WAIS Document Retrieval[Code of Federal Regulations]
[Title 7, Volume 4]
[Revised as of January 1, 2008]
From the U.S. Government Printing Office via GPO Access
[CITE: 7CFR246]

[Page 334-447]
 
                          TITLE 7--AGRICULTURE
 
    CHAPTER II--FOOD AND NUTRITION SERVICE, DEPARTMENT OF AGRICULTURE
 
PART 246_SPECIAL SUPPLEMENTAL NUTRITION PROGRAM FOR WOMEN, INFANTS AND 

CHILDREN--Table of Contents

                            Subpart A_General

Sec.
246.1 General purpose and scope.
246.2 Definitions.
246.3 Administration.

              Subpart B_State and Local Agency Eligibility

246.4 State plan.
246.5 Selection of local agencies.
246.6 Agreements with local agencies.

                    Subpart C_Participant Eligibility

246.7 Certification of participants.
246.8 Nondiscrimination.
246.9 Fair hearing procedures for participants.

                     Subpart D_Participant Benefits

246.10 Supplemental foods.
246.11 Nutrition education.

                    Subpart E_State Agency Provisions

246.12 Food delivery systems.
246.13 Financial management system.
246.14 Program costs.
246.15 Program income other than grants.
246.16 Distribution of funds.
246.16a Infant formula cost containment.
246.17 Closeout procedures.
246.18 Administrative appeal of State agency actions.

                     Subpart F_Monitoring and Review

246.19 Management evaluation and monitoring reviews.
246.20 Audits.
246.21 Investigations.

                   Subpart G_Miscellaneous Provisions

246.22 Administrative appeal of FNS decisions.
246.23 Claims and penalties.
246.24 Procurement and property management.
246.25 Records and reports.
246.26 Other provisions.
246.27 Program information.
246.28 OMB control numbers.

    Authority: 42 U.S.C. 1786.

    Source: 50 FR 6121, Feb. 13, 1985, unless otherwise noted.

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                            Subpart A_General

Sec. 246.1  General purpose and scope.

    This part announces regulations under which the Secretary of 
Agriculture shall carry out the Special Supplemental Nutrition Program 
for Women, Infants and Children (WIC Program). Section 17 of the Child 
Nutrition Act of 1966, as amended, states in part that the Congress 
finds that substantial numbers of pregnant, postpartum and breastfeeding 
women, infants and young children from families with inadequate income 
are at special risk with respect to their physical and mental health by 
reason of inadequate nutrition or health care, or both. The purpose of 
the Program is to provide supplemental foods and nutrition education 
through payment of cash grants to State agencies which administer the 
Program through local agencies at no cost to eligible persons. The 
Program shall serve as an adjunct to good health care during critical 
times of growth and development, in order to prevent the occurrence of 
health problems, including drug and other harmful substance abuse, and 
to improve the health status of these persons. The program shall be 
supplementary to the Food Stamp Program; any program under which foods 
are distributed to needy families in lieu of food stamps; and receipt of 
food or meals from soup kitchens, or shelters, or other forms of 
emergency food assistance.

[50 FR 6121, Feb. 13, 1985, as amended at 54 FR 51294, Dec. 14, 1989; 58 
FR 11506, Feb. 26, 1993]

Sec. 246.2  Definitions.

    For the purpose of this part and all contracts, guidelines, 
instructions, forms and other documents related hereto, the term:
    Above-50-percent vendors means vendors that derive more than 50 
percent of their annual food sales revenue from WIC food instruments, 
and new vendor applicants expected to meet this criterion under 
guidelines approved by FNS.
    Affirmative Action Plan means that portion of the State Plan which 
describes how the Program will be initiated and expanded within the 
State's jurisdiction in accordance with Sec. 246.4(a).
    A-130 means Office of Management and Budget Circular A-130, which 
provides guidance for the coordinated development and operation of 
information systems.
    Applicants means pregnant women, breastfeeding women, postpartum 
women, infants, and children who are applying to receive WIC benefits, 
and the breastfed infants of applicant breastfeeding women. Applicants 
include individuals who are currently participating in the program but 
are re-applying because their certification period is about to expire.
    Authorized supplemental foods means those supplemental foods 
authorized by the State or local agency for issuance to a particular 
participant.
    Breastfeeding means the practice of feeding a mother's breastmilk to 
her infant(s) on the average of at least once a day.
    Breastfeeding women means women up to one year postpartum who are 
breastfeeding their infants.
    Categorical eligibility means persons who meet the definitions of 
pregnant women, breastfeeding women, postpartum women, or infants or 
children.
    Certification means the implementation of criteria and procedures to 
assess and document each applicant's eligibility for the Program.
    Children means persons who have had their first birthday but have 
not yet attained their fifth birthday.
    Clinic means a facility where applicants are certified.
    Competent professional authority means an individual on the staff of 
the local agency authorized to determine nutritional risk and prescribe 
supplemental foods. The following persons are the only persons the State 
agency may authorize to serve as a competent professional authority: 
Physicians, nutritionists (bachelor's or master's degree in Nutritional 
Sciences, Community Nutrition, Clinical Nutrition, Dietetics, Public 
Health Nutrition or Home Economics with emphasis in Nutrition), 
dieticians, registered nurses, physician's assistants (certified by the 
National Committee on Certification of Physician's Assistants or 
certified by

[[Page 336]]

the State medical certifying authority), or State or local medically 
trained health officials. This definition also applies to an individual 
who is not on the staff of the local agency but who is qualified to 
provide data upon which nutritional risk determinations are made by a 
competent professional authority on the staff of the local agency.
    Competitive bidding means a procurement process under which FNS or 
the State agency selects a single source (such as a single infant 
formula manufacturer offering the lowest price), as determined by the 
submission of sealed bids, for a product for which bids are sought for 
use in the Program.
    Compliance buy means a covert, on-site investigation in which a 
representative of the Program poses as a participant, parent or 
caretaker of an infant or child participant, or proxy, transacts one or 
more food instruments, and does not reveal during the visit that he or 
she is a program representative.
    Contract brand infant formula means all infant formulas (except 
exempt infant formulas) produced by the manufacturer awarded the infant 
formula cost containment contract. If under a single solicitation the 
manufacturer subcontracts for soy-based infant formula, then all soy-
based infant formulas covered by the subcontract are also considered 
contract brand infant formulas (see Sec. 246.16a(c)(1)(i)). If a State 
agency elects to solicit separate bids for milk-based and soy-based 
infant formulas, all infant formulas issued under each contract are 
considered the contract brand infant formula (see Sec. 
246.16a(c)(1)(ii)). For example, all of the milk-based infant formulas 
issued by a State agency that are produced by the manufacturer that was 
awarded the milk-based contract are considered contract brand infant 
formulas. Similarly, all of the soy-based infant formulas issued by a 
State agency that are produced by the manufacturer that was awarded the 
soy-based contract are also considered to be contract brand infant 
formulas. Contract brand infant formulas also include all infant 
formulas (except exempt infant formulas) introduced after the contract 
is awarded.
    Cost containment measure means a competitive bidding, rebate, direct 
distribution, or home delivery system implemented by a State agency as 
described in its approved State Plan of operation and administration.
    CSFP means the Commodity Supplemental Food Program administered by 
the Department, authorized by section 5 of the Agriculture and Consumer 
Protection Act of 1973, as amended, and governed by part 247 of this 
title.
    Days means calendar days.
    Department means the U.S. Department of Agriculture.
    Discount means, with respect to a State agency that provides Program 
foods to participants without the use of retail grocery stores (such as 
a State agency that provides for the home delivery or direct 
distribution of supplemental food), the amount of the price reduction or 
other price concession provided to any State agency by the manufacturer 
or supplier of the particular food product as the result of the purchase 
of Program food by each such State agency, or its representative, from 
the manufacturer or supplier.
    Disqualification means the act of ending the Program participation 
of a participant, authorized food vendor, or authorized State or local 
agency, whether as a punitive sanction or for administrative reasons.
    Documentation means the presentation of written documents which 
substantiate statements made by an applicant or participant or a person 
applying on behalf of an applicant.
    Drug means:
    (a) A beverage containing alcohol;
    (b) A controlled substance (having the meaning given it in section 
102(6) of the Controlled Substance Act (21 U.S.C. 802(6)); or
    (c) A controlled substance analogue (having the meaning given it in 
section 102(32) of the Controlled Substance Act (21 U.S.C. 802(32)).
    Dual participation means simultaneous participation in the Program 
in one or more than one WIC clinic, or participation in the Program and 
in the CSFP during the same period of time.
    Electronic signature means an electronic sound, symbol, or process, 
attached to or associated with an application or other record and 
executed

[[Page 337]]

and or adopted by a person with the intent to sign the record.
    Employee fraud and abuse means the intentional conduct of a State, 
local agency or clinic employee which violates program regulations, 
policies, or procedures, including, but not limited to, misappropriating 
or altering food instruments, entering false or misleading information 
in case records, or creating case records for fictitious participants.
    Exempt infant formula means an infant formula that meets the 
requirements for an exempt infant formula under section 412(h) of the 
Federal Food, Drug, and Cosmetic Act (21 U.S.C. 350a(h)) and the 
regulations at 21 CFR parts 106 and 107.
    Family means a group of related or nonrelated individuals who are 
living together as one economic unit, except that residents of a 
homeless facility or an institution shall not all be considered as 
members of a single family.
    Fiscal year means the period of 12 calendar months beginning October 
1 of any calendar year and ending September 30 of the following calendar 
year.
    FNS means the Food and Nutrition Service of the U.S. Department of 
Agriculture.
    Food costs means the costs of supplemental foods, determined in 
accordance with Sec. 246.14(b).
    Food delivery system means the method used by State and local 
agencies to provide supplemental foods to participants.
    Food instrument means a voucher, check, electronic benefits transfer 
card (EBT), coupon or other document which is used by a participant to 
obtain supplemental foods.
    Food sales means sales of all Food Stamp Program eligible foods 
intended for home preparation and consumption, including meat, fish, and 
poultry; bread and cereal products; dairy products; fruits and 
vegetables. Food items such as condiments and spices, coffee, tea, 
cocoa, and carbonated and noncarbonated drinks may be included in food 
sales when offered for sale along with foods in the categories 
identified above. Food sales do not include sales of any items that 
cannot be purchased with food stamp benefits, such as hot foods or food 
that will be eaten in the store.
    Health services means ongoing, routine pediatric and obstetric care 
(such as infant and child care and prenatal and postpartum examinations) 
or referral for treatment.
    High-risk vendor means a vendor identified as having a high 
probability of committing a vendor violation through application of the 
criteria established in Sec. 246.12(j)(3) and any additional criteria 
established by the State agency.
    Home food delivery contractor means a sole proprietorship, 
partnership, cooperative association, corporation, or other business 
entity that contracts with a State agency to deliver authorized 
supplemental foods to the residences of participants under a home food 
delivery system.
    Homeless facility means the following types of facilities which 
provide meal service. A supervised publicly or privately operated 
shelter (including a welfare hotel or congregate shelter) designed to 
provide temporary living accommodations; a facility that provides a 
temporary residence for individuals intended to be institutionalized; or 
a public or private place not designed for, or normally used as, a 
regular sleeping accommodation for human beings.
    Homeless individual means a woman, infant or child:
    (a) Who lacks a fixed and regular nighttime residence; or
    (b) Whose primary nighttime residence is:
    (1) A supervised publicly or privately operated shelter (including a 
welfare hotel, a congregate shelter, or a shelter for victims of 
domestic violence) designated to provide temporary living accommodation;
    (2) An institution that provides a temporary residence for 
individuals intended to be institutionalized;
    (3) A temporary accommodation of not more than 365 days in the 
residence of another individual; or
    (4) A public or private place not designed for, or ordinarily used 
as, a regular sleeping accommodation for human beings.
    IHS means the Indian Health Service of the U.S. Department of Health 
and Human Services.

[[Page 338]]

    Individual with disabilities means a handicapped person as defined 
in 7 CFR 15b.3.
    Infant formula means a food that meets the definition of an infant 
formula in section 201(z) of the Federal Food, Drug, and Cosmetic Act 
(21 U.S.C. 321(z)) and that meets the requirements for an infant formula 
under section 412 of the Federal Food, Drug, and Cosmetic Act (21 U.S.C. 
350a) and the regulations at 21 CFR parts 106 and 107.
    Institution means any residential accommodation which provides meal 
service, except private residences and homeless facilities.
    Infants means persons under one year of age.
    Inventory audit means the examination of food invoices or other 
proofs of purchase to determine whether a vendor has purchased 
sufficient quantities of supplemental foods to provide participants the 
quantities specified on food instruments redeemed by the vendor during a 
given period of time.
    Local agency means: (a) A public or private, nonprofit health or 
human service agency which provides health services, either directly or 
through contract, in accordance with Sec. 246.5; (b) an IHS service 
unit; (c) an Indian tribe, band or group recognized by the Department of 
the Interior which operates a health clinic or is provided health 
services by an IHS service unit; or (d) an intertribal council or group 
that is an authorized representative of Indian tribes, bands or groups 
recognized by the Department of the Interior, which operates a health 
clinic or is provided health services by an IHS service unit.
    Members of populations means persons with a common special need who 
do not necessarily reside in a specific geographic area, such as off-
reservation Indians or migrant farmworkers and their families.
    Migrant farmworker means an individual whose principal employment is 
in agriculture on a seasonal basis, who has been so employed within the 
last 24 months, and who establishes, for the purposes of such 
employment, a temporary abode.
    Net price means the difference between an infant formula 
manufacturer's lowest national wholesale price per unit for a full 
truckload of infant formula and the rebate level or the discount offered 
or provided by the manufacturer under an infant formula cost containment 
contract.
    Non-contract brand infant formula means all infant formula, 
including exempt infant formula, that is not covered by an infant 
formula cost containment contract awarded by that State agency.
    Nonprofit agency means a private agency which is exempt from income 
tax under the Internal Revenue Code of 1954, as amended.
    Nutrition education means individual or group education sessions and 
the provision of information and educational materials designed to 
improve health status, achieve positive change in dietary habits, and 
emphasize relationships between nutrition and health, all in keeping 
with the individual's personal, cultural, and socioeconomic preferences.
    Nutrition Services and Administration (NSA) Costs means those direct 
and indirect costs, exclusive of food costs, as defined in Sec. 
246.14(c), which State and local agencies determine to be necessary to 
support Program operations. Costs include, but are not limited to, the 
costs of Program administration, start-up, monitoring, auditing, the 
development of and accountability for food delivery systems, nutrition 
education and breastfeeding promotion and support, outreach, 
certification, and developing and printing food instruments.
    Nutritional risk means: (a) Detrimental or abnormal nutritional 
conditions detectable by biochemical or anthropometric measurements; (b) 
Other documented nutritionally related medical conditions; (c) Dietary 
deficiencies that impair or endanger health; (d) Conditions that 
directly affect the nutritional health of a person, including alcoholism 
or drug abuse; or (e) Conditions that predispose persons to inadequate 
nutritional patterns or nutritionally related medical conditions, 
including, but not limited to, homelessness and migrancy.
    OIG means the Department's Office of the Inspector General.

[[Page 339]]

    Other harmful substances means other substances such as tobacco, 
prescription drugs and over-the-counter medications that can be harmful 
to the health of the WIC population, especially the pregnant woman and 
her fetus.
    Participants means pregnant women, breastfeeding women, postpartum 
women, infants and children who are receiving supplemental foods or food 
instruments under the Program, and the breastfed infants of participant 
breastfeeding women.
    Participant violation means any intentional action of a participant, 
parent or caretaker of an infant or child participant, or proxy that 
violates Federal or State statutes, regulations, policies, or procedures 
governing the Program. Participant violations include intentionally 
making false or misleading statements or intentionally misrepresenting, 
concealing, or withholding facts to obtain benefits; exchanging food 
instruments or supplemental foods for cash, credit, non-food items, or 
unauthorized food items, including supplemental foods in excess of those 
listed on the participant's food instrument; threatening to harm or 
physically harming clinic or vendor staff; and dual participation.
    Participation means the sum of the number of persons who have 
received supplemental foods or food instruments during the reporting 
period and the number of infants breastfed by participant breastfeeding 
women (and receiving no supplemental foods or food instruments) during 
the reporting period.
    Postpartum women means women up to six months after termination of 
pregnancy.
    Poverty income guidelines means the poverty income guidelines 
prescribed by the Department of Health and Human Services. These 
guidelines are adjusted annually by the Department of Health and Human 
Services, with each annual adjustment effective July 1 of each year. The 
poverty income guidelines prescribed by the Department of Health and 
Human Services shall be used for all States, as defined in this section, 
except for Alaska and Hawaii. Separate poverty income guidelines are 
prescribed for Alaska and Hawaii.
    Pregnant women means women determined to have one or more embryos or 
fetuses in utero.
    Price adjustment means an adjustment made by the State agency, in 
accordance with the vendor agreement, to the purchase price on a food 
instrument after it has been submitted by a vendor for redemption to 
ensure that the payment to the vendor for the food instrument complies 
with the State agency's price limitations.
    Program means the Special Supplemental Nutrition Program for Women, 
Infants and Children (WIC) authorized by section 17 of the Child 
Nutrition Act of 1966, as amended.
    Proxy means any person designated by a woman participant, or by a 
parent or caretaker of an infant or child participant, to obtain and 
transact food instruments or to obtain supplemental foods on behalf of a 
participant. The proxy must be designated consistent with the State 
agency's procedures established pursuant to Sec. 246.12(r)(1). Parents 
or caretakers applying on behalf of child and infant participants are 
not proxies.
    Rebate means the amount of money refunded under cost containment 
procedures to any State agency from the manufacturer of the particular 
food product as the result of the purchase of the supplemental food with 
a voucher or other purchase instrument by a participant in each State 
agency's program. Such rebates shall be payments made subsequent to the 
exchange of a food instrument for food.
    Remote Indian or Native village means an Indian or Native village 
that is located in a rural area, has a population of less than 5,000 
inhabitants, and is not accessible year-round by means of a public road 
(as defined in 23 U.S.C. 101).
    Routine monitoring means overt, on-site monitoring during which 
program representatives identify themselves to vendor personnel.
    Secretary means the Secretary of Agriculture.
    SFPD means the Supplemental Food Programs Division of the Food and 
Nutrition Service of the U.S. Department of Agriculture.
    7 CFR part 3016 means the Department's Uniform Federal Assistance

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Regulations. Part 3016 implements the policies established by the Office 
of Management and Budget (OMB) in Circulars A-21, A-87, A-102, A-110, 
and A-122, as well as OMB Guidance on Implementation of the Federal 
Grant and Cooperative Agreement Act of 1977.
    7 CFR part 3017 means the Department's Common Rule regarding 
Governmentwide Debarment and Suspension (Non-procurement). Part 3017 
implements the requirements established by Executive Order 12549 
(February 18, 1986).
    7 CFR part 3018 means the Department's Common Rule regarding 
Governmentwide New Restrictions on Lobbying. Part 3018 implements the 
requirements established by section 319 of the 1990 Appropriations Act 
for the Department of Interior and Related Agencies (Pub. L. 101-121).
    7 CFR part 3021 means the Department's Common Rule regarding 
Governmentwide Requirements for Drug-Free Workplace. Part 3021 
implements the requirements established in section 5151-5160 of the 
Drug-Free Workplace Act of 1988 (Pub. L. 100-690).
    Sign or signature means a handwritten signature on paper or an 
electronic signature. If the State agency chooses to use electronic 
signatures, the State agency must ensure the reliability and integrity 
of the technology used and the security and confidentiality of 
electronic signatures collected in accordance with sound management 
practices, and applicable Federal law and policy, and the 
confidentiality requirements in Sec. 246.26.
    State means any of the fifty States, the District of Columbia, the 
Commonwealth of Puerto Rico, the Virgin Islands, Guam, American Samoa, 
or the Commonwealth of the Northern Mariana Islands.
    State agency means the health department or comparable agency of 
each State; an Indian tribe, band or group recognized by the Department 
of the Interior; an intertribal council or group which is an authorized 
representative of Indian tribes, bands or groups recognized by the 
Department of the Interior and which has an ongoing relationship with 
such tribes, bands or groups for other purposes and has contracted with 
them to administer the Program; or the appropriate area office of the 
IHS.
    State Plan means a plan of Program operation and administration that 
describes the manner in which the State agency intends to implement and 
operate all aspects of Program administration within its jurisdiction in 
accordance with Sec. 246.4.
    Supplemental foods means those foods containing nutrients determined 
to be beneficial for pregnant, breastfeeding, and postpartum women, 
infants and children, as prescribed by the Secretary in Sec. 246.10.
    Vendor means a sole proprietorship, partnership, cooperative 
association, corporation, or other business entity operating one or more 
stores authorized by the State agency to provide authorized supplemental 
foods to participants under a retail food delivery system. Each store 
operated by a business entity constitutes a separate vendor and must be 
authorized separately from other stores operated by the business entity. 
Each store must have a single, fixed location, except when the 
authorization of mobile stores is necessary to meet the special needs 
described in the State agency's State Plan in accordance with Sec. 
246.4(a)(14)(xiv).
    Vendor authorization means the process by which the State agency 
assesses, selects, and enters into agreements with stores that apply or 
subsequently reapply to be authorized as vendors.
    Vendor limiting criteria means criteria established by the State 
agency to determine the maximum number and distribution of vendors it 
authorizes pursuant to Sec. 246.12(g)(2).
    Vendor overcharge means intentionally or unintentionally charging 
the State agency more for authorized supplemental foods than is 
permitted under the vendor agreement. It is not a vendor overcharge when 
a vendor submits a food instrument for redemption and the State agency 
makes a price adjustment to the food instrument.
    Vendor peer group system means a classification of authorized 
vendors into groups based on common characteristics or criteria that 
affect food prices, for the purpose of applying appropriate competitive 
price criteria to vendors at authorization and limiting

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payments for food to competitive levels.
    Vendor selection criteria means the criteria established by the 
State agency to select individual vendors for authorization consistent 
with the requirements in Sec. 246.12(g)(3) and (g)(4).
    Vendor violation means any intentional or unintentional action of a 
vendor's current owners, officers, managers, agents, or employees (with 
or without the knowledge of management) that violates the vendor 
agreement or Federal or State statutes, regulations, policies, or 
procedures governing the Program.
    WIC means the Special Supplemental Nutrition Program for Women, 
Infants and Children authorized by section 17 of the Child Nutrition Act 
of 1966, 42 U.S.C. 1786.
    WIC-eligible medical foods means certain enteral products that are 
specifically formulated to provide nutritional support for individuals 
with a diagnosed medical condition, when the use of conventional foods 
is precluded, restricted, or inadequate. Such WIC-eligible medical foods 
may be nutritionally complete or incomplete, but they must serve the 
purpose of a food, provide a source of calories and one or more 
nutrients, and be designed for enteral digestion via an oral or tube 
feeding. WIC-eligible medical foods include many, but not all, products 
that meet the definition of medical food in Section 5(b)(3) of the 
Orphan Drug Act (21 U.S.C. 360ee(b)(3)).

[50 FR 6121, Feb. 13, 1985; 50 FR 8098, Feb. 28, 1985, as amended at 52 
FR 25189, July 2, 1987; 54 FR 51294, Dec. 14, 1989; 55 FR 9717, Mar. 15, 
1990; 58 FR 11506, Feb. 26, 1993; 58 FR 47022, Sept. 7, 1993; 59 FR 
11498, Mar. 11, 1994; 63 FR 63973, Nov. 18, 1998; 64 FR 13322, Mar. 18, 
1999; 64 FR 56674, Oct. 21, 1999; 65 FR 3378, Jan. 21, 2000; 65 FR 
53527, Sept. 5, 2000; 65 FR 51222, Aug. 23, 2000; 65 FR 77249, Dec. 11, 
2000; 65 FR 83277, Dec. 29, 2000; 70 FR 71722, Nov. 29, 2005; 71 FR 
56727, Sept. 27, 2006]

    Effective Date Note: At 72 FR 68984, Dec. 6, 2007, Sec. 246.2 was 
amended by adding new definitions of ``Cash-value voucher'' and 
``Farmer,'' amending the definitions of ``Compliance buy'', ``Employee 
fraud and abuse'', ``Participants'' and ``Proxy'' by removing the words 
``food instruments'' and adding in their place the words ``food 
instruments or cash-value vouchers, '' the definition ``Nutrition 
Services and Administration (NSA) Costs'' by removing the words ``food 
instruments'' and adding in their place the words ``food instruments and 
cash-value vouchers'', and the definition of ``WIC-eligible medical 
foods'' by removing the words ``with a diagnosed medical condition'' and 
adding in their place the words ``with a qualifying condition'', and by 
revising the second sentence, and by revising the definitions of 
``Participant violation'' and ``Participation,'' effective February 4, 
2008. For the convenience of the user, the added and revised text is set 
forth as follows:

Sec. 246.2  Definitions.

                                * * * * *

    Cash-value voucher means a fixed-dollar amount check, voucher, 
electronic benefit transfer (EBT) card or other document which is used 
by a participant to obtain authorized fruits and vegetables.

                                * * * * *

    Farmer means an individual authorized by the State agency to sell 
eligible fruits and vegetables to participants at a farmers' market or 
roadside stands. Individuals who exclusively sell produce grown by 
someone else, such as wholesale distributors, cannot be authorized.

                                * * * * *

    Participant violation means any intentional action of a participant, 
parent or caretaker of an infant or child participant, or proxy that 
violates Federal or State statutes, regulations, policies, or procedures 
governing the Program. Participant violations include intentionally 
making false or misleading statements or intentionally misrepresenting, 
concealing, or withholding facts to obtain benefits; exchanging cash-
value vouchers, food instruments or supplemental foods for cash, credit, 
non-food items, or unauthorized food items, including supplemental foods 
in excess of those listed on the participant's food instrument; 
threatening to harm or physically harming clinic, farmer or vendor 
staff; and dual participation.
    Participation means the sum of:
    (1) The number of persons who received supplemental foods or food 
instruments during the reporting period;
    (2) The number of infants who did not receive supplemental foods or 
food instruments but whose breastfeeding mother received supplemental 
foods or food instruments during the report period; and
    (3) The number of breastfeeding women who did not receive 
supplemental foods or food instruments but whose infant received

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supplemental foods or food instruments during the report period.

                                * * * * *

    WIC-eligible medical foods * * * Such WIC-eligible medical foods 
must serve the purpose of a food, meal or diet (may be nutritionally 
complete or incomplete) and provide a source of calories and one or more 
nutrients; be designed for enteral digestion via an oral or tube 
feeding; and may not be a conventional food, drug, flavoring, or 
enzyme.* * *

Sec. 246.3  Administration.

    (a) Delegation to FNS. Within the Department, FNS shall act on 
behalf of the Department in the administration of the Program. Within 
FNS, SFPD and the Regional Offices are responsible for Program 
administration. FNS shall provide assistance to State and local agencies 
and evaluate all levels of Program operations to ensure that the goals 
of the Program are achieved in the most effective and efficient manner 
possible.
    (b) Delegation to the State agency. The State agency is responsible 
for the effective and efficient administration of the Program in 
accordance with the requirements of this part; the Department's 
regulations governing nondiscrimination (7 CFR parts 15, 15a, and 15b); 
governing administration of grants (7 CFR part 3016); governing 
nonprocurement debarment/suspension (7 CFR part 3017); governing 
restrictions on lobbying (7 CFR part 3018); and governing the drug-free 
workplace requirements (7 CFR 3021); FNS guidelines; and, instructions 
issued under the FNS Directives Management System. The State agency 
shall provide guidance to local agencies on all aspects of Program 
operations.
    (c) Agreement and State Plan. (1) Each State agency desiring to 
administer the Program shall annually submit a State Plan and enter into 
a written agreement with the Department for administration of the 
Program in the jurisdiction of the State agency in accordance with the 
provisions of this part.
    (2) The written agreement shall include a certification regarding 
lobbying and, if applicable, a disclosure of lobbying activities, as 
required by 7 CFR part 3018.
    (d) State agency eligibility. A State agency shall be ineligible to 
participate in the WIC Program if State or local sales tax is collected 
on WIC food purchases in the area in which it administers the program, 
except that, if sales tax is collected on WIC food purchases by 
sovereign Indian entities which are not State agencies, the State agency 
shall remain eligible if any vendors collecting such tax are 
disqualified.
    (e) State staffing standards. Each State agency shall ensure that 
sufficient staff is available to administer an efficient and effective 
Program including, but not limited to, the functions of nutrition 
education, certification, food delivery, fiscal reporting, monitoring, 
and training. Based on the June participation of the previous fiscal 
year, each State agency, as a minimum, shall employ the following staff:
    (1) A full-time or equivalent administrator when the monthly 
participation level exceeds 1,500, or a half-time or equivalent 
administrator when the monthly participation exceeds 500.
    (2) At least one full-time or equivalent Program specialist for each 
10,000 participants above 1,500, but the State agency need not employ 
more than eight Program specialists unless the State agency considers it 
necessary. Program specialists should be utilized for providing fiscal 
management and technical assistance, monitoring vendors, reviewing local 
agencies, training, and nutritional services, or other Program duties as 
assigned by the State agency.
    (3) For nutrition-related services, one full-time or equivalent 
nutritionist when the monthly participation is above 1,500, or a half-
time or equivalent nutritionist when the monthly participation exceeds 
500. The nutritionist shall be named State WIC Nutrition Coordinator and 
shall meet State personnel standards and qualifications in paragraphs 
(e)(3) (i), (ii), (iii), (iv), or (v) of this section and have the 
qualifications in paragraph (e)(3)(vi) of this section. Upon request, an 
exception to these qualifications may be granted by FNS. The State WIC 
Nutrition Coordinator shall--

[[Page 343]]

    (i) Hold a Master's degree with emphasis in food and nutrition, 
community nutrition, public health nutrition, nutrition education, human 
nutrition, nutrition science or equivalent and have at least two years 
responsible experience as a nutritionist in education, social service, 
maternal and child health, public health, nutrition, or dietetics; or
    (ii) Be registered or eligible for registration with the American 
Dietetic Association and have at least two years experience; or
    (iii) Have at least a Bachelor of Science or Bachelor of Arts 
degree, from an accredited four-year institution, with emphasis in food 
and nutrition, community nutrition, public health nutrition, nutrition 
education, human nutrition, nutrition science or equivalent and have at 
least three years of responsible experience as a nutritionist in 
education, social service, maternal and child health, public health 
nutrition, or dietetics; or
    (iv) Be qualified as a Senior Public Health Nutritionist under the 
Department of Health and Human Services guidelines; or
    (v) Meet the IHS standards for a Public Health Nutritionist; and
    (vi) Have at least one of the following: Program development skills, 
education background and experience in the development of educational 
and training resource materials, community action experience, counseling 
skills or experience in participant advocacy.
    (4) A designated breastfeeding promotion coordinator, to coordinate 
breastfeeding promotion efforts identified in the State plan in 
accordance with the requirement of Sec. 246.4(a)(9) of this part. The 
person to whom the State agency assigns this responsibility may perform 
other duties as well.
    (5) A staff person designated for food delivery system management. 
The person to whom the State agency assigns this responsibility may 
perform other duties as well.
    (6) The State agency shall enforce hiring practices which comply 
with the nondiscrimination criteria set forth in Sec. 246.8. The hiring 
of minority staff is encouraged.
    (f) Delegation to local agency. The local agency shall provide 
Program benefits to participants in the most effective and efficient 
manner, and shall comply with this part, the Department's regulations 
governing nondiscrimination (7 CFR parts 15, 15a, 15b), the Department's 
regulations governing the administration of grants (7 CFR part 3016), 
Office of Management and Budget Circular A-130, and State agency and FNS 
guidelines and instructions.

[50 FR 6121, Feb. 13, 1985; 50 FR 8098, Feb. 28, 1985, as amended at 52 
FR 21236, June 4, 1987; 59 FR 11499, Mar. 11, 1994; 65 FR 83277, Dec. 
29, 2000; 71 FR 56728, Sept. 27, 2006]

              Subpart B_State and Local Agency Eligibility

Sec. 246.4  State plan.

    (a) Requirements. By August 15 of each year, each State agency shall 
submit to FNS for approval a State Plan for the following fiscal year as 
a prerequisite to receiving funds under this section. The State agency 
may submit the State Plan in the format provided by FNS guidance. 
Alternatively, the State agency may submit the Plan in combination with 
other federally required planning documents or develop its own format, 
provided that the information required below is included. FNS requests 
advance notification that a State agency intends to use an alternative 
format. The State Plan shall be signed by the State designated official 
responsible for ensuring that the Program is operated in accordance with 
the State Plan. FNS will provide written approval or denial of a 
completed State Plan or amendment within 30 days of receipt. Within 15 
days after FNS receives an incomplete Plan, FNS will notify the State 
agency that additional information is needed to complete the Plan. Any 
disapproval will be accompanied by a statement of the reasons for the 
disapproval. After receiving approval of the State Plan, each State 
agency shall only submit to FNS for approval substantive changes in the 
State Plan. A complete and approved Plan shall include:
    (1) An outline of the State agency's goals and objectives for 
improving Program operations.

[[Page 344]]

    (2) A budget for nutrition services and administration funds, and an 
estimate of food expenditures.
    (3) An estimate of Statewide participation for the coming fiscal 
year by category of women, infants and children.
    (4) The State agency staffing pattern.
    (5) An Affirmative Action Plan which includes--
    (i) A list of all areas and special populations, in priority order 
based on relative need, within the jurisdiction of the State agency, the 
State agency's plans to initiate or expand operations under the Program 
in areas most in need of supplemental foods, including plans to inform 
nonparticipating local agencies of the availability and benefits of the 
Program and the availability of technical assistance in implementing the 
Program, and a description of how the State agency will take all 
reasonable actions to identify potential local agencies and encourage 
agencies to implement or expand operations under the Program within the 
following year in the neediest one-third of all areas unserved or 
partially served;
    (ii) An estimate of the number of potentially eligible persons in 
each area and a list of the areas in the Affirmative Action Plan which 
are currently operating the Program and their current participation, 
which participant priority levels as specified in Sec. 246.7 are being 
reached in each of these areas, and which areas in the Affirmative 
Action Plan are currently operating CSFP and their current 
participation; and
    (iii) A list of the names and addresses of all local agencies.
    (6) Plans to provide program benefits to eligible migrant 
farmworkers and their families, to Indians, and to homeless individuals.
    (7) The State agency's plans, to be conducted in cooperation with 
local agencies, for informing eligible persons of the availability of 
Program benefits, including the eligibility criteria for participation, 
the location of local agencies operating the Program, and the 
institutional conditions of Sec. 246.7(n)(1)(i) of this part, with 
emphasis on reaching and enrolling eligible women in the early months of 
pregnancy and migrants. Such information shall be publicly announced by 
the State agency and by local agencies at least annually. Such 
information shall also be distributed to offices and organizations that 
deal with significant numbers of potentially eligible persons, including 
health and medical organizations, hospitals and clinics, welfare and 
unemployment offices, social service agencies, farmworker organizations, 
Indian tribal organizations, organizations and agencies serving homeless 
individuals, and religious and community organizations in low-income 
areas.
    (8) A description of how the State agency plans to coordinate 
program operations with other services or programs that may benefit 
participants in, or applicants for, the program.
    (9) The State agency's nutrition education goals and action plans, 
including a description of the methods that will be used to provide drug 
and other harmful substance abuse information, promote breastfeeding, 
and to meet the special nutrition education needs of migrant farmworkers 
and their families, Indians, and homeless persons.
    (10) For Indian State or local agencies that wish to apply for the 
alternate income determination procedure in accordance with Sec. 
246.7(d)(2)(vii), documentation that the majority of Indian household 
members have incomes below eligibility criteria.
    (11) A copy of the procedure manual developed by the State agency 
for guidance to local agencies in operating the Program. The manual 
shall include--
    (i) Certification procedures, including:
    (A) A list of the specific nutritional risk criteria by priority 
level which explains how a person's nutritional risk is determined;
    (B) Hematological data requirements including timeframes for the 
collection of such data;
    (C) The procedures for requiring proof of pregnancy, consistent with 
Sec. 246.7(c)(2)(ii), if the State agency chooses to require such 
proof;
    (D) The State agency's income guidelines for Program eligibility;
    (E) Adjustments to the participant priority system (see Sec. 
246.7(e)(4)) to accommodate high-risk postpartum

[[Page 345]]

women or the addition of Priority VII; and,
    (F) Alternate language for the statement of rights and 
responsibilities which is provided to applicants, parents, or caretakers 
when applying for benefits as outlined in Sec. 246.7(i)(10) and 
(j)(2)(i) through (j)(2)(iii). This alternate language must be approved 
by FNS before it can be used in the required statement.
    (ii) Methods for providing nutrition education to participants. 
Nutrition education will include information on drug abuse and other 
harmful substances. Participants will include homeless individuals.
    (iii) Instructions concerning all food delivery operations performed 
at the local level;
    (iv) Instructions for providing all records and reports which the 
State agency requires local agencies to maintain and submit; and
    (v) Instructions on coordinating operations under the program with 
drug and other harmful substance abuse counseling and treatment 
services.
    (12) A description of the State agency's financial management 
system.
    (13) A description of how the State agency will distribute nutrition 
services and administration funds, including start-up funds, to local 
agencies operating under the Program.
    (14) A description of the food delivery system as it operates at the 
State agency level, including--
    (i) Type of system. All food delivery systems in use within the 
State agency's jurisdiction;
    (ii) Vendor limiting and selection criteria. Vendor limiting 
criteria, if used by the State agency, and the vendor selection criteria 
established by the State agency consistent with the requirements in 
Sec. 246.12(g)(3) and (g)(4);
    (iii) Vendor agreement. A sample vendor agreement, including the 
sanction schedule, which may be incorporated as an attachment or, if the 
sanction schedule is in the State agency's regulations, through citation 
to the regulations. State agencies that intend to delegate signing of 
vendor agreements to local agencies must describe the State agency 
supervision and instruction that will be provided to ensure the 
uniformity and quality of local agency activities;
    (iv) Vendor monitoring. The system for monitoring vendors to ensure 
compliance and prevent fraud, waste, and program noncompliance, and the 
State agency's plans for improvement in the coming year in accordance 
with Sec. 246.12(j). The State agency must also include the criteria it 
will use to determine which vendors will receive routine monitoring 
visits. State agencies that intend to delegate any aspect of vendor 
monitoring responsibilities to a local agency or contractor must 
describe the State agency supervision and instruction that will be 
provided to ensure the uniformity and quality of vendor monitoring;
    (v) Options regarding trafficking convictions. The option exercised 
by the State agency to sanction vendors pursuant to Sec. 
246.12(k)(1)(i).
    (vi) Food instruments. A facsimile of the food instrument, if used, 
and a description of the system the State agency will use to account for 
the disposition of food instruments in accordance with Sec. 246.12(q);
    (vii) Names of contractors. The names of companies, excluding 
authorized vendors, with whom the State agency has contracted to 
participate in the operation of the food delivery system;
    (viii) Nutrition services and administration funds conversion For 
State agencies applying for authority to convert food funds to nutrition 
services and administration funds under Sec. 246.16(g), a full 
description of their proposed cost-cutting system or system 
modification;
    (ix) Homeless participants. If the State agency plans to adapt its 
food delivery system to accommodate the needs of homeless individuals, a 
description of such adaptations;
    (x) Infant formula cost containment. A description of any infant 
formula cost containment system. A State agency must submit a State Plan 
or Plan amendment if it is attempting to structure and justify a system 
that is not a single-supplier competitive bidding system for infant 
formula in accordance with Sec. 246.16a(d); is requesting a waiver for 
an infant formula cost containment system under Sec. 246.16a(e); or, is 
planning to change or modify its current system or implement a system 
for

[[Page 346]]

the first time. The amendment must be submitted at least 90 days before 
the proposed effective date of the system change. The plan amendment 
must include documentation for requests for waivers based on 
interference with efficient or effective program operations; a cost 
comparison analysis conducted under Sec. 246.16a(d)(2); and a 
description of the proposed cost containment system. If FNS disputes 
supporting plan amendment documentation, it will deem the Plan amendment 
incomplete under this paragraph (a), and will provide the State agency 
with a statement outlining disputed issues within 15 days of receipt of 
the Plan amendment. The State agency may not enter into any infant 
formula cost containment contract until the disputed issues are resolved 
and FNS has given its consent. If necessary, FNS may grant a 
postponement of implementation of an infant formula cost containment 
system under Sec. 246.16a(f). If at the end of the postponement period 
issues remain unresolved the State agency must proceed with a cost 
containment system judged by FNS to comply with the provisions of this 
part. If the State agency does not comply, it will be subject to the 
penalties set forth in Sec. 246.16a(i);
    (xi) Vendor training. The procedures the State agency will use to 
train vendors in accordance with Sec. 246.12(i). State agencies that 
intend to delegate any aspect of training to a local agency, contractor, 
or vendor representative must describe the State agency supervision and 
instruction that will be provided to ensure the uniformity and quality 
of vendor training;
    (xii) Food instrument security. A description of the State agency's 
system for ensuring food instrument security in accordance with Sec. 
246.12(p);
    (xiii) Participant access determination criteria. A description of 
the State agency's participant access determination criteria consistent 
with Sec. 246.12(l); and
    (xiv) Mobile stores. The special needs necessitating the 
authorization of mobile stores, if the State agency chooses to authorize 
such stores.
    (xv) Vendor cost containment. A description of the State agency's 
vendor peer group system, competitive price criteria, and allowable 
reimbursement levels that demonstrates that the State agency is in 
compliance with the cost containment provisions in Sec. 246.12(g)(4); 
information on non-profit above-50-percent vendors that the State agency 
has exempted from competitive price criteria and allowable reimbursement 
levels in Sec. 246.12(g)(4)(iv); a justification and documentation 
supporting the State agency's request for an exemption from the vendor 
peer group requirement in Sec. 246.12(g)(4), if applicable; and, if the 
State agency authorizes any above-50-percent vendors, information 
required by FNS to determine whether the State agency's vendor cost 
containment system meets the requirements in Sec. 246.12(g)(4)(i).
    (xvi) Other cost containment systems. A description of any other 
food cost containment systems (such as juice and cereal rebates and food 
item restrictions).
    (15) The State agency's plans to prevent and identify dual 
participation in accordance with Sec. 246.7(l)(1)(i) and (l)(1)(ii). In 
States where the Program and the CSFP operate in the same area, or where 
an Indian State agency operates a Program in the same area as a 
geographic State agency, a copy of the written agreement between the 
State agencies for the detection and prevention of dual participation 
shall be submitted.
    (16) A description of the procedures the State will use to comply 
with the civil rights requirements described in Sec. 246.8, including 
the processing of discrimination complaints.
    (17) A copy of the State agency's fair hearing procedures for 
participants and the administrative appeal procedures for local agencies 
and food vendors.
    (18) The State agency's plan to reach and enroll migrants, and 
eligible women in the early months of pregnancy.
    (19) The State agency's plan to establish, to the extent 
practicable, that homeless facilities, and institutions if it chooses to 
make the Program available to them, meet the conditions established in 
Sec. 246.7(n)(1)(i) of this part, if residents of such accommodations 
are to be eligible to receive WIC Program benefits.
    (20) A plan to provide program benefits to unserved infants and 
children

[[Page 347]]

under the care of foster parents, protective services, or child welfare 
authorities, including infants exposed to drugs perinatally.
    (21) A plan to improve access to the Program for participants and 
prospective applicants who are employed or who reside in rural areas, by 
addressing their special needs through the adoption or revision of 
procedures and practices to minimize the time participants and 
applicants must spend away from work and the distances participants and 
applicants must travel. The State agency shall also describe any plans 
for issuance of food instruments to employed or rural participants, or 
to any other segment of the participant population, through means other 
than direct participant pick-up, pursuant to Sec. 246.12(r)(4). Such 
description shall also include measures to ensure the integrity of 
Program services and fiscal accountability. The State agency will also 
describe its policy for approving transportation of participants to and 
from WIC clinics.
    (22) Assurance that each local agency and any subgrantees of the 
State agency and/or local agencies are in compliance with the 
requirements of 7 CFR part 3017 regarding nonprocurement debarment/
suspension.
    (23) A description of the State agency's plans to provide and 
maintain a drug-free workplace in compliance with requirements in 7 CFR 
part 3021.
    (24) A list of all organizations with which the State agency or its 
local agencies has executed or intends to execute a written agreement 
pursuant to Sec. 246.26(h) authorizing the use and disclosure of 
confidential applicant and participant information for non-WIC purposes.
    (25) The State agency's policies and procedures for preventing 
conflicts of interest at the local agency or clinic level in a 
reasonable manner. At a minimum, this plan must prohibit the following 
WIC certification practices by local agency or clinic employees, or 
provide effective alternative policies and procedures when such 
prohibition is not possible:
    (i) Certifying oneself;
    (ii) Certifying relatives or close friends; or,
    (iii) One employee determining eligibility for all certification 
criteria and issuing food instruments or supplemental food for the same 
participant.
    (26) The State agency's plan for collecting and maintaining 
information on cases of participant and employee fraud and abuse. Such 
information should include the nature of the fraud detected and the 
associated dollar losses.
    (27) The State agency's Universal Identifier number.
    (b) Public comment. The State agency shall establish a procedure 
under which members of the general public are provided an opportunity to 
comment on the development of the State agency plan.
    (c) Amendments. At any time after approval, the State agency may 
amend the State Plan to reflect changes. The State agency shall submit 
the amendments to FNS for approval. The amendments shall be signed by 
the State designated official responsible for ensuring that the Program 
is operated in accordance with the State Plan.
    (d) Retention of copy. A copy of the approved State Plan or the WIC 
portion of the State's composite plan of operations shall be kept on 
file at the State agency for public inspection.

