification to make 
regarding the eligibility certification process and is most 
appropriately addressed through guidance. On December 3, 2013, FNS 
issued SP 11-2014 ``Effective Date of Free or Reduced Price Meal 
Eligibility Determinations.'' This memorandum provides clarification on 
the flexibility available to LEA officials for establishing the 
effective date of eligibility for children certified for free or 
reduced price meals based on household applications. Therefore, FNS is 
not including this change in the final rule.
Second Review Duration
    Under proposed 7 CFR 245.11(c)(2), LEAs selected for a second 
review would have been required to conduct a second review of 
applications each year, until the State agency determines that the LEA 
is no longer demonstrating a high level of, or is no longer at risk 
for, administrative error associated with the certification process. 
For LEAs selected for a second review of applications using Criteria 1, 
2, or 4, second reviews would be required until such time as the LEA 
provided the State agency with documentation demonstrating that no more 
than 5 percent of reviewed applications required a change in 
eligibility determination. For LEAs selected for the second review of 
applications using criterion 3, a second review of applications would 
have been required every base year of the Provision 2 or Provision 3 
cycle.
    The proposed rule defined documentation as the required LEA annual 
report (described next) detailing the number of free and reduced price 
applications subject to a second review and the number and percentage 
of reviewed applications for which the eligibility determination was 
changed, and a summary of the type of changes made.
    In recognition of the changes to the LEA selection criteria, this 
rule finalizes at 7 CFR 245.11(c)(2) that selected LEAs must conduct a 
second review of applications until LEA-provided documentation 
demonstrates to the satisfaction of the State agency, that no more than 
5 percent of reviewed applications required a change in eligibility 
determination.
    To provide LEAs more flexibility in demonstrating they no longer 
are at risk for certification error, this final rule expands 
documentation to also include information obtained by a State agency 
through administrative reviews. This change is finalized at 7 CFR 
245.11(c)(2).

State Agency and LEA Reporting Requirements

    As required by the HHFKA, the proposed rule would have established 
reporting requirements for State agencies and LEAs. The proposed 
reporting requirements were expected to allow the State agency and the 
Department to monitor the effect of the second review of applications 
requirement.
State Agency Requirements
    Under 7 CFR 245.11(b) of the proposal, State agencies would have 
been required to submit an annual report to FNS on February 1 in a 
format prescribed by FNS. The report would provide information 
detailing the number of free and reduced price applications subject to 
a second review, the number and percentage of reviewed applications for 
which the eligibility was changed, and a summary of the type of changes 
that were made for all the LEAs subject to a second review of 
applications.
    The final rule makes two technical changes to the proposed State 
agency reporting requirements. The proposed rule did not specify a 
format for State reporting. Therefore in an effort to provide 
clarification and keep consistent with data already collected on the 
FNS-742, this final rule requires at 7 CFR 245.11(b) that the report 
required by State agencies include LEA-level information. This means 
State agencies will provide the information described above for each 
LEA required to conduct a second review of applications. In addition, 
the final rule at 7 CFR 245.11(b) changes the date reports are due to 
FNS from February 1 to March 15, consistent with existing verification 
reporting requirements.

[[Page 7052]]

This change provides State agencies with additional time to obtain the 
data from LEAs.
    Finally, the final rule adds a requirement that State agencies 
provide technical assistance to LEAs who demonstrate they are at risk 
for certification errors to ameliorate any problems. While newly added 
to paragraph (b), this addition falls within existing State agency 
responsibilities in managing the program.
LEA Requirements
    The proposed rule at 7 CFR 245.11(c)(3) would have required LEAs 
subject to the second review of applications to submit to the State 
agency an annual report, detailing the number of free and reduced price 
applications subject to a second review, the number and percentage of 
reviewed applications for which the eligibility determination was 
changed, and a summary of the types of changes that were made.
    While the proposed rule did not address the timeframes covered by 
the LEA report, this final rule clarifies that the information reported 
to the State agency, is information as of October 31st. This means 
State and LEAs will only need to report on applications for the current 
school year that have been reviewed on or before October 31st, a date 
consistent with already existing reporting requirements. State agencies 
have discretion in establishing the reporting format and timeframe for 
report submission, provided such timeframes permit the State to meet 
its reporting deadline to FNS.
    One comment acknowledged that there will be additional reporting 
and recordkeeping, and three comments stated that the estimates for 
reporting and recordkeeping burden provided in the proposed rule were 
low. FNS agrees that LEAs will need to track how many applications were 
approved in error compared to total applications and the reasons for 
the errors, and that SAs will need to collect and report the data 
collected from LEAs to FNS. FNS also acknowledges that the second 
review of all applications has administrative burden for LEAs that are 
at risk for eligibility determination errors. However, reviewing 
applications as mandated by this rule is considered a normal (usual and 
customary) operating task and therefore this new requirement does not 
add new burden. It should be noted that a second review of applications 
can be expected to help LEAs ensure better outcomes during an 
administrative review which could lessen the burden during and 
following an administrative review.
    State agencies are encouraged to use the administrative review 
process or other existing mechanisms, wherever possible, to implement 
this requirement as seamlessly as possible. State agencies can notify 
LEAs subject to the second review requirements at the exit conference 
for the administrative review or through the administrative review 
report. This approach would allow LEAs sufficient time to obtain 
technical assistance and establish procedures for the forthcoming 
school year.
    The reporting requirements described above are finalized at 7 CFR 
245.11(b)(2) for State agencies and reporting requirements for LEAs are 
finalized at 7 CFR 245.11(c)(3).
Implementation
    As noted in the DATES section, this final rule is effective March 
10, 2014. However, because implementation begins with identification of 
LEAs with high error rates or at-risk of error, the actual conduct of 
second reviews will not start until the beginning of the next school 
year. For example, for School Years 2013-2014 and 2014-2015, 
implementation is phased-in as follows:
     State agencies must identify LEAs subject to a second 
review and notify affected LEAs no later than June 30, 2014 (School 
Year 2013-2014) (7 CFR 245.11(a)).
     Identified LEAs must conduct second reviews of 
applications beginning July 1, 2014 (School Year 2014-2015) (7 CFR 
245.11(c)).
     Affected LEAs must submit to the State agency, an annual 
report on the results of the second review in a format prescribed by 
the State agency. The report must be submitted no later than the date 
specified by the State agency (in School Year 2014-2015) (7 CFR 
245.11(c)(3)).
     State agencies must submit a report providing LEA-level 
information including the number of free and reduced price applications 
subject to a second review in the LEA, the number and percentage of 
reviewed applications for which the eligibility determination was 
changed in the LEA, and a summary of the types of changes that were 
made to applications reviewed in the LEA to FNS no later than March 15, 
2015 (7 CFR 245.11(b)(2)).
Amendatory Changes Since Publication of Proposed Rule
    Since publication of the proposed rule, FNS has amended 7 CFR part 
245 by adding a new 7 CFR 245.12, State agencies and direct 
certification requirements. Therefore, this final rule will redesignate 
7 CFR 245.11 through 245.14 as 7 CFR 245.12 through 245.15 and add a 
new 7 CFR 245.11, which contains the second review of application 
requirements.
Monitoring of Compliance
    While not directly addressed in the proposed rule, FNS would like 
to take this opportunity to remind State agencies and LEAs that, as 
with other program requirements, this provision will be monitored 
through the administrative review process. Additional information 
regarding monitoring of compliance with the second review of 
applications requirement will be addressed in a forthcoming 
administrative review regulation.
Technical Correction
    This rule also corrects a typographical error which appeared in the 
proposed rule statement regarding Executive Order 12988, Civil Justice 
Reform. This rule is intended to have preemptive effect, as provided 
for in the statement in this final rule.