[50 FR 6121, Feb. 13, 1985, as amended at 52 FR 21236, June 4, 1987; 53 
FR 25314, July 6, 1988; 54 FR 51294, Dec. 14, 1989; 55 FR 9717, Mar. 15, 
1990; 57 FR 34506, Aug. 5, 1992; 58 FR 11506, Feb. 26, 1993; 59 FR 
11499, Mar. 11, 1994; 63 FR 63973, Nov. 18, 1998; 64 FR 13322, Mar. 18, 
1999; 64 FR 70177, Dec. 16, 1999; 65 FR 51223, Aug. 23, 2000; 65 FR 
53527, Sept. 5, 2000; 65 FR 83278, Dec. 29, 2000; 70 FR 71722, Nov. 29, 
2005; 71 FR 56728, Sept. 27, 2006]

    Effective Date Note: At 72 FR 68984, Dec. 6, 2007, Sec. 246.4 was 
amended by revising paragraphs (a)(11)(iii), (14)(vi), and (14)(xi), and 
by amending paragraph (a)(14)(iii) by revising the heading and the first 
sentence, mend, paragraph (a)(14)(xii) by removing the words ``food 
instrument'' wherever they appear and adding in their place the words 
``food instrument and cash-value voucher'', paragraph (a)(21) by 
removing the words ``food instruments'' and adding in their place the 
words ``food instruments and cash-value vouchers'', and paragraph 
(a)(25)(iii) by removing the words ``food instruments'' and adding in 
their place the words ``food instruments, cash-value vouchers'', 
effective February 4, 2008. For the convenience of the user, the revised 
text is set forth as follows:

[[Page 348]]

Sec. 246.4  State plan.

    (a) * * *
    (11) * * *
    (iii) Instructions concerning all food delivery operations performed 
at the local level, including the list of acceptable foods and their 
maximum monthly quantities as required by Sec. 246.10(b)(1).

                                * * * * *

    (14) * * *
    (iii) Vendor and farmer agreement. A sample vendor and farmer, if 
applicable, agreement, including the sanction schedule, which may be 
incorporated as an attachment or, if the sanction schedule is in the 
State agency's regulations, through citation to the regulations. * * *

                                * * * * *

    (vi) Food instruments and cash-value vouchers. A facsimile of the 
food instrument and cash-value voucher, if used, and a description of 
the system the State agency will use to account for the disposition of 
food instruments and cash value vouchers in accordance with Sec. 
246.12(q);

                                * * * * *

    (xi) Vendor and farmer training. The procedures the State agency 
will use to train vendors in accordance with Sec. 246.12(i) and 
farmers. State agencies that intend to delegate any aspect of training 
to a local agency, contractor, or vendor representative must describe 
the State agency supervision and instructions that will be provided to 
ensure the uniformity and quality of vendor training.

                                * * * * *

Sec. 246.5  Selection of local agencies.

    (a) General. This section sets forth the procedures the State agency 
shall perform in the selection of local agencies and the expansion, 
reduction, and disqualification of local agencies already in operation. 
In making decisions to intitiate, continue, and discontinue the 
participation of local agencies, the State agency shall give 
consideration to the need for Program benefits as delineated in the 
Affirmative Action Plan.
    (b) Application of local agencies. The State agency shall require 
each agency, including subdivisions of the State agency, which desires 
approval as a local agency, to submit a written local agency 
application. After the receipt of an incomplete application, the State 
agency shall provide written notification to the applicant agency of the 
additional information needed. After the receipt of a complete 
application, the State agency shall notify the applicant agency in 
writing of the approval or disapproval of its application. When an 
application is disapproved, the State agency shall advise the applicant 
agency of the reasons for disapproval and of the right to appeal as set 
forth in Sec. 246.18. When an agency submits an application and there 
are no funds to serve the area, the applicant agency shall be notified 
that there are currently no funds available for Program initiation or 
expansion. The applicant agency shall be notified by the State agency 
when funds become available.
    (c) Program initiation and expansion. The State agency shall meet 
the following requirements concerning Program initiation and expansion:
    (1) The State agency will consider the Affirmative Action Plan (see 
Sec. 246.4(a)(5)) when funding local agencies and expanding existing 
operations, and may consider how much of the current need is being met 
at each priority level. The selection criteria cited in paragraph (d)(1) 
of this section shall be applied to each area or special population 
before eliminating that area from consideration and serving the next 
area of special population. The State agency shall consider the number 
of participants in each priority level being served by existing local 
agencies in determining when it is appropriate to move into additional 
areas in the Affirmative Action Plan or to expand existing operations in 
an area. Additionally, the State agency shall consider the total number 
of people potentially eligible in each area compared to the number being 
served.
    (2) The State agency shall provide a written justification to FNS 
for not funding an agency to serve the highest priority area or special 
population. Such justification may include its inability to administer 
the Program, lack of interest expressed for operating the Program, or 
for those areas or special populations which are under consideration for 
expansion of an existing operation, a determination by the

[[Page 349]]

State agency that there is a greater need for funding an agency serving 
an area or special population not operating the Program. The State 
agency shall use the participant priority system in Sec. 246.7 as a 
measurement of greater need in such determination.
    (3) The State agency may fund more than one local agency to serve 
the same area or special population as long as more than one local 
agency is necessary to serve the full extent of need in that area or 
special population.
    (d) Local agency priority system. The State agency shall establish 
standards for the selection of new local agencies. Such standards shall 
include the following considerations:
    (1) The State agency shall consider the following priority system, 
which is based on the relative availability of health and administrative 
services, in the selection of local agencies:
    (i) First consideration shall be given to a public or a private 
nonprofit health agency that will provide ongoing, routine pediatric and 
obstetric care and administrative services.
    (ii) Second consideration shall be given to a public or a private 
nonprofit health or human service agency that will enter into a written 
agreement with another agency for either ongoing, routine pediatric and 
obstetric care or administrative services.
    (iii) Third consideration shall be given to a public or private 
nonprofit health agency that will enter into a written agreement with 
private physicians, licensed by the State, in order to provide ongoing, 
routine pediatric and obstetric care to a specific category of 
participants (women, infants or children).
    (iv) Fourth consideration shall be given to a public or private 
nonprofit human service agency that will enter into a written agreement 
with private physicians, licensed by the State, to provide ongoing, 
routine pediatric and obstetric care.
    (v) Fifth consideration shall be given to a public or private 
nonprofit health or human service agency that will provide ongoing, 
routine pediatric and obstetric care through referral to a health 
provider.
    (2) The State agency must, when seeking new local agencies, publish 
a notice in the local media (unless it has received an application from 
a local public or nonprofit private health agency that can provide 
adequate services). The notice will include a brief explanation of the 
Program, a description of the local agency priority system (outlined in 
this paragraph (d)), and a request that potential local agencies notify 
the State agency of their interest. In addition, the State agency will 
contact all potential local agencies to make sure they are aware of the 
opportunity to apply. If an application is not submitted within 30 days, 
the State agency may then select a local agency in another area. If 
sufficient funds are available, a State agency will give notice and 
consider applications outside the local area at the same time.
    (e) Disqualification of local agencies. (1) The State agency may 
disqualify a local agency--
    (i) When the State agency determines noncompliance with Program 
regulations;
    (ii) When the State's Program funds are insufficient to support the 
continued operation of all its existing local agencies at their current 
participation level; or
    (iii) When the State agency determines, following a review of local 
agency credentials in accordance with paragraph (f) of this section, 
that another local agency can operate the Program more effectively and 
efficiently.
    (2) The State agency may establish its own criteria for 
disqualification of local agencies. The State agency shall notify the 
local agency of any State-established criteria. In addition to any State 
established criteria, the State agency shall consider, at a minimum--
    (i) The availability of other community resources to participants 
and the cost efficiency and cost effectiveness of the local agency in 
terms of both food and nutrition services and administration costs;
    (ii) The percentages of participants in each priority level being 
served by the local agency and the percentage of need being met in each 
participant category;
    (iii) The relative position of the area or special population served 
by the local agency in the Affirmative Action Plan;

[[Page 350]]

    (iv) The local agency's place in the priority system in paragraph 
(d)(1) of this section; and
    (v) The capability of another local agency or agencies to accept the 
local agency's participants.
    (3) When disqualifying a local agency under the Program, the State 
agency shall--
    (i) Make every effort to transfer affected participants to another 
local agency without disruption of benefits;
    (ii) Provide the affected local agency with written notice not less 
than 60 days in advance of the pending action which includes an 
explanation of the reasons for disqualification, the date of 
disqualification, and, except in cases of the expiration of a local 
agency's agreement, the local agency's right to appeal as set forth in 
Sec. 246.18; and
    (iii) Ensure that the action is not in conflict with any existing 
written agreements between the State and the local agency.
    (f) Periodic review of local agency qualifications. The State agency 
may conduct periodic reviews of the qualifications of authorized local 
agencies under its jurisdiction. Based upon the results of such reviews 
the State agency may make appropriate adjustments among the 
participating local agencies, including the disqualification of a local 
agency when the State agency determines that another local agency can 
operate the Program more effectively and efficiently. In conducting such 
reviews, the State agency shall consider the factors listed in paragraph 
(e)(2) of this section in addition to whatever criteria it may develop. 
The State agency shall implement the procedures established in paragraph 
(e)(3) of this section when disqualifying a local agency.

[50 FR 6121, Feb. 13, 1985; 50 FR 8098, Feb. 28, 1985; 65 FR 53527, 
Sept. 5, 2000; 71 FR 56728, Sept. 27, 2006]

Sec. 246.6  Agreements with local agencies.

    (a) Signed written agreements. The State agency shall enter into a 
signed written agreement with each local agency, including subdivisions 
of the State agency, which sets forth the local agency's 
responsibilities for Program operations as prescribed in this part. 
Copies of the agreement shall be kept on file at both the State and 
local agencies for purposes of review and audit in accordance with 
Sec. Sec. 246.19 and 246.20. Neither the State agency nor the local 
agency has an obligation to renew the agreement. The expiration of an 
agreement is not subject to appeal. The State agency shall provide local 
agencies with advance written notice of the expiration of an agreement 
as required under Sec. Sec. 246.5(e)(3)(ii) and 246.18(b)(1).
    (b) Provisions of agreement. The agreement between the State agency 
and each local agency shall ensure that the local agency--
    (1) Complies with all the fiscal and operational requirements 
prescribed by the State agency pursuant to this part, 7 CFR part 3016, 
the debarment and suspension requirements of 7 CFR part 3017, if 
applicable, the lobbying restrictions of 7 CFR part 3018, and FNS 
guidelines and instructions, and provides on a timely basis to the State 
agency all required information regarding fiscal and Program 
information;
    (2) Has a competent professional authority on the staff of the local 
agency and the capabilities necessary to perform the certification 
procedures;
    (3) Makes available appropriate health services to participants and 
informs applicants of the health services which are available;
    (4) Prohibits smoking in the space used to carry out the WIC Program 
during the time any aspect of WIC services are performed;
    (5) Has a plan for continued efforts to make health services 
available to participants at the clinic or through written agreements 
with health care providers when health services are provided through 
referral;
    (6) Provides nutrition education services to participants, in 
compliance with Sec. 246.11 and FNS guidelines and instructions;
    (7) Implements a food delivery system prescribed by the State agency 
pursuant to Sec. 246.12 and approved by FNS;
    (8) Maintains complete, accurate, documented and current accounting 
of all Program funds received and expended;

[[Page 351]]

    (9) Maintains on file and has available for review, audit, and 
evaluation all criteria used for certification, including information on 
the area served, income standards used, and specific criteria used to 
determine nutritional risk; and
    (10) Does not discriminate against persons on the grounds of race, 
color, national origin, age, sex or handicap; and compiles data, 
maintains records and submits reports as required to permit effective 
enforcement of the nondiscrimination laws.
    (c) Indian agencies. Each Indian State agency shall ensure that all 
local agencies under its jurisdiction serve primarily Indian 
populations.
    (d) Health and human service agencies. When a health agency and a 
human service agency comprise the local agency, both agencies shall 
together meet all the requirements of this part and shall enter into a 
written agreement which outlines all Program responsibilities of each 
agency. The agreement shall be approved by the State agency during the 
application process and shall be on file at both the State and local 
agency. No Program funds shall be used to reimburse the health agency 
for the health services provided. However, costs of certification borne 
by the health agency may be reimbursed.
    (e) Health or human service agencies and private physicians. When a 
health or human service agency and private physician(s) comprise the 
local agency, all parties shall together meet all of the requirements of 
this part and shall enter into a written agreement which outlines the 
inter-related Program responsibilities between the physician(s) and the 
local agency. The agreement shall be approved by the State agency during 
the application process and shall be on file at both agencies. The local 
agency shall advise the State agency on its application of the name(s) 
and address(es) of the private physician(s) participating and obtain 
State agency approval of the written agreement. A competent professional 
authority on the staff of the health or human service agency shall be 
responsible for the certification of participants. No Program funds 
shall be used to reimburse the private physician(s) for the health 
services provided. However, costs of certification data provided by the 
physician(s) may be reimbursed.
    (f) Outreach/Certification In Hospitals. The State agency shall 
ensure that each local agency operating the program within a hospital 
and/or that has a cooperative arrangement with a hospital:
    (1) Advises potentially eligible individuals that receive inpatient 
or outpatient prenatal, maternity, or postpartum services, or that 
accompany a child under the age of 5 who receives well-child services, 
of the availability of program services; and
    (2) To the extent feasible, provides an opportunity for individuals 
who may be eligible to be certified within the hospital for 
participation in the WIC Program.

[50 FR 6121, Feb. 13, 1985, as amended at 59 FR 11500, Mar. 11, 1994; 63 
FR 63974, Nov. 18, 1998]

                    Subpart C_Participant Eligibility

Sec. 246.7  Certification of participants.

    (a) Integration with health services. To lend administrative 
efficiency and participant convenience to the certification process, 
whenever possible, Program intake procedures shall be combined with 
intake procedures for other health programs or services administered by 
the State and local agencies. Such merging may include verification 
procedures, certification interviews, and income computations. Local 
agencies shall maintain and make available for distribution to all 
pregnant, postpartum, and breastfeeding women and to parents or 
caretakers of infants and children applying for and participating in the 
Program a list of local resources for drug and other harmful substance 
abuse counseling and treatment.
    (b) Program referral and access. State and local agencies shall 
provide WIC Program applicants and participants or their designated 
proxies with information on other health-related and public assistance 
programs, and when appropriate, shall refer applicants and participants 
to such programs.
    (1) The State agency shall provide each local WIC agency with 
materials showing the maximum income limits, according to family size, 
applicable to

[[Page 352]]

pregnant women, infants, and children up to age 5 under the medical 
assistance program established under Title XIX of the Social Security 
Act (in this section, referred to as the ``Medicaid Program''). The 
local agency shall, in turn, provide to adult individuals applying or 
reapplying for the WIC Program for themselves or on behalf of others, 
written information about the Medicaid Program. If such individuals are 
not currently participating in Medicaid but appear to have family income 
below the applicable maximum income limits for the program, the local 
agency shall also refer these individuals to Medicaid, including the 
referral of infants and children to the appropriate entity in the area 
authorized to determine eligibility for early and periodic screening, 
diagnostic, and treatment (EPSDT) services, and, the referral of 
pregnant women to the appropriate entity in the area authorized to 
determine presumptive eligibility for the Medicaid Program, if such 
determinations are being offered by the State.
    (2) State agencies shall provide WIC services at community and 
migrant health centers, Indian Health Services facilities, and other 
federally health care supported facilities established in medically 
underserved areas to the extent feasible.
    (3) Local agencies may provide information about other potential 
sources of food assistance in the local area to adult individuals 
applying or reapplying in person for the WIC Program for themselves or 
on behalf of others, when such applicants cannot be served because the 
Program is operating at capacity in the local area.
    (4) Each local agency that does not routinely schedule appointments 
shall schedule appointments for employed adult individuals seeking to 
apply or reapply for participation in the WIC Program for themselves or 
on behalf of others so as to minimize the time such individuals are 
absent from the workplace due to such application.
    (5) Each local agency shall attempt to contact each pregnant woman 
who misses her first appointment to apply for participation in the 
Program in order to reschedule the appointment. At the time of initial 
contact, the local agency shall request an address and telephone number 
where the pregnant woman can be reached.
    (c) Eligibility criteria and basic certification procedures. (1) To 
qualify for the Program, infants, children, and pregnant, postpartum, 
and breastfeeding women must:
    (i) Reside within the jurisdiction of the State (except for Indian 
State agencies). Indian State agencies may establish a similar 
requirement. All State agencies may determine a service area for any 
local agency, and may require that an applicant reside within the 
service area. However, the State agency may not use length of residency 
as an eligibility requirement.
    (ii) Meet the income criteria specified in paragraph (d) of this 
section.
    (iii) Meet the nutritional risk criteria specified in paragraph (e) 
of this section.
    (2)(i) At certification, the State or local agency must require each 
applicant to present proof of residency (i.e., location or address where 
the applicant routinely lives or spends the night) and proof of 
identity. The State or local agency must also check the identity of 
participants, or in the case of infants or children, the identity of the 
parent or guardian, or proxies when issuing food or food instruments. 
The State agency may authorize the certification of applicants when no 
proof of residency or identity exists (such as when an applicant or an 
applicant's parent is a victim of theft, loss, or disaster; a homeless 
individual; or a migrant farmworker). In these cases, the State or local 
agency must require the applicant to confirm in writing his/her 
residency or identity. Further, an individual residing in a remote 
Indian or Native village or an individual served by an Indian tribal 
organization and residing on a reservation or pueblo may establish proof 
of residency by providing the State agency their mailing address and the 
name of the remote Indian or Native village.
    (ii) For a State agency opting to require proof of pregnancy, the 
State agency may issue benefits to applicants who claim to be pregnant 
(assuming that all other eligibility criteria are met) but whose 
conditions (as pregnant) are not visibly noticeable and do not have 
documented proof of

[[Page 353]]

pregnancy at the time of the certification interview and determination. 
The State agency should then allow a reasonable period of time, not to 
exceed 60 days, for the applicant to provide the requested 
documentation. If such documentation is not provided as requested, the 
woman can no longer be considered categorically eligible, and the local 
agency would then be justified in terminating the woman's WIC 
participation in the middle of a certification period.
    (3) A State, a State agency, and an Indian Tribal Organization 
(including, an Indian tribe, band, or group recognized by the Department 
of the Interior; or an intertribal council or group which is an 
authorized representative of Indian tribes, bands or groups recognized 
by the Department of the Interior and which has an ongoing relationship 
with such tribes, bands or groups for other purposes and has contracted 
with them to administer the Program) serving as a State agency, may 
limit WIC participation to United States citizens, nationals, and 
qualified aliens as these terms are defined in the Immigration and 
Nationality Laws (8 U.S.C. 1101 et seq.). State agencies that implement 
this option shall inform FNS of their intentions and provide copies of 
the procedures they will establish regarding the limitation of WIC 
services to United States citizens, nationals, and qualified aliens.
    (4) The certification procedure shall be performed at no cost to the 
applicant.
    (d) Income criteria and income eligibility determinations. The State 
agency shall establish, and provide local agencies with, income 
guidelines, definitions, and procedures to be used in determining an 
applicant's income eligibility for the Program.
    (1) Income eligibility guidelines. The State agency may prescribe 
income guidelines either equaling the income guidelines established 
under section 9 of the National School Lunch Act for reduced-price 
school meals or identical to State or local guidelines for free or 
reduced-price health care. However, in conforming Program income 
guidelines to health care guidelines, the State agency shall not 
establish Program guidelines which exceed the guidelines for reduced-
price school meals or are less than 100 percent of the revised poverty 
income guidelines issued annually by the Department of Health and Human 
Services. Program applicants who meet the requirements established by 
paragraph (d)(2)(vi)(A) of this section shall not be subject to the 
income limits established by State agencies under this paragraph.
    (i) Local agency income eligibility guidelines. Different guidelines 
may be prescribed for different local agencies within the State provided 
that the guidelines are the ones used by the local agencies for 
determining eligibility for free or reduced-price health care.
    (ii) Annual adjustments in the income guidelines. On or before June 
1 each year, FNS will announce adjustments in the income guidelines for 
reduced-price meals under section 9 of the National School Lunch Act, 
based on annual adjustments in the revised poverty income guidelines 
issued by the Department of Health and Human Services.
    (iii) Implementation of the income guidelines. On or before July 1 
each year, each State agency shall announce and transmit to each local 
agency the State agency's family size income guidelines, unless changes 
in the poverty income guidelines issued by the Department of Health and 
Human Services do not necessitate changes in the State or local agency's 
income guidelines. The State agency may implement revised guidelines 
concurrently with the implementation of income guidelines under the 
Medicaid program established under Title XIX of the Social Security Act 
(42 U.S.C. 1396 of et seq.). The State agency shall ensure that 
conforming adjustments are made, if necessary, in local agency income 
guidelines. The local agency shall implement (revised) guidelines not 
later than July 1 of each year for which such guidelines are issued by 
the State.
    (2) Income eligibility determinations. The State agency shall ensure 
that local agencies determine income through the use of a clear and 
simple application form provided or approved by the State agency.
    (i) Timeframes for determining income. In determining the income 
eligibility

[[Page 354]]

of an applicant, the State agency may instruct local agencies to 
consider the income of the family during the past 12 months and the 
family's current rate of income to determine which indicator more 
accurately reflects the family's status. However, persons from families 
with adult members who are unemployed shall be eligible based on income 
during the period of unemployment if the loss of income causes the 
current rate of income to be less than the State or local agency's 
income guidelines for Program eligibility.
    (ii) Definition of ``Income''. If the State agency uses the National 
School Lunch reduced-priced meal income guidelines, as specified in 
paragraph (d)(1) of this section, it shall use the following definition 
of income: Income for the purposes of this part means gross cash income 
before deductions for income taxes, employees' social security taxes, 
insurance premiums, bonds, etc. Income includes the following--
    (A) Monetary compensation for services, including wages, salary, 
commissions, or fees;
    (B) Net income from farm and non-farm self-employment;
    (C) Social Security benefits;
    (D) Dividends or interest on savings or bonds, income from estates 
or trusts, or net rental income;
    (E) Public assistance or welfare payments;
    (F) Unemployment compensation;
    (G) Government civilian employee or military retirement or pensions 
or veterans' payments;
    (H) Private pensions or annuities;
    (I) Alimony or child support payments;
    (J) Regular contributions from persons not living in the household;
    (K) Net royalties; and
    (L) Other cash income. Other cash income includes, but is not 
limited to, cash amounts received or withdrawn from any source including 
savings, investments, trust accounts and other resources which are 
readily available to the family.
    (iii) Use of a State or local health care definition of ``Income''. 
If the State agency uses State or local free or reduced-price health 
care income guidelines, it will ensure that the definitions of income 
(see paragraph (d)(2)(ii) of this section), family (see Sec. 246.2) and 
allowable exclusions from income (see paragraph (d)(2)(iv) of this 
section) are used uniformly to determine an applicant's income 
eligibility. This ensures that households with a gross income in excess 
of 185 percent of the Federal income guidelines (see paragraph (d)(1) of 
this section) are not eligible for Program benefits. The exception to 
this requirement is persons who are also income eligible under other 
programs (see paragraph (d)(2)(vi) of this section).
    (iv) Income exclusions. (A) In determining income eligibility, the 
State agency may exclude from consideration as income any:
    (1) Basic allowance for housing received by military services 
personnel residing off military installations or in privatized housing, 
whether on- or off-base; and
    (2) Cost-of-living allowance provided under 37 U.S.C. 405, to a 
member of a uniformed service who is on duty outside the contiguous 
states of the United States.
    (B) The value of inkind housing and other inkind benefits, shall be 
excluded from consideration as income in determining an applicant's 
eligibility for the program.
    (C) Loans, not including amounts to which the applicant has constant 
or unlimited access.
    (D) Payments or benefits provided under certain Federal programs or 
acts are excluded from consideration as income by legislative 
prohibition. The payments or benefits which must be excluded from 
consideration as income include, but are not limited to:
    (1) Reimbursements from the Uniform Relocation Assistance and Real 
Property Acquisition Policies Act of 1970 (Pub. L. 91-646, sec. 216, 42 
U.S.C. 4636);
    (2) Any payment to volunteers under Title I (VISTA and others) and 
Title II (RSVP, foster grandparents, and others) of the Domestic 
Volunteer Service Act of 1973 (Pub. L. 93-113, sec. 404(g), 42 U.S.C. 
5044(g)) to the extent excluded by that Act;
    (3) Payment to volunteers under section 8(b)(1)(B) of the Small 
Business Act (SCORE and ACE) (Pub. L. 95-510, sec. 101, 15 U.S.C. 
637(b)(1)(D));

[[Page 355]]

    (4) Income derived from certain submarginal land of the United 
States which is held in trust for certain Indian tribes (Pub. L. 94-114, 
sec. 6, 25 U.S.C. 459e);
    (5) Payments received under the Job Training Partnership Act (Pub. 
L. 97-300, sec. 142(b), 29 U.S.C. 1552(b));
    (6) Income derived from the disposition of funds to the Grand River 
Band of Ottawa Indians (Pub. L. 94-540, sec. 6);
    (7) Payments received under the Alaska Native Claims Settlement Act 
(Pub. L. 100-241, sec. 15, 43 U.S.C. sec. 1626(c));
    (8) The value of assistance to children or their families under the 
National School Lunch Act, as amended (Pub. L. 94-105, sec. 9(d), 42 
U.S.C. sec. 1760(e)), the Child Nutrition Act of 1966 (Pub. L. 89-642, 
sec. 11(b), 42 U.S.C. sec. 1780(b)), and the Food Stamp Act of 1977 
(Pub. L. 95-113, sec. 1301, 7 U.S.C. sec. 2017(b));
    (9) Payments by the Indian Claims Commission to the Confederated 
Tribes and Bands of the Yakima Indian Nation or the Apache Tribe of the 
Mescalero Reservation (Pub. L. 95-433, sec. 2, 25 U.S.C. 609c-1);
    (10) Payments to the Passamaquoddy Tribe and the Penobscot Nation or 
any of their members received pursuant to the Maine Indian Claims 
Settlement Act of 1980 (Pub. L. 96-420, sec. 6, 9(c), 25 U.S.C. 1725(i), 
1728(c));
    (11) Payments under the Low-income Home Energy Assistance Act, as 
amended (Pub. L. 99-125, sec. 504(c), 42 U.S.C. sec. 8624(f));
    (12) Student financial assistance received from any program funded 
in whole or part under Title IV of the Higher Education Act of 1965, 
including the Pell Grant, Supplemental Educational Opportunity Grant, 
State Student Incentive Grants, National Direct Student Loan, PLUS, 
College Work Study, and Byrd Honor Scholarship programs, which is used 
for costs described in section 472 (1) and (2) of that Act (Pub. L. 99-
498, section 479B, 20 U.S.C. 1087uu). The specified costs set forth in 
section 472 (1) and (2) of the Higher Education Act are tuition and fees 
normally assessed a student carrying the same academic workload as 
determined by the institution, and including the costs for rental or 
purchase of any equipment, materials, or supplies required of all 
students in the same course of study; and an allowance for books, 
supplies, transportation, and miscellaneous personal expenses for a 
student attending the institution on at least a half-time basis, as 
determined by the institution. The specified costs set forth in section 
472 (1) and (2) of the Act are those costs which are related to the 
costs of attendance at the educational institution and do not include 
room and board and dependent care expenses;
    (13) Payments under the Disaster Relief Act of 1974, as amended by 
the Disaster Relief and Emergency Assistance Amendments of 1989 (Pub. L. 
100-707, sec. 105(i), 42 U.S.C. sec. 5155(d));
    (14) Effective July 1, 1991, payments received under the Carl D. 
Perkins Vocational Education Act, as amended by the Carl D. Perkins 
Vocational and Applied Technology Education Act Amendments of 1990 (Pub. 
L. 101-392, sec. 501, 20 U.S.C. sec. 2466d);
    (15) Payments pursuant to the Agent Orange Compensation Exclusion 
Act (Pub. L. 101-201, sec. 1);
    (16) Payments received for Wartime Relocation of Civilians under the 
Civil Liberties Act of 1988 (Pub. L. 100-383, sec. 105(f)(2), 50 App. 
U.S.C. sec. 1989b-4(f)(2));
    (17) Value of any child care payments made under section 
402(g)(1)(E) of the Social Security Act, as amended by the Family 
Support Act (Pub. L. 100-485, sec. 301, 42 U.S.C. sec. 602 (g)(1)(E));
    (18) Value of any ``at-risk'' block grant child care payments made 
under section 5081 of Pub. L. 101-508, which amended section 402(i) of 
the Social Security Act;
    (19) Value of any child care provided or paid for under the Child 
Care and Development Block Grant Act, as amended (Pub. L. 102-586, Sec. 
8(b)), 42 U.S.C. 9858q);
    (20) Mandatory salary reduction amount for military service 
personnel which is used to fund the Veteran's Educational Assistance Act 
of 1984 (GI Bill), as amended (Pub. L. 99-576, sec. 303(a)(1), 38 U.S.C. 
sec. 1411 (b));
    (21) Payments received under the Old Age Assistance Claims 
Settlement Act, except for per capita shares in excess of

[[Page 356]]

$2,000 (Pub. L. 98-500, sec. 8, 25 U.S.C. sec. 2307);
    (22) Payments received under the Cranston-Gonzales National 
Affordable Housing Act, unless the income of the family equals or 
exceeds 80 percent of the median income of the area (Pub. L. 101-625, 
sec. 522(i)(4), 42 U.S.C. sec. 1437f nt);
    (23) Payments received under the Housing and Community Development 
Act of 1987, unless the income of the family increases at any time to 
not less than 50 percent of the median income of the area (Pub. L. 100-
242, sec. 126(c)(5)(A), 25 U.S.C. sec. 2307);
    (24) Payments received under the Sac and Fox Indian claims agreement 
(Pub. L. 94-189, sec. 6);
    (25) Payments received under the Judgment Award Authorization Act, 
as amended (Pub. L. 97-458, sec. 4, 25 U.S.C. sec. 1407 and Pub. L. 98-
64, sec. 2(b), 25 U.S.C. sec. 117b(b));
    (26) Payments for the relocation assistance of members of Navajo and 
Hopi Tribes (Pub. L. 93-531, sec. 22, 22 U.S.C. sec. 640d-21);
    (27) Payments to the Turtle Mountain Band of Chippewas, Arizona 
(Pub. L. 97-403, sec. 9);
    (28) Payments to the Blackfeet, Grosventre, and Assiniboine tribes 
(Montana) and the Papago (Arizona) (Pub. L. 97-408, sec. 8(d));
    (29) Payments to the Assiniboine Tribe of the Fort Belknap Indian 
community and the Assiniboine Tribe of the Fort Peck Indian Reservation 
(Montana) (Pub. L. 98-124, sec. 5);
    (30) Payments to the Red Lake Band of Chippewas (Pub. L. 98-123, 
sec. 3);
    (31) Payments received under the Saginaw Chippewa Indian Tribe of 
Michigan Distribution of Judgment Funds Act (Pub. L. 99-346, sec. 
6(b)(2)); and
    (32) Payments to the Chippewas of Mississippi (Pub. L. 99-377, sec. 
4(b)).
    (v) Are applicants required to document income eligibility? (A) 
Adjuctively/automatically income eligible applicants. The State or local 
agency must require applicants determined to be adjunctively or 
automatically income eligible to document their eligibility for the 
program that makes them income eligible as set forth in paragraph 
(d)(2)(vi) of this section.
    (B) Other applicants. The State or local agency must require all 
other applicants to provide documentation of family income at 
certification.
    (C) Exceptions. The income documentation requirement does not apply 
to an individual for whom the necessary documentation is not available 
or an individual such as a homeless woman or child for whom the agency 
determines the income documentation requirement would present an 
unreasonable barrier to participation. Examples of individuals for whom 
the necessary documentation is not available include those with no 
income or no proof of income (such as an applicant or applicant's parent 
who is a migrant farmworker or other individual who works for cash). 
These are the only exceptions that may be used. When using these 
exceptions, the State or local agency must require the applicant to sign 
a statement specifying why he/she cannot provide documentation of 
income. Such a statement is not required when there is no income.
    (D) Verification. The State or local agency may require verification 
of information it determines necessary to confirm income eligibility for 
Program benefits.
    (vi) Adjunct or automatic income eligibility. (A) The State agency 
shall accept as income-eligible for the Program any applicant who 
documents that he/she is:
    (1) Certified as fully eligible to receive food stamps under the 
Food Stamp Act of 1977, or certified as fully eligible, or presumptively 
eligible pending completion of the eligibility determination process, to 
receive Temporary Assistance for Needy Families (TANF) under Part A of 
Title IV of the Social Security Act or Medical Assistance (i.e., 
Medicaid) under Title XIX of the Social Security Act; or
    (2) A member of a family that is certified eligible to receive 
assistance under TANF, or a member of a family in which a pregnant woman 
or an infant is certified eligible to receive assistance under Medicaid.
    (B) The State agency may accept, as evidence of income within 
Program guidelines, documentation of the applicant's participation in 
State-administered programs not specified in this

[[Page 357]]

paragraph that routinely require documentation of income, provided that 
those programs have income eligibility guidelines at or below the State 
agency's Program income guidelines.
    (C) Persons who are adjunctively income eligible, as set forth in 
paragraphs (d)(2)(vi)(A) of this section, shall not be subject to the 
income limits established under paragraph (d)(1) of this section.
    (vii) Income eligibility of pregnant women. A pregnant woman who is 
ineligible for participation in the program because she does not meet 
income guidelines shall be considered to have satisfied the income 
guidelines if the guidelines would be met by increasing the number of 
individuals in her family by the number of embryos or fetuses in utero. 
The same increased family size may also be used for any of the pregnant 
woman's categorically eligible family members. The State agency shall 
allow applicants to waive this increase in family size.
    (viii) Income eligibility of Indian applicants. If an Indian State 
agency (or a non-Indian State agency which acts on behalf of a local 
agency operated by an Indian organization or the Indian Health Service) 
submits census data or other reliable documentation demonstrating to FNS 
that the majority of the Indian households in a local agency's service 
area have incomes at or below the State agency's income eligibility 
guidelines, FNS may authorize the State agency to approve the use of an 
income certification system under which the local Indian agency shall 
inform each Indian applicant household of the maximum family income 
allowed for that applicant's family size. The local agency shall ensure 
that the applicant, or the applicant's parent or caretaker, signs a 
statement that the applicant's family income does not exceed the 
maximum. The local agency may verify the income eligibility of any 
Indian applicant.
    (ix) Are instream migrant farmworkers and their family members 
required to document income eligibility? Certain instream migrant 
farmworkers and their family members with expired Verification of 
Certification cards shall be declared to satisfy the State agency's 
income standard and income documentation requirements. Such cases 
include when income of that instream migrant farmworker is determined at 
least once every 12 months. Such families shall satisfy the income 
criteria in any State for any subsequent certification while the migrant 
is instream during the 12-month period following the determination. The 
determination can occur either in the migrant's home base area before 
the migrant has entered the stream for a particular agricultural season, 
or in an instream area during the agricultural season.
    (e) Nutritional risk. To be certified as eligible for the Program, 
applicants who meet the Program's eligibility standards specified in 
paragraph (c) of this section must be determined to be at nutritional 
risk. A competent professional authority on the staff of the local 
agency shall determine if a person is at nutritional risk through a 
medical and/or nutritional assessment. This determination may be based 
on referral data submitted by a competent professional authority not on 
the staff of the local agency. Nutritional risk data shall be documented 
in the participant's file and shall be used to assess an applicant's 
nutritional status and risk, tailor the food package to address 
nutritional needs, design appropriate nutrition education, and make 
referrals to health and social services for follow-up, as necessary and 
appropriate.
    Except as stated in paragraph (e)(1)(v) of this section, at least 
one determination of nutritional risk must be documented at the time of 
certification in order for an income eligible applicant to receive WIC 
benefits.
    (1) Determination of nutritional risk. (i) Required nutritional risk 
data. (A) At a minimum, height or length and weight measurements shall 
be performed and/or documented in the applicant's file at the time of 
certification. In addition, a hematological test for anemia such as a 
hemoglobin, hematocrit, or free erythrocyte protoporphyrin test shall be 
performed and/or documented at certification for applicants with no 
other nutritional risk factor present. For applicants with a qualifying 
nutritional risk factor present at certification, such test shall be 
performed and/or documented within 90 days of

[[Page 358]]

the date of certification. However, for breastfeeding women 6-12 months 
postpartum, such hematological tests are not required if a test was 
performed after the termination of their pregnancy. In addition, such 
hematological tests are not required, but are permitted, for infants 
under nine months of age. All infants nine months of age and older (who 
have not already had a hematological test performed or obtained, between 
the ages of six and nine months), shall have a hematological test 
performed between nine and twelve months of age or obtained from 
referral sources. This hematological test does not have to occur within 
90 days of the date of certification. Only one test is required for 
children between 12 and 24 months of age, and this test should be done 6 
months after the infant test, if possible. At the State or local 
agency's discretion, the hematological test is not required for children 
ages two and older who were determined to be within the normal range at 
their last certification. However, the hematological test shall be 
performed on such children at least once every 12 months. Hematological 
test data submitted by a competent professional authority not on the 
staff of the local agency may be used to establish nutritional risk. 
However, such referral hematological data must:
    (1) Be reflective of a woman applicant's category, meaning the test 
must have been taken for pregnant women during pregnancy and for 
postpartum or breastfeeding women following termination of pregnancy;
    (2) Conform to the anemia screening schedule for infants and 
children as outlined in paragraph (e)(1)(ii)(B) of this section; and
    (3) Conform to recordkeeping requirements as outlined in paragraph 
(i)(4) of this section.
    (B) Height or length and weight measurements and, with the 
exceptions specified in paragraph (e)(1)(v) of this section, 
hematological tests, shall be obtained for all participants, including 
those who are determined at nutritional risk based solely on the 
established nutritional risk status of another person, as provided in 
paragraphs (e)(1)(iv) and (e)(1)(v) of this section.
    (ii) Timing of nutritional risk data. (A) Weight and height or 
length. Weight and height or length shall be measured not more than 60 
days prior to certification for program participation.
    (B) Hematological test for anemia. (1) For pregnant, breastfeeding, 
and postpartum women, and child applicants, the hematological test for 
anemia shall be performed or obtained from referral sources at the time 
of certification or within 90 days of the date of certification. The 
hematological test for anemia may be deferred for up to 90 days from the 
time of certification for applicants who have at least one qualifying 
nutritional risk factor present at the time of certification. If no 
qualifying risk factor is identified, a hematological test for anemia 
must be performed or obtained from referral sources (with the exception 
of presumptively eligible pregnant women).
    (2) Infants nine months of age and older (who have not already had a 
hematological test performed, between six and nine months of age, by a 
competent professional authority or obtained from referral sources), 
shall between nine and twelve months of age have a hematological test 
performed or obtained from referral sources. Such a test may be 
performed more than 90 days after the date of certification.
    (3) For pregnant women, the hematological test for anemia shall be 
performed during their pregnancy. For persons certified as postpartum or 
breastfeeding women, the hematological test for anemia shall be 
performed after the termination of their pregnancy. For breastfeeding 
women who are 6-12 months postpartum, no additional blood test is 
necessary if a test was performed after the termination of their 
pregnancy. The participant or parent/guardian shall be informed of the 
test results when there is a finding of anemia, and notations reflecting 
the outcome of the tests shall be made in the participant's file. 
Nutrition education, food package tailoring, and referral services shall 
be provided to the participant or parent/guardian, as necessary and 
appropriate.
    (iii) Breastfeeding dyads. A breastfeeding woman may be determined 
to be a nutritional risk if her

[[Page 359]]

breastfed infant has been determined to be a nutritional risk. A 
breastfed infant can be certified based on the mother's medical and/or 
nutritional assessment. A breastfeeding mother and her infant shall be 
placed in the highest priority level for which either is qualified.
    (iv) Infants born to WIC mothers or women who were eligible to 
participate in WIC. An infant under six months of age may be determined 
to be at nutritional risk if the infant's mother was a Program 
participant during pregnancy or of medical records document that the 
woman was at nutritional risk during pregnancy because of detrimental or 
abnormal nutritional conditions detectable by biochemical or 
anthropometric measurements or other documented nutritionally related 
medical conditions.
    (v) Presumptive eligibility for pregnant women. A pregnant woman who 
meets the income eligibility standards may be considered presumptively 
eligible to participate in the program, and may be certified immediately 
without an evaluation of nutritional risk for a period up to 60 days. A 
nutritional risk evaluation of such woman shall be completed not later 
than 60 days after the woman is certified for participation. A 
hematological test for anemia is not required to be performed within the 
60-day period, but rather within 90 days, unless the nutritional risk 
evaluation performed does not identify a qualifying risk factor. If no 
qualifying risk factor is identified, a hematological test for anemia 
must be performed or obtained from referral sources before the 60-day 
period elapses. Under the subsequent determination process, if the woman 
does not meet any qualifying nutritional risk criteria, including anemia 
criteria, the woman shall be determined ineligible and may not 
participate in the program for the reference pregnancy after the date of 
the determination. Said applicant may subsequently reapply for program 
benefits and if found to be both income eligible and at qualifying 
nutritional risk may participate in the program. Persons found 
ineligible to participate in the program under this paragraph shall be 
advised in writing of the ineligibility, of the reasons for the 
ineligibility, and of the right to a fair hearing. The reasons for the 
ineligibility shall be properly documented and shall be retained on file 
at the local agency. In addition, if the nutritional risk evaluation is 
not completed within the 60-day timeframe, the woman shall be determined 
ineligible.
    (vi) Regression. A WIC participant who is reapplying for WIC 
benefits may be considered to be at nutritional risk in the next 
certification period if the competent professional authority determines 
that the applicant's nutritional status may regress to the nutritional 
risk condition(s) certified for in the previous certification period 
without supplemental foods and/or WIC nutrition services, and if the 
nutritional risk condition(s) certified for in the previous 
certification period is/are appropriate to the category of the 
participant in the subsequent certification based on regression. 
However, such applicants shall not be considered at nutritional risk 
based on the possibility of regression for consecutive certification 
periods. Applicants who are certified based on the possibility of 
regression should be placed either in the same priority for which they 
were certified in the previous certification period; a priority level 
lower than the priority level assigned in the previous certification 
period, consistent with Sec. 246.7(e)(4); or in Priority VII, if the 
State agency is using that priority level.
    (2) Nutritional risk criteria. The following are examples of 
nutritional risk conditions which may be used as a basis for 
certification. These examples include--
    (i) Detrimental or abnormal nutritional conditions detectable by 
biochemical or anthropometric measurements, such as anemia, underweight, 
overweight, abnormal patterns of weight gain in a pregnant woman, low 
birth weight in an infant, or stunting in an infant or child;
    (ii) Other documented nutritionally related medical conditions, such 
as clinical signs of nutritional deficiencies, metabolic disorders, pre-
eclampsia in pregnant women, failure to thrive in an infant, chronic 
infections in any person, alcohol or drug abuse or