III. Procedural Matters

Executive Order 12866 and Executive Order 13563

    Executive Orders 12866 and 13563 direct agencies to assess all 
costs and benefits of available regulatory alternatives and, if 
regulation is necessary, to select regulatory approaches that maximize 
net benefits (including potential economic, environmental, public 
health and safety effects, distributive impacts, and equity). Executive 
Order 13563 emphasizes the importance of quantifying both costs and 
benefits, of reducing costs, of harmonizing rules, and of promoting 
flexibility.
    This final rule has been determined to be not significant and was 
not reviewed by the Office of Management and Budget (OMB) in 
conformance with Executive Order 12866.

Regulatory Flexibility Act

    This rule has been reviewed with regard to the requirements of the 
Regulatory Flexibility Act (RFA) of 1980, (5 U.S.C. 601-612). Pursuant 
to that review, it has been certified that this rule will not have a 
significant impact on a substantial number of small entities. While 
there may be some LEA burden associated with the second review of 
applications required in this final rule, the burden will not be 
significant and will be outweighed by the benefits of decreased 
administrative error associated with certification. Additionally, only 
LEAs that fall under the established criteria would be

[[Page 7053]]

required to conduct the second review of applications.

Unfunded Mandates Reform Act

    Title II of the Unfunded Mandates Reform Act of 1995 (UMRA), Public 
Law 104-4, 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, the 
Department generally must prepare a written statement, including a cost 
benefit analysis, for proposed and final rules with ``Federal 
mandates'' that may result in expenditures by State, local or tribal 
governments, in the aggregate, or 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 the Department to identify 
and consider a reasonable number of regulatory alternatives and adopt 
the most cost effective or least burdensome alternative that achieves 
the objectives of the rule.
    This final rule does not contain 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, the rule is not subject to the requirements of sections 
202 and 205 of the UMRA.

Executive Order 12372

    The National School Lunch Program is listed in the Catalog of 
Federal Domestic Assistance Programs under 10.555. For the reasons set 
forth in the final rule in 7 CFR part 3015, subpart V, and related 
Notice (48 FR 29115, June 24, 1983), this program is included in the 
scope of Executive Order 12372 which requires intergovernmental 
consultation with State and local officials.

Executive Order 13132

    Executive Order 13132 requires Federal agencies to consider the 
impact of their regulatory actions on State and local governments. 
Where such actions have federalism implications, agencies are directed 
to provide a statement for inclusion in the preamble to the regulations 
describing the agency's considerations in terms of the three categories 
called for under Section (6)(b)(2)(B) of Executive Order 13121.
    Prior Consultation With State Officials:
    Prior to drafting this final rule, FNS staff received informal 
input from various stakeholders while participating in various State, 
regional, national, and professional conferences. Numerous 
stakeholders, including State and local program operators, also 
provided input at public meetings held by the School Nutrition 
Association.
    Nature of Concerns and the Need To Issue This Rule:
    State agencies and LEAs want to provide the best possible school 
meals through the NSLP but are concerned about the costs and 
administrative burden associated with increased program oversight. 
While FNS is aware of these concerns, the National School Lunch Act, 42 
U.S.C. 1769c(b)(6), as amended by the HHFKA, requires that LEAs that 
demonstrate a high level of, or a high risk for, administrative error 
associated with certification have an individual or entity review the 
initial eligibility determinations for free and reduced price school 
meals for accuracy prior to sending out household notifications of 
eligibility or ineligibility.
    Extent to Which We Meet Those Concerns:
    FNS has considered the impact of this final rule on State and local 
operators and has developed a rule that would implement the second 
review of applications requirement in the most effective and least 
burdensome manner.

Executive Order 12988

    This final rule has been reviewed under Executive Order 12988, 
Civil Justice Reform. This final 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 and timely implementation. This rule is not intended to have 
retroactive effect unless so specified in the Effective Dates section 
of the final rule. Prior to any judicial challenge to the provisions of 
this rule, all applicable administrative procedures under Sec.  
210.18(q) or Sec.  235.11(f) must be exhausted.