[[Page 360]]

mental retardation in women, lead poisoning, history of high risk 
pregnancies or factors associated with high risk pregnancies (such as 
smoking; conception before 16 months postpartum; history of low birth 
weight, premature births, or neonatal loss; adolescent pregnancy; or 
current multiple pregnancy) in pregnant women, or congenital 
malformations in infants or children, or infants born of women with 
alcohol or drug abuse histories or mental retardation.
    (iii) Dietary deficiencies that impair or endanger health, such as 
inadequate dietary patterns assessed by a 24-hour dietary recall, 
dietary history, or food frequency checklist; and
    (iv) Conditions that predispose persons to inadequate nutritional 
patterns or nutritionally related medical conditions, such as 
homelessness or migrancy.
    (3) Nutritional risk priorities. In determining nutritional risk, 
the State agency shall develop and include in its State Plan, specific 
risk conditions by priority level with indices for identifying these 
conditions. The criteria shall be used statewide and in accordance with 
the priority system as set forth in paragraph (e)(4) of this section.
    (4) Nutritional risk priority system. The competent professional 
authority shall fill vacancies which occur after a local agency has 
reached its maximum participation level by applying the following 
participant priority system to persons on the local agency's waiting 
list. Priorities I through VI shall be utilized in all States. The State 
agency may, at its discretion, expand the priority system to include 
Priority VII. The State agency may set income or other sub-priority 
levels within any of these seven priority levels. The State agency may 
expand Priority III, IV, or V to include high-risk postpartum women. The 
State agency may place pregnant or breastfeeding women and infants who 
are at nutritional risk solely because of homelessness or migrancy in 
Priority IV; children who are at nutritional risk solely because of 
homelessness or migrancy in Priority V; and postpartum women who are at 
nutritional risk solely because of homelessness or migrancy in Priority 
VI, OR, the State agency may place pregnant, breastfeeding or postpartum 
women, infants, and children who are at nutritional risk solely because 
of homelessness or migrancy in Priority VII.
    (i) Priority I. Pregnant women, breastfeeding women and infants at 
nutritional risk as demonstrated by hematological or anthropometric 
measurements, or other documented nutritionally related medical 
conditions which demonstrate the need for supplemental foods.
    (ii) Priority II. Except those infants who qualify for Priority I, 
infant up to six months of age of Program participants who participated 
during pregnancy, and infants up to six months of age born of women who 
were not Program participants during pregnancy but whose medical records 
document that they were at nutritional risk during pregnancy due to 
nutritional conditions detectable by biochemical or anthropometric 
measurements or other documented nutritionally related medical 
conditions which demonstrated the person's need for supplemental foods.
    (iii) Priority III. Children at nutritional risk as demonstrated by 
hematological or anthropometric measurements or other documented medical 
conditions which demonstrate the child's need for supplemental foods.
    (iv) Priority IV. Pregnant women, breastfeeding women, and infants 
at nutritional risk because of an inadequate dietary pattern.
    (v) Priority V. Children at nutritional risk because of an 
inadequate dietary pattern.
    (vi) Priority VI. Postpartum women at nutritional risk.
    (vii) Priority VII. Individuals certified for WIC solely due to 
homelessness or migrancy and, at State agency option, in accordance with 
the provisions of paragraph (e)(1)(vi) of this section, previously 
certified participants who might regress in nutritional status without 
continued provision of supplemental foods.
    (f) Processing standards. The local agencies shall process 
applicants within the following timeframes:
    (1) Waiting lists. When the local agency is serving its maximum 
caseload, the local agency shall maintain a waiting list of individuals 
who visit the

[[Page 361]]

local agency to express interest in receiving Program benefits and who 
are likely to be served. However, in no case shall an applicant who 
requests placement on the waiting list be denied inclusion. State 
agencies may establish a policy which permits or requires local agencies 
to accept telephone requests for placement on the waiting list. The 
waiting list shall include the person's name, address or phone number, 
status (e.g., pregnant, breastfeeding, age of applicant), and the date 
he or she was placed on the waiting list. Individuals shall be notified 
of their placement on a waiting list within 20 days after they visit the 
local agency during clinic office hours to request Program benefits. For 
those State agencies establishing procedures to accept telephone 
requests for placement on a waiting list, individuals shall be notified 
of their placement on a waiting list within 20 days after contacting the 
local agency by phone. The competent professional authority shall apply 
the participant priority system as specified in paragraph (e)(4) of this 
section to the waiting list to ensure that the highest priority persons 
become Program participants first when caseload slots become available.
    (2) Timeframes for processing applicants. (i) When the local agency 
is not serving its maximum caseload, the local agency shall accept 
applications, make eligibility determinations, notify the applicants of 
the decisions made and, if the applicants are to be enrolled, issue food 
or food instruments. All of these actions shall be accomplished within 
the timeframes set forth below.
    (ii) The processing timeframes shall begin when the individual 
visits the local agency during clinic office hours to make an oral or 
written request for Program benefits. To ensure that accurate records 
are kept of the date of such requests, the local agency shall, at the 
time of each request, record the applicant's name, address and the date. 
The remainder of the information necessary to determine eligibility 
shall be obtained by the time of certification. Medical data taken prior 
to certification may be used as provided in paragraph (g)(4) of this 
section.
    (iii) The local agency shall act on applications within the 
following timeframes:
    (A) Special nutritional risk applicants shall be notified of their 
eligibility or ineligibility within 10 days of the date of the first 
request for Program benefits; except that State agencies may provide an 
extension of the notification period to a maximum of 15 days for those 
local agencies which make written request, including a justification of 
the need for an extension. The State agency shall establish criteria for 
identifying categories of persons at special nutritional risk who 
require expedited services. At a minimum, however, these categories 
shall include pregnant women eligible as Priority I participants, and 
migrant farmworkers and their family members who soon plan to leave the 
jurisdiction of the local agency.
    (B) All other applicants shall be notified of their eligibility or 
ineligibility within 20 days of the date of the first request for 
Program benefits.
    (iv) Each local agency using a retail purchase system shall issue a 
food instrument(s) to the participant at the same time as notification 
of certification. Such food instrument(s) shall provide benefits for the 
current month or the remaining portion thereof and shall be redeemable 
immediately upon receipt by the participant. Local agencies may mail the 
initial food instrument(s) with the notification of certification to 
those participants who meet the criteria for the receipt of food 
instruments through the mail, as provided in Sec. 246.12(r)(4).
    (v) Each local agency with a direct distribution or home delivery 
system shall issue the supplemental foods to the participant within 10 
days of issuing the notification of certification.
    (g) Certification periods. (1) Program benefits will be based upon 
certifications established in accordance with the following timeframes:

[[Page 362]]

------------------------------------------------------------------------
               A/an:                         Will be certified:
------------------------------------------------------------------------
(i) Pregnant woman................  For the duration of her pregnancy,
                                     and up to the last day of the month
                                     in which the infant becomes six
                                     weeks old or the pregnancy ends
                                     (for example, if the infant is born
                                     June 4, six weeks after birth would
                                     be July 16, and certification would
                                     end July 31).
(ii) Postpartum woman.............  Up to the last day of the sixth
                                     month after the baby is born or the
                                     pregnancy ends (postpartum).
(iii) Breastfeeding woman.........  Approximately every six months. The
                                     State agency may permit its local
                                     agencies to certify a breastfeeding
                                     woman up to the last day of the
                                     month in which her infant turns 1
                                     year old, or until the woman ceases
                                     breastfeeding, whichever occurs
                                     first.
(iv) Infant.......................  Approximately every six months. The
                                     State agency may permit its local
                                     agencies to certify an infant under
                                     six months of age up to the last
                                     day of the month in which the
                                     infant turns 1 year old, provided
                                     the quality and accessibility of
                                     health care services are not
                                     diminished.
(v) Child.........................  Approximately every six months
                                     ending with the last day of the
                                     month in which a child reaches his/
                                     her fifth birthday.
------------------------------------------------------------------------

    (2) The State agency may authorize local agencies under its 
jurisdiction to establish shorter certification periods than outlined in 
paragraph (g)(1) of this section on a case-by-case basis. If the State 
agency exercises this option, it shall issue guidance for use by local 
agencies in establishing the shorter periods.
    (3) In cases where there is difficulty in appointment scheduling for 
persons referenced in paragraphs (g)(1) (iii), (iv) and (v) of this 
section, the certification period may be shortened or extended by a 
period not to exceed 30 days.
    (h) Mandatory and optional mid-certification actions. Mid-
certification actions are either mandatory or optional as follows:
    (1) Mandatory reassessment of income eligibility mid-certification. 
(i) The local agency must reassess a participant's income eligibility 
during the current certification period if the local agency receives 
information indicating that the participant's household income has 
changed. However, such assessments are not required in cases where 
sufficient time does not exist to effect the change. Sufficient time 
means 90 days or less before the expiration of the certification period.
    (ii) Mandatory disqualification mid-certification for income 
ineligibility. The local agency must disqualify a participant and any 
other household members currently receiving WIC benefits who are 
determined ineligible based on the mid-certification income 
reassessment. However, adjunctively-eligible WIC participants (as 
defined in paragraphs (d)(2)(vi)(A) or (d)(2)(vi)(B) of this section) 
may not be disqualified from the WIC Program solely because they, or 
certain family members, no longer participate in one of the other 
specified programs. The State agency will ensure that such participants 
and other household members currently receiving WIC benefits are 
disqualified during a certification period only after their income 
eligibility has been reassessed based on the income screening procedures 
used for applicants who are not adjunctively eligible.
    (2) Mandatory sanctions or other actions for participant violations. 
The local agency must impose disqualifications, or take other actions in 
accordance with the procedures set forth in Sec. 246.12(u), in response 
to participant violations including, but not limited to, the violations 
listed in the definition of Participant violation in Sec. 246.2.
    (3) Optional mid-certification actions. A participant may be 
disqualified during a certification period for the following reasons:
    (i) A State agency may allow local agencies to disqualify a 
participant for failure to obtain food instruments or supplemental foods 
for several consecutive months. As specified by the State agency, proof 
of such failure includes failure to pick up supplemental foods or food 
instruments, nonreceipt of food instruments (when mailed instruments are 
returned), or failure to have an electronic benefit transfer card 
revalidated for purchase of supplemental foods; or
    (ii) If a State agency experiences funding shortages, it may be 
necessary to discontinue Program benefits to some certified 
participants. The State agency must explore alternatives (such

[[Page 363]]

as elimination of new certifications) before taking such action. In 
discontinuing benefits, the State agency will affect the least possible 
number of participants and those whose nutritional and health status 
would be least impaired by the action. When a State agency elects to 
discontinue benefits due to insufficient funds, it will not enroll new 
participants during that period. The State may discontinue benefits by:
    (A) Disqualifying a group of participants; and/or,
    (B) Withholding benefits from a group with the expectation of 
providing benefits again when funds are available.
    (i) Certification forms. All certification data for each person 
certified shall be recorded on a form (or forms) which are provided by 
the State agency. The information on the forms shall include--
    (1) Name and address;
    (2) Date of initial visit to apply for participation;
    (3) An indication of whether the applicant was physically present at 
certification and, if not, the reason why an exception was granted or a 
copy of the document(s) in the file which explains the reason for the 
exception;
    (4) A description of the document(s) used to determine residency and 
identity or a copy of the document(s) used or the applicant's written 
statement when no documentation exists;
    (5) Information regarding income eligibility for the Program as 
specified in paragraph (d) of this section as follows:
    (i) A description of the document(s) used to determine income 
eligibility or a copy of the document(s) in the file;
    (ii) An indication that no documentation is available and the 
reason(s) why or a copy of the applicant's written statement explaining 
such circumstances; or
    (iii) An indication that the applicant has no income.
    (6) The date of certification and the date nutritional risk data 
were taken if different from the date of certification;
    (7) Height or length, weight, and hematological test results;
    (8) The specific nutritional risk conditions which established 
eligibility for the supplemental foods. Documentation should include 
health history when appropriate to the nutritional risk condition, with 
the applicant's or applicant's parent's or caretaker's consent;
    (9) The signature and title of the competent professional authority 
making the nutritional risk determination, and, if different, the 
signature and title of the administrative person responsible for 
determining income eligibility under the Program; and
    (10) A statement of the rights and obligations under the Program. 
The statement must contain a signature space, and must be read by or to 
the applicant, parent, or caretaker. It must contain the following 
language or alternate language as approved by FNS (see Sec. 
246.4(a)(11)(i)), and be signed by the applicant, parent, or caretaker 
after the statement is read:

    I have been advised of my rights and obligations under the Program. 
I certify that the information I have provided for my eligibility 
determination is correct, to the best of my knowledge. This 
certification form is being submitted in connection with the receipt of 
Federal assistance. Program officials may verify information on this 
form. I understand that intentionally making a false or misleading 
statement or intentionally misrepresenting, concealing, or withholding 
facts may result in paying the State agency, in cash, the value of the 
food benefits improperly issued to me and may subject me to civil or 
criminal prosecution under State and Federal law.

    (11) If the State agency exercises the authority to use and disclose 
confidential applicant and participant information for non-WIC purposes 
pursuant to Sec. 246.26(d)(2), a statement that:
    (i) Notifies applicants that the chief State health officer (or the 
governing authority, in the case of an Indian State agency) may 
authorize the use and disclosure of information about their 
participation in the WIC Program for non-WIC purposes;
    (ii) Must indicate that such information will be used by State and 
local WIC agencies and public organizations only in the administration 
of their programs that serve persons eligible for the WIC Program; and,
    (iii) Will be added to the statement required under paragraph 
(i)(10) of this section. This statement must also indicate that such 
information can be used

[[Page 364]]

by the recipient organizations only for the following:
    (A) To determine the eligibility of WIC applicants and participants 
for programs administered by such organizations;
    (B) To conduct outreach for such programs;
    (C) To enhance the health, education, or well-being of WIC 
applicants and participants currently enrolled in those programs;
    (D) To streamline administrative procedures in order to minimize 
burdens on participants and staff; and,
    (E) To assess and evaluate a State's health system in terms of 
responsiveness to participants' health care needs and health care 
outcomes.
    (j) Notification of participant rights and responsibilities. In 
order to inform applicants and participants or their parents or 
caretakers of Program rights and responsibilities, the following 
information shall be provided. Where a significant number or proportion 
of the population eligible to be served needs the information in a 
language other than English, reasonable steps shall be taken to provide 
the information in appropriate languages to such persons, considering 
the scope of the Program and the size and concentration of such 
population.
    (1) During the certification procedure, every Program applicant, 
parent or caretaker shall be informed of the illegality of dual 
participation.
    (2) At the time of certification, each Program participant, parent 
or caretaker must read, or have read to him or her, the statement 
provided in paragraph (i)(10) of this section (or an alternate statement 
as approved by FNS). In addition, the following sentences (or alternate 
sentences as approved by FNS) must be read:
    (i) ``Standards for eligibility and participation in the WIC Program 
are the same for everyone, regardless of race, color, national origin, 
age, handicap, or sex.''
    (ii) ``You may appeal any decision made by the local agency 
regarding your eligibility for the Program.''
    (iii) ``The local agency will make health services and nutrition 
education available to you, and you are encouraged to participate in 
these services.''
    (3) If the State agency implements the policy of disqualifying a 
participant for not picking up supplemental foods or food instruments in 
accordance with paragraph (h)(1)(ii) of this section, it shall provide 
notice of this policy and of the importance of regularly picking up food 
instruments or supplemental foods to each participant, parent or 
caretaker at the time of each certification.
    (4) At least during the initial certification visit, each 
participant, parent or caretaker shall receive an explanation of how the 
local food delivery system operates and shall be advised of the types of 
health services available, where they are located, how they may be 
obtained and why they may be useful.
    (5) Persons found ineligible for the Program during a certification 
visit shall be advised in writing of the ineligibility, of the reasons 
for the ineligibility, and of the right to a fair hearing. The reasons 
for ineligibility shall be properly documented and shall be retained on 
file at the local agency.
    (6) A person who is about to be suspended or disqualified from 
program participation at any time during the certification period shall 
be advised in writing not less than 15 days before the suspension or 
disqualification. Such notification shall include the reasons for this 
action, and the participant's right to a fair hearing. Further, such 
notification need not be provided to persons who will be disqualified 
for not picking up supplemental foods or food instruments in accordance 
with paragraph (h)(1)(ii) of this section.
    (7) When a State or local agency pursues collection of a claim 
pursuant to Sec. 246.23(c) against an individual who has been 
improperly issued benefits, the person shall be advised in writing of 
the reason(s) for the claim, the value of the improperly issued benefits 
which must be repaid, and of the right to a fair hearing.
    (8) Each participant, parent or caretaker shall be notified not less 
than 15 days before the expiration of each certification period that 
certification for the Program is about to expire.
    (9) If a State agency must suspend or terminate benefits to any 
participant during the participant's certification

[[Page 365]]

period due to a shortage of funds for the Program, it shall issue a 
notice to such participant in advance, as stipulated in paragraph (j)(6) 
of this section.
    (k) Transfer of certification. (1) Each State agency shall ensure 
issuance of a Verification of Certification card to every participant 
who is a member of a family in which there is a migrant farmworker or 
any other participant who is likely to be relocating during the 
certification period. Certifying local agencies shall ensure that 
Verification of Certification cards are fully completed.
    (2) The State agency shall require the receiving local agency to 
accept Verification of Certification cards from participants, including 
participants who are migrant farmworkers or members of their families, 
who have been participating in the Program in another local agency 
within or outside of the jurisdiction of the State agency. A person with 
a valid Verification of Certification card shall not be denied 
participation in the receiving State because the person does not meet 
that State's particular eligibility criteria.
    (3) The Verification of Certification card is valid until the 
certification period expires, and shall be accepted as proof of 
eligibility for Program benefits. If the receiving local agency has 
waiting lists for participation, the transferring participant shall be 
placed on the list ahead of all waiting applicants.
    (4) The Verification of Certification card shall include the name of 
the participant, the date the certification was performed, the date 
income eligibility was last determined, the nutritional risk condition 
of the participant, the date the certification period expires, the 
signature and printed or typed name of the certifying local agency 
official, the name and address of the certifying local agency and an 
identification number or some other means of accountability. The 
Verification of Certification card shall be uniform throughout the 
jurisdiction of the State agency.
    (l) Dual participation. The State agency is responsible for the 
following:
    (1) In conjunction with WIC local agencies, the prevention and 
identification of dual participation within each local agency and 
between local agencies under the State agency's jurisdiction, including 
actions to identify suspected instances of dual participation at least 
semiannually. The State or local agency must take follow-up action 
within 120 days of detecting instances of suspected dual participation;
    (2) In areas where a local agency serves the same population as an 
Indian State agency or a CSFP agency, and in areas where geographical or 
other factors make it likely that participants travel regularly between 
contiguous local service areas located across State agency borders, 
entering into an agreement with the other agency for the detection and 
prevention of dual participation. The agreement must be made in writing 
and included in the State Plan;
    (3) Immediate termination from participation in one of the programs 
or clinics for participants found in violation due to dual 
participation; and
    (4) In cases of dual participation resulting from intentional 
misrepresentation, the collection of improperly issued benefits in 
accordance with Sec. 246.23(c)(1) and disqualification from both 
programs in accordance with Sec. 246.12(u)(2).
    (m) Certification of persons in homeless facilities and 
institutions. (1) Pregnant, breastfeeding, and postpartum women, infants 
or children who meet the requirements of paragraph (c) of this section, 
and who reside in a homeless facility, shall be considered eligible for 
the Program and shall be treated equally with all other eligible 
applicants at the local agency where they apply for WIC benefits, 
Provided that: the State or local agency has taken reasonable steps to:
    (i) Establish, to the extent practicable, that the homeless facility 
meets the following conditions with respect to resident WIC 
participants:
    (A) The homeless facility does not accrue financial or in-kind 
benefit from a person's participation in the Program, e.g., by reducing 
its expenditures for food service because its residents are receiving 
WIC foods;
    (B) Foods provided by the WIC Program are not subsumed into a 
communal food service, but are available

[[Page 366]]

exclusively to the WIC participant for whom they were issued;
    (C) The homeless facility places no constraints on the ability of 
the participant to partake of the supplemental foods and nutrition 
education available under the Program;
    (ii) Contact the homeless facility periodically to ensure continued 
compliance with these conditions; and
    (iii) Request the homeless facility to notify the State or local 
agency if it ceases to meet any of these conditions.
    (2) The State agency may authorize or require local agencies to make 
the Program available to applicants who meet the requirements of 
paragraph (c) of this section, but who reside in institutions which meet 
the conditions of paragraphs (n)(1)(i)(A)-(C) of this section with 
respect to resident WIC participants.
    (3) The State or local agency shall attempt to establish to the best 
of its ability,whether a homeless facility or institution complies with 
the conditions of paragraphs (n)(1)(i) (A)-(C) of this section with 
respect to WIC participants. If caseload slots are available, full 
certification periods shall be provided to the following:
    (i) Participants who are residents of a homeless facility or 
institution which has been found to be in compliance with the conditions 
of paragraph (n)(1)(i)(A)-(C) of this section;
    (ii) Participants who are residents of a homeless facility or 
institution whose compliance with the conditions of paragraphs 
(n)(1)(i)(A)-(C) of this section has not yet been established; and
    (iii) Participants for whom no other shelter alternative is 
available in the local agency's service delivery area.
    (4) If a homeless facility or institution has been determined to be 
noncompliant during the course of a participant's initial certification 
period, participants applying for continued benefits may be certified 
again, but the State agency shall discontinue issuance of WIC foods, 
except infant formula, to the participant in such accommodation until 
the accommodation's compliance is achieved or alternative shelter 
arrangements are made. If certified, such participants shall continue to 
be eligible to receive all other WIC benefits, such as nutrition 
education and health care referral services.
    (5) The State agency shall continue to the end of their 
certification periods the participation of residents of a homeless 
facility or institution which ceases to comply with the conditions of 
paragraphs (n)(1)(i)(A)-(C) of this section.
    (6) As soon as the State or local agency determines that a homeless 
facility/institution does not meet the conditions of paragraphs 
(n)(1)(i) (A)-(C) of this section, it shall refer all participants using 
such accommodation to any other accommodations in the area which meet 
these conditions.
    (n) Drug and other harmful substance abuse screening. When a State 
agency determines that screening is necessary to fulfill the referral 
requirements in this part, the State agency must require screening for 
the use of drugs and other harmful substances. When such screening is 
required, it shall:
    (1) Be limited to the extent the State agency deems necessary to 
fulfill the referral requirement of Sec. 246.4(a)(8) of this part and 
the drug and other harmful substance abuse information requirement of 
Sec. 246.11(a)(3) of this part; and
    (2) Be integrated into certification process as part of the medical 
or nutritional assessment.
    (o) Are applicants required to be physically present at 
certification?--(1) In general. The State or local agency must require 
all applicants to be physically present at each WIC certification.
    (2) Exceptions.--(i) Disabilities. The State or local agency must 
grant an exception to applicants who are qualified individuals with 
disabilities and are unable to be physically present at the WIC clinic 
because of their disabilities or applicants whose parents or caretakers 
are individuals with disabilities that meet this standard. Examples of 
such situations include:
    (A) A medical condition that necessitates the use of medical 
equipment that is not easily transportable;
    (B) A medical condition that requires confinement to bed rest; and
    (C) A serious illness that may be exacerbated by coming in to the 
WIC clinic.

[[Page 367]]

    (ii) Receiving ongoing health care. The State agency may exempt from 
the physical presence requirement, if being physically present would 
pose an unreasonable barrier, an infant or child who was present at his/
her initial WIC certification and has documented ongoing health care 
from a health care provider other than the WIC local agency.
    (iii) Working parents or caretakers. The State agency may exempt 
from the physical presence requirement an infant or child who was 
present at his/her initial WIC certification and was present at a WIC 
certification or recertification determination within the 1-year period 
ending on the date of the most recent certification or recertification 
determination and is under the care of one or more working parents or 
one or more primary working caretakers whose working status presents a 
barrier to bringing the infant or child in to the WIC clinic.
    (p) Certification of qualified aliens. In those cases where a person 
sponsors a qualified alien, (as the term is defined in the Immigration 
and Nationality Laws (8 U.S.C.1101 et seq.)), i.e., signs an affidavit 
of support, the sponsor's income, including the income of the sponsor's 
spouse, shall not be counted in determining the income eligibility of 
the qualified alien except when the alien is a member of the sponsor's 
family or economic unit. Sponsors of qualified aliens are not required 
to reimburse the State or local agency or the Federal government for WIC 
Program benefits provided to sponsored aliens. Further, qualified aliens 
are eligible for the WIC Program without regard to the length of time in 
the qualifying status.

[50 FR 6121, Feb. 13, 1985, as amended at 52 FR 21236, June 4, 1987; 53 
FR 35301, Sep. 13, 1988; 54 FR 51295, Dec. 14, 1989; 55 FR 3387, Feb. 1, 
1990; 57 FR 34506, Aug. 5, 1992; 58 FR 11506, Feb. 26, 1993; 59 FR 
11500, Mar. 11, 1994; 60 FR 19490, Apr. 19, 1995; 63 FR 63974, Nov. 18, 
1998; 64 FR 70177, Dec. 16, 1999; 65 FR 3378, Jan. 21, 2000; 65 FR 
53527, Sept. 5, 2000; 65 FR 77249, Dec. 11, 2000; 65 FR 83278, Dec. 29, 
2000; 67 FR 66304, Oct. 31, 2002; 71 FR 56728, Sept. 27, 2006]

    Effective Date Note: At 72 FR 68985, Dec. 6, 2007, in Sec. 246.7, 
paragraphs (c)(2)(i) and (f)(2)(i) were amended by removing the words 
``food or food instruments'' and adding in their place the words `` 
food, cash-value vouchers or food instruments''; and paragraphs 
(f)(2)(iv), (h)(3)(i), (j)(3) and (j)(6) were revised, effective 
February 4, 2008. For the convenience of the user, the revised text is 
set forth as follows:

Sec. 246.7  Certification of participants.

                                * * * * *

    (f) * * *
    (2) * * *
    (iv) Each local agency using a retail purchase system shall issue a 
food instrument(s) and if applicable cash-value voucher(s) to the 
participant at the same time as notification of certification. Such food 
instrument(s) and cash-value vouchers shall provide benefits for the 
current month or the remaining portion thereof and shall be redeemable 
immediately upon receipt by the participant. Local agencies may mail the 
initial food instrument(s) and if applicable cash-value vouchers with 
the notification of certification to those participants who meet the 
criteria for the receipt of food instruments through the mail, as 
provided in Sec. 246.12(r)(4).

                                * * * * *

    (h) * * *
    (3) * * *
    (i) A State agency may allow local agencies to disqualify a 
participant for failure to obtain food instruments, cash-value vouchers 
or supplemental foods for several consecutive months. As specified by 
the State agency, proof of such failure includes failure to pick up 
supplemental foods, cash-value vouchers or food instruments, nonreceipt 
of food instruments or cash-value vouchers (when mailed instruments or 
vouchers are returned), or failure to have an electronic benefit 
transfer card revalidated for purchase of supplemental foods; or

                                * * * * *

    (j) * * *
    (3) If the State agency implements the policy of disqualifying a 
participant for not picking up supplemental foods, cash-value vouchers 
or food instruments in accordance with paragraph (h)(3)(i) of this 
section, it shall provide notice of this policy and of the importance of 
regularly picking up cash-value vouchers, food instruments or 
supplemental foods to each participant, parent or caretaker at the time 
of each certification.

                                * * * * *

    (6) A person who is about to be suspended or disqualified from 
program participation at any time during the certification period shall 
be advised in writing not less than 15

[[Page 368]]

days before the suspension or disqualification. Such notification shall 
include the reasons for this action, and the participant's right to a 
fair hearing. Further, such notification need not be provided to persons 
who will be disqualified for not picking up cash-value vouchers, 
supplemental foods or food instruments in accordance with paragraph 
(h)(3)(i) of this section.

                                * * * * *

Sec. 246.8  Nondiscrimination.

    (a) Civil rights requirements. The State agency shall comply with 
the requirements of title VI of the Civil Rights Act of 1964, title IX 
of the Education Amendments of 1972, section 504 of the Rehabilitation 
Act of 1973, the Age Discrimination Act of 1975, Department of 
Agriculture regulations on nondiscrimination (7 CFR parts 15, 15a and 
15b), and FNS instructions to ensure that no person shall, on the 
grounds of race, color, national origin, age, sex or handicap, be 
excluded from participation in, be denied benefits of, or be otherwise 
subjected to discrimination under the Program. Compliance with title VI 
of the Civil Rights Act of 1964, title IX of the Education Amendments of 
1972, Section 504 of the Rehabilitation Act of 1973, the Age 
Discrimination Act of 1975, and regulations and instructions issued 
thereunder shall include, but not be limited to:
    (1) Notification to the public of the nondiscrimination policy and 
complaint rights of participants and potentially eligible persons;
    (2) Review and monitoring activity to ensure Program compliance with 
the nondiscrimination laws and regulations;
    (3) Collection and reporting of racial and ethnic participation data 
as required by title VI of the Civil Rights Act of 1964, which prohibits 
discrimination in federally assisted programs on the basis of race, 
color, or national origin; and
    (4) Establishment of grievance procedures for handling complaints 
based on sex and handicap.
    (b) Complaints. Persons seeking to file discrimination complaints 
may file them either with the Secretary of Agriculture, or the Director, 
Office of Equal Opportunity, USDA, Washington, DC 20250 or with the 
Office established by the State agency to handle discrimination 
grievances or complaints. All complaints received by State or local 
agencies which allege discrimination based on race, color, national 
origin, or age shall be referred to the Secretary of Agriculture or 
Director, Office of Equal Opportunity. A State or local agency may 
process complaints which allege discrimination based on sex or handicap 
if grievance procedures are in place.
    (c) Non-English materials. Where a significant number or proportion 
of the population eligible to be served needs service or information in 
a language other than English in order effectively to be informed of or 
to participate in the Program, the State agency shall take reasonable 
steps considering the size and concentration of such population, to 
provide information in appropriate languages to such persons. This 
requirement applies with regard to required Program information except 
certification forms which are used only by local agency staff. The State 
agency shall also ensure that all rights and responsibilities listed on 
the certification form are read to these applicants in the appropriate 
language.

Sec. 246.9  Fair hearing procedures for participants.

    (a) Availability of hearings. The State agency shall provide a 
hearing procedure through which any individual may appeal a State or 
local agency action which results in a claim against the individual for 
repayment of the cash value of improperly issued benefits or results in 
the individual's denial of participation or disqualification from the 
Program.
    (b) Hearing system. The State agency shall provide for either a 
hearing at the State level or a hearing at the local level which permits 
the individual to appeal a local agency decision to the State agency. 
The State agency may adopt local level hearings in some areas, such as 
those with large caseloads, and maintain only State level hearings in 
other areas.
    (c) Notification of appeal rights. At the time of a claim against an 
individual for improperly issued benefits or at the time of 
participation denial or of disqualification from the Program, the

[[Page 369]]

State or local agency shall inform each individual in writing of the 
right to a fair hearing, of the method by which a hearing may be 
requested, and that any positions or arguments on behalf of the 
individual may be presented personally or by a representative such as a 
relative, friend, legal counsel or other spokesperson. Such notification 
is not required at the expiration of a certification period.
    (d) Request for hearing. A request for a hearing is defined as any 
clear expression by the individual, the individual's parent, caretaker, 
or other representative, that he or she desires an opportunity to 
present his or her case to a higher authority. The State or local agency 
shall not limit or interfere with the individual's freedom to request a 
hearing.
    (e) Time limit for request. The State or local agency shall provide 
individuals a reasonable period of time to request fair hearings; 
provided that, such time limit is not less than 60 days from the date 
the agency mails or gives the applicant or participant the notice of 
adverse action.
    (f) Denial or dismissal of request. The State and local agencies 
shall not deny or dismiss a request for a hearing unless--
    (1) The request is not received within the time limit set by the 
State agency in accordance with paragraph (e) of this section;
    (2) The request is withdrawn in writing by the appellant or a 
representative of the appellant;
    (3) The appellant or representative fails, without good cause, to 
appear at the scheduled hearing; or
    (4) The appellant has been denied participation by a previous 
hearing and cannot provide evidence that circumstances relevant to 
Program eligibility have changed in such a way as to justify a hearing.
    (g) Continuation of benefits. Participants who appeal the 
termination of benefits within the period of time provided under 
paragraph (e) of this section must continue to receive Program benefits 
until the hearing official reaches a decision or the certification 
period expires, whichever occurs first. This does not apply to 
applicants denied benefits at initial certification, participants whose 
certification period has expired or participants who become 
categorically ineligible for benefits. Applicants who are denied 
benefits at initial certification, or participants who become 
categorically ineligible during a certification period (or whose 
certification period expires), may appeal the denial or termination, but 
must not receive benefits while awaiting the hearing.
    (h) Rules of procedure. State and local agencies shall process each 
request for a hearing under uniform rules of procedure and shall makes 
these rules of procedure available for public inspection and copying. At 
a minimum, such rules shall include: The time limits for requesting and 
conducting a hearing; all advance notice requirements; the rules of 
conduct at the hearing; and the rights and responsibilities of the 
appellant. The procedures shall not be unduly complex or legalistic.
    (i) Hearing official. Hearings shall be conducted by an impartial 
official who does not have any personal stake or involvement in the 
decision and who was not directly involved in the initial determination 
of the action being contested. The hearing official shall--
    (1) Administer oaths or affirmations if required by the State;
    (2) Ensure that all relevant issues are considered;
    (3) Request, receive and make part of the hearing record all 
evidence determined necessary to decide the issues being raised;
    (4) Regulate the conduct and course of the hearing consistent with 
due process to ensure an orderly hearing;
    (5) Order, where relevant and necessary, an independent medical 
assessment or professional evaluation from a source mutually 
satisfactory to the appellant and the State agency; and
    (6) Render a hearing decision which will resolve the dispute.
    (j) Conduct of the hearing. The State or lcoal agency shall ensure 
that the hearing is accessible to the appellant and is held within three 
weeks from the date the State or local agency received the request for a 
hearing. The State or local agency shall provide the appellant with a 
minimum of 10 days advance written notice of the time and place of the 
hearing and shall enclose

[[Page 370]]

an explanation of the hearing procedure with the notice. The State or 
local agency shall also provide the appellant or representative an 
opportunity to--
    (1) Examine, prior to and during the hearing, the documents and 
records presented to support the decision under appeal;
    (2) Be assisted or represented by an attorney or other persons;
    (3) Bring witnesses;
    (4) Advance arguments without undue interference;
    (5) Question or refute any testimony or evidence, including an 
opportunity to confront and cross-examine adverse witnesses; and
    (6) Submit evidence to establish all pertinent facts and 
circumstances in the case.
    (k) Fair hearing decisions. (1) Decisions of the hearing official 
shall be based upon the application of appropriate Federal law, 
regulations and policy as related to the facts of the case as 
established in the hearing record. The verbatim transcript or recording 
of testimony and exhibits, or an official report containing the 
substance of what transpired at the hearing, together with all papers 
and requests filed in the proceeding, constitute the exclusive record 
for a final decision by hearing official. The State or local agency 
shall retain the hearing record in accordance with Sec. 246.25 and make 
these records available, for copying and inspection, to the appellant or 
representative at any reasonable time.
    (2) The decision by the hearing official shall summarize the facts 
of the case, specify the reasons for the decision, and identify the 
supporting evidence and the pertinent regulations or policy. The 
decision shall become a part of the record.
    (3) Within 45 days of the receipt of the request for the hearing, 
the State or local agency shall notify the appellant or representative 
in writing of the decision and the reasons for the decision in 
accordance with paragraph (k)(2) of this section. If the decision is in 
favor of the appellant and benefits were denied or discontinued, 
benefits shall begin immediately. If the decision concerns 
disqualification and is in favor of the agency, as soon as 
administratively feasible, the local agency shall terminate any 
continued benefits, as decided by the hearing official. If the decision 
regarding repayment of benefits by the appellant is in favor of the 
agency, the State or local agency shall resume its efforts to collect 
the claim, even during pendency of an appeal of a local-level fair 
hearing decision to the State agency. The appellant may appeal a local 
hearing decision to the State agency, provided that the request for 
appeal is made within 15 days of the mailing date of the hearing 
decision notice. If the decision being appealed concerns 
disqualification from the Program, the appellant shall not continue to 
receive benefits while an appeal to the State agency of a decision 
rendered on appeal at the local level is pending. The decision of a 
hearing official at the local level is binding on the local agency and 
the State agency unless it is appealed to the State level and overturned 
by the State hearing official.
    (4) The State and local agency shall make all hearing records and 
decisions available for public inspection and copying; however, the 
names and addresses of participants and other members of the public 
shall be kept confidential.
    (l) Judicial review. If a State level decision upholds the agency 
action and the appellant expresses an interest in pursuing a higher 
review of the decision, the State agency shall explain any further State 
level review of the decision and any State level rehearing process. If 
these are either unavailable or have been exhausted, the State agency 
shall explain the right to pursue judicial review of the decision.

[50 FR 6121, Feb. 13, 1985, as amended at 52 FR 21236, June 4, 1987; 59 
FR 11503, Mar. 11, 1994; 71 FR 56730, Sept. 27, 2006]

                     Subpart D_Participant Benefits

Sec. 246.10  Supplemental foods.

    (a) General. This section prescribes the requirements for providing 
supplemental foods to participants.
    (b) State agency responsibilities. State agencies shall--
    (1) Identify foods which are acceptable for use under the Program in 
accordance with the requirements of this

[[Page 371]]

section and provide to local agencies a list of acceptable foods and 
their maximum monthly quantities as specified in paragraph (c) of this 
section; and
    (2) Ensure that local agencies--
    (i) Make available at least one food from each group in each food 
package listed in paragraph (c) of this section. However, this does not 
mean that the local agency must provide each participant with a food 
from each food group;
    (ii) Make available to participants the supplemental foods, as 
authorized in paragraph (c) of this section; and
    (iii) Designate a competent professional authority to prescribe 
types of supplemental foods in quantities appropriate for each 
participant, taking into consideration the participant's age and dietary 
needs. The amounts of supplemental foods shall not exceed the maximum 
quantities specified in this section.
    (c) Food packages. There are seven food packages available under the 
Program which may be provided to participants. The authorized 
supplemental foods shall be prescribed from food packages according to 
the category and nutritional need of the participant. The food packages 
are as follows:
    Note: The metric units given are mathematical conversions. If 
packaging practices change, the authorized food quantities will be 
revised accordingly.
    (1) Food Package I--Infants 0 Through 3 Months. (i) Iron-fortified 
infant formula--requirements and routine issuance. Except as specified 
in paragraphs (c)(1)(iii) through (c)(1)(v) of this section, local 
agencies must issue a contract brand infant formula that meets the 
requirements of paragraph (c)(1)(i) of this section. The supplemental 
food for this food package is an iron-fortified infant formula that is 
not an exempt infant formula. The iron-fortified infant formula must be 
nutritionally complete, not requiring the addition of any ingredients 
other than water prior to being served in a liquid state. It also must 
contain at least 10 milligrams of iron per liter at standard dilution 
and supply 67 kilocalories per 100 milliliters (i.e., approximately 20 
kilocalories per fluid ounce of infant formula) at standard dilution. 
Medical documentation is not required for any contract brand infant 
formula authorized for issuance by the State agency, including the soy-
based contract brand of infant formula. However, the State agency may 
require medical documentation for any contract brand infant formula even 
though it meets these requirements and may decide that some contract 
brand infant formulas may not be issued under any circumstances.
    (ii) Physical forms. Local agencies must issue all WIC formulas (WIC 
formula means all infant formulas, including exempt infant formulas, and 
WIC-eligible medical foods) in concentrated liquid or powdered physical 
forms. Ready-to-feed WIC formulas may be authorized when the competent 
professional authority determines and documents that the participant's 
household has an unsanitary or restricted water supply or poor 
refrigeration, the participant or person caring for the participant may 
have difficulty in correctly diluting concentrated forms or 
reconstituting powdered forms, or the WIC formula is only available in 
ready-to-feed form.
    (iii) WIC formulas requiring medical documentation. Local agencies 
may issue the following WIC formulas, but only with medical 
documentation:
    (A) Any contract brand infant formula that does not meet the 
requirements of paragraph (c)(1)(i) of this section (e.g., low-iron, 
low-calorie, or high-calorie infant formulas);
    (B) Any non-contract brand infant formula (even if it meets the 
requirements for an iron-fortified infant formula in paragraph (c)(1)(i) 
of this section);
    (C) Any exempt infant formula; and
    (D) Any WIC-eligible medical food.
    (iv) Religious eating patterns exception. Local agencies may issue a 
non-contract brand infant formula that meets the requirements of 
paragraph (c)(1)(i) of this section without medical documentation in 
order to meet religious eating patterns. However, if the non-contract 
brand infant formula does not meet the requirements of paragraph 
(c)(1)(i) of this section, medical documentation must be provided. 
Documentation of the basis of the substitution must be kept on file at 
the local clinic.
    (v) Medical documentation. (A) Determination. For purposes of this 
food

[[Page 372]]

package, medical documentation means a determination by a licensed 
health care professional authorized to write medical prescriptions under 
State law. A licensed health care professional must make a medical 
determination that an infant has a medical condition that dictates the 
use of the following: a contract brand infant formula that does not meet 
the requirements of paragraph (c)(1)(i) of this section; a non-contract 
brand infant formula; an exempt infant formula; or a WIC-eligible 
medical food. These conditions include, but are not limited to: those 
that contraindicate the use of iron-fortified infant formula, metabolic 
disorders, inborn errors of amino acid metabolism, gastrointestinal 
disorders, malabsorption syndromes, and food allergies. Low-calorie WIC 
formulas may not be issued solely for the purpose of managing body 
weight.
    (B) Technical requirements. Medical documentation must include the 
brand name of the WIC formula prescribed; medical diagnosis warranting 
the issuance of WIC formula; length of time the prescribed WIC formula 
is medically required by the participant; and signature or name (if the 
initial medical documentation was received by telephone) of the 
requesting health care professional. Medical documentation may be 
provided as an original written document, electronically, or by 
facsimile. Medical documentation also may be provided by telephone to a 
competent professional authority who must promptly document the 
information which must be kept on file at the local clinic. However, 
this method may only be used until written confirmation is received and 
only when absolutely necessary on an individual participant basis to 
prevent undue hardship to a participant or to prevent a delay in the 
provision of infant formula that would place the participant at 
increased nutritional risk. The local clinic must obtain written 
confirmation of the medical documentation within a reasonable amount of 
time (i.e., one or two weeks' time) after accepting the initial medical 
documentation by telephone. The written documentation must be kept on 
file with the initial telephone documentation.
    (vi) Quantities and types of supplemental foods. The quantities and 
types of supplemental foods prescribed shall be appropriate for the 
participant taking into consideration the participant's age and dietary 
needs. The maximum quantity of supplemental foods authorized per month 
is as follows:

------------------------------------------------------------------------
                 Food                               Quantity
------------------------------------------------------------------------
Formula:
  Concentrated liquid formula.........  403 fluid oz. (11.9 L).
        or
  Powdered formula....................  May be substituted at the rate
                                         of 8 lbs. (3.6 kg) per 403
                                         fluid oz. (11.9 L) of
                                         concentrated liquid formula.
        or
  Ready-to-feed formula...............  May be substituted at the rate
                                         of 26 fluid oz. (.8 L) per 13
                                         fluid oz. (.4 L) of
                                         concentrated liquid formula.
------------------------------------------------------------------------

    (2) Food Package II--Infants 4 through 12 Months. (i) Infant formula 
as specified in paragraphs (c)(1)(i) through (c)(1)(v) of this section.
    (ii) Infant cereal which contains a minimum of 45 milligrams of iron 
per 100 grams of dry cereal.
    (iii) Single strength fruit juice which contains a minimum of 30 
milligrams of vitamin C per 100 milliliters; or frozen concentrated 
fruit juice which contains a minimum of 30 milligrams of vitamin C per 
100 milliliters of reconstituted juice; or infant juice which contains a 
minimum of 30 milligrams of vitamin C per 100 milliliters. Issuance 
prior to the time when the infant can drink from a cup is discouraged. 
The competent professional authority shall instruct the participant's 
parent or guardian to feed the juice to the participant from a cup to 
prevent ``bottle caries.''
    (iv) The quantities and types of supplemental foods prescribed shall 
be appropriate for the participant taking into consideration the 
participant's age and dietary needs. The maximum quantity of 
supplemental foods authorized per month is as follows:

------------------------------------------------------------------------
                 Food                               Quantity
------------------------------------------------------------------------
Formula:
  Concentrated liquid formula.........  403 fluid oz. (11.9 L).
        or
  Powdered formula....................  May be substituted at the rate
                                         of 8 lb. (3.6 kg) per 403 fluid
                                         oz. (11.9 L) of concentrated
                                         liquid formula.

[[Page 373]]

        or
  Ready-to-feed formula...............  May be substituted at the rate
                                         of 26 fluid oz. (.8 L) per 13
                                         fluid oz. (.4 L) of
                                         concentrated liquid formula.
Infant cereal.........................  24 oz. dry (.7 kg).
Juice: \1\
  Single strength adult juice.........  92 fluid oz. (2.7 L).
        or
  Frozen concentrated juice...........  96 fluid oz. reconstituted (2.8
                                         L).
        or
  Infant juice........................  May be substituted at the rate
                                         of 63 fluid oz. (1.9 L) of
                                         infant juice per 92 fluid oz.
                                         (2.7 L) of single strength
                                         adult juice.
------------------------------------------------------------------------
\1\ Combinations of single strength or frozen concentrated juice may be
  issued as long as the total volume of juice does not exceed the amount
  specified for single strength juice.

    (3) Food Package III--Children/Women with Special Dietary Needs. 
Local agencies may issue this food package to women and children only 
with medical documentation. The supplemental foods in Food Package III 
are set forth in paragraphs (c)(3)(i) through (c)(3)(iv) of this 
section. For purposes of this food package, medical documentation means 
a determination by a licensed health care professional authorized to 
write medical prescriptions under State law that the child or woman has 
a medical condition that dictates the use of a WIC formula (WIC formula 
means all infant formulas, including exempt infant formulas, and WIC-
eligible medical foods) because the use of conventional foods is 
precluded or restricted. These medical conditions include, but are not 
limited to, metabolic disorders, inborn errors of amino acid metabolism, 
gastrointestinal disorders, malabsorption syndromes and food allergies. 
This food package may not be issued solely for the purpose of enhancing 
nutrient intake or managing body weight. Medical documentation for WIC 
formulas must meet the technical requirements described in paragraph 
(c)(1)(v)(B) of this section.
    (i) WIC formulas (i.e., an infant formula, exempt infant formula, or 
WIC-eligible medical food).
    (ii) Cereal (hot or cold) which contains a minimum of 28 milligrams 
of iron per 100 grams of dry cereal and not more than 21.2 grams of 
sucrose and other sugars per 100 grams of dry cereal (6 grams per 
ounce).
    (iii) Single strength fruit juice or vegetable juice, or both, which 
contains a minimum of 30 milligrams of vitamin C per 100 milliliters; or 
frozen concentrated fruit or vegetable juice, or both, which contains a 
minimum of 30 milligrams of vitiamin C per 100 milliliters of 
reconstituted juice.
    (iv) The quantities and types of supplemental foods prescribed shall 
be appropriate for the participant taking into consideration the 
participant's age and special dietary needs. The maximum quantity of 
supplemental foods authorized per month is as follows:

------------------------------------------------------------------------
                 Food                               Quantity
------------------------------------------------------------------------
Formula:
  Concentrated liquid formula.........  403 fluid oz. (11.9 L).
  Addition \1\........................  52 fluid oz. (1.5 L).
        or
  Powdered formula....................  May be substituted at a rate of
                                         8 lb. (3.6 kg) per 403 fluid
                                         oz. (11.9 L) of concentrated
                                         liquid formula.
  Addition \1\........................  1 lb. (.4 kg).
        or
  Ready-to-feed formula...............  May be substituted at the rate
                                         of 26 fluid oz. (.8 L) per 13
                                         fluid oz. (.4 L) of
                                         concentrated liquid formula.
  Addition \1\........................  104 fluid oz. (3.1 L).
Cereal (hot or cold)..................  36 oz. dry (1 kg).
Juice: \2\
  Single strength juice...............  138 fluid oz. (4.1 L).
        or
  Frozen concentrated juice...........  144 fluid oz. reconstituted (4.3
                                         L).
------------------------------------------------------------------------
\1\ Additional formula may be issued on an individual basis provided the
  need is demonstrated and documented in the individual's certification
  file by the competent professional authority.
\2\ Combinations of single strength and frozen concentrated juice may be
  issued as long as the total volume does not exceed the amount
  specified for single strength juice.

    (4) Food Package IV--Children 1 to 5 Years. (i) Pasteurized fluid 
whole milk which is flavored or unflavored and which contains 400 
International Units of vitamin D per quart (.9 liter); or pasteurized 
fluid skim or lowfat milk which is flavored or unflavored and which 
contains 400 International Units of vitamin D and 2000 International 
Units of vitamin A per fluid quart (.9 liter); or pasteurized cultured 
buttermilk which contains 400 International units of vitamin D and 2000 
International Units of vitamin A per fluid quart (.9 liter); or 
evaporated whole milk which contains 400 International Units of vitamin 
D per reconstituted quart (.9 liter); or evaporated skimmed milk which 
contains 400 International Units of vitamin D and 2000 International 
Units of vitamin A per reconstituted quart (.9 liter); or dry whole

[[Page 374]]

milk which contains 400 International Units of vitamin D per 
reconstituted quart (.9 liter); or nonfat or lowfat dry milk which 
contains 400 International Units of vitamin D and 2000 International 
Units of vitamin A per reconstituted quart (.9 liter); or domestic 
cheese (pasteurized process American, Monterey Jack, Colby, natural 
Cheddar, Swiss, Brick, Muenster, Provolone, Mozzarella Part-Skim or 
Whole).
    (ii) Adult cereal (hot or cold) which contains a minimum of 28 
milligrams of iron per 100 grams of dry cereal and not more than 21.2 
grams of sucrose and other sugars per 100 grams of dry cereal (6 grams 
per ounce).
    (iii) Single strength fruit juice or vegetable juice, or both, which 
contains a minimum of 30 milligrams of vitamin C per 100 milliliters; or 
frozen concentrated fruit or vegetable juice, or both, which contains a 
minimum of 30 milligrams of vitamin C per 100 milliliters of 
reconstituted juice.
    (iv) Eggs or dried egg mix.
    (v) Peanut butter or mature dry beans or peas, including but not 
limited to, lentils, black, navy, kidney, garbanzo, soy, pinto, and mung 
beans, crowder, cow, split and black-eyed peas.
    (vi) The quantities and types of supplemental foods prescribed shall 
be appropriate for the participant taking into consideration the 
participant's age and dietary needs. The maximum quantity of 
supplemental foods authorized per month is as follows:

------------------------------------------------------------------------
                 Food                               Quantity
------------------------------------------------------------------------
Milk:
  Fluid whole milk....................  24 qt. (22.7 L).
        or
  Fluid skim or low fat milk..........  May be substituted for fluid
                                         whole milk on a quart-for-quart
                                         (.9 L) basis.
        or
  Cultured buttermilk.................  May be substituted for fluid
                                         whole milk on a quart-for-quart
                                         (.9 L) basis.
        or
  Evaporated whole milk...............  May be substituted for fluid
                                         whole milk at the rate of 13
                                         fluid oz. (.4 L) per qt. (.9 L)
                                         of fluid whole milk.
        or
  Evaporated skimmed milk.............  May be substituted for fluid
                                         whole milk at the rate of 13
                                         fluid oz. (.4 L) per qt. (.9 L)
                                         of fluid whole milk.
        or
  Dry whole milk......................  May be substituted for fluid
                                         whole milk at the rate of 1 lb.
                                         (.4 kg) per 3 qt. (2.8 L) of
                                         fluid whole milk.
        or
  Nonfat or lowfat dry milk...........  May be substituted for fluid
                                         whole milk at the rate of 1 lb.
                                         (.4 kg) per 5 qt. (4.7 L) of
                                         fluid whole milk.
        or
  Cheese..............................  May be substituted for fluid
                                         whole milk at the rate of 1 lb.
                                         (.4 kg) per 3 qt. (2.8 L) of
                                         fluid whole milk. 4 lbs. (1.8
                                         kg) is the maximum amount which
                                         may be substituted. \1\
Eggs:
  Eggs................................  2 doz. or 2\1/2\ doz.
        or
  Dried egg mix.......................  May be substituted at the rate
                                         of 1.5 lb. (.7 kg) egg mix per
                                         2 doz. fresh eggs or 2 lb. (.9
                                         kg) egg mix per 2\1/2\ doz.
                                         fresh eggs.
Cereals (hot or cold).................  36 oz. dry (1 kg).
Juice:\2\
  Single strength juice...............  276 fluid oz. (8.2 L).
        or
  Frozen concentrated juice...........  288 fluid oz. reconstituted (8.5
                                         L).
Legumes:
  Dry beans or peas...................  1 lb. (.4 kg).
        or
  Peanut butter.......................  18 oz. (.5 kg).
------------------------------------------------------------------------
\1\ Additional cheese may be issued on an individual basis in cases of
  lactose intolerance, provided the need is documented in the
  participant's file by the competent professional authority.
\2\ Combinations of single strength and frozen concentrated juice may be
  issued as long as the total volume does not exceed the amount
  specified for single strength juice.

    (5) Food Package V--Pregnant and Breastfeeding Women (Basic). (i) 
Pasteurized fluid whole milk which is flavored or unflavored and which 
contains 400 International Units of Vitamin D per quart (.9 liter) or 
pasteurized fluid skim or lowfat milk which is flavored or unflavored 
and which contains 400 International Units of vitamin D and 2000 
International Units of vitamin A per fluid quart (.9 liter); or 
pasteurized cultured buttermilk which contains 400 International Units 
of vitamin D and 2000 International Units of vitamin A per fluid quart 
(.9 liter); or evaporated whole milk which contains 400 International 
Units of vitamin D per reconstituted quart (.9 liter); or evaporated 
skimmed milk which contains 400 International Units of vitamin D and 
2000 International Units of vitamin A per reconstituted quart (.9 
liter); or dry whole milk which contains 400 International Units of 
vitamin D per reconstituted quart (.9 liter); or nonfat or lowfat dry 
milk which contains 400 International Units of vitamin D and 2000 
International Units of vitamin A per reconstituted quart (.9 liter); or 
domestic cheese (pasteurized process

[[Page 375]]

American, Monterey Jack, Colby, natural Cheddar, Swiss, Brick, Muenster, 
Provolone, Mozzarella Part-Skim or Whole).
    (ii) Adult cereal (hot or cold) which contains a minimum of 28 
milligrams of iron per 100 grams of dry cereal and not more than 21.2 
grams of sucrose and other sugars per 100 grams of dry cereal (6 grams 
per ounce).
    (iii) Single strength fruit juice or vegetable juice, or both, which 
contains a minimum of 30 milligrams of vitamin C per 100 milliliters; or 
frozen concentrated fruit or vegetable juice, or both, which contains a 
minimum of 30 milligrams of vitamin C per 100 milliliters of 
reconstituted juice.
    (iv) Eggs or dried egg mix.
    (v) Peanut butter or mature dry beans or peas, including but not 
limited to lentils, black, navy, kidney, garbanzo, soy, pinto and mung 
beans, crowder, cow, split and black-eyed peas.
    (vi) The quantities and types of supplemental foods prescribed shall 
be appropriate for the participant taking into consideration the 
participant's age and dietary needs. The maximum quantity of 
supplemental foods authorized per month is as follows:

------------------------------------------------------------------------
                 Food                               Quantity
------------------------------------------------------------------------
Milk:
  Fluid whole milk....................  28 qt. (26.5 L).
        or
  Fluid skim or lowfat milk...........  May be substituted for fluid
                                         whole milk on a quart-for-quart
                                         (.9 L) basis.
        or
  Cultured buttermilk.................  May be substituted for fluid
                                         whole milk on a quart-for-quart
                                         (.9 L) basis.
        or
  Evaporated whole milk...............  May be substituted for fluid
                                         whole milk at the rate of 13
                                         fluid oz. (.4 L) per qt. (.9 L)
                                         of fluid whole milk.
        or
  Evaporated skimmed milk.............  May be substituted for fluid
                                         whole milk at the rate of 13
                                         fluid oz. (.4 L) per qt. (.9 L)
                                         of fluid whole milk.
        or
  Dry whole milk......................  May be substituted for fluid
                                         whole milk at the rate of 1 lb.
                                         (.4 kg) per 3 qt. (2.8 L) of
                                         fluid whole milk.
        or
  Nonfat or lowfat dry milk...........  May be substituted for fluid
                                         whole milk at the rate of 1 lb.
                                         (.4 kg) per 5 qt. (4.7 L) of
                                         fluid whole milk.
        or
  Cheese..............................  May be substituted for fluid
                                         whole milk at the rate of 1 lb.
                                         (.4 kg) per 3 qt. (2.8 L) of
                                         fluid whole milk. 4 lbs. (1.8
                                         kg) is the maximum amount which
                                         may be substituted.\1\
Eggs:
  Eggs................................  2 doz. or 2\1/2\ doz.
        or
  Dried egg mix.......................  May be substituted at the rate
                                         of 1.5 lb. (.7 kg) egg mix per
                                         2 doz. fresh eggs, or 2 lb. (.9
                                         kg) egg mix per 2\1/2\ doz.
                                         fresh eggs.
Cereals (hot or cold).................  36 oz. dry (1 kg).
Juice:\2\
  Single strength juice...............  276 fluid oz. (8.2 L).
        or
  Frozen, concentrated juice..........  288 fluid oz. reconstituted (8.5
                                         L).
Legumes:
  Dry beans or peas...................  1 lb. (.4 kg).
        or
  Peanut butter.......................  18 oz. (.5 kg).
------------------------------------------------------------------------
\1\ Additional cheese may be issued on an individual basis in cases of
  lactose intolerance, provided the need is documented in the
  participant's file by the competent professional authority.
\2\ Combinations of single strength or frozen concentrated juice may be
  issued as long as the total volume does not exceed the amount
  specified for single strength juice.

    (6) Food Package VI--Non-breastfeeding Postpartum Women. (i) 
Pasteurized fluid whole milk which is flavored or unflavored and which 
contains 400 International Units of vitamin D per quart (.9 liter); or 
pasteurized fluid skim or lowfat milk which is flavored or unflavored 
and which contains 400 International Units of vitamin D and 2000 
International Units of vitamin A per fluid quart (.9 liter); or 
pasteurized cultured buttermilk which contains 400 International Units 
of vitamin D and 2000 International Units of vitamin A per fluid quart 
(.9 liter); or evaporated whole milk which contains 400 International 
Units of vitamin D per reconstituted quart (.9 liter); or evaporated 
skimmed milk which contains 400 International Units of vitamin D and 
2000 International Units of vitamin A per reconstituted quart (.9 
liter); or dry whole milk which contains 400 International Units of 
vitamin D per reconstituted quart (.9 liter); or nonfat or lowfat dry 
milk which contains 400 International Units of Vitamin D and 2000 
International Units of vitamin A per reconstituted quart (.9 liter); or 
domestic cheese (pasteurized process American, Monterey Jack, Colby, 
natural Cheddar, Swiss, Brick, Muenster,

[[Page 376]]

Provolone, Mozzarella Part-Skim or Whole).
    (ii) Cereal (hot or cold) which contains a minimum of 28 milligrams 
of iron per 100 grams of dry cereal and not more than 21.1 grams of 
sucrose and other sugars per 100 grams of dry cereal (6 grams per 1 
ounce).
    (iii) Single strength fruit juice or vegetable juice, or both, which 
contains a minimum of 30 milligrams of vitamin C per 100 milliliters; or 
concentrated fruit or vegetable juice, or both, which contains a minimum 
of 30 milligrams of vitamin C per 100 milliliters of reconstituted 
juice.
    (iv) Eggs or dried egg mix.
    (v) The quantities and types of supplemental foods prescribed shall 
be appropriate for the participant taking into consideration the 
participant's age and dietary needs. The maximum quantity of 
supplemental foods authorized per month is as follows:

------------------------------------------------------------------------
                 Food                               Quantity
------------------------------------------------------------------------
Milk:
  Fluid whole milk....................  24 qt. (22.7 L).
        or
  Fluid skim or lowfat milk...........  May be substituted for fluid
                                         whole milk on a quart-for-quart
                                         (.9 L ) basis.
        or
  Cultured buttermilk.................  May be substituted for fluid
                                         whole milk on a quart-for-quart
                                         (.9 L) basis.
        or
  Evaporated whole milk...............  May be substituted for fluid
                                         whole milk at the rate of 13
                                         fluid oz. (.4 L) per qt. (.9 L)
                                         of fluid whole milk.
        or
  Evaporated skimmed milk.............  May be substituted for fluid
                                         whole milk at the rate of 13
                                         fluid oz. (.4 L) per qt. (.9 L)
                                         of fluid whole milk.
        or
  Dry whole milk......................  May be substituted for fluid
                                         whole milk at the rate of 1 lb.
                                         (.4 kg) per 3 qt. (2.8 L) of
                                         fluid whole milk.
        or
  Nonfat or lowfat dry milk...........  May be substituted for fluid
                                         whole milk at the rate of 1 lb.
                                         (.4 kg) per 5 qt. (4.7 L) of
                                         fluid whole milk.
        or
  Cheese..............................  May be substituted for fluid
                                         whole milk at the rate of 1 lb.
                                         (.4 kg) per 3 qt. (2.8 L) of
                                         fluid whole milk. 4 lbs. (1.8
                                         kg) is the maximum amount which
                                         may be substituted.\1\
Eggs:
  Eggs................................  2 doz. or 2\1/2\ doz.
        or
  Dried egg mix.......................  May be substituted at the rate
                                         of 1.5 lb. (.7 kg) egg mix per
                                         2 doz. fresh eggs of 2 lb. (.9
                                         kg) egg mix per 2\1/2\ doz.
                                         fresh eggs.
Cereal (hot or cold)..................  36 oz. dry (1 kg).
Juice\2\
  Single strength juice...............  184 fluid oz. (5.4 L).
        or
  Frozen concentrated juice...........  192 fluid oz. reconstituted (5.7
                                         L).
------------------------------------------------------------------------
\1\ Additional cheese may be issued on an individual basis in cases of
  lactose intolerance, provided the need is documented in the
  participant's file by the competent professional authority.
\2\ Combinations of single strength or frozen concentrated juice may be
  issued as long as the total volume does not exceed the amount
  specified for single strength juice.

    (7) Food Package VII--Breastfeeding Women (Enhanced). (i) 
Pasteurized fluid whole milk which is flavored or unflavored and which 
contains 400 International Units of Vitamin D per quart (.9 liter) or 
pasteurized fluid skim or lowfat milk which is flavored or unflavored 
and which contains 400 International Units of vitamin D and 2000 
International Units of vitamin A per fluid quart (.9 liter); or 
pasteurized cultured buttermilk which contains 400 International Units 
of vitamin D and 2000 International Units of vitamin A per fluid quart 
(.9 liter); or evaporated whole milk which contains 400 International 
Units of vitamin D per reconstituted quart (.9 liter); or evaporated 
skim milk which contains 400 International Units of vitamin D and 2000 
International Units of vitamin A per reconstituted quart (.9 liter); or 
dry whole milk which contains 400 International Units of vitamin D per 
reconstituted quart (.9 liter); or nonfat or lowfat dry milk which 
contains 400 International Units of vitamin D and 2000 International 
Units of vitamin A per reconstituted quart (.9 liter); or domestic 
cheese (pasteurized process American, Monterey Jack, Colby, natural 
Cheddar, Swiss, Brick, Muenster, Provolone, Mozzarella Part-Skim or 
Whole).
    (ii) Domestic cheese (pasteurized process American, Monterey Jack, 
Colby, natural Cheddar, Swiss, Brick, Muenster, Provolone, Mozzarella 
Part-Skim or Whole).
    (iii) Adult cereal (hot or cold) which contains a minimum of 28 
milligrams of iron per 100 grams of dry cereal and not more than 21.2 
grams of sucrose and other sugars per 100 grams of dry cereal (6 grams 
per ounce).
    (iv) Single strength fruit juice or vegetable juice, or both, which 
contains a minimum of 30 milligrams of vitamin C per 100 milliliters; or 
frozen

[[Page 377]]

concentrated fruit or vegetable juice, or both, which contains a minimum 
of 30 milligrams of vitamin C per 100 milliliters of reconstituted 
juice.
    (v) Eggs or dried egg mix.
    (vi) Peanut butter.
    (vii) Mature dry beans or peas, including but not limited to 
lentils, black, navy, kidney, garbanzo, soy, pinto and mung beans, 
crowder, cow, split and black-eyed peas.
    (viii) Tuna: Canned white, light, dark or blended tuna packed in 
water or oil, including solid and solid pack; chunk, chunks and chunk 
style; flake and flakes; and grated.
    (ix) Carrots: Raw, canned or frozen. Mature raw; canned and frozen 
carrots containing only the mature root of the carrot plant packed in 
water.
    (x) The quantities and types of supplemental foods prescribed shall 
be appropriate for the participant taking into consideration the 
participant's age and dietary needs. The maximum quantity of 
supplemental foods authorized per month is as follows:

------------------------------------------------------------------------
             Food                               Quantity
------------------------------------------------------------------------
Milk:
    Fluid whole milk or......  28 qt. (26.5 L).
    Cheese or................  May be substituted for fluid whole milk
                                at the rate of 1 lb. (.4 kg) per 3 qt.
                                (2.8 L) of fluid whole milk. 4 lbs. (1.8
                                kg) is the maximum amount which may be
                                substituted.
                               Additional cheese may be issued on an
                                individual basis in cases of lactose
                                intolerance, provided the need is
                                documented in the participant's file by
                                the competent professional authority.
    Fluid skim or lowfat milk  May be substituted for fluid whole milk
     or.                        on a quart-for-quart (.9 L) basis.
    Cultured buttermilk or...  May be substituted for fluid whole milk
                                on a quart-for-quart (.9 L) basis.
    Evaporated whole milk or.  May be substituted for fluid whole milk
                                at the rate of 13 fluid oz. (.4 L) per
                                qt. (.9 L) of fluid whole milk.
    Evaporated skimmed milk    May be substituted for fluid whole milk
     or.                        at the rate of 13 fluid oz. (.4 L) per
                                qt. (.9 L) of fluid whole milk.
    Dry whole milk or........  May be substituted for fluid whole milk
                                at the rate of 1 lb. (.4 kg) per 3 qt.
                                (2.8 L) of fluid whole milk.
    Nonfat or lowfat dry milk  May be substituted for fluid whole milk
                                at the rate of 1 lb. (.4 kg) per 5 qt.
                                (4.7 L) of fluid whole milk.
Cheese:
    Cheese...................  1 lb. (.4 kg).
Eggs:
    Eggs or..................  2 doz. or 2\1/2\ doz.
    Dried egg mix............  May be substituted at the rate of 1.5 lb.
                                (.7 kg) egg mix per 2 doz. fresh eggs,
                                or 2 lb. (.9 kg) egg mix per 2\1/2\ doz.
                                fresh eggs.
Cereals:
    Cereals (hot or cold)....  36 oz. dry (1 kg).
Juice:
    Single strength juice or.  322 fluid oz. (9.6 L).
    Frozen concentrated juice  336 fluid oz. reconstituted (10.0 L).
                               Combinations of single strength or frozen
                                concentrated juice may be issued as long
                                as the total volume does not exceed the
                                amount specified for single strength
                                juice.
Legumes:
    Dry beans or peas and....  1 lb. (.4 kg). May be substituted for
                                peanut butter at the rate of 1 lb. of
                                dry beans or peas per 18 oz. of peanut
                                butter.
    Peanut butter............  18 oz. (.5 kg). Peanut butter may not be
                                substituted for mature dry beans or peas
                                at any rate.
Fish:
    Tuna.....................  26 oz. (.8 kg).
Vegetable:
    Raw carrots or...........  2 lb. (.9 kg).
    Frozen carrots or........  May be substituted for fresh at the rate
                                of 1 lb. frozen per 1 lb. fresh.
    Canned carrots...........  May be substituted for fresh at the rate
                                of 1 16-20 ounce can of carrots per 1
                                lb. fresh.
------------------------------------------------------------------------

    (d) Use of commodity foods. (1) At the request of a State agency, 
the Department will purchase commodity foods for the State agency using 
funds allocated to the State agency. The commodity foods purchased and 
made available to the State agency shall be equivalent to the foods 
specified in paragraph (c) of this section.
    (2) The State agency shall--
    (i) Distribute the commodity foods to the local agency or 
participant;

[[Page 378]]

    (ii) Ensure satisfactory storage conditions for the commodity foods, 
including documentation of proper insurance; and
    (iii) Ensure that there are proper storage facilities for commodity 
foods.
    (e) Plans for substitutions or eliminations. (1) The State agency 
may submit to FNS a plan for substitution of food(s) acceptable for use 
in the Program to allow for different cultural eating patterns and 
substitution or elimination of a category of foods to accommodate the 
special needs of homeless persons, and/or residents of institutions if 
the State agency chooses to serve such persons under Sec. 246.7(m)(2) 
of this part. The plan shall provide the State agency's justification, 
including a specific explanation of the cultural eating pattern or the 
homeless situation which requires the proposed alteration and other 
information necessary for FNS to evaluate the plan as specified in 
paragraph (e)(2) of this section for cultural substitutions and in 
paragraph (e)(3) of this section for homeless substitutions or 
eliminations.
    (2) FNS will evaluate a State agency's plan for substitution of 
foods for different cultural eating patterns based on the following 
criteria:
    (i) Any proposed substitute food must be nutritionally equivalent or 
superior to the food it is intended to replace.
    (ii) The proposed substitute must be widely available to 
participants in the areas where the substitute is intended to be used.
    (iii) The cost of the substitute must be equivalent to or less than 
the cost of the food it is intended to replace.
    (3) FNS will evaluate a State agency's plan for substitution or 
elimination of a food category to accommodate the special needs of a 
specific group of homeless persons based on the justification presented 
by the State agency documenting the need. Documentation shall illustrate 
that all alternatives from within existing food packages have been 
explored and shall include a specific description of the circumstances 
of the homeless persons to be served that necessitate the proposed food 
package alteration.
    (4) FNS will make a determination on the proposed plan based on the 
evaluation criteria specified in paragraph (e)(2) or (e)(3) of this 
section, as appropriate. The State agency shall substitute or eliminate 
foods only after receiving the written approval of FNS.
    (f) Infant formula manufacturer registration. Infant formula 
manufacturers supplying formula to the WIC Program shall register with 
the Secretary of Health and Human Services under the Federal Food, Drug, 
and Cosmetic Act (21 U.S.C. 321 et seq.). Such manufacturers wishing to 
bid for a State contract to supply infant formula to the program shall 
first certify with the State health department that their formulas 
comply with the Federal Food, Drug, and Cosmetic Act and regulations 
issued pursuant to the Act.

[50 FR 6121, Feb. 13, 1985; 50 FR 8098, Feb. 28, 1985, as amended at 51 
FR 13208, Apr. 18, 1986; 51 FR 16155, May 1, 1986; 53 FR 25314, July 6, 
1988; 54 FR 51295, Dec. 14, 1989; 57 FR 34506, Aug. 5, 1992; 57 FR 
56240, Nov. 27, 1992; 65 FR 51223, Aug. 23, 2000]

    Effective Date Note: At 72 FR 68985, Dec. 6, 2007, Sec. 246.10 was 
revised, effective February 4, 2008. For the convenience of the user, 
the revised text is set forth as follows:

Sec. 246.10  Supplemental foods.

    (a) General. This section prescribes the requirements for providing 
supplemental foods to participants. The State agency must ensure that 
local agencies comply with this section.
    (b) State agency responsibilities. (1) State agencies may:
    (i) Establish criteria in addition to the minimum Federal 
requirements in Table 4 of paragraph (e)(12) of this section, except 
that the State agency may not establish further restrictions on the 
eligible fruits and vegetables, for the supplemental foods in their 
States. These State criteria could address, but not be limited to, other 
nutritional standards, competitive cost, State-wide availability, and 
participant appeal; and
    (ii) Make food package adjustments to better accommodate 
participants who are homeless. At the State agency's option, these 
adjustments would include, but not be limited to, issuing authorized 
supplemental foods in individual serving-size containers to accommodate 
lack of food storage or preparation facilities.
    (2) State agencies must:
    (i) Identify the brands of foods and package sizes that are 
acceptable for use in the Program in their States in accordance with the 
requirements of this section. State agencies must also provide to local 
agencies, and include in the State Plan, a list of acceptable

[[Page 379]]

foods and their maximum monthly allowances as specified in Tables 1 
through 4 of paragraphs (e)(9) through (e)(12) of this section; and
    (ii) Ensure that local agencies:
    (A) Make available to participants the maximum monthly allowances of 
authorized supplemental foods, except as noted in paragraph (c) of this 
section, and abide by the authorized substitution rates for WIC food 
substitutions as specified in Tables 1 through 3 of paragraphs (e)(9) 
through (e)(11) of this section;
    (B) Make available to participants more than one food from each WIC 
food category except for the categories of peanut butter and eggs, and 
any of the WIC-eligible fruits and vegetables (fresh or processed) in 
each authorized food package as listed in paragraph (e) of this section;
    (C) Authorize only a competent professional authority to prescribe 
the categories of authorized supplemental foods in quantities that do 
not exceed the regulatory maximum and are appropriate for the 
participant, taking into consideration the participant's age and 
nutritional needs; and
    (D) Advise participants or their caretaker, when appropriate, that 
the supplemental foods issued are only for their personal use. However, 
the supplemental foods are not authorized for participant use while 
hospitalized on an in-patient basis. In addition, consistent with Sec. 
246.7(m)(1)(i)(B), supplemental foods are not authorized for use in the 
preparation of meals served in a communal food service. This restriction 
does not preclude the provision or use of supplemental foods for 
individual participants in a nonresidential setting (e.g., child care 
facility, family day care home, school, or other educational program); a 
homeless facility that meets the requirements of Sec. 246.7(m)(1); or, 
at the State agency's discretion, a residential institution (e.g., home 
for pregnant teens, prison, or residential drug treatment center) that 
meets the requirements currently set forth in Sec. 246.7(m)(1) and 
(m)(2).
    (c) Nutrition tailoring. The full maximum monthly allowances of all 
supplemental foods in all food packages must be made available to 
participants if medically or nutritionally warranted. Reductions in 
these amounts cannot be made for cost-savings, administrative 
convenience, caseload management, or to control vendor abuse. Reductions 
in these amounts cannot be made for categories, groups or subgroups of 
WIC participants. The provision of less than the maximum monthly 
allowances of supplemental foods to an individual WIC participant in all 
food packages is appropriate only when:
    (1) Medically or nutritionally warranted (e.g., to eliminate a food 
due to a food allergy);
    (2) A participant refuses or cannot use the maximum monthly 
allowances; or
    (3) The quantities necessary to supplement another programs' 
contribution to fill a medical prescription would be less than the 
maximum monthly allowances.
    (d) Medical documentation--(1) Supplemental foods requiring medical 
documentation. Medical documentation is required for the issuance of the 
following supplemental foods:
    (i) Any non-contract brand infant formula;
    (ii) Any infant formula prescribed to a child or adult who receives 
Food Package III;
    (iii) Any exempt infant formula;
    (iv) Any WIC-eligible medical food;
    (v) Any authorized supplemental food issued to participants who 
receive Food Package III;
    (vi) Any authorized soy-based beverage or tofu issued to children 
who receive Food Package IV;
    (vii) Any additional authorized cheese issued to children who 
receive Food Package IV that exceeds the maximum substitution rate;
    (viii) Any additional authorized tofu and cheese issued to women who 
receive Food Packages V and VII that exceeds the maximum substitution 
rate; and
    (ix) Any contract brand infant formula that does not meet the 
requirements in Table 4 of paragraph (e)(12) of this section.
    (2) Supplemental foods not requiring medical documentation. (i) 
State agencies may authorize local agencies to issue a non-contract 
brand infant formula that meets the requirements in Table 4 of paragraph 
(e)(12) of this section without medical documentation in order to meet 
religious eating patterns; and
    (ii) The State agency has the discretion to require medical 
documentation for any contract brand infant formula and may decide that 
some contract brand infant formula may not be issued under any 
circumstances.
    (3) Medical Determination. For purposes of this program, medical 
documentation means that a health care professional licensed to write 
medical prescriptions under State law has:
    (i) Made a medical determination that the participant has a 
qualifying condition as described in paragraphs (e)(3) through (e)(7) of 
this section that dictates the use of the supplemental foods, as 
described in paragraph (d)(1) of this section; and
    (ii) Provided the written documentation that meets the technical 
requirements described in paragraphs (d)(4)(ii) and (d)(4)(iii) of this 
section.
    (4) Technical Requirements--(i) Location. All medical documentation 
must be kept on file (electronic or hard copy) at the local clinic. The 
medical documentation kept on file must include the initial telephone 
documentation, when received as described in paragraph (d)(4)(iii)(B) of 
this section.

[[Page 380]]

    (ii) Content. All medical documentation must include the following:
    (A) The name of the authorized WIC formula (infant formula, exempt 
infant formula, WIC-eligible medical food) prescribed, including amount 
needed per day;
    (B) The authorized supplemental food(s) appropriate for the 
qualifying condition(s) and their prescribed amounts;
    (C) Length of time the prescribed WIC formula and/or supplemental 
food is required by the participant;
    (D) The qualifying condition(s) for issuance of the authorized 
supplemental food(s) requiring medical documentation, as described in 
paragraphs (e)(3) through (e)(7) of this section; and
    (E) Signature, date and contact information (or name, date and 
contact information), if the initial medical documentation was received 
by telephone and the signed document is forthcoming, of the health care 
professional licensed by the State to write prescriptions in accordance 
with State laws.
    (iii) Written confirmation--(A) General. Medical documentation must 
be written and may be provided as an original written document, an 
electronic document, by facsimile or by telephone to a competent 
professional authority until written confirmation is received.
    (B) Medical documentation provided by telephone. Medical 
documentation may be provided by telephone to a competent professional 
authority who must promptly document the information. The collection of 
the required information by telephone for medical documentation purposes 
may only be used until written confirmation is received from a health 
care professional licensed to write medical prescriptions and used only 
when absolutely necessary on an individual participant basis. The local 
clinic must obtain written confirmation of the medical documentation 
within a reasonable amount of time (i.e., one or two week's time) after 
accepting the initial medical documentation by telephone.
    (5) Medical supervision requirements. Due to the nature of the 
health conditions of participants who are issued supplemental foods that 
require medical documentation, close medical supervision is essential 
for each participant's dietary management. The responsibility remains 
with the participant's health care provider for this medical oversight 
and instruction. This responsibility cannot be assumed by personnel at 
the WIC State or local agency. However, it would be the responsibility 
of the WIC competent professional authority to ensure that only the 
amounts of supplemental foods prescribed by the participant's health 
care provider are issued in the participant's food package.
    (e) Food packages. There are seven food packages available under the 
Program that may be provided to participants. The authorized 
supplemental foods must be prescribed from food packages according to 
the category and nutritional needs of the participant. The food packages 
are as follows:
    (1) Food Package I--Infants birth through 5 months--(i) Participant 
category served. This food package is designed for issuance to infant 
participants from birth through age 5 months who do not have a condition 
qualifying them to receive Food Package III.
    (ii) Infant feeding categories--(A) Birth to one month. Three infant 
feeding options are available during the first month after birth--fully 
breastfeeding, i.e., the infant receives no infant formula from the WIC 
Program; partially breastfeeding, i.e., the infant receives not more 
than 104 reconstituted fluid ounces of formula; or fully formula-
feeding. Infant formula is not provided during the first month after 
birth to fully breastfed infants to support the successful establishment 
of breastfeeding.
    (B) One through 5 months. Three infant feeding options are available 
from 1 months through 5 months--fully breastfeeding, fully formula-
feeding, or partially breastfeeding, i.e., the infant is breastfed but 
also receives infant formula from the WIC Program in an amount not to 
exceed approximately half the amount of infant formula allowed for a 
fully formula fed infant.
    (iii) Infant formula requirements. This food package provides iron-
fortified infant formula that is not an exempt infant formula. The 
issuance of any contract brand or noncontract brand infant formula that 
contains less than 10 milligrams of iron per liter at standard dilution 
(i.e., approximately 20 kilocalories per fluid ounce of prepared 
formula) is prohibited. Except as specified in paragraph (d) of this 
section, local agencies must issue a contract brand infant formula that 
meets the requirements in Table 4 of paragraph (e)(12) of this section.
    (iv) Physical forms. Local agencies must issue all WIC formulas (WIC 
formulas mean all infant formula, exempt infant formula and WIC-eligible 
medical foods) in concentrated liquid or powder physical forms. Ready-
to-feed WIC formulas may be authorized when the competent professional 
authority determines and documents that:
    (A) The participant's household has an unsanitary or restricted 
water supply or poor refrigeration;
    (B) The person caring for the participant may have difficulty in 
correctly diluting concentrated or powder forms; or
    (C) The WIC infant formula is only available in ready-to-feed.
    (v) Authorized category of supplemental foods. Infant formula is the 
only category of supplemental foods authorized in this food package. 
Exempt infant formulas and WIC-eligible medical foods are authorized 
only in Food Package III.