Civil Rights Impact Analysis

    FNS has reviewed this final rule in accordance with the Department 
Regulation 4300-4, ``Civil Rights Impact Analysis'', and 1512-1, 
``Regulatory Decision Making Requirements.'' to identify and address 
any major civil rights impacts the rule might have on minorities, 
women, and persons with disabilities. After a careful review of the 
rule's intent and provisions, FNS has determined that this rule is not 
intended to limit or reduce in any way the ability of protected classes 
of individuals to receive benefits on the basis of their race, color, 
national origin, sex, age or disability, nor is it intended to have a 
differential impact on minority owned or operated business 
establishments, and women-owned or operated business establishments 
that participate in the Child Nutrition Programs. The final rule is 
technical in nature, and it affects only State agency and local 
educational agency operations.

Paperwork Reduction Act

    In accordance with section 3507(d) of the Paperwork Reduction Act 
of 1995 (44 U.S.C. 3501 et seq.), the information collection or 
recordkeeping requirements included in this final rule, which were 
filed under 0584-0573, have been submitted for approval to the Office 
of Management and Budget (OMB). When OMB notifies us of its decision, 
if approval is denied, we will publish a document in the Federal 
Register providing notice of what action we plan to take.

E-Government Act Compliance

    FNS is committed to complying with the E-Government Act, 2002 to 
promote the use of the Internet and other information technologies to 
provide increased opportunities for citizen access to Government 
information and services, and for other purposes.

List of Subjects

7 CFR Part 210

    Children, Commodity School Program, Food assistance programs, Grant 
programs-social programs, National School Lunch Program, Nutrition, 
Reporting and recordkeeping requirements, Surplus agricultural 
commodities.

7 CFR Part 245

    Civil rights, Food assistance programs, Grant programs-education, 
Grant programs-health, Infants and children, Milk, Reporting and 
recordkeeping requirements, School breakfast and lunch programs.
    Accordingly, 7 CFR parts 210 and 245 are amended as follows:

PART 210--NATIONAL SCHOOL LUNCH PROGRAM

0
1. The authority citation for part 210 continues to read as follows:

    Authority:  42 U.S.C. 1751-1760, 1779.

0
2. Amend Sec.  210.15:
0
a. In paragraph (a)(7), by removing the word ``and'';
0
b. In paragraph (a)(8), by removing the period and adding ``; and'' in 
its place;
0
c. By adding a new paragraph (a)(9).
    The addition reads as follows:


Sec.  210.15  Reporting and recordkeeping.

    (a) * * *
    (9) For any local educational agency required to conduct a second 
review of free and reduced price applications as

[[Page 7054]]

required under Sec.  245.11 of this chapter, the number of free and 
reduced price applications subject to a second review, the number and 
percentage of reviewed applications for which the eligibility 
determination was changed, and a summary of the types of changes made.
* * * * *

0
3. Amend Sec.  210.20:
0
a. In paragraph (a)(8), by removing the word ``and'';
0
b. In paragraph (a)(9), by removing the period and adding ``; and'' in 
its place;
0
c. By adding a new paragraph (a)(10).
    The addition reads as follows:


Sec.  210.20  Reporting and recordkeeping.

    (a) * * *
    (10) For each local educational agency required to conduct a second 
review of applications under Sec.  245.11 of this chapter, the number 
of free and reduced price applications subject to a second review, the 
results of the reviews including the number and percentage of reviewed 
applications for which the eligibility determination was changed, and a 
summary of the types of changes made.
* * * * *

PART 245--DETERMINING ELIGIBILITY FOR FREE AND REDUCED PRICE MEALS 
AND FREE MILK IN SCHOOLS

0
4. The authority citation for part 245 continues to read as follows:

    Authority:  42 U.S.C. 1752, 1758, 1759a, 1772, 1773, and 1779.

0
5. Revise Sec.  245.6(c)(6)(i) as follows:


Sec.  245.6  Application, eligibility and certification of children for 
free and reduced price meals and free milk.