[[Page 381]]

    (2) Food Package II--Infants 6 through 11 months--(i) Participant 
category served. This food package is designed for issuance to infant 
participants from 6 through 11 months of age who do not have a condition 
qualifying them to receive Food Package III.
    (ii) Infant feeding options. Three infant feeding options are 
available--fully breastfeeding, fully formula-feeding, or partially 
breastfeeding.
    (iii) Infant formula requirements. The requirements for issuance of 
infant formula in Food Package I, specified in paragraphs (e)(1)(iii) 
and (e)(1)(iv) of this section, also apply to the issuance of infant 
formula in Food Package II.
    (iv) Authorized categories of supplemental foods. Infant formula, 
infant fruits and vegetables, infant meat, and infant cereal are the 
categories of supplemental foods authorized in this food package.
    (3) Food Package III--Participants with qualifying conditions--(i) 
Participant category served and qualifying conditions. This food package 
is reserved for issuance to women, infants and child participants who 
have a documented qualifying condition that requires the use of a WIC 
formula (infant formula, exempt infant formula or WIC-eligible medical 
food) because the use of conventional foods is precluded, restricted, or 
inadequate to address their special nutritional needs. Medical 
documentation must meet the requirements described in paragraph (d) of 
this section. Participants who are eligible to receive this food package 
must have one or more qualifying conditions, as determined by a health 
care professional licensed to write medical prescriptions under State 
law. The qualifying conditions include but are not limited to premature 
birth, low birth weight, failure to thrive, inborn errors of metabolism 
and metabolic disorders, gastrointestinal disorders, malabsorption 
syndromes, immune system disorders, severe food allergies that require 
an elemental formula, and life threatening disorders, diseases and 
medical conditions that impair ingestion, digestion, absorption or the 
utilization of nutrients that could adversely affect the participant's 
nutrition status. This food package may not be issued solely for the 
purpose of enhancing nutrient intake or managing body weight.
    (ii) Non-authorized issuance of Food Package III. This food package 
is not authorized for:
    (A) Infants whose only condition is:
    (1) A diagnosed formula intolerance or food allergy to lactose, 
sucrose, milk protein or soy protein that does not require the use of an 
exempt infant formula; or
    (2) A non-specific formula or food intolerance.
    (B) Women and children who have a food intolerance to lactose or 
milk protein that can be successfully managed with the use of one of the 
other WIC food packages (i.e., Food Packages IV-VII); or
    (C) Any participant solely for the purpose of enhancing nutrient 
intake or managing body weight without an underlying qualifying 
condition.
    (iii) Restrictions on the issuance of WIC formulas in ready-to-feed 
(RTF) forms. WIC State agencies must issue WIC formulas (infant formula, 
exempt infant formula and WIC-eligible medical foods) in concentrated 
liquid or powder physical forms unless the requirements for issuing RTF 
are met as described in paragraph (e)(1)(iv) of this section. In 
addition to those requirements, there are two additional conditions 
which may be used to issue RTF in Food Package III:
    (A) If a ready-to-feed form better accommodates the participant's 
condition; or
    (B) If it improves the participant's compliance in consuming the 
prescribed WIC formula.
    (iv) Unauthorized WIC costs. All apparatus or devices (e.g., enteral 
feeding tubes, bags and pumps) designed to administer WIC formulas are 
not allowable WIC costs.
    (v) Authorized categories of supplemental foods. The supplemental 
foods authorized in this food package require medical documentation for 
issuance and include infant formula (for children or women), exempt 
infant formula, WIC-eligible medical foods, infant cereal, infant food 
fruits and vegetables, milk and milk alternatives, cheese, eggs, canned 
fish, fruits and vegetables, breakfast cereal, whole wheat bread or 
other whole grains, juice, legumes and/or peanut butter.
    (vi) Coordination with medical payors and other programs that 
provide or reimburse for formulas. WIC State agencies must coordinate 
with other Federal, State or local government agencies or with private 
agencies that operate programs that also provide or could reimburse for 
exempt infant formulas and WIC-eligible medical foods benefits to mutual 
participants. At a minimum, a WIC State agency must coordinate with the 
State Medicaid Program for the provision of exempt infant formulas and 
WIC-eligible medical foods that are authorized or could be authorized 
under the State Medicaid Program for reimbursement and that are 
prescribed for WIC participants who are also Medicaid recipients. The 
WIC State agency is responsible for providing up to the maximum amount 
of exempt infant formulas and WIC-eligible medical foods under Food 
Package III in situations where reimbursement is not provided by another 
entity.
    (4) Food Package IV--Children 1 through 4 years--(i) Participant 
category served. This food package is designed for issuance to 
participants 1 through 4 years of age who do not have a condition 
qualifying them to receive Food Package III.
    (ii) Authorized categories of supplemental foods. Milk, breakfast 
cereal, juice, fruits

[[Page 382]]

and vegetables, whole wheat bread or other whole grains, eggs, and 
legumes or peanut butter are the categories of supplemental foods 
authorized in this food package. Cheese may be substituted for milk in 
amounts described in Table 2 of paragraph (e)(10) of this section. 
Substitutions exceeding the maximum substitution allowance of cheese, up 
to the maximum allowance for fluid milk, may be allowed with medical 
documentation of the qualifying condition. Soy-based beverage and tofu 
can be substituted for milk only with medical documentation in this food 
package, in amounts described in Table 2 of paragraph (e)(10) of this 
section. A health care professional licensed by the State to write 
prescriptions must make a medical determination and provide medical 
documentation that a child cannot drink milk and requires soy-based 
beverage, tofu, or additional cheese as a substitute for milk. Such 
determination can be made for situations that include, but are not 
limited to, milk allergy, severe lactose maldigestion, and vegan diets. 
Medical documentation must meet the requirements described in paragraph 
(d) of this section.
    (5) Food Package V--Pregnant and partially breastfeeding women--(i) 
Participant category served. This food package is designed for issuance 
to women participants with singleton pregnancies who do not have a 
condition qualifying them to receive Food Package III. This food package 
is also designed for issuance to breastfeeding women participants, up to 
1 year postpartum, who do not have a condition qualifying them to 
receive Food Package III and whose partially breastfed infants receive 
formula from the WIC program in amounts that do not exceed the maximum 
allowances described in Table 1 of paragraph (e)(9) of this section. 
Women participants breastfeeding more than one infant, and women 
participants pregnant with more than one fetus, are eligible to receive 
Food Package VII as described in paragraph (e)(7) of this section.
    (ii) Authorized categories of supplemental foods. Milk, breakfast 
cereal, juice, fruits and vegetables, whole wheat bread or other whole 
grains, eggs, legumes and peanut butter are the categories of 
supplemental foods authorized in this food package. Cheese or calcium-
set tofu may be substituted for milk in amounts described in Table 2 of 
paragraph (e)(10) of this section. Amounts of cheese or calcium-set tofu 
exceeding the maximum substitution allowances may be allowed with 
medical documentation of the qualifying condition, up to the maximum 
allowance for fluid milk. A health care professional licensed by the 
State to write prescriptions must make a medical determination and 
provide medical documentation that a woman cannot drink milk and 
requires additional cheese or calcium-set tofu. Such determination can 
be made for situations that include, but are not limited to, milk 
allergy or severe lactose maldigestion. Medical documentation must meet 
the requirements described in paragraph (d) of this section.
    (6) Food Package VI--Postpartum women--(i) Participant category 
served. This food package is designed for issuance to women up to 6 
months postpartum who are not breastfeeding their infants, and to 
breastfeeding women up to 6 months postpartum whose participating infant 
receives more than the maximum amount of formula allowed for partially 
breastfed infants as described in Table 1 of paragraph (e)(9) of this 
section.
    (ii) Authorized categories of supplemental foods. Milk, breakfast 
cereal, juice, fruits and vegetables, eggs, and legumes or peanut butter 
are the categories of supplemental foods authorized in this food 
package. Cheese or calcium-set tofu may be substituted for milk in 
amounts described in Table 2 of paragraph (e)(10) of this section. 
Amounts of cheese or calcium-set tofu exceeding the maximum substitution 
allowances may be allowed with medical documentation of the qualifying 
condition, up to the maximum allowance for fluid milk. A health care 
professional licensed by the State to write prescriptions must make a 
medical determination and provide medical documentation that a woman 
cannot drink milk and requires additional cheese or calcium-set tofu. 
Such determination can be made for situations that include, but are not 
limited to, milk allergy or severe lactose maldigestion. Medical 
documentation must meet the requirements described in paragraph (d) of 
this section.
    (7) Food Package VII--Fully breastfeeding--(i) Participant category 
served. This food package is designed for issuance to breastfeeding 
women up to 1 year postpartum whose infants do not receive infant 
formula from WIC (these breastfeeding women are assumed to be fully 
breastfeeding their infants). This food package is also designed for 
issuance to women participants pregnant with two or more fetuses, and 
women participants partially breastfeeding multiple infants. Women 
participants fully breastfeeding multiple infants receive 1.5 times the 
supplemental foods provided in Food Package VII.
    (ii) Authorized categories of supplemental foods. Milk, cheese, 
breakfast cereal, juice, fruits and vegetables, whole wheat bread or 
other whole grains, eggs, legumes, peanut butter, and canned fish are 
the categories of supplemental foods authorized in this food package. 
Cheese or calcium-set tofu may be substituted for milk in amounts 
described in Table 2 of paragraph (e)(10) of this section. Amounts of 
cheese or calcium-set tofu exceeding the maximum substitution allowances 
may be allowed with medical documentation of the qualifying condition, 
up to the maximum allowance for fluid milk. A

[[Page 383]]

health care professional licensed by the State to write prescriptions 
must make a medical determination and provide medical documentation that 
a woman cannot drink milk and requires additional cheese or calcium-set 
tofu. Such determination can be made for situations that include, but 
are not limited to, milk allergy or severe lactose maldigestion. Medical 
documentation must meet the requirements described in paragraph (d) of 
this section.
    (8) Supplemental Foods--Maximum monthly allowances, options and 
substitution rates, and minimum requirements. Tables 1 through 3 of 
paragraphs (e)(9) through (e)(11) of this section specify the maximum 
monthly allowances of foods in WIC food packages and identify WIC food 
options and substitution rates. Table 4 of paragraph (e)(12) of this 
section describes the minimum requirements and specifications of 
supplemental foods in the WIC food packages.
    (9) Maximum monthly allowances of supplemental foods for infants. 
The maximum monthly allowances, options and substitution rates of 
supplemental foods for infants in Food Packages I, II and III are stated 
in Table 1 as follows:

[[Page 384]]

                          Table 1.--Maximum Monthly Allowances of Supplemental Foods for Infants in Food Packages I, II and III
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                       Fully formula fed (FF)              Partially breastfed (BF/FF)                  Fully breastfed (BF)
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                       Food packages I-
                                Food packages  I-                     BF/FF & III BF/FF
                                FF & III-FF  A: 0  Food packages  II-   A: 0 to 1 month  Food packages  II-
           Foods \1\             through 3 months    FF & III-FF  6   \2\  B: 1 through   BF/FF &  III BF/  Food package  I-BF  0  Food package II-BF  6
                                  B: 4 through 5   through 11 months   3 months \2\  C:  FF   6 through 11     through 5 months      through 11 months
                                      months                             4 through 5           months
                                                                            months
--------------------------------------------------------------------------------------------------------------------------------------------------------
WIC Formula 4 5 6 7...........  A: 806 fl oz       624 fl oz          A: 104 fl oz       312 fl oz
                                 reconstituted      reconstituted      reconstituted      reconstituted
                                 liquid             liquid             powder \3\         liquid
                                 concentrate or     concentrate or    B: 364 fl oz        concentrate or
                                 832 fl oz RTF or   640 fl oz RTF or   reconstituted      320 fl oz RTF or
                                 870 fl oz         696 fl oz           liquid            384 fl oz
                                 reconstituted      reconstituted      concentrate or     reconstituted
                                 powder.            powder.            384 fl oz RTF or   powder.
                                B: 884 fl oz                           435 fl oz
                                 reconstituted                         reconstituted
                                 liquid                                powder.
                                 concentrate or                       C: 442 fl oz
                                 896 fl oz RTF or                      reconstituted
                                 960 fl oz                             liquid
                                 reconstituted                         concentrate or
                                 powder.                               448 fl oz RTF or
                                                                       522 fl oz
                                                                       reconstituted
                                                                       powder.
Infant cereal \8\.............  .................  24 oz............  .................  24 oz............  .....................  24 oz.
Infant food fruits and          128 oz...........  128 oz...........  256 oz...........
 vegetables 8 9 10.
Infant food--meat 8 10........  .................  .................  .................  .................  .....................  77.5 oz.
--------------------------------------------------------------------------------------------------------------------------------------------------------
Table 1 Footnotes: (abbreviations in order of appearance in table): FF = fully formula fed; BF/FF = partially breastfed (i.e., the infant is breastfed
  but also receives formula from the WIC Program); BF = fully breastfed (i.e., the infant receives no formula through the WIC program).
\1\ Table 4 of paragraph (e)(12) of this section describes the minimum requirements and specifications for the supplemental foods.
\2\ The powder form is the form recommended for partially breastfed infants ages 0 through 3 months in Food Package I.
\3\ Liquid concentrate and ready-to-feed (RTF) may be substituted at rates that provide comparable nutritive value.
\4\ WIC formula means infant formula, exempt infant formula, or WIC-eligible medical food. Only infant formula may be issued for infants in Food
  Packages I and II. Exempt infant formula may only be issued for infants in Food Package III.
\5\ The maximum monthly allowance is specified in reconstituted fluid ounces for liquid concentrate, RTF liquid, and powder forms of infant formula and
  exempt infant formula. Reconstituted fluid ounce is the form prepared for consumption as directed on the container.
\6\ If powder infant formula is provided, State agencies must provide at least the number of reconstituted fluid ounces as the maximum allowance for the
  liquid concentrate form of the same product in the same Food Package up to the maximum monthly allowance for powder. State agencies must issue whole
  containers that are all the same size.
\7\ State agencies may round up and disperse whole containers of infant formula over the food package timeframe to allow participants to receive the
  full authorized nutritional benefit (FNB). State agencies must use the methodology described in accordance with paragraph (h)(1) of this section.
\8\ State agencies may round up and disperse whole containers of infant foods (infant cereal, fruits and vegetables, and meat) over the Food Package
  timeframe. State agencies must use the methodology described in accordance with paragraph (h)(2) of this section.
\9\ Fresh banana may replace up to 16 ounces of infant food fruit at a rate of 1 pound of bananas per 8 ounces of infant food fruit.
\10\ In lieu of infant foods (cereal, fruit and vegetables, and meat), infants greater than 6 months of age in Food Package III may receive exempt
  infant formula or WIC-eligible medical foods at the same maximum monthly allowance as infants ages 4 through 5 months of age of the same feeding
  option.

[[Page 385]]

    (10) Maximum monthly allowances of supplemental foods in Food 
Packages IV through VII. The maximum monthly allowances, options and 
substitution rates of supplemental foods for children and women in Food 
Package IV through VII are stated in Table 2 as follows:

Table 2.--Maximum Monthly Allowances of Supplemental Foods for Children and Women in Food Packages IV, V, VI and
                                                       VII
----------------------------------------------------------------------------------------------------------------
                                       Children                                  Women
                                 -------------------------------------------------------------------------------
                                                        Food package V:
                                                         Pregnant and      Food package VI:    Food package VII:
            Foods \1\             Food package IV  1       partially       Postpartum (up to         Fully
                                    through 4 years    breastfeeding (up       6 months        breastfeeding (up
                                                           to 1 year        postpartum) \3\     to 1 year post-
                                                        postpartum) \2\                         partum) \4\ \5\
----------------------------------------------------------------------------------------------------------------
Juice, single strength \6\......  128 fl oz.........  144 fl oz.........  96 fl oz..........  144 fl oz.
Milk, fluid.....................  16 qt 7 8 9 10....  22 qt. 7 8 11 12..  16 qt. 7 8 11 12..  24 qt. 7 8 11 12
Breakfast cereal \13\...........  36 oz.............  36 oz.............  36 oz.............  36 oz.
Cheese..........................  N/A...............  N/A...............  N/A...............  1 lb.
Eggs............................  1 dozen...........  1 dozen...........  1 dozen...........  2 dozen.
Fruits and vegetables 14 15.....  $6.00 in cash       $8.00 in cash-      $8.00 in cash-      $10.00 in cash-
                                   value vouchers.     value vouchers.     value vouchers.     value vouchers.
Whole wheat bread or other whole  2 lb..............  1 lb..............  N/A...............  1 lb.
 grains \16\.
Fish (canned)...................  N/A...............  N/A...............  N/A...............  30 oz.
Legumes, dry \17\...............  1 lb..............  1 lb..............  1 lb..............  1 lb.
And/or peanut butter............  Or 18 oz..........  And 18 oz.........  Or 18 oz..........  And 18 oz.
----------------------------------------------------------------------------------------------------------------
Table 2 Footnotes: N/A = the supplemental food is not authorized in the corresponding food package.
\1\ Table 4 of paragraph (e)(12) of this section describes the minimum requirements and specifications for the
  supplemental foods.
\2\ Food Package V is issued to two categories of WIC participants: Women participants with singleton
  pregnancies and breastfeeding women whose partially breastfed infants receive formula from the WIC Program in
  amounts that do not exceed the maximum formula allowances for Food Packages I-BF/FF-A, I-BF/FF-B, I-BF/FF-C,
  or II-BF/FF, as appropriate for the age of the infant as described in Table 1 of paragraph (e)(9) of this
  section.
\3\ Food Package VI is issued to two categories of WIC participants: Non-breastfeeding postpartum women and
  breastfeeding postpartum women whose partially breastfed infants receive more than the maximum infant formula
  allowances for Food Packages I-BF/FF-A, I-BF/FF-B, I-BF/FF-C or II-BF/FF, as appropriate for the age of the
  infant as described in Table 1 of paragraph (e)(9) of this section.
\4\ Food Package VII is issued to three categories of WIC participants: Fully breastfeeding women whose infants
  do not receive formula from the WIC Program; women pregnant with two or more fetuses; and women fully or
  partially breastfeeding multiple infants.
\5\ Women fully breastfeeding multiple infants are prescribed 1.5 times the maximum allowances.
\6\ Combinations of single-strength and concentrated juices may be issued provided that the total volume does
  not exceed the maximum monthly allowance for single-strength juice.
\7\ Whole milk, as specified in FDA standards, is the only type of milk allowed for 1-year-old children (12
  through 23 months). Reduced fat milks, as specified in FDA standards, i.e., 2% milk fat, are the only types of
  milk allowed for children <ls-thn-eq>= 24 months of age and women.
\8\ Evaporated milk may be substituted at the rate of 16 fluid ounces of evaporated milk per 32 fluid ounces of
  fluid milk or a 1:2 fluid ounce substitution ratio. Dry milk may be substituted at an equal reconstituted rate
  to fluid milk. When a combination of different milk forms is provided, the full maximum monthly fluid milk
  allowance must be provided.
\9\ For children, cheese may be substituted for milk at the rate of 1 pound of cheese per 3 quarts of milk. No
  more than 1 lb. of cheese may be substituted for milk. With medical documentation, additional amounts of
  cheese may be substituted in cases of lactose intolerance or other qualifying conditions, up to the maximum
  allowance for fluid milk.
\10\ For children, soy-based beverage and calcium-set tofu may be substituted for milk only with medical
  documentation for qualifying conditions. Soy-based beverage may be substituted for milk, with medical
  documentation, for children in Food Package IV on a quart for quart basis up to the total maximum allowance of
  milk. Tofu may be substituted for milk, with medical documentation, for children in Food Package IV at the
  rate of 1 pound of tofu per 1 quart of milk up to the total maximum allowance of milk.
\11\ For women, cheese or calcium-set tofu may be substituted for milk at the rate of 1 pound of cheese per 3
  quarts of milk or 1 pound of tofu per 1 quart of milk. A maximum of 4 quarts of milk can be substituted in
  this manner in Food Packages V and VI; however, no more than 1 pound of cheese may be substituted for milk. A
  maximum of 6 quarts of milk can be substituted in this manner in Food Package VII; therefore, no more than 2
  lbs. of cheese may be substituted for milk. With medical documentation, additional amounts of cheese or tofu
  may be substituted, up to the maximum allowances for fluid milk, in cases of lactose intolerance or other
  qualifying conditions.
\12\ For women, soy-based beverage may be substituted for milk at the rate of 1 quart of soy-based beverage for
  1 quart of milk up to the total maximum monthly allowance of milk.
\13\ At least one-half of the total number of breakfast cereals on the State agency's authorized food list must
  have whole grain as the primary ingredient and meet labeling requirements for making a health claim as a
  ``whole grain food with moderate fat content'' as defined in Table 4 of paragraph (e)(12) of this section.
\14\ Processed (canned, frozen, dried) fruits and vegetables may be substituted for fresh fruits and vegetables.
  Dried fruit and dried vegetables are not authorized for children in Food Package IV.
\15\ The monthly value of the fruit/vegetable cash-value vouchers will be adjusted annually for inflation as
  described in Sec.  246.16(j).
\16\ Brown rice, bulgur (cracked wheat), oatmeal, whole-grain barley, soft corn or whole wheat tortillas may be
  substituted for whole wheat bread on an equal weight basis.
\17\ Canned legumes may be substituted for dried legumes at the rate of 64 oz. of canned beans for 1 lb. dried
  beans. Under Food Packages V and VII, two additional combinations of dry or canned beans/peas are authorized:
  1 lb. Dry and 64 oz. Canned beans/peas (and no peanut butter); or 2 lb. Dry or 128 oz. Canned beans/peas (and
  no peanut butter) or 36 oz. peanut butter (and no beans).

[[Page 386]]

    (11) Maximum monthly allowances of supplemental foods for children 
and women with qualifying conditions in Food Package III. The maximum 
monthly allowances, options and substitution rates of supplemental foods 
for participants with qualifying conditions in Food Package III are 
stated in Table 3 as follows:

[[Page 387]]

      Table 3.--Maximum Monthly Allowances of Supplemental Foods for Children and Women in Food Package III
----------------------------------------------------------------------------------------------------------------
                                       Children                                  Women
                                 -------------------------------------------------------------------------------
                                                         Pregnant and
            Foods\1\                                       partially       Postpartum (up to         Fully
                                   1 through 4 years   breastfeeding (up       6 months       breastfeeding, (up
                                                           to 1 year        postpartum) \3\     to 1 year post-
                                                        postpartum) \2\                         partum) \4\ \5\
----------------------------------------------------------------------------------------------------------------
Juice, single strength \6\......  128 fl oz.........  144 fl oz.........  96 fl oz..........  144 fl oz.
WIC Formula \7\ \8\.............  455 fl oz liquid    455 fl oz liquid    455 fl oz liquid    455 fl oz. liquid
                                   concentrate.        concentrate.        concentrate.        concentrate.
Milk............................  16 qt \9\ \10\      22 qt \9\ \10\      16 qt \9\ \10\      24 qt. \9\ \10\
                                   \11\ \12\.          \13\ \14\.          \13\ \14\.          \13\ \14\
Breakfast cereal \15\ \16\......  36 oz.............  36 oz.............  36 oz.............  36 oz.
Cheese..........................  N/A...............  N/A...............  N/A...............  1 lb.
Eggs............................  1 dozen...........  1 dozen...........  1 dozen...........  2 dozen.
Fruits and vegetables \17 18\...  $6.00 in cash       $8.00 in cash       $8.00 in cash       $10.00 in cash
                                   value vouchers.     value vouchers.     value vouchers.     value vouchers.
Whole wheat bread \19\..........  2 lb..............  1 lb..............  N/A...............  1 lb.
Fish (canned)...................  N/A...............  N/A...............  N/A...............  30 oz.
Legumes, dry \20\...............  1 lb..............  1 lb..............  1 lb..............  1 lb.
and/or Peanut butter............  Or 18 oz..........  And 18 oz.........  Or 18 oz..........  And 18 oz.
----------------------------------------------------------------------------------------------------------------
Table 3 Footnotes: N/A=the supplemental food is not authorized in the corresponding food package.
\1\ Table 4 of paragraph (e)(12) of this section describes the minimum requirements and specifications for the
  supplemental foods.
\2\ Food Package V is issued to two categories of WIC participants--women participants with singleton
  pregnancies and breastfeeding women whose partially breastfed infants receive formula from the WIC Program in
  amounts that do not exceed the maximum formula allowances for Food Packages I-BF/FF-A, I-BF/FF-B, I-BF/FF-C,
  or II-BF/FF, as appropriate for the age of the infant as described in Table 1 of paragraph (e)(9) of this
  section.
\3\ Food Package VI is issued to two categories of WIC participants--non-breastfeeding postpartum women and
  breastfeeding postpartum women whose partially breastfed infants receive more than the maximum formula
  allowances for Food Packages I-BF/FF-A, I-BF/FF-B, I-BF/FF-C or II-BF/FF, as appropriate for the age of the
  infant as described in Table 1 of paragraph (e)(9) of this section.
\4\ Food Package VII is issued to three categories of WIC participants--fully breastfeeding women whose infants
  do not receive formula from the WIC Program; women pregnant with two or more fetuses; and women fully or
  partially breastfeeding multiple infants.
\5\ Women fully breastfeeding multiple infants are prescribed 1.5 times the maximum allowances.
\6\ Combinations of single-strength and concentrated juices may be issued provided that the total volume does
  not exceed the maximum monthly allowance for single-strength juice.
\7\ WIC formula means infant formula, exempt infant formula, or WIC-eligible medical food.
\8\ Powder and Ready-to-Feed may be substituted at rates that provide comparable nutritive value.
\9\ Whole milk, as specified in FDA standards, is the only type of milk allowed for 1-year-old children (12
  through 23 months). Reduced fat milks, as specified in FDA standards, i.e., 2% milk fat, are the only types of
  milk allowed for children <ls-thn-eq> 24 months of age and women. With medical documentation, whole milk may
  be substituted for reduced fat milk for children <ls-thn-eq> 24 months of age and women.
\10\ Evaporated milk may be substituted at the rate of 16 fluid ounces of evaporated milk per 32 fluid ounces of
  fluid milk or a 1:2 fluid ounce substitution ratio. Dry milk may be substituted at an equal reconstituted rate
  to fluid milk. When a combination of different milk forms is provided, the full maximum monthly fluid milk
  allowance must be provided.
\11\ For children, cheese may be substituted for milk at the rate of 1 pound of cheese per 3 quarts of milk. No
  more than 1 lb. of cheese may be substituted for milk. With medical documentation, additional amounts of
  cheese may be substituted in cases of lactose intolerance or other qualifying conditions, up to the maximum
  allowance for fluid milk.
\12\ For children, soy-based beverage and tofu may be substituted for milk only with medical documentation for
  qualifying conditions. Soy-based beverage may be substituted for milk, with medical documentation, for
  children in Food Package IV on a quart for quart basis up to the total maximum allowance of milk. Tofu may be
  substituted for milk, with medical documentation, for children in Food Package IV at the rate of 1 pound of
  tofu per 1 quart of milk up to the total maximum allowance of milk.
\13\ For women, cheese or calcium-set tofu may be substituted for milk at the rate of l pound of cheese per 3
  quarts of milk or 1 pound of tofu per 1 quart of milk. A maximum of 4 quarts of milk can be substituted in
  this manner in Food Packages V and VI; however, no more than 1 pound of cheese may be substituted for milk. A
  maximum of 6 quarts of milk can be substituted in this manner in Food Package VII; therefore, no more than 2
  lbs. of cheese may be substituted for milk. With medical documentation, additional amounts of cheese or tofu
  may be substituted, up to the maximum allowances for fluid milk, in cases of lactose intolerance or other
  qualifying conditions.
\14\ For women, soy-based beverage may be substituted for milk at the rate of 1 quart of soy-based beverage for
  1 quart of milk up to the total maximum monthly allowance of milk.
\15\ 32 dry ounces of infant cereal may be substituted for 36 ounces of breakfast cereal.
\16\ At least one half of the total number of breakfast cereals on the State agency's authorized food list must
  have whole grain as the primary ingredient and meet labeling requirements for making a health claim as a
  ``whole grain food with moderate fat content'' as defined in Table 4 of paragraph (e)(12) of this section.
\17\ Processed (canned, frozen, dried) fruits and vegetables may be substituted for fresh fruits and vegetables.
  Dried fruit and dried vegetables are not authorized for children.
\18\ The monthly value of the fruit/vegetable cash-value vouchers will be adjusted annually for inflation as
  described in Sec.  246.16(j).
\19\ Brown rice, bulgur (cracked wheat), oatmeal, whole-grain barley, soft corn or whole wheat tortillas may be
  substituted for whole wheat bread on an equal weight basis.

[[Page 388]]

\20\ Canned legumes may be substituted for dried legumes at the rate of 64 oz of canned beans for 1 lb dried
  beans. Issuance of two additional combinations of dry or canned beans/peas is authorized for the Pregnant and
  Partially Breastfeeding (up to 1 year postpartum) category and Fully Breastfeeding (Enhanced) (up to 1 year
  postpartum) category: 1 lb. Dry and 64 oz. Canned beans/peas (and no peanut butter); or 2 lb. Dry or 128 oz.
  Canned beans/peas (and no peanut butter) or 36 oz. Peanut butter (and no beans).

[[Page 389]]

    (12) Minimum requirements and specifications for supplemental foods. 
Table 4 describes the minimum requirements and specifications for 
supplemental foods in all food packages:

Table 4.--Minimum Requirements and Specifications for Supplemental Foods
------------------------------------------------------------------------
       Categories/foods         Minimum requirements and specifications
------------------------------------------------------------------------
WIC formula:
    Infant formula...........  All authorized infant formulas must (1)
                                meet the definition for an infant
                                formula in section 201(z) of the Federal
                                Food, Drug, and Cosmetic Act (21 U.S.C.
                                321(z)) and meet the requirements for an
                                infant formula under section 412 of the
                                Federal Food, Drug and Cosmetic Act, as
                                amended (21 U.S.C. 350a) and the
                                regulations at 21 CFR parts 106 and 107;
                               (2) Be designed for enteral digestion via
                                an oral or tube feeding;
                               (3) Provide at least 10 mg iron per liter
                                (at least 1.8 mg iron/100 kilocalories)
                                at standard dilution;
                               (4) Provide at least 67 kilocalories per
                                100 milliliters (approximately 20
                                kilocalories per fluid ounce) at
                                standard dilution.
                               (5) Not require the addition of any
                                ingredients other than water prior to
                                being served in a liquid state.
    Exempt infant formula....  All authorized exempt infant formula must
                                (1) meet the definition and requirements
                                for an exempt infant formula under
                                section 412(h) of the Federal Food,
                                Drug, and Cosmetic Act as amended (21
                                U.S.C. 350a(h)) and the regulations at
                                21 CFR Parts 106 and 107; and
                               2) Be designed for enteral digestion via
                                an oral or tube feeding.
    WIC-eligible medical       Certain enteral products that are
     foods.\1\                  specifically formulated to provide
                                nutritional support for individuals with
                                a qualifying condition, when the use of
                                conventional foods is precluded,
                                restricted, or inadequate. Such WIC-
                                eligible medical foods must serve the
                                purpose of a food, meal or diet (may be
                                nutritionally complete or incomplete)
                                and provide a source of calories and one
                                or more nutrients; be designed for
                                enteral digestion via an oral or tube
                                feeding; and may not be a conventional
                                food, drug, flavoring, or enzyme.
                               WIC-eligible medical foods include many,
                                but not all, products that meet the
                                definition of medical food in Section
                                5(b)(3) of the Orphan Drug Act (21
                                U.S.C. 360ee(b)(3)).
Milk and milk alternatives:
    Cow's milk...............  Must conform to FDA standard of identity
                                for whole, reduced fat, low-fat, or non-
                                fat milks (21 CFR 131.110). Must be
                                pasteurized and contain at least 400 IU
                                of vitamin D per quart (100 IU per cup)
                                and 2000 IU of vitamin A per quart (500
                                IU per cup).
                               May be flavored or unflavored. May be
                                fluid, shelf-stable, evaporated (21 CFR
                                131.130), or dried (i.e., powder) (21
                                CFR 131.147).\2\
                               Cultured Milks. Must conform to FDA
                                standard of identity for cultured milk
                                (21 CFR 131.112--cultured buttermilk,
                                kefir cultured milk, acidophilus
                                cultured milk).
    Goat milk................  Must conform to FDA standard of identity
                                for whole, reduced fat, low-fat, or non-
                                fat milks (21 CFR part 131). Must be
                                pasteurized and contain at least 400 IU
                                of vitamin D per quart (100 IU per cup)
                                and 2000 IU of vitamin A per quart (500
                                IU per cup) following FDA fortification
                                standards (21 CFR part 131). May be
                                flavored or unflavored. May be fluid,
                                shelf-stable, evaporated (21 CFR
                                131.130), or dried (i.e., powdered) (21
                                CFR 131.147).\2\
    Cheese...................  Domestic cheese made from 100 percent
                                pasteurized milk. Must conform to FDA
                                standard of identity (21 CFR Part 133);
                                Monterey Jack, Colby, natural Cheddar,
                                Swiss, Brick, Muenster, Provolone, part-
                                skim or whole Mozzarella, pasteurized
                                processed American, or blends of any of
                                these cheeses are authorized.
                               Cheeses that are labeled low, free,
                                reduced, less or light in the nutrients
                                of sodium, fat or cholesterol are WIC-
                                eligible.\3\
    Tofu.....................  Calcium-set tofu prepared with only
                                calcium salts (e.g., calcium sulfate).
                                May not contain added fats, sugars,
                                oils, or sodium.
    Soy-based beverage.......  Must be fortified to meet the following
                                nutrient levels: 276 mg calcium per cup,
                                8 g protein per cup, 500 IU vitamin A
                                per cup, 100 IU vitamin D per cup, 24 mg
                                magnesium per cup, 222 mg phosphorus per
                                cup, 349 mg potassium per cup, 0.44 mg
                                riboflavin per cup, and 1.1 mcg vitamin
                                B12 per cup, in accordance with
                                fortification guidelines issued by FDA.
Juice........................  Must be pasteurized 100% unsweetened
                                fruit juice. Must conform to FDA
                                standard of identity (21 CFR part 146)
                                or vegetable juice must conform to FDA
                                standard of identity (21 CFR part 156)
                                and contain at least 30 mg of vitamin C
                                per 100 mL of juice. With the exception
                                of 100 percent citrus juices, State
                                agencies must verify the vitamin C
                                content of all State-approved juices.
                                Juices that are fortified with other
                                nutrients may be allowed at the State
                                agency's option. Juice may be fresh,
                                from concentrate, frozen, canned, or
                                shelf-stable.
                               Vegetable juice may be regular or lower
                                in sodium.\3\
Eggs.........................  Fresh shell domestic hens' eggs or dried
                                eggs mix (must conform to FDA standard
                                of identity in 21 CFR 160.105) or
                                pasteurized liquid whole eggs (must
                                conform to FDA standard of identity in
                                21 CFR 160.115).
                               Hard boiled eggs, where readily available
                                for purchase in small quantities, may be
                                provided for homeless participants.

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Breakfast cereal.............  Breakfast cereals as defined by FDA in 21
                                CFR 170.3(n)(4) for ready-to-eat and
                                instant and regular hot cereals.
                               Must contain a minimum of 28 mg iron per
                                100 g dry cereal.
                               Must contain <= 21.2 g sucrose and other
                                sugars per 100 g dry cereal (<= 6 g per
                                dry oz).
                               At least half of the cereals authorized
                                on a State agency's food list must have
                                whole grain as the primary ingredient by
                                weight AND meet labeling requirements
                                for making a health claim as a ``whole
                                grain food with moderate fat content'':
                                \4\
                               (1) Contain a minimum of 51% whole grains
                                (using dietary fiber as the indicator);
                               (2) Meet the regulatory definitions for
                                ``low saturated fat'' at 21 CFR 101.62
                                (<= 1 g saturated fat per RACC) and
                                ``low cholesterol'' (<= 20 mg
                                cholesterol per RACC);
                               (3) Bear quantitative trans fat labeling;
                                and
                               (4) Contain <= 6.5 g total fat per RACC
                                and <= 0.5 g trans fat per RACC.
Fruits and Vegetables (fresh   Any variety of fresh whole or cut fruit
 and processed).                without added sugars.\5\
                               Any variety of fresh whole or cut
                                vegetable, except white potatoes,
                                without added sugars, fats, or oils
                                (orange yams and sweet potatoes are
                                allowed).\5\
                               Any variety of canned \6\ fruits (must
                                conform to FDA standard of identity (21
                                CFR part 145); including applesauce,
                                juice pack or water pack without added
                                sugars, fats, oils, or salt (i.e.
                                sodium). Any variety of frozen fruits
                                without added sugars.\7\
                               Any variety of canned \6\ or frozen
                                vegetables (must conform to FDA standard
                                of identity (21 CFR part 155)) except
                                white potatoes (orange yams and sweet
                                potatoes are allowed); without added
                                sugars, fats, or oils. May be regular or
                                lower in sodium.\3 7\
                               Any type of dried fruits or dried
                                vegetable without added sugars, fats,
                                oils, or salt (i.e., sodium).\5\
Whole wheat bread/Whole grain                    Bread
 bread/Other whole             Whole wheat bread must conform to FDA
 unprocessed grains.            standard of identity (21 CFR 136.180).
                                (Includes whole wheat buns and rolls.)
                               AND
                               Whole wheat must be the primary
                                ingredient by weight in all whole wheat
                                bread products.
                               Whole grain bread must meet labeling
                                requirements for making a health claim
                                as a ``whole grain food with moderate
                                fat content'':\4\
                               (1) Contain a minimum of 51% whole grains
                                (using dietary fiber as the indicator);
                               (2) Meet the regulatory definitions for
                                ``low saturated fat'' at 21 CFR 101.62
                                (<= 1 g saturated fat per RACC) and
                                ``low cholesterol'' (<= 20 mg
                                cholesterol per RACC);
                               (3) Bear quantitative trans fat labeling;
                                and
                               (4) Contain <= 6.5 g total fat per RACC
                                and <= 0.5 g trans fat per RACC.
                               AND
                               Whole grain must be the primary
                                ingredient by weight in all whole grain
                                bread products.
                                     Other Whole Unprocessed Grains
                               Brown rice, bulgur (cracked wheat),
                                oatmeal, and whole-grain barley without
                                added sugars, fats, oils, or salt (i.e.,
                                sodium). May be instant-, quick-, or
                                regular-cooking.
                               Soft corn or whole wheat tortillas may be
                                allowed at the State agency's option.
                                Whole grain must be the primary
                                ingredient by weight.
Canned fish \6\..............  Canned only:
                               Light tuna (must conform to FDA standard
                                of identity (21 CFR 161.190));
                               Salmon (must conform to FDA standard of
                                identity (21 CFR 161.170));
                               Sardines;
                               Mackerel (N. Atlantic Scomber scombrus,
                                or Chub Pacific Scomber japonicus);
                               May be packed in water or oil. Pack may
                                include bones or skin. May be regular or
                                lower in sodium content.\3\
Mature legumes (dry beans and  Any type of mature dry beans, peas, or
 peas).                         lentils in dry-packaged or canned \6\
                                forms. Examples include but are not
                                limited to black beans (``turtle
                                beans''), blackeye peas (cowpeas of the
                                blackeye variety, ``cow beans''),
                                garbanzo beans (chickpeas), great
                                northern beans, kidney beans, lima beans
                                (``butter beans''), navy beans, pinto
                                beans, soybeans, split peas, and
                                lentils. All categories exclude soups.
                                May not contain added sugars, fats, oils
                                or meat as purchased. Canned legumes may
                                be regular or lower in sodium content.\3
                                8\
                               Baked beans may be provided for
                                participants with limited cooking
                                facilities.\8\
Peanut butter................  Peanut butter and reduced fat peanut
                                butter (must conform to FDA Standard of
                                Identity (21 CFR 164.150)); creamy or
                                chunky, regular or reduced fat, salted
                                or unsalted \3\ forms are allowed.
Infant Foods:
    Infant cereal............  Infant cereal must contain a minimum of
                                45 mg of iron per 100 g of dry
                                cereal.\9\
    Infant fruits............  Any variety of single ingredient
                                commercial infant food fruit without
                                added sugars, starches, or salt (i.e.,
                                sodium). Texture may range from strained
                                through diced.\10\
    Infant vegetables........  Any variety of single ingredient
                                commercial infant food vegetables
                                without added sugars, starches, or salt
                                (i.e., sodium). Texture may range from
                                strained through diced.\11\

[[Page 391]]

    Infant meat..............  Any variety of commercial infant food
                                meat or poultry, as a single major
                                ingredient, with added broth or gravy.
                                Added sugars or salt (i.e. sodium) are
                                not allowed. Texture may range from
                                pureed through diced.\12\
------------------------------------------------------------------------
Table 4 Footnotes: FDA = Food and Drug Administration of the U.S.
  Department of Health and Human Services; RACC = reference amount
  customarily consumed.
\1\ The following are not considered a WIC eligible medical food:
  Formulas used solely for the purpose of enhancing nutrient intake,
  managing body weight, addressing picky eaters or used for a condition
  other than a qualifying condition (e.g., vitamin pills, weight control
  products, etc.); medicines or drugs, as defined by the Food, Drug and
  Cosmetic Act (21 U.S.C. 350a) as amended; enzymes, herbs, or
  botanicals; oral rehydration fluids or electrolyte solutions;
  flavoring or thickening agents; and feeding utensils or devices (e.g.,
  feeding tubes, bags, pumps) designed to administer a WIC-eligible
  formula.
\2\ All authorized milks must confirm to FDA, DHHS standards of identity
  for milks as defined by 21 CFR part 131 and meet WIC's requirements
  for vitamin fortification as stated above. Additional authorized milks
  include, but are not limited to: calcium-fortified, lactose-reduced
  and lactose-free, acidified, and UHT pasteurized milks. Other milks
  are permitted at the State agency's discretion provided that the State
  agency determines that the milk meets the minimum requirements for
  authorized milk.
\3\ Any of the folowing lower sodium forms are allowable:
Sodium-free--less than 5 mg sodium per serving;
Very low sodium--35 mg sodium or less per serving or, if the serving is
  30 g or less or 2 tablespoons or less, 35 mg sodium or less per 50 g
  of the food;
Low-sodium--140 mg sodium or less per serving or, if the serving is 30 g
  or less or 2 tablespoons or less, 140 mg sodium or less per 50 g of
  the food;
Light in sodium--at least 50 percent less sodium per serving than
  average reference amount for same food with no sodium reduction;
Lightly salted--at least 50 percent less sodium per serving than
  reference amount (If the food is not ``low in sodium,'' the statement
  ``not a low-sodium food'' must appear on the same panel as the
  Nutrition Facts panel.); and
Reduced or less sodium--at least 25 percent less sodium per serving than
  reference food.
\4\ Food and Drug Administration (FDA), Health Claim Notification for
  Whole Grain Foods with Moderate Fat Content at http://
  www.cfsan.fda.gov/dms/flgrain2.html
\5\ Herbs or spices; edible blossoms and flowers, e.g., squash blossoms
  (broccoli, cauliflower and artichokes are allowed); creamed or sauced
  vegetables; vegetable-grain (pasta or rice) mixtures; fruit-nut
  mixtures; breaded vegetables; fruits and vegetables for purchase on
  salad bars; peanuts; ornamental and decorative fruits and vegetables
  such as chili peppers on a string; garlic on a string; gourds; painted
  pumpkins; fruit baskets and party vegetable trays; and items such as
  blueberry muffins and other baked goods are not authorized. Mature
  legumes (dry beans and peas) and juices are provided as separate food
  WIC categories and are not authorized under the fruit and vegetable
  category.
\6\ ``Canned'' refers to processed food items in cans or other shelf-
  stable containers, e.g., jars, pouches.
\7\ Excludes white potatoes; catsup or other condiments; pickled
  vegetables, olives; soups; juices; and fruit leathers and fruit roll-
  ups.
\8\ The following canned mature legumes are not authorized: soups;
  immature varieties of legumes, such as those used in canned green
  peas, green beans, snap beans, orange beans, and wax beans; baked
  beans with meat; e.g., beans and franks; and beans containing added
  sugars (with the exception of baked beans), fats, meat, or oils.
\9\ Infant cereals containing infant formula, milk, fruit, or other non-
  cereal ingredients are not allowed.
\10\ Mixtures with cereal or infant food desserts (e.g., peach cobbler)
  are not authorized; however, combinations of single ingredients (e.g.,
  apple-banana) are allowed.
\11\ Combinations of single ingredients (e.g., peas and carrots) are
  allowed.
\12\ No infant food combinations (e.g., meat and vegetables) or dinners
  (e.g., spaghetti and meatballs) are allowed.

    (f) USDA purchase of commodity foods. (1) At the request of a State 
agency, FNS may purchase commodity foods for the State agency using 
funds allocated to the State agency. The commodity foods purchased and 
made available to the State agency must be equivalent to the foods 
specified in Table 4 of paragraph (e)(12) of this section.
    (2) The State agency must:
    (i) Distribute the commodity foods to its local agencies or 
participants; and
    (ii) Ensure satisfactory storage facilities and conditions for the 
commodity foods, including documentation of proper insurance.
    (g) Infant formula manufacturer registration. Infant formula 
manufacturers supplying formula to the WIC Program must be registered 
with the Secretary of Health and Human Services under the Federal Food, 
Drug, and Cosmetic Act (21 U.S.C. 301 et seq.). Such manufacturers 
wishing to bid for a State contract to supply infant formula to the 
program must certify with the State health department that their 
formulas comply with the Federal Food, Drug, and Cosmetic Act and 
regulations issued pursuant to the Act.
    (h) Rounding up. State agencies may round up to the next whole 
container for either infant formula or infant foods (infant cereal, 
fruits, vegetables and meat). State agencies that use the rounding up 
option must calculate the amount of infant formula or infant foods 
provided according to the requirements and methodology as described in 
this section.
    (1) Infant Formula. State agencies must use the maximum monthly 
allowance of reconstituted fluid ounces of liquid concentrate infant 
formula as specified in Table 1 of paragraph (e)(9) of this section as 
the full nutritional benefit (FNB) provided by infant formula for each 
food package category and infant feeding option (e.g., Food Package I A 
fully formula fed, IA-FF).
    (i) For State agencies that use rounding up of infant formula, the 
FNB is determined over the timeframe (the number of months) that the 
participant receives the food package. In any given month of the 
timeframe, the monthly issuance of reconstituted fluid ounces of infant 
formula may exceed the maximum monthly allowance or fall below

[[Page 392]]

the FNB; however, the cumulative average over the timeframe may not fall 
below the FNB. In addition, the State agency must:
    (A) Use the methodology described in paragraph (h)(1)(ii) of this 
section for calculating and dispersing the rounding up option;
    (B) Issue infant formula in whole containers that are all the same 
size; and
    (C) Disperse the number of whole containers as evenly as possible 
over the timeframe with the largest monthly issuances given in the 
beginning of the timeframe.
    (ii) The methodology to calculate rounding up and dispersing infant 
formula to the next whole container over the food package timeframe is 
as follows:
    (A) Multiply the FNB amount for the appropriate food package and 
feeding option (e.g. Food Package I A fully formula fed, IA-FF) by the 
timeframe the participant will receive the food package to determine the 
total amount of infant formula to be provided.
    (B) Divide the total amount of infant formula to be provided by the 
yield of the container (in reconstituted fluid ounces) issued by the 
State agency to determine the total number of containers to be issued 
during the timeframe that the food package is prescribed.
    (C) If the number of containers to be issued does not result in a 
whole number of containers, the State agency must round up to the next 
whole container in order to issue whole containers.
    (2) Infant foods. (i) State agencies may use the rounding up option 
to the next whole container of infant food (infant cereal, fruits, 
vegetables and meats) when the maximum monthly allowance cannot be 
issued due to varying container sizes of authorized infant foods.
    (ii) State agencies that use the rounding up option for infant foods 
must:
    (A) Use the methodology described in paragraph (h)(2)(iii) of this 
section for calculating and dispersing the rounding up option;
    (B) Issue infant foods in whole containers; and
    (C) Disperse the number of whole containers as evenly as possible 
over the timeframe (the number of months the participant will receive 
the food package).
    (iii) The methodology to round up and disperse infant food is as 
follows:
    (A) Multiply the maximum monthly allowance for the infant food by 
the timeframe the participant will receive the food package to determine 
the total amount of food to be provided.
    (B) Divide the total amount of food provided by the container size 
issued by the State agency (e.g., ounces) to determine the total number 
of food containers to be issued during the timeframe that the food 
package is prescribed.
    (C) If the number of containers to be issued does not result in a 
whole number of containers, the State agency must round up to the next 
whole container in order to issue whole containers.
    (i) Plans for substitutions. (1) The State agency may submit to FNS 
a plan for substitution of food(s) acceptable for use in the Program to 
allow for different cultural eating patterns. The plan shall provide the 
State agency's justification, including a specific explanation of the 
cultural eating pattern and other information necessary for FNS to 
evaluate the plan as specified in paragraph (i)(2) of this section.
    (2) FNS will evaluate a State agency's plan for substitution of 
foods for different cultural eating patterns based on the following 
criteria:
    (i) Any proposed substitute food must be nutritionally equivalent or 
superior to the food it is intended to replace.
    (ii) The proposed substitute food must be widely available to 
participants in the areas where the substitute is intended to be used.
    (iii) The cost of the substitute food must be equivalent to or less 
than the cost of the food it is intended to replace.
    (3) FNS will make a determination on the proposed plan based on the 
evaluation criteria specified in paragraph (i)(2) of this section, as 
appropriate. The State agency shall substitute foods only after 
receiving the written approval of FNS.

Sec. 246.11  Nutrition education.

    (a) General. (1) Nutrition education shall be considered a benefit 
of the Program, and shall be made available at no cost to the 
participant. Nutrition education shall be designed to be easily 
understood by participants, and it shall bear a practical relationship 
to participant nutritional needs, household situations, and cultural 
preferences including information on how to select food for themselves 
and their families. Nutrition education shall be thoroughly integrated 
into participant health care plans, the delivery of supplemental foods, 
and other Program operations.
    (2) The State agency shall ensure that nutrition education is made 
available to all participants. Nutrition education may be provided 
through the local agencies directly, or through arrangements made with 
other agencies. At the time of certification, the local agency shall 
stress the positive, long-term benefits of nutrition education and 
encourage the participant to attend and participate in nutrition 
education activities. However, individual

[[Page 393]]

participants shall not be denied supplemental foods for failure to 
attend or participate in nutrition education activities.
    (3) As an integral part of nutrition education, the State agency 
shall ensure that local agencies provide drug and other harmful 
substance abuse information to all pregnant, postpartum, and 
breastfeeding women and to parents or caretakers of infants and children 
participating in the program. Drug and other harmful substance abuse 
information may also be provided to pregnant, postpartum, and 
breastfeeding women and to parents or caretakers of infants and children 
participating in local agency services other than the Program.
    (b) Goals. Nutrition education shall be designed to achieve the 
following two broad goals:
    (1) Stress the relationship between proper nutrition and good health 
with special emphasis on the nutritional needs of pregnant, postpartum, 
and breastfeeding women, infants and children under five years of age, 
and raise awareness about the dangers of using drugs and other harmful 
substances during pregnancy and while breastfeeding.
    (2) Assist the individual who is at nutritional risk in achieving a 
positive change in food habits, resulting in improved nutritional status 
and in the prevention of nutrition-related problems through optimal use 
of the supplemental foods and other nutritious foods. This is to be 
taught in the context of the ethnic, cultural and geographic preferences 
of the participants and with consideration for educational and 
environmental limitations experienced by the participants.
    (c) State agency responsibilities. The State agency shall perform 
the following activities in carrying out nutrition education 
responsibilities:
    (1) Develop and coordinate the nutrition education component of 
Program operations with consideration of local agency plans, needs and 
available nutrition education resources.
    (2) Provide in-service training and technical assistance for 
professional and para-professional personnel involved in providing 
nutrition education to participants at local agencies. The State agency 
shall also provide training on the promotion and management of 
breastfeeding to staff at local agencies who will provide information 
and assistance on this subject to participants.
    (3) Identify or develop resources and educational materials for use 
in local agencies, including breastfeeding promotion and instruction 
materials, taking reasonable steps to include materials in languages 
other than English in areas where a significant number or proportion of 
the population needs the information in a language other than English, 
considering the size and concentration of such population and, where 
possible, the reading level of participants.
    (4) Develop and implement procedures to ensure that nutrition 
education is offered to all adult participants and to parents and 
guardians of infant or child participants, as well as child 
participants, whenever possible.
    (5) Monitor local agency activities to ensure compliance with 
provisions set forth in paragraphs (c)(7), (d), and (e) of this section.
    (6) Establish standards for participant contacts that ensure 
adequate nutrition education in accordance with paragraph (e) of this 
section.
    (7) Establish standards for breastfeeding promotion and support 
which include, at a minimum, the following:
    (i) A policy that creates a positive clinic environment which 
endorses breastfeeding as the preferred method of infant feeding;
    (ii) A requirement that each local agency designate a staff person 
to coordinate breastfeeding promotion and support activities;
    (iii) A requirement that each local agency incorporate task-
appropriate breastfeeding promotion and support training into 
orientation programs for new staff involved in direct contact with WIC 
clients; and
    (iv) A plan to ensure that women have access to breastfeeding 
promotion and support activities during the prenatal and postpartum 
periods.
    (d) Local agency responsibilities. Local agencies shall perform the 
following activities in carrying out their nutrition education 
responsibilities:

[[Page 394]]

    (1) Make nutrition education available or enter into an agreement 
with another agency to make nutrition education available to all adult 
participants, and to parents or caretakers of infant and child 
participants, and whenever possible, to child participants. Nutrition 
education may be provided through the use of individual or group 
sessions. Educational materials designed for Program participants may be 
utilized to provide education to pregnant, postpartum, and breastfeeding 
women and to parents or caretakers of infants and children participating 
in local agency services other than the program.
    (2) Develop an annual local agency nutrition education plan 
consistent with the State's nutrition education component of Program 
operations and in accordance with this part and FNS guidelines. The 
local agency shall submit its nutrition education plan to the State 
agency by a date specified by the State agency.
    (e) Participant contacts. (1) The nutrition education contacts shall 
be made available through individual or group sessions which are 
appropriate to the individual participant's nutritional needs. All 
pregnant participants shall be encouraged to breastfeed unless 
contraindicated for health reasons.
    (2) During each six-month certification period, at least two 
nutrition contacts shall be made available to all adult participants and 
the parents or caretakers of infant and child participants, and wherever 
possible, the child participants themselves.
    (3) Nutrition education contacts shall be made available at a 
quarterly rate, but not necessarily taking place within each quarter, to 
parents or caretakers of infant participants certified for a period in 
excess of six months.
    (4) The local agency shall document in each participant's 
certification file that nutrition education has been given to the 
participant in accordance with State agency standards, except that the 
second or any subsequent nutrition education contact during a 
certification period that is provided to a participant in a group 
setting may be documented in a masterfile. Should a participant miss a 
nutrition education appointment, the local agency shall, for purposes of 
monitoring and further education efforts, document this fact in the 
participant's file, or, at the local agency's discretion, in the case of 
a second or subsequent missed contact where the nutrition education was 
offered in a group setting, document this fact in a master file.
    (5) An individual care plan shall be provided for a participant 
based on the need for such plan as determined by the competent 
professional authority, except that any participant, parent, or 
caretaker shall receive such plan upon request.
    (6) Contacts shall be designed to meet different cultural and 
language needs of Program participants.

[50 FR 6121, Feb. 13, 1985; 50 FR 8098, Feb. 28, 1985, as amended at 58 
FR 11507, Feb. 26, 1993; 59 FR 11503, Mar. 11, 1994; 65 FR 53528, Sept. 
5, 2000; 71 FR 56731, Sept. 27, 2006]

                    Subpart E_State Agency Provisions

Sec. 246.12  Food delivery systems.

    (a) General. This section sets forth design and operational 
requirements for food delivery systems. In recognition of emergent 
electronic benefits transfer (EBT) technology, FNS may, on a case-by-
case basis, modify regulatory provisions to the extent FNS determines 
the particular EBT system provides adequate safeguards that serve the 
purpose of the provisions being modified.
    (1) Management. The State agency is responsible for the fiscal 
management of, and accountability for, food delivery systems under its 
jurisdiction. The State agency may permit only authorized vendors, home 
food delivery contractors, and direct distribution sites to accept food 
instruments.
    (2) Design. The State agency must design all food delivery systems 
to be used by its local agencies.
    (3) FNS oversight. FNS may, for a stated cause and by written 
notice, require revision of a proposed or operating food delivery system 
and will allow a reasonable time for the State agency to effect such a 
revision.
    (4) Part 3016. All contracts or agreements entered into by the State 
or local agency for the management or operation of food delivery systems

[[Page 395]]

must conform to the requirements of Part 3016 of this title.
    (b) Uniform food delivery systems. The State agency may operate up 
to three types of food delivery systems under its jurisdiction--retail, 
home delivery, or direct distribution. Each system must be procedurally 
uniform throughout the jurisdiction of the State agency and must ensure 
adequate participant access to supplemental foods. When used, food 
instruments must be uniform within each type of system.
    (c) No charge for authorized supplemental foods. The State agency 
must ensure that participants receive their authorized supplemental 
foods free of charge.
    (d) Compatibility of food delivery system. The State agency must 
ensure that the food delivery system(s) selected is compatible with the 
delivery of health and nutrition education services to participants.
    (e) Retail food delivery systems: General. Retail food delivery 
systems are systems in which participants, parents or caretakers of 
infant and child participants, and proxies obtain authorized 
supplemental foods by submitting a food instrument to an authorized 
vendor.
    (f) Retail food delivery systems: Food instrument requirements--(1) 
General. State agencies using retail food delivery systems must use food 
instruments that comply with the requirements of paragraph (f)(2) of 
this section.
    (2) Printed food instruments. Each printed food instrument must 
clearly bear on its face the following information:
    (i) Authorized supplemental foods. The supplemental foods authorized 
to be obtained with the food instrument;
    (ii) First date of use. The first date on which the food instrument 
may be used to obtain supplemental foods;
    (iii) Last date of use. The last date on which the food instrument 
may be used to obtain authorized supplemental foods. This date must be a 
minimum of 30 days from the first date on which it may be used, except 
for the participant's first month of issuance, when it may be the end of 
the month or cycle for which the food instrument is valid. Rather than 
entering a specific last date of use on each instrument, all instruments 
may be printed with a notice that the participant must transact them 
within a specified number of days after the first date on which the food 
instrument may be used;
    (iv) Redemption period. The date by which the vendor must submit the 
food instrument for redemption. This date must be no more than 60 days 
from the first date on which the food instrument may be used. If the 
date is fewer than 60 days, then the State agency must ensure that the 
allotted time provides the vendor sufficient time to submit the food 
instrument for redemption without undue burden;
    (v) Serial number. A unique and sequential serial number;
    (vi) Purchase price. A space for the purchase price to be entered. 
At the discretion of the State agency, a maximum price may be printed on 
the food instrument that is higher than the expected purchase price of 
the authorized supplemental foods for which it will be used, but that is 
low enough to protect against potential loss of funds. When a maximum 
price is printed on the food instrument, the space for the purchase 
price must be clearly distinguishable from the maximum price. For 
example, the words ``purchase price'' or ``actual amount of sale'' could 
be printed larger and in a different area of the food instrument than 
the maximum price; and
    (vii) Signature space. A space where participants, parents or 
caretakers of infant or child participants, or proxies must sign.
    (3) Vendor identification. The State agency must implement 
procedures to ensure each food instrument submitted for redemption can 
be identified by the vendor that submitted the food instrument. Each 
vendor operated by a single business entity must be identified 
separately. The State agency may identify vendors by requiring that all 
authorized vendors stamp their names and/or enter a vendor 
identification number on all food instruments prior to submitting them 
for redemption.
    (g) Retail food delivery systems: Vendor authorization--(1) General. 
The State agency must authorize an appropriate number and distribution 
of vendors in order to ensure the lowest practicable food prices 
consistent with adequate participant access to supplemental

[[Page 396]]

foods and to ensure effective State agency management, oversight, and 
review of its authorized vendors.
    (2) Vendor limiting criteria. The State agency may establish 
criteria to limit the number of stores it authorizes. The State agency 
must apply its limiting criteria consistently throughout its 
jurisdiction. Any vendor limiting criteria used by the State agency must 
be included in the State Plan in accordance with Sec. 246.4(a)(14)(ii).
    (3) Vendor selection criteria. The State agency must develop and 
implement criteria to select stores for authorization. The State agency 
must apply its selection criteria consistently throughout its 
jurisdiction. The State agency may reassess any authorized vendor at any 
time during the vendor's agreement period using the vendor selection 
criteria in effect at the time of the reassessment and must terminate 
the agreements with those vendors that fail to meet them. The vendor 
selection criteria must include the following categories and 
requirements and must be included in the State Plan in accordance with 
Sec. 246.4(a)(14)(ii).
    (i) Minimum variety and quantity of supplemental foods. The State 
agency must establish minimum requirements for the variety and quantity 
of supplemental foods that a vendor applicant must stock to be 
authorized. The State agency may not authorize a vendor applicant unless 
it determines that the vendor applicant meets these minimums. The State 
agency may establish different minimums for different vendor peer 
groups.
    (ii) Business integrity. The State agency must consider the business 
integrity of a vendor applicant. In determining the business integrity 
of a vendor applicant, the State agency may rely solely on facts already 
known to it and representations made by the vendor applicant on its 
vendor application. The State agency is not required to establish a 
formal system of background checks for vendor applicants. Unless denying 
authorization of a vendor applicant would result in inadequate 
participant access, the State agency may not authorize a vendor 
applicant if during the last six years the vendor applicant or any of 
the vendor applicant's current owners, officers, or managers have been 
convicted of or had a civil judgment entered against them for any 
activity indicating a lack of business integrity. Activities indicating 
a lack of business integrity include fraud, antitrust violations, 
embezzlement, theft, forgery, bribery, falsification or destruction of 
records, making false statements, receiving stolen property, making 
false claims, and obstruction of justice. The State agency may add other 
types of convictions or civil judgments to this list.
    (iii) Current Food Stamp Program disqualification or civil money 
penalty for hardship. Unless denying authorization of a vendor applicant 
would result in inadequate participant access, the State agency may not 
authorize a vendor applicant that is currently disqualified from the 
Food Stamp Program or that has been assessed a Food Stamp Program civil 
money penalty for hardship and the disqualification period that would 
otherwise have been imposed has not expired.
    (4) Vendor selection criteria: competitive price. The State agency 
must establish a vendor peer group system and distinct competitive price 
criteria and allowable reimbursement levels for each peer group. The 
State agency must use the competitive price criteria to evaluate the 
prices a vendor applicant charges for supplemental foods as compared to 
the prices charged by other vendor applicants and authorized vendors, 
and must authorize vendors selected from among those that offer the 
program the most competitive prices. The State agency must consider a 
vendor applicant's shelf prices or the prices it bids for supplemental 
foods, which may not exceed its shelf prices. In establishing 
competitive price criteria and allowable reimbursement levels, the State 
agency must consider participant access by geographic area.
    (i) Vendors that meet the above-50-percent criterion. Vendors that 
derive more than 50 percent of their annual food sales revenue from WIC 
food instruments, and new vendor applicants expected to meet this 
criterion under guidelines approved by FNS, are defined as above-50-
percent vendors. Each State agency annually must implement

[[Page 397]]

procedures approved by FNS to identify authorized vendors and vendor 
applicants as either above-50-percent vendors or regular vendors. The 
State agency must receive FNS certification of its vendor cost 
containment system under section 246.12(g)(4)(vi) prior to authorizing 
any above-50-percent vendors. The State agency that chooses to authorize 
any above-50-percent vendors:
    (A) Must distinguish these vendors from other authorized vendors in 
its peer group system or its alternative cost containment system 
approved by FNS by establishing separate peer groups for above-50-
percent vendors or by placing above-50-percent vendors in peer groups 
with other vendors and establishing distinct competitive price selection 
criteria and allowable reimbursement levels for the above-50-percent 
vendors;
    (B) Must reassess the status of new vendors within six months after 
authorization to determine whether or not the vendors are above-50-
percent vendors, and must take necessary follow-up action, such as 
terminating vendor agreements or reassigning vendors to the appropriate 
peer group;
    (C) Must compare above-50-percent vendors' prices against the prices 
of vendors that do not meet the above-50-percent criterion in 
determining whether the above-50-percent vendors have competitive prices 
and in establishing allowable reimbursement levels for such vendors; and
    (D) Must ensure that the prices of above-50-percent vendors do not 
inflate the competitive price criteria and allowable reimbursement 
levels for the peer groups or result in higher total food costs if 
program participants transact their food instruments at above-50-percent 
vendors rather than at other vendors that do not meet the above-50-
percent criterion. To comply with this requirement, the State agency 
must compare the average cost of each type of food instrument redeemed 
by above-50-percent vendors against the average cost of the same type of 
food instrument redeemed by regular vendors. The average cost per food 
instrument must be weighted to reflect the relative proportion of food 
instruments redeemed by each category of vendors in the peer group 
system. The State agency must compute statewide average costs per food 
instrument at least quarterly to monitor compliance with this 
requirement. If average payments per food instrument for above-50-
percent vendors exceed average payments per food instrument to regular 
vendors, then the State agency must take necessary action to ensure 
compliance, such as adjusting payment levels, recouping excess payments, 
or terminating vendor agreements with above-50-percent vendors whose 
prices are least competitive and that are not needed to ensure 
participant access. Where EBT systems are in use, it may be more 
appropriate to compare prices of individual WIC food items to ensure 
that average payments to above-50-percent vendors do not exceed average 
payments for the same food item to comparable vendors. If FNS determines 
that a State agency has failed to ensure that above-50-percent vendors 
do not result in higher costs to the program than if participants 
transact their food instruments at regular vendors, FNS will establish a 
claim against the State agency to recover excess food funds expended and 
will require remedial action.
    (ii) Implementing effective peer groups. The State agency's 
methodology for establishing a vendor peer group system must include the 
following:
    (A) At least two criteria for establishing peer groups, one of which 
must be a measure of geography, such as metropolitan or other 
statistical areas that form distinct labor and products markets, unless 
the State agency receives FNS approval to use a single criterion;
    (B) Routine collection and monitoring of vendor shelf prices at 
least every six months following authorization; and
    (C) Assessment of the effectiveness of the peer groupings and 
competitive price criteria at least every three years and modification, 
as necessary, to enhance system performance. The State agency may change 
a vendor's peer group whenever the State agency determines that 
placement in an alternate peer group is warranted.

[[Page 398]]

    (iii) Subsequent price increases. The State agency must establish 
procedures to ensure that a vendor selected for participation in the 
program does not, subsequent to selection, increase prices to levels 
that would make the vendor ineligible for authorization.
    (iv) Exceptions to competitive price criteria. The State agency may 
except from the competitive price criteria and allowable reimbursement 
levels pharmacy vendors that supply only exempt infant formula and/or 
WIC-eligible medical foods, and non-profit vendors for which more than 
50 percent of their annual revenue from food sales consists of revenue 
derived from WIC food instruments. A State agency that elects to exempt 
non-profit vendors from competitive price criteria and/or allowable 
reimbursements levels must notify FNS, in writing, at least 30 days 
prior to the effective date of the exemption. The State agency's 
notification must indicate the reason for the exemption, including 
whether the vendor is needed to ensure participant access, why other 
vendors that are subject to competitive price criteria and allowable 
reimbursement levels cannot provide the required supplemental foods, the 
benefits to the program of exempting the non-profit vendor from the 
competitive price criteria and/or allowable reimbursement levels, the 
criteria the State agency used to assess the competitiveness of the non-
profit vendor's prices, and how the State agency will determine the 
reimbursement level for the non-profit vendor. This notification 
requirement does not apply to State agency contracts and agreements with 
non-profit health and/or human service agencies or organizations.
    (v) Exemptions from the vendor peer group system requirement. With 
prior written approval from FNS, a State agency may use a vendor cost 
containment approach other than a peer group system if it meets certain 
conditions. A State agency that obtains an exemption from the peer group 
requirement still must establish competitive pricing criteria for vendor 
selection and allowable reimbursement levels. An exemption from the peer 
group requirement would remain in effect until the State agency no 
longer meets the conditions on which the exemption was based, until FNS 
revokes the exemption, or for three years, whichever occurs first. 
During the period of the exemption, the State agency must provide 
annually to FNS documentation that it either authorizes no above-50-
percent vendors, or that such vendors' redemptions continue to represent 
less than five percent of total WIC redemptions, depending on the terms 
of the exemption. The conditions for obtaining an exemption from the 
vendor peer group system are as follows:
    (A) The State agency chooses not to authorize any vendors that 
derive more than 50 percent of their revenue from food sales from WIC 
food instruments, and the State agency demonstrates to FNS that 
establishing a vendor peer group system would be inconsistent with 
efficient and effective operation of the program, or that its 
alternative cost containment system would be as effective as a peer 
group system; or
    (B) The State agency determines that food instruments redeemed by 
vendors that meet the above-50-percent criterion comprise less than five 
percent of the total WIC redemptions in the State in the fiscal year 
prior to a fiscal year in which the exemption is effective; and the 
State agency demonstrates to FNS that its alternative vendor cost 
containment system would be as effective as a vendor peer group system 
and would not result in higher costs if program participants redeem food 
instruments at vendors that meet the above-50-percent criterion rather 
than at vendors that do not meet this criterion.
    (vi) Cost containment certification. If a State agency elects to 
authorize any above-50-percent vendors, the State agency must submit 
information, in accordance with guidance provided by FNS, to demonstrate 
that its competitive price criteria and allowable reimbursement levels 
do not result in average payments per food instrument to these vendors 
that are higher than average payments per food instrument to comparable 
vendors that are not above-50-percent vendors. To calculate average 
payments per food instrument, the State agency must include either all 
food instruments redeemed by all authorized vendors or a representative

[[Page 399]]

sample of the redeemed food instruments. The State agency must add the 
redemption amounts for all redeemed food instruments of the same type 
and divide the sum by the number of food instruments of that type. If 
the State agency does not designate food instruments by type, it must 
calculate the average payment for each distinct combination of foods 
prescribed on the food instrument. The State agency may calculate 
average payments per food instrument type for groups of vendors that 
meet the above-50-percent criterion and comparable vendors, or the State 
agency may calculate average payments for each food instrument type for 
each vendor. State agencies with EBT systems must compare the average 
cost of each WIC food purchased by participants at above-50-percent 
vendors with the average cost of each food purchased from comparable 
vendors. If FNS determines, based on its review of the information 
provided by the State agency and any other relevant data, that the 
requirements in this paragraph have been met, FNS will certify that the 
State agency's competitive price criteria and allowable reimbursement 
levels established for above-50-percent vendors do not result in higher 
average payments per food instrument (or higher costs for each WIC food 
item in EBT systems). If the State agency's methodology for establishing 
competitive price criteria and allowable reimbursement levels fails to 
meet the requirement of this section regarding average food instrument 
payments to above-50-percent vendors, FNS will disapprove the State 
agency's request to authorize above-50-percent vendors. At least every 
three years following initial certification, the State agency must 
submit information which demonstrates that it continues to meet the 
requirements of this section relative to average payments to above-50-
percent vendors. FNS may require annual updates of selected food 
instrument redemption data.
    (vii) Limitation on private rights of action. The competitive 
pricing provisions of this paragraph do not create a private right of 
action based on facts that arise from the impact or enforcement of these 
provisions.
    (5) On-site preauthorization visit. The State agency must conduct an 
on-site visit prior to or at the time of a vendor's initial 
authorization.
    (6) Sale of store to circumvent WIC sanction. The State agency may 
not authorize a vendor applicant if the State agency determines the 
store has been sold by its previous owner in an attempt to circumvent a 
WIC sanction. The State agency may consider such factors as whether the 
store was sold to a relative by blood or marriage of the previous 
owner(s) or sold to any individual or organization for less than its 
fair market value.
    (7) Impact on small businesses. The State agency is encouraged to 
consider the impact of authorization decisions on small businesses.
    (8) Application periods. The State agency may limit the periods 
during which applications for vendor authorization will be accepted and 
processed, except that applications must be accepted and processed at 
least once every three years. The State agency must develop procedures 
for processing vendor applications outside of its timeframes when it 
determines there will be inadequate participant access unless additional 
vendors are authorized.
    (9) Data collection at authorization. At the time of application, 
the State agency must collect the vendor applicant's Food Stamp Program 
authorization number if the vendor applicant is authorized in that 
program. In addition, the State agency must collect the vendor 
applicant's current shelf prices for supplemental foods.
    (h) Retail food delivery systems: Vendor agreements--(1) General. 
(i) Entering into agreements. The State agency must enter into written 
agreements with all authorized vendors. The agreements must be for a 
period not to exceed three years. The agreement must be signed by a 
representative who has legal authority to obligate the vendor and a 
representative of the State agency. When the vendor representative is 
obligating more than one vendor, the agreement must specify all vendors 
covered by the agreement. When more than one vendor is specified in the 
agreement, the State agency may add or delete an individual vendor 
without affecting the remaining vendors. The

[[Page 400]]

State agency must require vendors to reapply at the expiration of their 
agreements and must provide vendors with not less than 15 days advance 
written notice of the expiration of their agreements.
    (ii) Delegation to local agencies. The State agency may delegate to 
its local agencies the authority to sign vendor agreements if the State 
agency indicates its intention to do so in its State Plan in accordance 
with Sec. 246.4(a)(14)(iii). In such cases, the State agency must 
provide supervision and instruction to ensure the uniformity and quality 
of local agency activities.
    (2) Standard vendor agreement. The State agency must use a standard 
vendor agreement throughout its jurisdiction, although the State agency 
may make exceptions to meet unique circumstances provided that it 
documents the reasons for such exceptions.
    (3) Vendor agreement provisions. The vendor agreement must contain 
the following specifications, although the State agency may determine 
the exact wording to be used:
    (i) Acceptance of food instruments. The vendor may accept food 
instruments only from participants, parents or caretakers of infant and 
child participants, or proxies.
    (ii) No substitutions, cash, credit, refunds, or exchanges. The 
vendor may provide only the authorized supplemental foods listed on the 
food instrument. The vendor may not provide unauthorized food items, 
non-food items, cash, or credit (including rainchecks) in exchange for 
food instruments. The vendor may not provide refunds or permit exchanges 
for authorized supplemental foods obtained with food instruments, except 
for exchanges of an identical authorized supplemental food item when the 
original authorized supplemental food item is defective, spoiled, or has 
exceeded its ``sell by,'' ``best if used by,'' or other date limiting 
the sale or use of the food item. An identical authorized supplemental 
food item means the exact brand and size as the original authorized 
supplemental food item obtained and returned by the participant.
    (iii) Treatment of participants, parents/caretakers, and proxies. 
The vendor must offer program participants, parents or caretakers of 
infant of child participants, and proxies the same courtesies offered to 
other customers.
    (iv) Time periods for transacting food instruments. The vendor may 
accept a food instrument only within the specified time period.
    (v) Purchase price on food instruments. The vendor must ensure that 
the purchase price is entered on food instruments in accordance with the 
procedures described in the vendor agreement. The State agency has the 
discretion to determine whether the vendor or the participant enters the 
purchase price. The purchase price must include only the authorized 
supplemental food items actually provided and must be entered on the 
food instrument before it is signed.
    (vi) Signature on food instruments. For printed food instruments, 
the vendor must ensure the participant, parent or caretaker of an infant 
or child participant, or proxy signs the food instrument in the presence 
of the cashier. In EBT systems, a Personal Identification Number (PIN) 
may be used in lieu of a signature.
    (vii) Sales tax prohibition. The vendor may not collect sales tax on 
authorized supplemental foods obtained with food instruments.
    (viii) Food instrument redemption. The vendor must submit food 
instruments for redemption in accordance with the redemption procedures 
described in the vendor agreement. The vendor may redeem a food 
instrument only within the specified time period. As part of the 
redemption procedures, the State agency may make price adjustments to 
the purchase price on food instruments submitted by the vendor for 
redemption to ensure compliance with the price limitations applicable to 
the vendor. As part of the redemption procedures, the State agency must 
establish and apply limits on the amount of reimbursement allowed for 
food instruments based on a vendor's peer group and competitive price 
criteria. In setting allowable reimbursement levels, the State agency 
must consider participant access in a geographic area and may include a 
factor to reflect fluctuations in wholesale prices. In establishing 
allowable reimbursement levels

[[Page 401]]

for above-50-percent vendors the State agency must ensure that 
reimbursements do not result in higher food costs than if participants 
transacted their food instruments at vendors that are not above-50-
percent vendors, or in higher average payments per food instrument to 
above-50-percent vendors than average payments to comparable vendors. 
The State agency may make price adjustments to the purchase price on 
food instruments submitted by the vendor for redemption to ensure 
compliance with the allowable reimbursement level applicable to the 
vendor. A vendor's failure to remain price competitive is cause for 
termination of the vendor agreement, even if actual payments to the 
vendor are within the maximum reimbursement amount. The State agency may 
exempt vendors that supply only exempt infant formula and/or WIC-
eligible medical foods and non-profit above-50-percent vendors from the 
allowable reimbursement limits.
    (ix) Vendor claims. When the State agency determines the vendor has 
committed a vendor violation that affects the payment to the vendor, the 
State agency will delay payment or establish a claim. The State agency 
may delay payment or establish a claim in the amount of the full 
purchase price of each food instrument that contained the vendor 
overcharge or other error. The State agency will provide the vendor with 
an opportunity to justify or correct a vendor overcharge or other error. 
The vendor must pay any claim assessed by the State agency. In 
collecting a claim, the State agency may offset the claim against 
current and subsequent amounts to be paid to the vendor. In addition to 
denying payment or assessing a claim, the State agency may sanction the 
vendor for vendor overcharges or other errors in accordance with the 
State agency's sanction schedule.
    (x) No charge for authorized supplemental foods or restitution from 
participants. The vendor may not charge participants, parents or 
caretakers of infant and child participants, or proxies for authorized 
supplemental foods obtained with food instruments. In addition, the 
vendor may not seek restitution from these individuals for food 
instruments not paid or partially paid by the State agency.
    (xi) Training. At least one representative of the vendor must 
participate in training annually. Annual vendor training may be provided 
by the State agency in a variety of formats, including newsletters, 
videos, and interactive training. The State agency will have sole 
discretion to designate the date, time, and location of all interactive 
training, except that the State agency will provide the vendor with at 
least one alternative date on which to attend such training.
    (xii) Vendor training of staff. The vendor must inform and train 
cashiers and other staff on program requirements.
    (xiii) Accountability for owners, officers, managers, and employees. 
The vendor is accountable for its owners, officers, managers, agents, 
and employees who commit vendor violations.
    (xiv) Monitoring. The vendor may be monitored for compliance with 
program requirements.
    (xv) Recordkeeping. The vendor must maintain inventory records used 
for Federal tax reporting purposes and other records the State agency 
may require for the period of time specified by the State agency in the 
vendor agreement. Upon request, the vendor must make available to 
representatives of the State agency, the Department, and the Comptroller 
General of the United States, at any reasonable time and place for 
inspection and audit, all food instruments in the vendor's possession 
and all program-related records.
    (xvi) Termination. The State agency will immediately terminate the 
agreement if it determines that the vendor has provided false 
information in connection with its application for authorization. Either 
the State agency or the vendor may terminate the agreement for cause 
after providing advance written notice of a period of not less than 15 
days to be specified by the State agency.
    (xvii) Change in ownership or location or cessation of operations. 
The vendor must provide the State agency advance written notification of 
any change in vendor ownership, store location, or cessation of 
operations. In such instances, the State agency will terminate the 
vendor agreement, except that

[[Page 402]]

the State agency may permit vendors to move short distances without 
terminating the agreement. The State agency has the discretion to 
determine the length of advance notice required for vendors reporting 
changes under this provision, whether a change in location qualifies as 
a short distance, and whether a change in business structure constitutes 
a change in ownership.
    (xviii) Sanctions. In addition to claims collection, the vendor may 
be sanctioned for vendor violations in accordance with the State 
agency's sanction schedule. Sanctions may include administrative fines, 
disqualification, and civil money penalties in lieu of disqualification. 
The State agency does not have to provide the vendor with prior warning 
that violations were occurring before imposing such sanctions.
    (xix) Conflict of interest. The State agency will terminate the 
agreement if the State agency identifies a conflict of interest, as 
defined by applicable State laws, regulations, and policies, between the 
vendor and the State agency or its local agencies.
    (xx) Criminal penalties. A vendor who commits fraud or abuse in the 
Program is liable to prosecution under applicable Federal, State or 
local laws. Those who have willfully misapplied, stolen or fraudulently 
obtained program funds will be subject to a fine of not more than 
$25,000 or imprisonment for not more than five years or both, if the 
value of the funds is $100 or more. If the value is less than $100, the 
penalties are a fine of not more than $1,000 or imprisonment for not 
more than one year or both.
    (xxi) Not a license/property interest. The vendor agreement does not 
constitute a license or a property interest. If the vendor wishes to 
continue to be authorized beyond the period of its current agreement, 
the vendor must reapply for authorization. If a vendor is disqualified, 
the State agency will terminate the vendor's agreement, and the vendor 
will have to reapply in order to be authorized after the 
disqualification period is over. In all cases, the vendor's new 
application will be subject to the State agency's vendor selection 
criteria and any vendor limiting criteria in effect at the time of the 
reapplication.
    (xxii) Compliance with vendor agreement, statutes, regulations, 
policies, and procedures. The vendor must comply with the vendor 
agreement and Federal and State statutes, regulations, policies, and 
procedures governing the Program, including any changes made during the 
agreement period.
    (xxiii) Nondiscrimination regulations. The vendor must comply with 
the nondiscrimination provisions of Departmental regulations (Parts 15, 
15a and 15b of this title).
    (xxiv) Compliance with vendor selection criteria. The vendor must 
comply with the vendor selection criteria throughout the agreement 
period, including any changes to the criteria. Using the current vendor 
selection criteria, the State agency may reassess the vendor at any time 
during the agreement period. The State agency will terminate the vendor 
agreement if the vendor fails to meet the current vendor selection 
criteria.
    (xxv) Reciprocal Food Stamp Program disqualification for WIC Program 
disqualifications. Disqualification from the WIC Program may result in 
disqualification as a retailer in the Food Stamp Program. Such 
disqualification may not be subject to administrative or judicial review 
under the Food Stamp Program.
    (4) Purchase price and redemption procedures. The State agency must 
describe in the vendor agreement its purchase price and redemption 
procedures. The redemption procedures must ensure that the State agency 
does not pay a vendor more than the price limitations applicable to the 
vendor.
    (5) Sanction schedule. The State agency must include its sanction 
schedule in the vendor agreement or as an attachment to it. The sanction 
schedule must include all mandatory and State agency vendor sanctions 
and must be consistent with paragraph (l) of this section. If the 
sanction schedule is in State law or regulations or in a document 
provided to the vendor at the time of authorization, the State agency 
instead may include an appropriate cross-reference in the vendor 
agreement.

[[Page 403]]

    (6) Actions subject to administrative review and review procedures. 
The State agency must include the adverse actions a vendor may appeal 
and those adverse actions that are not subject to administrative review. 
The State agency also must include a copy of the State agency's 
administrative review procedures in the vendor agreement or as an 
attachment to it or must include a statement that the review procedures 
are available upon request and the applicable review procedures will be 
provided along with an adverse action subject to administrative review. 
These items must be consistent with Sec. 246.18. If these items are in 
State law or regulations or in a document provided to the vendor at the 
time of authorization, the State agency instead may include an 
appropriate cross-reference in the vendor agreement.
    (7) Notification of program changes. The State agency must notify 
vendors of changes to Federal or State statutes, regulations, policies, 
or procedures governing the Program before the changes are implemented. 
The State agency should give as much advance notice as possible.
    (i) Retail food delivery systems: Vendor training--(1) General 
requirements. The State agency must provide training annually to at 
least one representative of each vendor. Prior to or at the time of a 
vendor's initial authorization, and at least once every three years 
thereafter, the training must be in an interactive format that includes 
a contemporaneous opportunity for questions and answers. The State 
agency must designate the date, time, and location of the interactive 
training and the audience (e.g., managers, cashiers, etc.) to which the 
training is directed. The State agency must provide vendors with at 
least one alternative date on which to attend interactive training. 
Examples of acceptable vendor training include on-site cashier training, 
off-site classroom-style train-the-trainer or manager training, a 
training video, and a training newsletter. All vendor training must be 
designed to prevent program errors and noncompliance and improve program 
service.
    (2) Content. The annual training must include instruction on the 
purpose of the Program, the supplemental foods authorized by the State 
agency, the minimum varieties and quantities of authorized supplemental 
foods that must be stocked by vendors, the procedures for transacting 
and redeeming food instruments, the vendor sanction system, the vendor 
complaint process, the claims procedures, and any changes to program 
requirements since the last training.
    (3) Delegation. The State agency may delegate vendor training to a 
local agency, a contractor, or a vendor representative if the State 
agency indicates its intention to do so in its State Plan in accordance 
with Sec. 246.4(a)(14)(xi). In such cases, the State agency must 
provide supervision and instruction to ensure the uniformity and quality 
of vendor training.
    (4) Documentation. The State agency must document the content of and 
vendor participation in vendor training.
    (j) Retail food delivery systems: Monitoring vendors and identifying 
high-risk vendors--(1) General requirements. The State agency must 
design and implement a system for monitoring its vendors for compliance 
with program requirements. The State agency may delegate vendor 
monitoring to a local agency or contractor if the State agency indicates 
its intention to do so in its State Plan in accordance with Sec. 
246.4(a)(14)(iv). In such cases, the State agency must provide 
supervision and instruction to ensure the uniformity and quality of 
vendor monitoring.
    (2) Routine monitoring. The State agency must conduct routine 
monitoring visits on a minimum of five percent of the number of vendors 
authorized by the State agency as of October 1 of each fiscal year in 
order to survey the types and levels of abuse and errors among 
authorized vendors and to take corrective actions, as appropriate. The 
State agency must develop criteria to determine which vendors will 
receive routine monitoring visits and must include such criteria in its 
State Plan in accordance with Sec. 246.4(a)(14)(iv).
    (3) Identifying high-risk vendors. The State agency must identify 
high-risk vendors at least once a year using criteria developed by FNS 
and/or other statistically-based criteria developed by the State agency. 
FNS will not

[[Page 404]]

change its criteria more frequently than once every two years and will 
provide adequate advance notification of changes prior to 
implementation. The State agency may develop and implement additional 
criteria. All State agency-developed criteria must be approved by FNS.
    (4) Compliance investigations. (i) High-risk vendors. The State 
agency must conduct compliance investigations of a minimum of five 
percent of the number of vendors authorized by the State agency as of 
October 1 of each fiscal year. The State agency must conduct compliance 
investigations on all high-risk vendors up to the five percent minimum. 
The State agency may count toward this requirement a compliance 
investigation of a high-risk vendor conducted by a Federal, State, or 
local law enforcement agency. The State agency also may count toward 
this requirement a compliance investigation conducted by another WIC 
State agency provided that the State agency implements the option to 
establish State agency sanctions based on mandatory sanctions imposed by 
the other WIC State agency, as specified in paragraph (l)(2)(iii) of 
this section. A compliance investigation of a high-risk vendor may be 
considered complete when the State agency determines that a sufficient 
number of compliance buys have been conducted to provide evidence of 
program noncompliance, when two compliance buys have been conducted in 
which no program violations are found, or when an inventory audit has 
been completed.
    (ii) Randomly selected vendors. If fewer than five percent of the 
State agency's authorized vendors are identified as high-risk, the State 
agency must randomly select additional vendors on which to conduct 
compliance investigations sufficient to meet the five-percent 
requirement. A compliance investigation of a randomly selected vendor 
may be considered complete when the State agency determines that a 
sufficient number of compliance buys have been conducted to provide 
evidence of program noncompliance, when two compliance buys are 
conducted in which no program violations are found, or when an inventory 
audit has been completed.
    (iii) Prioritization. If more than five percent of the State 
agency's vendors are identified as high-risk, the State agency must 
prioritize such vendors so as to perform compliance investigations of 
those determined to have the greatest potential for program 
noncompliance and/or loss of funds.
    (5) Monitoring report. For each fiscal year, the State agency must 
send FNS a summary of the results of its vendor monitoring containing 
information stipulated by FNS. The report must be sent by February 1 of 
the following fiscal year. Plans for improvement in the coming year must 
be included in the State Plan in accordance with Sec. 246.4(a)(14)(iv).
    (6) Documentation--(i) Monitoring visits. The State agency must 
document the following information for all monitoring visits, including 
routine monitoring visits, inventory audits, and compliance buys:
    (A) the date of the monitoring visit, inventory audit, or compliance 
buy;
    (B) the name(s) and signature(s) of the reviewer(s); and
    (C) the nature of any problem(s) detected.
    (ii) Compliance buys. For compliance buys, the State agency must 
also document:
    (A) the date of the buy;
    (B) a description of the cashier involved in each transaction;
    (C) the types and quantities of items purchased, current shelf 
prices or prices charged other customers, and price charged for each 
item purchased, if available. Price information may be obtained prior 
to, during, or subsequent to the compliance buy; and
    (D) the final disposition of all items as destroyed, donated, 
provided to other authorities, or kept as evidence.
    (k) Retail food delivery systems: Vendor claims--(1) System to 
review food instruments. The State agency must design and implement a 
system to review food instruments submitted by vendors for redemption to 
ensure compliance with the applicable price limitations and to detect 
questionable food instruments, suspected vendor overcharges, and other 
errors. This review must examine either all or a representative sample 
of the food instruments and may be done either before or after the State 
agency