* * * * *
    (c) * * *
    (6) * * *
    (i) Income applications. The local educational agency must notify 
the household of the children's eligibility and provide the eligible 
children the benefits to which they are entitled within 10 operating 
days of receiving the application from the household.
* * * * *
    Sec. Sec.  245.11 through 245.14 [Redesignated]

0
6. Redesignate Sec. Sec.  245.11 through 245.14 as Sec. Sec.  245.12 
through 245.15, respectively;

0
7. Add a new Sec.  245.11 to read as follows:


Sec.  245.11  Second review of applications.

    (a) General. On an annual basis not later than the end of each 
school year, State agencies must identify local educational agencies 
demonstrating a high level of, or risk for, administrative error 
associated with certification processes and notify the affected local 
educational agencies that they must conduct a second review of 
applications beginning in the following school year. The second review 
of applications must be completed prior to notifying the household of 
the eligibility or ineligibility of the household for free or reduced 
price meals.
    (b) State agency requirements--(1) Selection criteria. Local 
educational agencies subject to a second review must include:
    (i) Administrative review certification errors. All local 
educational agencies with 10 percent or more of the certification/
benefit issuances in error, as determined by the State agency during an 
administrative review; and
    (ii) State agency discretion. Local educational agencies not 
selected under paragraph (b)(1)(i) that are at risk for certification 
error, as determined by the State agency.
    (2) Reporting requirement. Beginning March 15, 2015, and every 
March 15 thereafter, each State agency must submit a report, as 
specified by FNS, describing the results of the second reviews 
conducted by each local educational agency in their State. The report 
must provide information about applications reviewed in each local 
educational agency and include:
    (i) The number of free and reduced price applications subject to a 
second review;
    (ii) The number of reviewed applications for which the eligibility 
determination was changed;
    (iii) The percentage of reviewed applications for which the 
eligibility determination was changed; and
    (iv) A summary of the types of changes that were made.
    (3) State agencies must provide technical assistance to ameliorate 
certification related problems at local educational agencies determined 
to be at risk for certification.
    (c) Local educational agency requirements. Beginning July 1, 2014, 
and each July 1 thereafter, local educational agencies selected by the 
State agency to conduct a second review of applications must ensure 
that the initial eligibility determination for each application is 
reviewed for accuracy prior to notifying the household of the 
eligibility or ineligibility of the household for free and reduced 
price meals. The second review must be conducted by an individual or 
entity who did not make the initial determination. This individual or 
entity is not required to be an employee of the local educational 
agency but must be trained on how to make application determinations. 
All individuals or entities who conduct a second review of applications 
are subject to the disclosure requirements set forth in Sec.  245.6(f) 
through (k).
    (1) Timeframes. The second review of initial determinations must be 
completed by the local educational agency in a timely manner and must 
not result in a delay in notifying the household, as set forth in Sec.  
245.6(c)(6)(i).
    (2) Duration of requirement to conduct a second review of 
applications. Selected local educational agencies must conduct a second 
review of applications annually until the State agency determines that 
local educational agency-provided documentation provided in accordance 
with paragraph (c)(3) of this section or data obtained by the State 
agency during an administrative review, demonstrates that no more than 
5 percent of reviewed applications required a change in eligibility 
determination.
    (3) Reporting requirement. Each local educational agency required 
to conduct a second review of applications must annually submit to the 
State agency, on a date established by the State agency, the following 
information as of October 31st:
    (i) The number of free and reduced price applications subject to a 
second review;
    (ii) The number of reviewed applications for which the eligibility 
determination was changed;
    (iii) The percentage of reviewed applications for which the 
eligibility determination was changed; and
    (iv) A summary of the types of changes that were made.

    Dated: January 31, 2014.
Audrey Rowe,
Administrator, Food and Nutrition Service.
[FR Doc. 2014-02556 Filed 2-5-14; 8:45 am]
BILLING CODE 3410-30-P