[[Page 405]]

makes payments on the food instruments. The review must include a price 
comparison or other edit designed to ensure compliance with the 
applicable price limitations and to assist in detecting vendor 
overcharges. For printed food instruments, the system also must detect 
the following errors: purchase price missing; participant, parent/
caretaker, or proxy signature missing; vendor identification missing; 
food instruments transacted or redeemed after the specified time 
periods; and, as appropriate, altered purchase price. The State agency 
must take follow-up action within 120 days of detecting any questionable 
food instruments, suspected vendor overcharges, and other errors and 
must implement procedures to reduce the number of errors when possible.
    (2) Delaying payment and establishing a claim. When the State agency 
determines the vendor has committed a vendor violation that affects the 
payment to the vendor, the State agency must delay payment or establish 
a claim. Such vendor violations may be detected through compliance 
investigations, food instrument reviews, or other reviews or 
investigations of a vendor's operations. The State agency may delay 
payment or establish a claim in the amount of the full purchase price of 
each food instrument that contained the vendor overcharge or other 
error.
    (3) Opportunity to justify or correct. When payment for a food 
instrument is delayed or a claim is established, the State agency must 
provide the vendor with an opportunity to justify or correct the vendor 
overcharge or other error. If satisfied with the justification or 
correction, the State agency must provide payment or adjust the proposed 
claim accordingly.
    (4) Timeframe and offset. The State agency must deny payment or 
initiate claims collection action within 90 days of either the date of 
detection of the vendor violation or the completion of the review or 
investigation giving rise to the claim, whichever is later. Claims 
collection action may include offset against current and subsequent 
amounts owed to the vendor.
    (5) Food instruments redeemed after the specified period. With 
justification and documentation, the State agency may pay vendors for 
food instruments submitted for redemption after the specified period for 
redemption. If the total value of such food instruments submitted at one 
time exceeds $500.00, the State agency must obtain the approval of the 
FNS Regional Office before payment.
    (l) Retail food delivery systems: Vendor sanctions--(1) Mandatory 
vendor sanctions--(i) Permanent disqualification. The State agency must 
permanently disqualify a vendor convicted of trafficking in food 
instruments or selling firearms, ammunition, explosives, or controlled 
substances (as defined in section 102 of the Controlled Substances Act 
(21 U.S.C. 802)) in exchange for food instruments. A vendor is not 
entitled to receive any compensation for revenues lost as a result of 
such violation. If reflected in its State Plan, the State agency may 
impose a civil money penalty in lieu of a disqualification for this 
violation when it determines, in its sole discretion, and documents 
that:
    (A) Disqualification of the vendor would result in inadequate 
participant access; or
    (B) The vendor had, at the time of the violation, an effective 
policy and program in effect to prevent trafficking; and the ownership 
of the vendor was not aware of, did not approve of, and was not involved 
in the conduct of the violation.
    (ii) Six-year disqualification. The State agency must disqualify a 
vendor for six years for:
    (A) One incidence of buying or selling food instruments for cash 
(trafficking); or
    (B) One incidence of selling firearms, ammunition, explosives, or 
controlled substances as defined in 21 U.S.C. 802, in exchange for food 
instruments.
    (iii) Three-year disqualification. The State agency must disqualify 
a vendor for three years for:
    (A) One incidence of the sale of alcohol or alcoholic beverages or 
tobacco products in exchange for food instruments;
    (B) A pattern of claiming reimbursement for the sale of an amount of 
a specific supplemental food item which

[[Page 406]]

exceeds the store's documented inventory of that supplemental food item 
for a specific period of time;
    (C) A pattern of vendor overcharges;
    (D) A pattern of receiving, transacting and/or redeeming food 
instruments outside of authorized channels, including the use of an 
unauthorized vendor and/or an unauthorized person;
    (E) A pattern of charging for supplemental food not received by the 
participant; or
    (F) A pattern of providing credit or non-food items, other than 
alcohol, alcoholic beverages, tobacco products, cash, firearms, 
ammunition, explosives, or controlled substances as defined in 21 U.S.C. 
802, in exchange for food instruments.
    (iv) One-year disqualification. The State agency must disqualify a 
vendor for one year for a pattern of providing unauthorized food items 
in exchange for food instruments, including charging for supplemental 
foods provided in excess of those listed on the food instrument.
    (v) Second mandatory sanction. When a vendor, who previously has 
been assessed a sanction for any of the violations in paragraphs 
(l)(1)(ii) through (l)(1)(iv) of this section, receives another sanction 
for any of these violations, the State agency must double the second 
sanction. Civil money penalties may only be doubled up to the limits 
allowed under paragraph (l)(1)(x)(C) of this section.
    (vi) Third or subsequent mandatory sanction. When a vendor, who 
previously has been assessed two or more sanctions for any of the 
violations listed in paragraphs (l)(1)(ii) through (l)(1)(iv) of this 
section, receives another sanction for any of these violations, the 
State agency must double the third sanction and all subsequent 
sanctions. The State agency may not impose civil money penalties in lieu 
of disqualification for third or subsequent sanctions for violations 
listed in paragraphs (l)(1)(ii) through (l)(1)(iv) of this section.
    (vii) Disqualification based on a Food Stamp Program 
disqualification. The State agency must disqualify a vendor who has been 
disqualified from the Food Stamp Program. The disqualification must be 
for the same length of time as the Food Stamp Program disqualification, 
may begin at a later date than the Food Stamp Program disqualification, 
and is not subject to administrative or judicial review under the WIC 
Program.
    (viii) Voluntary withdrawal or nonrenewal of agreement. The State 
agency may not accept voluntary withdrawal of the vendor from the 
Program as an alternative to disqualification for the violations listed 
in paragraphs (l)(1)(i) through (l)(1)(iv) of this section, but must 
enter the disqualification on the record. In addition, the State agency 
may not use nonrenewal of the vendor agreement as an alternative to 
disqualification.
    (ix) Participant access determinations. Prior to disqualifying a 
vendor for a Food Stamp Program disqualification pursuant to paragraph 
(l)(1)(vii) of this section or for any of the violations listed in 
paragraphs (l)(1)(ii) through (l)(1)(iv) of this section, the State 
agency must determine if disqualification of the vendor would result in 
inadequate participant access. The State agency must make the 
participant access determination in accordance with paragraph (l)(8) of 
this section. If the State agency determines that disqualification of 
the vendor would result in inadequate participant access, the State 
agency must impose a civil money penalty in lieu of disqualification. 
However, as provided in paragraph (l)(1)(vi) of this section, the State 
agency may not impose a civil money penalty in lieu of disqualification 
for third or subsequent sanctions for violations in paragraphs 
(l)(1)(ii) through (l)(1)(iv) of this section. The State agency must 
include documentation of its participant access determination and any 
supporting documentation in the file of each vendor who is disqualified 
or receives a civil money penalty in lieu of disqualification.
    (x) Civil money penalty formula. For each violation subject to a 
mandatory sanction, the State agency must use the following formula to 
calculate a civil money penalty imposed in lieu of disqualification:
    (A) Determine the vendor's average monthly redemptions for at least 
the 6-

[[Page 407]]

month period ending with the month immediately preceding the month 
during which the notice of adverse action is dated;
    (B) Multiply the average monthly redemptions figure by 10 percent 
(.10);
    (C) Multiply the product from paragraph (l)(1)(x)(B) of this section 
by the number of months for which the store would have been 
disqualified. This is the amount of the civil money penalty, provided 
that the civil money penalty shall not exceed $10,000 for each 
violation. For a violation that warrants permanent disqualification, the 
amount of the civil money penalty shall be $10,000, except for those 
violations listed in paragraph (l)(1)(i) of this section, where the 
civil money penalty shall be the maximum amount per violation specified 
in Sec. 3.91(b)(3)(v) of this title for trafficking violations, or 
Sec. 3.91(b)(3)(vi) of this title for selling firearms, ammunition, 
explosives, or controlled substances in exchange for food instruments. 
When during the course of a single investigation the State agency 
determines a vendor has committed multiple violations, the State agency 
must impose a CMP for each violation. The total amount of civil money 
penalties imposed for violations investigated as part of a single 
investigation may not exceed $40,000, except for those violations listed 
in paragraph (l)(1)(i) of this section, where the total amount of civil 
money penalties may not exceed the maximum amount for violations 
occurring during a single investigation specified in Sec. 3.91(b)(3)(v) 
of this title for trafficking violations, or Sec. 3.91(b)(3)(vi) of 
this title for selling firearms, ammunition, explosives, or controlled 
substances in exchange for food instruments.
    (xi) Notification to FNS. The State agency must provide the 
appropriate FNS office with a copy of the notice of adverse action and 
information on vendors it has either disqualified or imposed a civil 
money penalty in lieu of disqualification for any of the violations 
listed in paragraphs (l)(1)(i) through (l)(1)(iv) of this section. This 
information must include the name of the vendor, address, identification 
number, the type of violation(s), and the length of disqualification or 
the length of the disqualification corresponding to the violation for 
which the civil money penalty was assessed, and must be provided within 
15 days after the vendor's opportunity to file for a WIC administrative 
review has expired or all of the vendor's WIC administrative reviews 
have been completed.
    (xii) Multiple violations during a single investigation. When during 
the course of a single investigation the State agency determines a 
vendor has committed multiple violations (which may include violations 
subject to State agency sanctions), the State agency must disqualify the 
vendor for the period corresponding to the most serious mandatory 
violation. However, the State agency must include all violations in the 
notice of administration action. If a mandatory sanction is not upheld 
on appeal, then the State agency may impose a State agency-established 
sanction.
    (2) State agency vendor sanctions. (i) General requirements. The 
State agency may impose sanctions for vendor violations that are not 
specified in paragraphs (l)(1)(i) through (l)(1)(iv) of this section as 
long as such vendor violations and sanctions are included in the State 
agency's sanction schedule. State agency sanctions may include 
disqualifications, civil money penalties assessed in lieu of 
disqualification, and administrative fines. The total period of 
disqualification imposed for State agency violations investigated as 
part of a single investigation may not exceed one year. A civil money 
penalty or fine may not exceed $10,000 for each violation. The total 
amount of civil money penalties and administrative fines imposed for 
violations investigated as part of a single investigation may not exceed 
$40,000.
    (ii) Food Stamp Program civil money penalty for hardship. The State 
agency may disqualify a vendor that has been assessed a civil money 
penalty for hardship in the Food Stamp Program, as provided under Sec. 
278.6 of this chapter. The length of such disqualification must 
correspond to the period for which the vendor would otherwise have been 
disqualified in the Food Stamp Program. If a State agency decides to 
exercise this option, the State agency must:

[[Page 408]]

    (A) Include notification that it will take such disqualification 
action in its sanction schedule; and
    (B) Determine if disqualification of the vendor would result in 
inadequate participant access in accordance with paragraph (l)(8) of 
this section. If the State agency determines that disqualification of 
the vendor would result in inadequate participant access, the State 
agency may not disqualify the vendor or impose a civil money penalty in 
lieu of disqualification. The State agency must include documentation of 
its participant access determination and any supporting documentation in 
each vendor's file.
    (iii) A mandatory sanction by another WIC State agency. The State 
agency may disqualify a vendor that has been disqualified or assessed a 
civil money penalty in lieu of disqualification by another WIC State 
agency for a mandatory vendor sanction. The length of the 
disqualification must be for the same length of time as the 
disqualification by the other WIC State agency or, in the case of a 
civil money penalty in lieu of disqualification assessed by the other 
WIC State agency, for the same length of time for which the vendor would 
otherwise have been disqualified. The disqualification may begin at a 
later date than the sanction imposed by the other WIC State agency. If a 
State agency decides to exercise this option, the State agency must:
    (A) Include notification that it will take such action in its 
sanction schedule; and
    (B) Determine if disqualification of the vendor would result in 
inadequate participant access in accordance with paragraph (l)(8) of 
this section. If the State agency determines that disqualification of 
the vendor would result in inadequate participant access, the State 
agency must impose a civil money penalty in lieu of disqualification, 
except that the State agency may not impose a civil money penalty in 
situations in which the vendor has been assessed a civil money penalty 
in lieu of disqualification by the other WIC State agency. Any civil 
money penalty in lieu of disqualification must be calculated in 
accordance with paragraph (l)(2)(x) of this section. The State agency 
must include documentation of its participant access determination and 
any supporting documentation in each vendor's file.
    (3) Prior warning. The State agency does not have to provide the 
vendor with prior warning that violations were occurring before imposing 
any of the sanctions in paragraph (l) of this section.
    (4) Administrative reviews. The State agency must provide 
administrative reviews of sanctions to the extent required by Sec. 
246.18.
    (5) Installment plans. The State agency may use installment plans 
for the collection of civil money penalties and administrative fines.
    (6) Failure to pay a civil money penalty. If a vendor does not pay, 
only partially pays, or fails to timely pay a civil money penalty 
assessed in lieu of disqualification, the State agency must disqualify 
the vendor for the length of the disqualification corresponding to the 
violation for which the civil money penalty was assessed (for a period 
corresponding to the most serious violation in cases where a mandatory 
sanction included the imposition of multiple civil money penalties as a 
result of a single investigation).
    (7) Actions in addition to sanctions. Vendors may be subject to 
actions in addition to the sanctions in this section, such as claims 
pursuant to paragraph (k) of this section and the penalties set forth in 
Sec. 246.23(c) in the case of deliberate fraud.
    (8) Participant access determination criteria. The State agency must 
develop participant access criteria. When making participant access 
determinations, the State agency must consider the availability of other 
authorized vendors in the same area as the violative vendor and any 
geographic barriers to using such vendors.
    (9) Termination of agreement. When the State agency disqualifies a 
vendor, the State agency must also terminate the vendor agreement.
    (m) Home food delivery systems. Home food delivery systems are 
systems in which authorized supplemental foods are delivered to the 
participant's home. Home food delivery systems must provide for:
    (1) Procurement. Procurement of supplemental foods in accordance 
with

[[Page 409]]

Sec. 246.24, which may entail measures such as the purchase of food in 
bulk lots by the State agency and the use of discounts that are 
available to States.
    (2) Accountability. The accountable delivery of authorized 
supplemental foods to participants. The State agency must ensure that:
    (i) Home food delivery contractors are paid only after the delivery 
of authorized supplemental foods to participants;
    (ii) A routine procedure exists to verify the correct delivery of 
authorized supplemental foods to participants, and, at a minimum, such 
verification occurs at least once a month after delivery; and
    (iii) Records of delivery of supplemental foods and bills sent or 
payments received for such supplemental foods are retained for at least 
three years. Federal, State, and local authorities must have access to 
such records.
    (n) Direct distribution food delivery systems. Direct distribution 
food delivery systems are systems in which participants, parents or 
caretakers of infant or child participants, or proxies pick up 
authorized supplemental foods from storage facilities operated by the 
State agency or its local agencies. Direct distribution food delivery 
systems must provide for:
    (1) Storage and insurance. Adequate storage and insurance coverage 
that minimizes the danger of loss due to theft, infestation, fire, 
spoilage, or other causes;
    (2) Inventory. Adequate inventory control of supplemental foods 
received, in stock, and issued;
    (3) Procurement. Procurement of supplemental foods in accordance 
with Sec. 246.24, which may entail measures such as purchase of food in 
bulk lots by the State agency and the use of discounts that are 
available to States;
    (4) Availability. The availability of program benefits to 
participants and potential participants who live at great distance from 
storage facilities; and
    (5) Accountability. The accountable delivery of authorized 
supplemental foods to participants.
    (o) Participant, parent/caretaker, proxy, vendor, and home food 
delivery contractor complaints. The State agency must have procedures to 
document the handling of complaints by participants, parents or 
caretakers of infant or child participants, proxies, vendors, home food 
delivery contractors, and direct distribution contractors. Complaints of 
civil rights discrimination must be handled in accordance with Sec. 
246.8(b).
    (p) Food instrument security. The State agency must develop 
standards for ensuring the security of food instruments from the time 
the food instruments are created to the time they are issued to 
participants, parents/caretakers, or proxies. For pre-printed food 
instruments, these standards must include maintenance of perpetual 
inventory records of food instruments throughout the State agency's 
jurisdiction; monthly physical inventory of food instruments on hand 
throughout the State agency's jurisdiction; reconciliation of perpetual 
and physical inventories of food instruments; and maintenance of all 
food instruments under lock and key, except for supplies needed for 
immediate use. For EBT and print-on-demand food instruments, the 
standards must provide for the accountability and security of the means 
to manufacture and issue such food instruments.
    (q) Food instrument disposition. The State agency must account for 
the disposition of all food instruments as either issued or voided, and 
as either redeemed or unredeemed. Redeemed food instruments must be 
identified as validly issued, lost, stolen, expired, duplicate, or not 
matching valid enrollment and issuance records. In an EBT system, 
evidence of matching redeemed food instruments to valid enrollment and 
issuance records may be satisfied through the linking of the Primary 
Account Number (PAN) associated with the electronic transaction to valid 
enrollment and issuance records. This process must be performed within 
120 days of the first valid date for participant use of the food 
instruments and must be conducted in accordance with the financial 
management requirements of Sec. 246.13. The State agency will be 
subject to claims as outlined in Sec. 246.23(a)(4) for redeemed food 
instruments that do not meet the conditions established in paragraph (q) 
of this section.

[[Page 410]]

    (r) Issuance of food instruments and authorized supplemental foods. 
The State agency must:
    (1) Parents/caretakers and proxies. Establish uniform procedures 
that allow parents and caretakers of infant and child participants and 
proxies to obtain and transact food instruments or obtain authorized 
supplemental foods on behalf of a participant. In determining whether a 
particular participant or parent/caretaker should be allowed to 
designate a proxy or proxies, the State agency must require the local 
agency or clinic to consider whether adequate measures can be 
implemented to provide nutrition education and health care referrals to 
that participant or, in the case of an infant or child participant, to 
the participant's parent or caretaker;
    (2) Signature requirement. Ensure that the participant, parent or 
caretaker of an infant or child participant, or proxy signs for receipt 
of food instruments or authorized supplemental foods, except as provided 
in paragraph (r)(4) of this section;
    (3) Instructions. Ensure that participants, parents or caretakers of 
infant and child participants, and proxies receive instructions on the 
proper use of food instruments, or on the procedures for obtaining 
authorized supplemental foods when food instruments are not used. The 
State agency must also ensure that participants, parents or caretakers 
of infant and child participants, and proxies are notified that they 
have the right to complain about improper vendor and home food delivery 
contractor practices with regard to program responsibilities;
    (4) Food instrument pick up. Require participants, parents and 
caretakers of infant and child participants, and proxies to pick up food 
instruments in person when scheduled for nutrition education or for an 
appointment to determine whether participants are eligible for a second 
or subsequent certification period. However, in all other circumstances 
the State agency may provide for issuance through an alternative means 
such as EBT or mailing, unless FNS determines that such actions would 
jeopardize the integrity of program services or program accountability. 
If a State agency opts to mail food instruments, it must provide 
justification, as part of its alternative issuance system in its State 
Plan, as required in Sec. 246.4(a)(21), for mailing food instruments to 
areas where food stamps are not mailed. State agencies that opt to mail 
food instruments must establish and implement a system that ensures the 
return of food instruments to the State or local agency if a participant 
no longer resides or receives mail at the address to which the food 
instruments were mailed; and
    (5) Maximum issuance of food instruments. Ensure that no more than a 
three-month supply of food instruments or a one-month supply of 
authorized supplemental foods is issued at any one time to any 
participant, parent or caretaker of an infant or child participant, or 
proxy.
    (s) Payment to vendors and home food delivery contractors. The State 
agency must ensure that vendors and home food delivery contractors are 
paid promptly. Payment must be made within 60 days after valid food 
instruments are submitted for redemption. Actual payment to vendors and 
home food delivery contractors may be made by local agencies.
    (t) Conflict of interest. The State agency must ensure that no 
conflict of interest exists, as defined by applicable State laws, 
regulations, and policies, between the State agency and any vendor or 
home food delivery contractor, or between any local agency and any 
vendor or home food delivery contractor under its jurisdiction.
    (u) Participant violations and sanctions--(1) General requirements. 
The State agency must establish procedures designed to control 
participant violations. The State agency also must establish sanctions 
for participant violations. Participant sanctions may include 
disqualification from the Program for a period of up to one year.
    (2) Mandatory disqualification. (i) General. Except as provided in 
paragraphs (u)(2)(ii) and (u)(2)(iii) of this section, whenever the 
State agency assesses a claim of $100 or more, assesses a claim for dual 
participation, or assess a second or subsequent claim of any amount, the 
State agency must disqualify the participant for one year.

[[Page 411]]

    (ii) Exceptions to mandatory disqualification. The State agency may 
decide not to impose a mandatory disqualification if, within 30 days of 
receipt of the letter demanding repayment, full restitution is made or a 
repayment schedule is agreed on, or, in the case of a participant who is 
an infant, child, or under age 18, the State or local agency approves 
the designation of a proxy.
    (iii) Terminating a mandatory disqualification. The State agency may 
permit a participant to reapply for the Program before the end of a 
mandatory disqualification period if full restitution is made or a 
repayment schedule is agreed upon or, in the case of a participant who 
is an infant, child, or under age 18, the State or local agency approves 
the designation of a proxy.
    (3) Warnings before sanctions. The State agency may provide warnings 
before imposing participant sanctions.
    (4) Fair hearings. At the time the State agency notifies a 
participant of a disqualification, the State agency must advise the 
participant of the procedures to follow to obtain a fair hearing 
pursuant to Sec. 246.9.
    (5) Referral to law enforcement authorities. When appropriate, the 
State agency must refer vendors, home food delivery contractors, and 
participants who violate program requirements to Federal, State, or 
local authorities for prosecution under applicable statutes.

[65 FR 83278, Dec. 29, 2000, as amended at 70 FR 29579, May 24, 2005; 70 
FR 71722, Nov. 29, 2005; 71 FR 56731, Sept. 27, 2006]

    Effective Date Note: At 72 FR 68995, Dec. 6, 2007, Sec. 246.12 was 
amended by revising the second sentence of paragraph (a)(1), the heading 
of paragraph (f), and paragraphs (f)(1), (2) introductory text, 
(2)(iii), (3), (g)(3)(i), (h)(3)(ii), (iv) through (vi), (x), and 
paragraphs (k)(1), (5), and (o) through (s), by adding paragraph (v), in 
paragraphs (e), (f)(2)(i), (ii), (iv), (h)(3)(ix), (k)(2), and (3), by 
removing the words ``food instrument'' wherever they appear and adding 
in their place the words ``food instrument or cash-value voucher'', in 
paragraphs (h)(3)(i), (xv), and (i)(2), by removing the words ``food 
instruments'' wherever they appear and adding in their place the words 
``food instruments and cash-value vouchers'', and in paragraphs 
(l)(1)(i), (ii)(B), (iii)(A), (D), and (l)(1)(iii)(F), by removing the 
words ``food instruments'' wherever they appear and adding in their 
place the words ``food instruments or cash-value vouchers'', effective 
February 4, 2008. For the convenience of the user, the added and revised 
text is set forth as follows:

Sec. 246.12  Food delivery systems.

    (a) * * *
    (1) * * * The State agency may permit only authorized vendors and 
farmers, home food delivery contractors, and direct distribution sites 
to accept food instruments and cash-value vouchers.

                                * * * * *

    (f) Retail food delivery systems: Food instrument and cash-value 
voucher requirements--(1) General. State agencies using retail food 
delivery systems must use food instruments and cash-value vouchers that 
comply with the requirements of paragraph (f)(2) of this section.
    (2) Printed food instruments and cash-value vouchers. Each printed 
food instrument and cash-value voucher must clearly bear on its face the 
following information:

                                * * * * *

    (iii) Last date of use. The last date on which the food instrument 
or cash-value vouchers may be used to obtain authorized supplemental 
foods. This date must be a minimum of 30 days from the first date on 
which it may be used, except for the participant's first month of 
issuance, when it may be the end of the month or cycle for which the 
food instrument or cash-value voucher is valid. Rather than entering a 
specific last date of use on each instrument or cash-value voucher, all 
instruments or cash-value vouchers may be printed with a notice that the 
participant must transact them within a specified number of days after 
the first date on which the food instrument or cash-value voucher may be 
used;

                                * * * * *

    (3) Vendor identification. The State agency must implement 
procedures to ensure each food instrument and cash-value voucher 
submitted for redemption can be identified by the vendor or farmer that 
submitted the food instrument or cash-value voucher. Each vendor 
operated by a single business entity must be identified separately. The 
State agency may identify vendors by requiring that all authorized 
vendors stamp their names and/or enter a vendor identification number on 
all food instruments or cash-value vouchers prior to submitting them for 
redemption.
    (g) * * *
    (3) * * *
    (i) Minimum variety and quantity of supplemental foods. The State 
agency must establish minimum requirements for the variety and quantity 
of supplemental foods that a

[[Page 412]]

vendor applicant must stock to be authorized. These requirements include 
that the vendor stock at least two varieties of fruits, two varieties of 
vegetables, and at least one whole grain cereal authorized by the State 
agency. The State agency may not authorize a vendor applicant unless it 
determines that the vendor applicant meets these minimums. The State 
agency may establish different minimums for different vendor peer 
groups.

                                * * * * *

    (h) * * *
    (3) * * *
    (ii) No substitutions, cash, credit, refunds, or exchanges. The 
vendor may provide only the authorized supplemental foods listed on the 
food instrument and cash-value voucher. The vendor may not provide 
unauthorized food items, non-food items, cash, or credit (including 
rainchecks) in exchange for food instruments or cash-value vouchers. The 
vendor may not provide refunds or permit exchanges for authorized 
supplemental foods obtained with food instruments or cash-value 
vouchers, except for exchanges of an identical authorized supplemental 
food item when the original authorized supplemental food item is 
defective, spoiled, or has exceeded its ``sell by,'' ``best if used 
by,'' or other date limiting the sale or use of the food item. An 
identical authorized supplemental food item means the exact brand and 
size as the original authorized supplemental food item obtained and 
returned by the participant.

                                * * * * *

    (iv) Time periods for transacting food instruments and cash-value 
vouchers. The vendor may accept a food instrument or cash-value voucher 
only within the specified time period.
    (v) Purchase price on food instruments and cash-value vouchers. The 
vendor must ensure that the purchase price is entered on food 
instruments and cash-value vouchers in accordance with the procedures 
described in the vendor agreement. The State agency has the discretion 
to determine whether the vendor or the participant enters the purchase 
price. The purchase price must include only the authorized supplemental 
food items actually provided and must be entered on the food instrument 
or cash-value voucher before it is signed.
    (vi) Signature on food instruments and cash-value vouchers. For 
printed food instruments and cash-value vouchers, the vendor must ensure 
the participant, parent or caretaker of an infant or child participant, 
or proxy signs the food instrument or cash-value voucher in the presence 
of the cashier. In EBT systems, a Personal Identification Number (PIN) 
may be used in lieu of a signature.

                                * * * * *

    (x) No charge for authorized supplemental foods or restitution from 
participants. The vendor may not charge participants, parents or 
caretakers of infant and child participants, or proxies for authorized 
supplemental foods obtained with food instruments or cash-value 
vouchers. In addition, the vendor may not seek restitution from these 
individuals for food instruments or cash-value vouchers not paid or 
partially paid by the State agency. The State agency may, however, allow 
participants, parents or caretakers of child participants to pay the 
difference when the purchase of authorized fruits and vegetables exceeds 
the value of the cash-value voucher.

                                * * * * *

    (k) * * *
    (1) System to review food instruments and cash-value vouchers for 
vendor claims. The State agency must design and implement a system to 
review food instruments and cash-value vouchers submitted by vendors for 
redemption to ensure compliance with the applicable price limitations 
and to detect questionable food instruments or cash-value vouchers, 
suspected vendor overcharges, and other errors. This review must examine 
either all or a representative sample of the food instruments and cash-
value vouchers and may be done either before or after the State agency 
makes payments on the food instruments or cash-value vouchers. The 
review of food instruments must include a price comparison or other edit 
designed to ensure compliance with the applicable price limitations and 
to assist in detecting vendor overcharges. For printed food instruments 
and cash-value vouchers the system also must detect the following 
errors--purchase price missing; participant, parent/caretaker, or proxy 
signature missing; vendor identification missing; food instruments or 
cash-value vouchers transacted or redeemed after the specified time 
periods; and, as appropriate, altered purchase price. The State agency 
must take follow-up action within 120 days of detecting any questionable 
food instruments or cash-value vouchers, suspected vendor overcharges, 
and other errors and must implement procedures to reduce the number of 
errors when possible.

                                * * * * *

    (5) Food instruments and cash-value vouchers redeemed after the 
specified period. With justification and documentation, the State agency 
may pay vendors for food instruments and cash-value vouchers submitted 
for

[[Page 413]]

redemption after the specified period for redemption. If the total value 
of such food instruments or cash-value vouchers submitted at one time 
exceeds $500.00, the State agency must obtain the approval of the FNS 
Regional Office before payment.

                                * * * * *

    (o) Participant, parent/caretaker, proxy, vendor, farmer and home 
food delivery contractor complaints. The State agency must have 
procedures to document the handling of complaints by participants, 
parents or caretakers of infant or child participants, proxies, vendors, 
farmers, home food delivery contractors, and direct distribution 
contractors. Complaints of civil rights discrimination must be handled 
in accordance with Sec. 246.8(b).
    (p) Food instrument and cash-value voucher security. The State 
agency must develop standards for ensuring the security of food 
instruments and cash-value vouchers from the time the food instruments 
and cash-value vouchers are created to the time they are issued to 
participants, parents/caretakers, or proxies. For pre-printed food 
instruments or cash-value vouchers, these standards must include 
maintenance of perpetual inventory records of food instruments or cash-
value vouchers throughout the State agency's jurisdiction; monthly 
physical inventory of food instruments or cash-value vouchers on hand 
throughout the State agency's jurisdiction; reconciliation of perpetual 
and physical inventories of food instruments and cash-value vouchers; 
and maintenance of all food instruments and cash-value vouchers under 
lock and key, except for supplies needed for immediate use. For EBT and 
print-on-demand food instruments and cash-value vouchers, the standards 
must provide for the accountability and security of the means to 
manufacture and issue such food instruments and cash-value vouchers.
    (q) Food instrument and cash-value voucher disposition. The State 
agency must account for the disposition of all food instruments and 
cash-value vouchers as either issued or voided, and as either redeemed 
or unredeemed. Redeemed food instruments and cash-value vouchers must be 
identified as validly issued, lost, stolen, expired, duplicate, or not 
matching valid enrollment and issuance records. In an EBT system, 
evidence of matching redeemed food instruments to valid enrollment and 
issuance records may be satisfied through the linking of the Primary 
Account Number (PAN) associated with the electronic transaction to valid 
enrollment and issuance records. This process must be performed within 
120 days of the first valid date for participant use of the food 
instruments and must be conducted in accordance with the financial 
management requirements of Sec. 246.13. The State agency will be 
subject to claims as outlined in Sec. 246.23(a)(4) for redeemed food 
instruments or cash-value vouchers that do not meet the conditions 
established in paragraph (q) of this section.
    (r) Issuance of food instruments, cash-value vouchers and authorized 
supplemental foods. The State agency must:
    (1) Parents/caretakers and proxies. Establish uniform procedures 
that allow parents and caretakers of infant and child participants and 
proxies to obtain and transact food instruments and cash-value vouchers 
or obtain authorized supplemental foods on behalf of a participant. In 
determining whether a particular participant or parent/caretaker should 
be allowed to designate a proxy or proxies, the State agency must 
require the local agency or clinic to consider whether adequate measures 
can be implemented to provide nutrition education and health care 
referrals to that participant or, in the case of an infant or child 
participant, to the participant's parent or caretaker;
    (2) Signature requirement. Ensure that the participant, parent or 
caretaker of an infant or child participant, or proxy signs for receipt 
of food instruments, cash-value vouchers or authorized supplemental 
foods, except as provided in paragraph (r)(4) of this section;
    (3) Instructions. Ensure that participants, parents or caretakers of 
infant and child participants, and proxies receive instructions on the 
proper use of food instruments and cash-value vouchers, or on the 
procedures for obtaining authorized supplemental foods when food 
instruments or cash-value vouchers are not used. The State agency must 
also ensure that participants, parents or caretakers of infant and child 
participants, and proxies are notified that they have the right to 
complain about improper vendor, farmer and home food delivery contractor 
practices with regard to program responsibilities;
    (4) Food instrument and cash-value voucher pick up. Require 
participants, parents and caretakers of infant and child participants, 
and proxies to pick up food instruments and cash-value vouchers in 
person when scheduled for nutrition education or for an appointment to 
determine whether participants are eligible for a second or subsequent 
certification period. However, in all other circumstances the State 
agency may provide for issuance through an alternative means such as EBT 
or mailing, unless FNS determines that such actions would jeopardize the 
integrity of program services or program accountability. If a State 
agency opts to mail food instruments and cash-value vouchers, it must 
provide justification, as part of its alternative issuance system in its 
State Plan, as required in Sec. 246.4(a)(21), for mailing food 
instruments and cash-value voucher to areas where food stamps are not 
mailed. State

[[Page 414]]

agencies that opt to mail food instruments and cash-value vouchers must 
establish and implement a system that ensures the return of food 
instruments and cash-value vouchers to the State or local agency if a 
participant no longer resides or receives mail at the address to which 
the food instruments and cash-value vouchers were mailed; and
    (5) Maximum issuance of food instruments and cash-value voucher. 
Ensure that no more than a three-month supply of food instruments and 
cash-value vouchers or a one-month supply of authorized supplemental 
foods is issued at any one time to any participant, parent or caretaker 
of an infant or child participant, or proxy.
    (s) Payment to vendors, farmers and home food delivery contractors. 
The State agency must ensure that vendors, farmers and home food 
delivery contractors are paid promptly. Payment must be made within 60 
days after valid food instruments or cash-value vouchers are submitted 
for redemption. Actual payment to vendors, farmers and home food 
delivery contractors may be made by local agencies.

                                * * * * *

    (v) Farmers. The State agency may authorize farmers at farmers 
markets (or roadside stands) to accept the cash-value voucher for 
eligible fruits and vegetables. The State agency must enter into written 
agreements with all authorized farmers. The agreement must be signed by 
a representative who has legal authority to obligate the farmer and a 
representative of the State agency. The agreement must be for a period 
not to exceed three years. Only farmers authorized by the State agency 
may redeem the fruit and vegetable cash-value voucher. The State agency 
must require farmers to reapply at the expiration of their agreements 
and must provide farmers with not less than 15 days advance written 
notice of the expiration of the agreement.
    (1) The agreement must include the following provisions, although 
the State agency may determine the exact wording. The farmer must:
    (i) Assure that the cash-value voucher is redeemed only for eligible 
fruits and vegetables as defined by the State agency;
    (ii) Provide eligible fruits and vegetables at the current price or 
less than the current price charged to other customers;
    (iii) Accept the cash-value voucher within the dates of their 
validity and submit such vouchers for payment within the allowable time 
period established by the State agency;
    (iv) Redeem the cash-value voucher in accordance with a procedure 
established by the State agency,
    (v) Accept training on cash-value voucher procedures and provide 
training to any employees with cash-value voucher responsibilities on 
such procedures;
    (vi) Agree to be monitored for compliance with program requirements, 
including both overt and covert monitoring;
    (vii) Be accountable for actions of employees in the provision of 
authorized foods and related activities;
    (viii) Pay the State agency for any cash-value vouchers transacted 
in violation of this agreement;
    (ix) Offer WIC participants, parent or caretakers of child 
participants or proxies the same courtesies as other customers;
    (x) Comply with the nondiscrimination provisions of USDA regulations 
as provided in Sec. 248.7; and
    (xi) Notify the State agency if any farmers' market ceases operation 
prior to the end of the authorization period.
    (2) The farmer must not:
    (i) Collect sales tax on cash-value voucher purchases;
    (ii) Seek restitution from WIC participants, parent or caretakers of 
child participants or proxies for cash-value vouchers not paid or 
partially paid by the State agency;
    (iii) Issue cash change for purchases that are in an amount less 
than the value of the cash-value voucher;
    (3) Neither the State agency nor the farmer has an obligation to 
renew the agreement. Either the State agency or the farmer may terminate 
the agreement for cause after providing advance written notification.
    (4) The State agency may deny payment to the farmer for improperly 
redeemed cash-value vouchers and may demand refunds for payments already 
made on improperly redeemed vouchers.
    (5) The State agency may disqualify a farmer for WIC Program abuse. 
The farmer has the right to appeal a denial of an application to 
participate, a disqualification, or a program sanction by the State 
agency. Expiration of an agreement with a farmer and claims actions 
under Sec. 246.23, are not appealable.
    (6) A farmer which commits fraud or engages in other illegal 
activity is liable to prosecution under applicable Federal, State or 
local laws.

Sec. 246.13  Financial management system.

    (a) Disclosure of expenditures. The State agency shall maintain a 
financial management system which provides accurate, current and 
complete disclosure of the financial status of the Program. This shall 
include an accounting for all property and other assets and all Program 
funds received and expended each fiscal year.
    (b) Internal control. The State agency shall maintain effective 
control over

[[Page 415]]

and accountability for all Program grants and funds. The State agency 
must have effective internal controls to ensure that expenditures 
financed with Program funds are authorized and properly chargeable to 
the Program.
    (c) Record of expenditures. The State agency shall maintain records 
which adequately identify the source and use of funds expended for 
Program activities. These records shall contain, but are not limited to, 
information pertaining to authorization, receipt of funds, obligations, 
unobligated balances, assets, liabilities, outlays, and income.
    (d) Payment of costs. The State shall implement procedures which 
ensure prompt and accurate payment of allowable costs, and ensure the 
allowability and allocability of costs in accordance with the cost 
principles and standard provisions of this part, 7 CFR part 3016, and 
FNS guidelines and instructions.
    (e) Identification of obligated funds. The State agency shall 
implement procedures which accurately identify obligated Program funds 
at the time the obligations are made.
    (f) Resolution of audit findings. The State agency shall implement 
procedures which ensure timely and appropriate resolution of claims and 
other matters resulting from audit findings and recommendations.
    (g) Use of minority- and women-owned banks. Consistent with the 
national goals of expanding opportunities for minority business 
enterprises, State and local agencies are encouraged to use minority- 
and women-owned banks.
    (h) Adjustment of expenditures. The State agency must adjust 
projected expenditures to account for redeemed food instruments and for 
other changes as appropriate.
    (i) Transfer of cash. The State agency shall have controls to 
minimize the time elapsing between receipt of Federal funds from the 
U.S. Department of Treasury and the disbursements of these funds for 
Program costs. In the Letter of Credit system, the State agency shall 
make drawdowns from the U.S. Department of Treasury's Regional 
Disbursing Office as close as possible to the actual date that 
disbursement of funds is made. Advances made by the State agency to 
local agencies shall also conform to these same standards.
    (j) Local agency financial management. The State agency shall ensure 
that all local agencies develop and implement a financial management 
system consistent with requirements prescribed by FNS and the State 
agency pursuant to the requirements of this section.

[50 FR 6121, Feb. 13, 1985; 50 FR 8098, Feb. 28, 1985, as amended at 65 
FR 83286, Dec. 29, 2000]

Sec. 246.14  Program costs.

    (a) General. (1) The two kinds of allowable costs under the Program 
are ``food costs'' and ``nutrition services and administration costs.'' 
In general, costs necessary to the fulfillment of Program objectives are 
to be considered allowable costs. The two types of nutrition services 
and administration costs are:
    (i) Direct costs. Those direct costs that are allowable under 7 CFR 
part 3016.
    (ii) Indirect costs. Those indirect costs that are allowable under 7 
CFR part 3016. When computing indirect costs, food costs may not be used 
in the base to which the indirect cost rate is applied. In accordance 
with the provisions of 7 CFR part 3016, a claim for indirect costs shall 
be supported by an approved allocation plan for the determination of 
allowable indirect costs.
    (2) Program funds may not be used to pay for retroactive benefits. 
Except as provided in paragraph (e) of this section and Sec. Sec. 
246.16(g) and 246.16(h) of this part, funds allocated by FNS for food 
purchases may not be used to pay nutrition services and administration 
costs. However, nutrition services and administration funds may be used 
to pay for food costs.
    (b) What costs may I charge to the food grant? (1) The State agency 
may use food funds for costs of:
    (i) Acquiring supplemental foods provided to State or local agencies 
or participants, whichever receives the supplemental food first;
    (ii) Warehousing supplemental foods; and
    (iii) Purchasing and renting breast pumps.
    (2) For costs to be allowable, the State agency must ensure that 
food costs do not exceed the customary

[[Page 416]]

sales price charged by the vendor, home food delivery contractor, or 
supplier in a direct distribution food delivery system. In addition, 
food costs may not exceed the price limitations applicable to the 
vendor.
    (c) Specified allowable nutrition services and administration costs. 
Allowable nutrition services and administration (NSA) costs include the 
following:
    (1) The cost of nutrition education and breastfeeding promotion and 
support which meets the requirements of Sec. 246.11. During each fiscal 
year, each State agency shall expend, for nutrition education activities 
and breastfeeding promotion and support activities, an aggregate amount 
that is not less than the sum of one-sixth of the amount expended by the 
State agency for costs of NSA and an amount equal to its proportionate 
share of the national minimum expenditure for breastfeeding promotion 
and support activities. The amount to be spent on nutrition education 
shall be computed by taking one-sixth of the total fiscal year NSA 
expenditures. The amount to be spent by a State agency on breastfeeding 
promotion and support activities shall be an amount that is equal to at 
least its proportionate share of the national minimum breastfeeding 
promotion expenditure as specified in paragraph (c)(1) of this section. 
The national minimum expenditure for breastfeeding promotion and support 
activities shall be equal to $21 multiplied by the number of pregnant 
and breastfeeding women in the Program, based on the average of the last 
three months for which the Department has final data. On October 1, 1996 
and each October 1 thereafter, the $21 will be adjusted annually using 
the same inflation percentage used to determine the national 
administrative grant per person. If the State agency's total reported 
nutrition education and breastfeeding promotion and support expenditures 
are less than the required amount of expenditures, FNS will issue a 
claim for the difference. The State agency may request prior written 
permission from FNS to spend less than the required portions of its NSA 
grant for either nutrition education or for breastfeeding promotion and 
support activities. FNS will grant such permission if the State agency 
has sufficiently documented that other resources, including in-kind 
resources, will be used to conduct these activities at a level 
commensurate with the requirements of this paragraph (c)(1). However, 
food costs used to purchase or rent breast pumps may not be used for 
this purpose. Nutrition education costs are limited to activities which 
are distinct and separate efforts to help participants understand the 
importance of nutrition to health. The cost of dietary assessments for 
the purpose of certification, the cost of prescribing and issuing 
supplemental foods, the cost of screening for drug and other harmful 
substance use and making referrals to drug and other harmful substance 
abuse services, and the cost of other health-related screening shall not 
be applied to the expenditure requirement for nutrition education and 
breastfeeding promotion and support activities. The Department shall 
advise State agencies regarding methods for minimizing documentation of 
the nutrition education and breastfeeding promotion and support 
expenditure requirement. Costs to be applied to the one-sixth minimum 
amount required to be spent on nutrition education and the target share 
of funds required to be spent on breastfeeding promotion and support 
include, but need not be limited to--
    (i) Salary and other costs for time spent on nutrition education and 
breastfeeding promotion and support consultations whether with an 
individual or group;
    (ii) The cost of procuring and producing nutrition education and 
breastfeeding promotion and support materials including handouts, flip 
charts, filmstrips, projectors, food models or other teaching aids, and 
the cost of mailing nutrition education or breastfeeding promotion and 
support materials to participants;
    (iii) The cost of training nutrition or breastfeeding promotion and 
support educators, including costs related to conducting training 
sessions and purchasing and producing training materials;
    (iv) The cost of conducting evaluations of nutrition education or 
breastfeeding promotion and support

[[Page 417]]

activities, including evaluations conducted by contractors;
    (v) Salary and other costs incurred in developing the nutrition 
education and breastfeeding promotion and support portion of the State 
Plan and local agency nutrition education and breastfeeding promotion 
and support plans; and
    (vi) The cost of monitoring nutrition education and breastfeeding 
promotion and support activities.
    (2) The cost of Program certification, nutrition assessment and 
procedures and equipment used to determine nutritional risk, including 
the following:
    (i) Laboratory fees incurred for up to two hematological tests for 
anemia per individual per certification period. The first test shall be 
to determine anemia status. The second test may be performed only in 
follow up to a finding of anemia when deemed necessary for health 
monitoring as determined by the WIC State agency;
    (ii) Expendable medical supplies;
    (iii) Medical equipment used for taking anthropometric measurements, 
such as scales, measuring boards, and skin fold calipers; and for blood 
analysis to detect anemia, such as spectrophotometers, 
hematofluorometers and centrifuges; and
    (iv) Salary and other costs for time spent on nutrition assessment 
and certification.
    (3) The cost of outreach services.
    (4) The cost of administering the food delivery system, including 
the cost of transporting food.
    (5) The cost of translators for materials and interpreters.
    (6) The cost of fair hearings, including the cost of an independent 
medical assessment of the appellant, if necessary.
    (7) The cost of transporting participants to clinics when prior 
approval for using Program funds to provide transportation has been 
granted by the State agency and documentation that such service is 
considered essential to assure Program access has been filed at the 
State agency. Direct reimbursement to participants for transportation 
cost is not an allowable cost.
    (8) The cost of monitoring and reviewing Program operations.
    (9) The cost, exclusive of laboratory tests, of screening for drug 
and other harmful substance use and making referrals for counseling and 
treatment services.
    (10) The cost of breastfeeding aids which directly support the 
initiation and continuation of breastfeeding.
    (d) Costs allowable with approval. The costs of capital expenditures 
exceeding the dollar threshold established in Agency policy and guidance 
are allowable only with the approval of FNS prior to the capital 
investment. These expenditures include the costs of facilities, 
equipment (including medical equipment), automated data processing (ADP) 
projects, other capital assets, and any repairs that materially increase 
the value or useful life of such assets.
    (e) How and when may I use my funds recovered from vendors and 
participants? (1) The State agency may keep funds collected through the 
recovery of claims assessed against food vendors or participants. 
Recovered funds include those withheld from a vendor as a result of 
reviews of food instruments prior to payment. Recovered funds may be 
used for either food or NSA costs.
    (2) These recovered funds may be used in the fiscal year:
    (i) In which the initial obligation was made;
    (ii) In which the claim arose;
    (iii) In which the funds are collected; or
    (iv) after the funds are collected.
    (3) The State agency may not credit any recoveries until:
    (i) In the case of a vendor claim, the vendor has had the 
opportunity to correct or justify the error or apparent overcharge in 
accordance with Sec. 246.12(k)(3); or
    (ii) In the case of a participant, any administrative hearing 
requested in accordance with Sec. 246.9 has been completed.
    (4) The State agency must report vendor and participant recoveries 
to FNS through the normal reporting process;
    (5) The State agency must keep documentation supporting the amount 
and

[[Page 418]]

use of these vendor and participant recoveries.

[50 FR 6121, Feb. 13, 1987, as amended at 52 FR 21237, June 4, 1987; 53 
FR 25314, July 6, 1988; 54 FR 18091, Apr. 27, 1989; 58 FR 11507, Feb. 
26, 1993; 59 FR 11503, Mar. 11, 1994; 63 FR 63974, Nov. 18, 1998; 64 FR 
67999, Dec. 6, 1999; 64 FR 70178, Dec. 16, 1999; 65 FR 83286, Dec. 29, 
2000; 71 FR 56731, Sept. 27, 2006]

Sec. 246.15  Program income other than grants.

    (a) Interest earned on advances. Interest earned on advances of 
Program funds at the State and local levels shall be treated in 
accordance with the provisions of 31 CFR Part 205, which implement the 
requirements of the Cash Management Improvement Act of 1990. However, 
State agencies will not incur an interest liability to the Federal 
government on rebate funds for infant formula or other foods, provided 
that all interest earned on such funds is used for program purposes.
    (b) Other Program income. The State agency may use current program 
income (applied in accordance with the addition method described in 
Sec. 3016.25(g)(2) of this title) for costs incurred in the current 
fiscal year and, with the approval of FNS, for costs incurred in 
previous years or subsequent fiscal years. Provided that the costs 
supported by the income further the broad objectives of the Program, 
they need not be a kind that would be permissible as charges to Federal 
funds. Money received by the State agency as a result of civil money 
penalties or fines assessed against a vendor and any interest charged in 
the collection of these penalties and fines shall be considered as 
program income.

[50 FR 6121, Feb. 13, 1985, as amended at 63 FR 63974, Nov. 18, 1998; 64 
FR 13324, Mar. 18, 1999; 71 FR 56731, Sept. 27, 2006]

Sec. 246.16  Distribution of funds.

    (a) General. This paragraph describes the timeframes for 
distribution of appropriated funds by the Department to participating 
State agencies and the authority for the Secretary to use appropriated 
funds for evaluation studies and demonstration projects.
    (1) Authorized appropriations to carry out the provisions of this 
section may be made not more than 1 year in advance of the beginning of 
the fiscal year in which the funds shall become available for 
disbursement to the State agencies. The funds shall remain available for 
the purposes for which appropriated until expended.
    (2) In the case of appropriations legislation providing funds 
through the end of a fiscal year, the Secretary shall issue to State 
agencies an initial allocation of funds provided under such legislation 
not later than the expiration of the 15-day period beginning on the date 
of the enactment and subsequent allocation of funds shall be issued not 
later than the beginning of each of the second, third and fourth 
quarters of the fiscal year.
    (3) Allocations of funds pursuant to paragraph (a)(2) of this 
section shall be made as follows: The initial allocation of funds to 
State agencies shall include not less than \1/3\ of the appropriated 
amounts for the fiscal year. The allocation of funds to be made not 
later than the beginning of the second and third quarters shall each 
include not less than \1/4\ of the appropriated amounts for the fiscal 
year.
    (4) In the case of legislation providing funds for a period that 
ends prior to the end of a fiscal year, the Secretary shall issue to 
State agencies an initial allocation of funds not later than the 
expiration of the 10-day period beginning on the date of enactment. In 
the case of legislation providing appropriations for a period of not 
more than 4 months, all funds must be allocated to State agencies except 
those reserved by the Secretary to carry out paragraph (a)(6) of this 
section.
    (5) In any fiscal year unused amounts from a prior fiscal year that 
are identified by the end of the first quarter of the fiscal year shall 
be recovered and reallocated not later than the beginning of the second 
quarter of the fiscal year. Unused amounts from a prior fiscal year that 
are identified after the end of the first quarter of the fiscal year 
shall be recovered and reallocated on a timely basis.
    (6) Up to one-half of one percent of the sums appropriated for each 
fiscal year, not to exceed $5,000,000, shall be

[[Page 419]]

available to the Secretary for the purpose of evaluating Program 
performance, evaluating health benefits, providing technical assistance 
to improve State agency administrative systems, preparing reports on 
program participant characteristics, and administering pilot projects, 
including projects designed to meet the special needs of migrants, 
Indians, rural populations, and to carry out technical assistance and 
research evaluation projects for the WIC Farmers' Market Nutrition 
Program.
    (b) Distribution and application of grant funds to State agencies. 
Notwithstanding any other provision of law, funds made available to the 
State agencies for the Program in any fiscal year will be managed and 
distributed as follows:
    (1) The State agency shall ensure that all Program funds are used 
only for Program purposes. As a prerequisite to the receipt of funds, 
the State agency shall have executed an agreement with the Department 
and shall have received approval of its State Plan.
    (2) Notwithstanding any other provision of law, all funds not made 
available to the Secretary in accordance with paragraph (a)(6) of this 
section shall be distributed to State agencies on the basis of funding 
formulas which allocate funds to all State agencies for food costs and 
NSA costs incurred during the fiscal year for which the funds had been 
made available to the Department. Final State agency grant levels as 
determined by the funding formula and State agency breastfeeding 
promotion and support expenditure targets will be issued in a timely 
manner.
    (3) When may I transfer funds from one fiscal year to another?--(i) 
Back spend authority. The State agency may back spend into the prior 
fiscal year up to an amount equal to one percent of its current year 
food grant and one percent of its current year NSA grant. Food funds 
spent back may be used only for food costs incurred during the prior 
fiscal year. NSA funds spent back may be used for either food or NSA 
costs incurred during the prior fiscal year. With prior FNS approval, 
the State agency may also back spend food funds up to an amount equal to 
three percent of its current year food grant in a fiscal year for food 
costs incurred in the prior fiscal year. FNS will approve such a request 
only if FNS determines there has been a significant reduction in infant 
formula cost containment savings that affected the State agency's 
ability to maintain its participation level.
    (ii) Spend forward authority. (A) The State agency may spend forward 
NSA funds up to an amount equal to one percent of their total grant (NSA 
plus food grants) in any fiscal year. These NSA funds spent forward may 
be used only for NSA costs incurred in the next fiscal year. Any food 
funds that the State agency converts to NSA funds pursuant to paragraph 
(f) of this section (based on projected or actual participation 
increases during a fiscal year) may not be spent forward into the next 
fiscal year. With prior FNS approval, the State agency may spend forward 
additional NSA funds up to an amount equal to one-half of one percent of 
its total grant. These funds are to be used in the next fiscal year for 
the development of a management information system, including an 
electronic benefit transfer system.
    (B) Funds spent forward will not affect the amount of funds 
allocated to the State agency for any fiscal year. Funds spent forward 
must be the first funds expended by the State agency for costs incurred 
in the next fiscal year.
    (iii) Reporting requirements. In addition to obtaining prior FNS 
approval for certain spend forward/back spending options, the State 
agency must report to FNS the amount of all funds it already has or 
intends to back spend and spend forward. The spending options must be 
reported at closeout.
    (c) Allocation formula. State agencies shall receive grant 
allocations according to the formulas described in this paragraph. To 
accomplish the distribution of funds under the allocation formulas, 
State agencies shall furnish the Department with any necessary financial 
and Program data.
    (1) Use of participation data in the formula. Wherever the formula 
set forth in paragraphs (c)(2) and (c)(3) of this section require the 
use of participation

[[Page 420]]

data, the Department shall use participation data reported by State 
agencies according to Sec. 246.25(b).
    (2) How is the amount of NSA funds determined? The funds available 
for allocation to State agencies for NSA for each fiscal year must be 
sufficient to guarantee a national average per participant NSA grant, 
adjusted for inflation. The amount of the national average per 
participant grant for NSA for any fiscal year will be an amount equal to 
the national average per participant grant for NSA issued for the 
preceding fiscal year, adjusted for inflation. The inflation adjustment 
will be equal to the percentage change between two values. The first is 
the value of the index for State and local government purchases, as 
published by the Bureau of Economic Analysis of the Department of 
Commerce, for the 12-month period ending June 30 of the second preceding 
fiscal year. The second is the best estimate that is available at the 
start of the fiscal year of the value of such index for the 12-month 
period ending June 30 of the previous fiscal year. Funds for NSA costs 
will be allocated according to the following procedure:
    (i) Fair share target funding level determination. For each State 
agency, FNS will establish, using all available NSA funds, an NSA fair 
share target funding level which is based on each State agency's average 
monthly participation level for the fiscal year for which grants are 
being calculated, as projected by FNS. Each State agency receives an 
adjustment to account for the higher per participant costs associated 
with small participation levels and differential salary levels relative 
to a national average salary level. The formula shall be adjusted to 
account for these cost factors in the following manner: 90 percent of 
available funds shall provide compensation based on rates which are 
proportionately higher for the first 15,000 or fewer participants, as 
projected by FNS, and 10 percent of available funds shall provide 
compensation based on differential salary levels, as determined by FNS.
    (ii) Base funding level. To the extent funds are available and 
subject to the provisions of paragraph (c)(2)(iv) of this section, each 
State agency shall receive an amount equal to 100 percent of the final 
formula-calculated NSA grant of the preceding fiscal year, prior to any 
operational adjustment funding allocations made under paragraph 
(c)(2)(iv) of this section. If funds are not available to provide all 
State agencies with their base funding level, all State agencies shall 
have their base funding level reduced by a pro-rata share as required by 
the shortfall of available funds.
    (iii) Fair share allocation. Any funds remaining available for 
allocation for NSA after the base funding level required by paragraph 
(c)(2)(ii) of this section has been completed and subject to the 
provisions of paragraph (c)(2)(iv) of this section shall be allocated to 
bring each State agency closer to its NSA fair share target funding 
level. FNS shall make fair share allocation funds available to each 
State agency based on the difference between the NSA fair share target 
funding level and the base funding level, which are determined in 
accordance with paragraphs (c)(2)(i) and (c)(2)(ii) of this section, 
respectively. Each State agency's difference shall be divided by the sum 
of the differences for all State agencies, to determine the percent 
share of the available fair share allocation funds each State agency 
shall receive.
    (iv) Operational adjustment funds. Each State agency's final NSA 
grant shall be reduced by up to 10 percent, and these funds shall be 
aggregated for all State agencies within each FNS region to form an 
operational adjustment fund. The Regions shall allocate these funds to 
State agencies according to national guidelines and shall consider the 
varying needs of State agencies within the region.
    (v) Operational level. The sum of each State agency's stability, 
residual and operational adjustment funds shall constitute the State 
agency's operational level. This operational level shall remain 
unchanged for such year even if the number of Federally-supported 
participants in the program at such State agency is lower than the 
Federally-projected participation level. However, if the provisions of 
paragraph (e)(2)(ii) of this section are applicable, a State agency will 
have its operational level for NSA reduced in the immediately succeeding 
fiscal year.

[[Page 421]]

    (3) Allocation of food benefit funds. In any fiscal year, any 
amounts remaining from amounts appropriated for such fiscal year and 
amounts appropriated from the preceding fiscal year after making 
allocations under paragraph (a)(6) of this section and allocations for 
nutrition services and administration (NSA) as required by paragraph 
(c)(2) of this section shall be made available for food costs. 
Allocations to State agencies for food costs will be determined 
according to the following procedure:
    (i) Fair share target funding level determination. (A) For each 
State agency, FNS will establish a fair share target funding level which 
shall be an amount of funds proportionate to the State agency's share of 
the national aggregate population of persons who are income eligible to 
participate in the Program based on the 185 percent of poverty 
criterion. The Department will determine each State agency's population 
of persons categorically eligible for WIC which are at or below 185% of 
poverty, through the best available, nationally uniform, indicators as 
determined by the Department. If the Commodity Supplemental Food Program 
(CSFP) also operates in the area served by the WIC State agency, the 
number of participants in such area participating in the CSFP but 
otherwise eligible to participate in the WIC Program, as determined by 
FNS, shall be deducted from the WIC State agency's population of income 
eligible persons. If the State agency chooses to exercise the option in 
Sec. 246.7(c)(2) to limit program participation to U.S. citizens, 
nationals, and qualified aliens, FNS will reduce the State agency's 
population of income eligible persons to reflect the number of aliens 
the State agency declares no longer eligible.
    (B) The Department may adjust the respective amounts of food funds 
that would be allocated to a State agency which is outside the 48 
contiguous states and the District of Columbia when the State agency can 
document that economic conditions result in higher food costs for the 
State agency. Prior to any such adjustment, the State agency must 
demonstrate that it has successfully implemented voluntary cost 
containment measures, such as improved vendor management practices, 
participation in multi-state agency infant formula rebate contracts or 
other cost containment efforts. The Department may use the Thrifty Food 
Plan amounts used in the Food Stamp Program, or other available data, to 
formulate adjustment factors for such State agencies.
    (ii) Prior year grant level allocation. To the extent funds are 
available, each State agency shall receive a prior year grant allocation 
equal to its final authorized grant level as of September 30 of the 
prior fiscal year. If funds are not available to provide all State 
agencies with their full prior year grant level allocation, all State 
agencies shall have their full prior year grant level allocation reduced 
by a pro-rata share as required by the shortfall of available funds.
    (iii) Inflation/fair share allocation. (A) If funds remain available 
after the allocation of funds under paragraph (c)(3)(ii) of this 
section, the funds shall be allocated as provided in this paragraph 
(c)(3)(iii). First, FNS will calculate a target inflation allowance by 
applying the anticipated rate of food cost inflation, as determined by 
the Department, to the prior year grant funding level. Second, FNS will 
allocate 80 percent of the available funds to all State agencies in 
proportionate shares to meet the target inflation allowance. Third, FNS 
will allocate 20 percent of the available funds to each State agency 
which has a prior year grant level allocation, as determined in 
paragraph (c)(3)(ii) of this section and adjusted for inflation as 
determined in this paragraph (c)(3)(iii), which is still less than its 
fair share target funding level. The amount of funds allocated to each 
State agency shall be based on the difference between its prior year 
grant level allocation plus target inflation funds and the fair share 
funding target level. Each State agency's difference shall be divided by 
the sum of the differences for all such State agencies, to determine the 
percentage share of the 20 percent of available funds each State agency 
shall receive. In the event a State agency declines any of its 
allocation under either this paragraph (c)(3)(iii) or paragraph 
(c)(3)(ii) of this

[[Page 422]]

section, the declined funds shall be reallocated in the percentages and 
manner described in this paragraph (c)(3)(iii). Once all State agencies 
receive allocations equal to their full target inflation allowance, any 
remaining funds shall be allocated or reallocated, in the manner 
described in this paragraph (c)(3)(iii), to those State agencies still 
under their fair share target funding level.
    (B) In the event funds still remain after completing the 
distribution in paragraph (c)(3)(iii)(A) of this section, these funds 
shall be allocated to all State agencies including those with a 
stability allocation at, or greater than, their fair share allocation. 
Each State agency which can document the need for additional funds shall 
receive additional funds based on the difference between its prior year 
grant level and its fair share allocation. State agencies closest to 
their fair share allocation shall receive first consideration.
    (iv) Migrant services. At least \9/10\ of one percent of 
appropriated funds for each fiscal year shall be available first to 
assure service to eligible members of migrant populations. For those 
State agencies serving migrants, a portion of the grant shall be 
designated to each State agency for service to members of migrant 
populations based on that State agency's prior year reported migrant 
participation. The national aggregate amount made available first for 
this purpose shall equal \9/10\ of one percent of all funds appropriated 
each year for the Program.
    (v) Special provisions for Indian State agencies. The Department may 
choose to adjust the allocations and/or eligibles data among Indian 
State agencies, or among Indian State agencies and the geographic State 
agencies in which they are located when eligibles data for the State 
agencies' population is determined to not fairly represent the 
population to be served. Such allocations may be redistributed from one 
State agency to another, based on negotiated agreements among the 
affected State agencies approved by FNS.
    (4) Adjustment for new State agencies. Whenever a State agency that 
had not previously administered the program enters into an agreement 
with the Department to do so during a fiscal year, the Department shall 
make any adjustments to the requirements of this section that are deemed 
necessary to establish an appropriate initial funding level for such 
State agency.
    (d) Distribution of funds to local agencies. The State agency shall 
provide to local agencies all funds made available by the Department, 
except those funds necessary for allowable State agency NSA costs and 
food costs paid directly by the State agency. The State agency shall 
distribute the funds based on claims submitted at least quarterly by the 
local agency. Where the State agency advances funds to local agencies, 
the State agency shall ensure that each local agency has funds to cover 
immediate disbursement needs, and the State agency shall offset the 
advances made against incoming claims as they are submitted to ensure 
that funding levels reflect the actual expenditures reported by the 
local agency. Upon receipt of Program funds from the Department, the 
State agency shall take the following actions:
    (1) Distribute funds to cover expected food cost expenditures and/or 
distribute caseload targets to each local agency which are used to 
project food cost expenditures.
    (2) Allocate funds to cover expected local agency NSA costs in a 
manner which takes into consideration each local agency's needs. For the 
allocation of NSA funds, the State agency shall develop an NSA funding 
procedure, in cooperation with representative local agencies, which 
takes into account the varying needs of the local agencies. The State 
agency shall consider the views of local agencies, but the final 
decision as to the funding procedure remains with the State agency. The 
State agency shall take into account factors it deems appropriate to 
further proper, efficient and effective administration of the program, 
such as local agency staffing needs, density of population, number of 
persons served, and availability of administrative support from other 
sources.
    (3) The State agency may provide in advance to any local agency any 
amount of funds for NSA deemed necessary for the successful commencement 
or significant expansion of program operations during a reasonable

[[Page 423]]

period following approval of a new local agency, a new cost containment 
measure, or a significant change in an existing cost containment 
measure.
    (e) Recovery and reallocation of funds. (1) Funds may be recovered 
from a State agency at any time the Department determines, based on 
State agency reports of expenditures and operations, that the State 
agency is not expending funds at a rate commensurate with the amount of 
funds distributed or provided for expenditures under the Program. 
Recovery of funds may be either voluntary or involuntary in nature. Such 
funds shall be reallocated by the Department through application of 
appropriate formulas set forth in paragraph (c) of this section.
    (2) Performance standards. The following standards shall govern 
expenditure performance.
    (i) The amount allocated to any State agency for food benefits in 
the current fiscal year shall be reduced if such State agency's food 
expenditures for the preceding fiscal year do not equal or exceed 97 
percent of the amount allocated to the State agency for such costs. Such 
reduction shall equal the difference between the State agency's 
preceding year food expenditures and the performance expenditure 
standard amount. For purposes of determining the amount of such 
reduction, the amount allocated to the State agency for food benefits 
for the preceding fiscal year shall not include food funds expended for 
food costs incurred under the spendback provision in paragraph (b)(3)(i) 
of this section or conversion authority in paragraph (g) of this 
section. Temporary waivers of the performance standard may be granted at 
the discretion of the Department.
    (ii) Reduction of NSA grant. FNS will reduce the State agency's NSA 
grant for the next fiscal year if the State agency's current fiscal year 
per participant NSA expenditure is more than 10 percent higher than its 
per participant NSA grant. To avoid a reduction to its NSA grant level, 
the State agency may submit a ``good cause'' justification explaining 
why it exceeded the applicable limit on excess NSA expenditures. This 
justification must be submitted at the same time as the close-out report 
for the applicable fiscal year. Good cause may include dramatic and 
unforeseen increases in food costs, which would prevent a State agency 
from meeting its projected participation level.
    (iii) Spend forward funds. If any State agency notifies the 
Department of its intent to spend forward a specific amount of funds for 
expenditure in the subsequent fiscal year, in accordance with paragraph 
(b)(3)(ii) of this section, such funds shall not be subject to recovery 
by the Department.
    (f) How do I qualify to convert food funds to NSA funds based on 
increased participation?--(1) Requirements. The State agency qualifies 
to convert food funds to NSA funds based on increased participation in 
any fiscal year in two ways:
    (i) Approved plan. A State agency may submit a plan to FNS to reduce 
average food costs per participant and to increase participation above 
the FNS-projected level for the State agency. If approved, the State 
agency may use funds allocated for food costs to pay NSA costs.
    (ii) Participation increases achieved. The State agency may also 
convert food funds to NSA funds in any fiscal year if it achieves, 
through acceptable measures, increases in participation in excess of the 
FNS-projected level for the State agency. Acceptable measures include 
use of cost containment measures, curtailment of vendor abuse, and 
breastfeeding promotional activities. FNS will disallow the State 
agency's conversion of food funds to NSA funds in accordance with 
paragraph (h) of this section if:
    (A) The State agency increases its participation level through 
measures that are not in the nutritional interests of participants; or
    (B) It is not otherwise allowable under program regulations.
    (2) Limitation. The State agency may convert food funds only to the 
extent that the conversion is necessary--
    (i) To cover NSA expenditures in the current fiscal year that exceed 
the State agency's NSA grant for the current fiscal year and any NSA 
funds which the State agency has spent forward into the current fiscal 
year; and
    (ii) To ensure that the State agency maintains the level established 
for the

[[Page 424]]

per participant NSA grant for the current fiscal year.
    (3) Maximum amount. The maximum amount the State agency may convert 
equals the State agency's conversion rate times the projected or actual 
participation increase, as applicable. The conversion rate is the same 
as the per participant NSA grant and is determined by dividing the State 
agency's NSA grant by the FNS-projected participation level. The NSA 
grant used in the calculation equals the initial allocation of current 
year funds plus the operational adjustment funding allocated to the 
State agency for that fiscal year.
    (g) How do I qualify to convert food funds to NSA funds for service 
to remote Indian or Native villages?--(1) Eligible State agencies. Only 
State agencies located in noncontiguous States containing a significant 
number of remote Indian or Native villages qualify to convert food funds 
to NSA funds under this paragraph (g) in any fiscal year.
    (2) Limitation. In the current fiscal year, food funds may be 
converted only to the extent necessary to cover expenditures incurred:
    (i) In providing services (including the full cost of air 
transportation and other transportation) to remote Indian or Native 
villages; and
    (ii) To provide breastfeeding support in those areas that exceed the 
State agency's NSA grant for the current fiscal year and any NSA funds 
which the State agency has spent forward into the current fiscal year.
    (h) What happens at the end of the fiscal year in which food funds 
are converted? At the end of the fiscal year, the Department will 
determine the amount of food funds which the State agency was entitled 
to convert to NSA funds under paragraphs (f) and (g) of this section. In 
the event that the State agency has converted more than the permitted 
amount of funds, the Department will disallow the amount of excess 
conversion.
    (i) How do converted funds affect the calculation of my prior year 
food grant and base NSA grant? For purposes of establishing a State 
agency's prior year food grant and base NSA grant under paragraphs 
(c)(2)(i) and (c)(3)(i) of this section, respectively, amounts converted 
from food funds to NSA funds under paragraphs (f) and (g) of this 
section and Sec. 246.14(e) during the preceding fiscal year will be 
treated as though no conversion had taken place.

[50 FR 6121, Feb. 13, 1985, as amended at 52 FR 21237, June 4, 1987; 52 
FR 25190, July 2, 1987; 53 FR 2221, Jan. 27, 1988; 53 FR 25315, July 6, 
1988; 54 FR 18091, Apr. 27, 1989, 54 FR 19486, May 5, 1989; 58 FR 51568, 
Oct. 4, 1993; 59 FR 11504, Mar. 11, 1994; 59 FR 50823, Oct. 6, 1994; 63 
FR 63974, Nov. 18, 1998; 64 FR 56674, Oct. 21, 1999; 64 FR 61016, Nov. 
9, 1999; 64 FR 68000, Dec. 6, 1999; 65 FR 51224, Aug. 23, 2000; 65 FR 
53528, Sept. 5, 2000; 65 FR 77771, Dec. 13, 2000; 65 FR 80281, Dec. 21, 
2000]

    Effective Date Note: At 72 FR 68997, Dec. 6, 2007, Sec. 246.16 was 
amended by adding paragraph (j), effective February 4, 2008. For the 
convenience of the user, the added text is set forth as follows:

Sec. 246.16  Distribution of funds.

                                * * * * *

    (j) Inflation adjustment of the fruit and vegetable voucher. The 
monthly cash value of the fruit and vegetable voucher shall be adjusted 
annually for inflation. Adjustments are effective the first day of each 
fiscal year beginning on or after October 1, 2008. The inflation-
adjusted value of the voucher shall be equal to a base value increased 
by a factor based on the Consumer Price Index for fresh fruits and 
vegetables, as provided in this section.
    (1) Adjustment year. The adjustment year is the fiscal year that 
begins October 1 of the current calendar year.
    (2) Base value of the fruit and vegetable voucher. The base value of 
the fruit and vegetable voucher is the monthly cash value of the voucher 
for fiscal year 2008. The base value equals:
    (i) $6 for children;
    (ii) $8 for pregnant and postpartum women; and
    (iii) $10 for breastfeeding women.
    (3) Adjusted value of the fruit and vegetable voucher. The adjusted 
value of the fruit and vegetable voucher is the cash value of the 
voucher for adjustment years beginning on or after October 1, 2008. The 
adjusted value is the base value increased by an amount equal to the 
base value of the fruit and vegetable voucher:
    (i) Multiplied by the inflation adjustment described in paragraph 
(j)(4) of this section; and
    (ii) Subject to rounding as described in paragraph (j)(5) of this 
section.
    (4) Inflation adjustment. The inflation adjustment of the fruit and 
vegetable voucher shall equal the percentage (if any) by which

[[Page 425]]

the annual average value of the Consumer Price Index for fresh fruits 
and vegetables, computed from monthly values published by the Bureau of 
Labor Statistics, for the twelve months ending on March 31 of the fiscal 
year immediately prior to the adjustment year, exceeds the average of 
the monthly values of that index for the twelve months ending on March 
31, 2007.
    (5) Rounding. If any increase in the cash value of the voucher 
determined under paragraph (j)(3) of this section is not a multiple of 
$1, such increase shall be rounded to the next lowest multiple of $1. 
However, if the adjusted value of the voucher for the adjustment year, 
as determined under paragraph (j)(3) of this section, is lower than the 
adjusted value for the fiscal year immediately prior to the adjustment 
year, then the adjusted value of the voucher will remain unchanged from 
that immediate prior fiscal year.

Sec. 246.16a  Infant formula cost containment.

    (a) Who must use cost containment procedures for infant formula? All 
State agencies must continuously operate a cost containment system for 
infant formula that is implemented in accordance with this section 
except:
    (1) State agencies with home delivery or direct distribution food 
delivery systems;
    (2) Indian State agencies with 1,000 or fewer participants in April 
of any fiscal year, which are exempt for the following fiscal year;
    (3) State agencies granted a waiver under paragraph (e) of this 
section; and
    (4) State agencies granted a postponement under paragraph (f) of 
this section.
    (b) What cost containment procedures must be used? State agencies 
must use either a single-supplier competitive system as outlined in 
paragraph (c) of this section, or an alternative cost containment system 
as outlined in paragraph (d) of this section.
    (c) What is the single-supplier competitive system? Under the 
single-supplier competitive system, a State agency solicits sealed bids 
from infant formula manufacturers to supply and provide a rebate for 
infant formulas. The State agency must conduct the procurement in a 
manner that maximizes full and open competition consistent with the 
requirements of this section.
    (1) How must a State agency structure the bid solicitation? (i) 
Single solicitation. Under the single solicitation system, the State 
agency's bid solicitation must require the winning bidder to supply and 
provide a rebate on all infant formulas it produces that the State 
agency chooses to issue, except exempt infant formulas. Rebates must 
also be paid on any new infant formulas that are introduced after the 
contract is awarded. The solicitation must require bidders that do not 
produce a soy-based infant formula to subcontract with another 
manufacturer to supply a soy-based infant formula under the contract. In 
this case, the bid solicitation must require that the winning bidder pay 
the State agency a rebate on the soy-based infant formula supplied by 
the subcontractor that is issued by the State agency. The bid 
solicitation must require all rebates (including those for soy-based 
infant formula supplied by a subcontractor) to be calculated in 
accordance with paragraph (c)(5) of this section. All of these infant 
formulas are called contract brand infant formulas.
    (ii) Separate solicitations. Under the separate solicitation system, 
a State agency issues two bid solicitations. The first solicitation must 
require the winning bidder to supply and provide a rebate on all milk-
based infant formulas it produces that the State agency chooses to 
issue, except exempt infant formulas. Rebates must also be paid on any 
new milk-based infant formulas that are introduced by the manufacturer 
after the contract is awarded. These infant formulas are considered to 
be contract brand infant formulas. The second bid solicitation must 
require the winning bidder to supply and provide a rebate on all soy-
based infant formulas it produces that the State agency chooses to 
issue. Rebates must also be paid on any new soy-based infant formulas 
that are introduced by the manufacturer after the contract is awarded. 
These infant formulas are also considered to be contract brand infant 
formulas.
    (2) On what types and physical forms of infant formula must bids be 
solicited? The bid solicitation must require bidders to specify a rebate 
for each of the types and physical forms of infant formulas specified in 
the following chart. These rebates apply proportionally to other

[[Page 426]]

infant formulas produced by the winning bidder(s) (see paragraph (c)(5) 
of this section). For purposes of this section the infant formula on 
which bids are solicited is the primary contract brand infant formula.

------------------------------------------------------------------------
                                Physical forms of      Infant formula
    Type of infant formula        infant formula        requirements
------------------------------------------------------------------------
 (i) For a single solicitation, the solicitation must require bidders to
               specify a rebate amount for the following:
------------------------------------------------------------------------
A single milk-based infant      Concentrated       Meets requirements
 formula (primary contract       liquid,            under Sec.
 brand infant formula);          powdered, and      246.10(c)(1)(i) and
 bidders must specify the        ready-to-feed.     suitable for routine
 brand name of the milk-based                       issuance to the
 infant formula for which the                       majority of
 rebate is being specified.                         generally healthy,
                                                    full-term infants.
------------------------------------------------------------------------
 (ii) For separate solicitations, the solicitation must require bidders
              to specify a rebate amount for the following:
------------------------------------------------------------------------
(A) A single milk-based infant  Concentrated       Meets requirements
 formula (primary milk-based     liquid,            under Sec.
 contract brand infant           powdered, and      246.10(c)(1)(i) and
 formula); bidders must          ready-to-feed.     suitable for routine
 specify the brand name of the                      issuance to the
 milk-based infant formula for                      majority of
 which the rebate is being                          generally healthy,
 specified.                                         full-term infants.
------------------------------------------------------------------------
(B) A single soy-based infant   Concentrated       Meets requirements
 formula (primary soy-based      liquid,            under Sec.
 contract brand infant           powdered, and      246.10(c)(1)(i).
 formula); bidders must          ready-to-feed.
 specify the brand name of the
 soy-based infant formula for
 which the rebate is being
 specified.
------------------------------------------------------------------------

    (3) How are contracts awarded? A State agency must award the 
contract(s) to the responsive and responsible bidder(s) offering the 
lowest total monthly net price for infant formula or the highest monthly 
rebate (subject to paragraph (c)(3)(ii) of this section) for a 
standardized number of units of infant formula. The State agency must 
calculate the lowest net price using the lowest national wholesale cost 
per unit for a full truckload of the infant formula on the date of the 
bid opening.
    (i) Calculating the standardized number of units of infant formula. 
The State agency must specify a standardized number of units (e.g., 
cans) of infant formula by physical form (e.g., concentrated liquid, 
powdered, and ready-to-feed) to be bid upon. The standardized number of 
units must contain the equivalent of the total number of ounces by 
physical form needed to give the maximum allowance to the average 
monthly number of infants using each form. The number of infants does 
not include infant participants who are exclusively breastfed and those 
who are issued exempt infant formula. The average monthly number of 
infant using each physical form must be based on at least 6 months of 
the most recent participation and issuance data. In order to calculate 
the standardized number of units of infant formula by form to be bid 
upon, the average monthly number of infants using each physical form is 
multiplied by the maximum monthly allowable number of ounces for each 
form (as allowed under Sec. 246.10(c)(1)(vi)), and divided by the 
corresponding unit size (i.e., number of ounces per unit being bid). In 
order to compare bids, total cost is calculated by multiplying this 
standardized number of units by the net price for each physical form. 
Alternative calculations that arrive at a mathematically equivalent 
result are acceptable.
    (ii) Determining the lowest total monthly net price or highest 
rebate. To determine the lowest total monthly net price a State agency 
must multiply the net price per unit by the established standardized 
amount of infant formula to be bid upon as calculated in paragraph 
(c)(3)(i) of this section. If the bid evaluation is based on highest 
rebate offered, the State agency must multiply the rebate offered by the 
established amount of infant formula to be bid upon as calculated in 
paragraph (c)(3)(i) of this section.
    (iii) Highest rebate limitation. Before issuing the bid 
solicitation, a State agency that elects to evaluate bids by highest 
rebate must demonstrate to FNS' satisfaction that the weighted average 
retail prices for different brands of infant formula in the State vary 
by

[[Page 427]]

5 percent or less. The weighted average retail price must take into 
account the prices charged for each type and physical form of infant 
formula by authorized vendors or, if a State agency elects, it may 
include stores that do not participate in the WIC program in the State. 
The State agency must also base calculations on the proportion of each 
type and physical form of infant formula the State agency issues based 
on the data provided to bidders pursuant to paragraph (c)(4) of this 
section.
    (4) What data must be provided to bidders? The State agency must 
provide as part of the bid solicitation the participation and infant 
formula usage data and the standardized number of ounces by physical 
form of infant formula to be used in evaluating bids as described in 
paragraph (c)(3) of this section. The State agency must notify bidders 
that the participation and infant formula usage data does not 
necessarily reflect the actual issuance and redemption that will occur 
under the contract.
    (5) How is the rebate to be calculated on all other contract brand 
infant formulas? All bids must specify the rebates offered by each 
bidder for the primary contract brand infant formula(s). After the 
contract is awarded, the State agency must calculate the percentage 
discount for all other contract brand infant formulas (i.e., all other 
infant formulas produced by the bidder other than exempt infant 
formulas) approved for issuance by the State agency. The State agency 
must use the following method in calculating the rebates:
    (i) Calculation of percentage discounts. Rebates for contract brand 
infant formulas, other than the primary contract brand infant formula(s) 
for which bids were received, must be calculated by first determining 
the percentage discount for each physical form (e.g., concentrated 
liquid, powdered, and ready-to-feed) of the primary contract brand 
infant formula(s). The percentage discount must be calculated by 
dividing the rebate for the primary contract brand infant formula by the 
manufacturer's lowest national wholesale price per unit, as of the date 
of the bid opening, for a full truckload of the primary contract infant 
formula. The percentage discounts must be used to determine the rebate 
for all other contract brand infant formulas approved for issuance by 
the State agency.
    (ii) Calculation of rebate amount. The rebate for each type and form 
of all other contract brand infant formulas must be calculated by 
multiplying the percentage discount by the manufacturer's lowest 
national wholesale price per unit, as of the date of the bid opening, 
for a full truckload of the other contract brand infant formula. The 
percentage discount used for each of the other contract brand infant 
formulas depends on the physical form of the infant formula. For 
example, if the percentage discount provided for the primary contract 
brand powdered infant formula is 80 percent of its wholesale price, the 
same percentage discount must be applied to all other contract brand 
powdered infant formulas. The rebate for any types or forms of contract 
brand infant formulas that are introduced during the contract period 
must be calculated using the wholesale prices of these new contract 
brand infant formulas at the time the infant formulas are approved for 
issuance by the State agency.
    (iii) Calculation of rebates during contract term. The rebates 
resulting from the application of the percentage discount must remain 
the same throughout the contract period except for the inflation 
adjustments required in paragraph (c)(5)(iv) of this section.
    (iv) Inflation provisions. Bid solicitations must require the 
manufacturer to adjust for price changes subsequent to the bid opening. 
The inflation provision may require either a cent-for-cent increase in 
the rebate amounts whenever there is any change in the lowest national 
wholesale price for a full truckload of the particular infant formula, 
or may require another equally effective cost adjustment mechanism for 
inflation as established by the State agency in the bid solicitation.
    (6) Does a State agency have to approve the issuance of all contract 
brand infant formulas? No, the State agency may choose to approve for 
issuance, in addition to the primary contract brand infant formula(s), 
none, some, or all of the winning bidder's other infant formula(s). In 
addition, the State agency may require medical documentation

[[Page 428]]

before issuing any contract brand infant formula (see Sec. 
246.10(c)(1)(i)) and must require medical documentation before issuing 
any WIC formula covered by Sec. 246.10(c)(1)(iii).
    (d) What is an alternative cost containment system? Under an 
alternative cost containment system, a State agency elects to implement 
an infant formula cost containment system of its choice. The State 
agency may only implement an alternative system if such a system 
provides a savings equal to or greater than a single-supplier 
competitive system. A State agency must conduct a cost comparison 
demonstrating such savings as described in paragraphs (d)(1) and (d)(2) 
of this section.
    (1) How must the State agency structure the bid solicitation? The 
State agency must solicit bids simultaneously using the single-supplier 
competitive system described in paragraph (c) of this section and the 
alternative cost containment system(s) the State agency has selected. 
The State agency may prescribe standards of its choice for the 
alternative cost containment system(s), provided that conditions 
established for each system addressed in the bid solicitation include 
identical bid specifications for the contract period length and the 
types and forms of infant formula(s) to be included in the systems. In 
addition, the alternative cost containment system must cover the types 
and forms of infant formulas routinely issued to the majority of 
generally healthy, full-term infants. The State agency must use the 
procedure outlined in paragraph (d)(2) of this section in conducting a 
cost comparison to determine which system offers the greatest savings 
over the entire contract period specified in the bid solicitation.
    (2) How does the State agency conduct the cost comparison? (i) 
Establishing infant formula cost containment savings. (A) Savings under 
the single-supplier competitive system. The State agency must project 
food cost savings in the single-supplier competitive system based on the 
lowest monthly net price or highest monthly rebate, as described in 
paragraph (c)(3) of this section.
    (B) Savings under an alternative cost containment system. The State 
agency must project food cost savings under alternative cost containment 
systems based on the lowest monthly net cost or highest monthly rebate, 
as described in paragraph (c)(3) of this section. Food cost savings must 
be based on the standardized amount of infant formula expected to be 
issued as calculated for a single-supplier competitive system, prorated 
by the percentage of anticipated total infant formula purchases 
attributable to each manufacturer. The State agency must use the 
aggregate market share of the manufacturers submitting bids in 
calculating its cost savings estimate.
    (C) General. In establishing the potential food cost savings under 
each system, the State agency must take into consideration in its 
estimate of savings any inflation factors which would affect the amount 
of savings over the life of the contract. Further, the State agency must 
not subtract any loss of payments which would occur under the terms of a 
current contract as a result of any State agency action to be effective 
after expiration of the contract.
    (ii) Nutrition services and administration cost adjustment. The 
State agency must deduct from the food cost savings projected for each 
system under this paragraph (d) the nutrition services and 
administration costs associated with developing and implementing--but 
not operating--each cost containment system. This includes any 
anticipated costs for modifying its automated data processing system or 
components of its food delivery system(s), and of training participants, 
local agencies, vendors, and licensed health care professionals on the 
purpose and procedures of the new system. For contracts of two years or 
less, such costs must be proportionately distributed over at least a two 
year period. The State agency must not deduct any costs associated with 
procurement. The State agency must itemize and justify all nutrition 
services and administration cost adjustments as necessary and reasonable 
for the development and implementation of each system.
    (iii) Final cost comparison. The State agency must calculate the 
food costs savings and deduct the appropriate nutrition services and 
administration costs for each system for which bids were received. The 
State agency must

[[Page 429]]

implement the single-supplier competitive system, unless its comparative 
cost analysis shows that, over the length of the contract stipulated in 
the bid solicitation, an alternative cost containment system offers 
savings at least equal to, or greater than, those under the competitive 
single-supplier system. If the comparative cost analysis permits 
selection of the alternative cost containment system and the State 
agency wishes to implement that system, it must first submit a State 
Plan amendment with the calculations and supporting documentation for 
this cost analysis to FNS for approval. Only after the calculations are 
approved by FNS may the State agency award the contract or contracts 
under the alternative cost containment system.
    (e) How does a State agency request a waiver of the requirement for 
a single-supplier competitive system? A State agency which, after 
completing the cost comparison in paragraphs (d)(2)(i) through 
(d)(2)(iii) of this section, is required to implement the single-
supplier competitive cost containment system for infant formula 
procurement, may request a waiver from FNS to permit it to implement an 
alternative system. State agencies must support all waiver requests with 
documentation in the form of a State Plan amendment as required under 
Sec. 246.4(a)(14)(xi) and may submit such requests only in either of 
the following circumstances:
    (1) The difference between the single-supplier competitive system 
and the alternative cost containment system is less than 3 percent of 
the savings anticipated under the latter system and not more than 
$100,000 per annum.
    (2) The single-supplier competitive system would be inconsistent 
with the efficient or effective operation of the program. Examples of 
justifications FNS will not accept for a waiver, include, but are not 
limited to: preservation of participant preference for otherwise 
nutritionally equivalent infant formulas; maintenance of health care 
professionals' prerogatives to prescribe otherwise nutritionally 
equivalent infant formulas for non-medical reasons; potential loss of 
free or otherwise discounted materials to WIC clinics and other health 
care facilities; potential inability of a manufacturer selected in 
accordance with applicable State procurement procedures to supply 
contractually-specified amounts of infant formula; and the possibility 
of interrupted infant formula supplies to retail outlets as a 
consequence of entering into a contract with a single manufacturer.
    (f) How does a State agency request a postponement of the 
requirement for a continuously operated cost containment system for 
infant formula? A State agency may request a postponement of the 
requirement to continuously operate a cost containment system for infant 
formula that has been implemented in accordance with this section. 
However, a State agency may only request a postponement when it has 
taken timely and responsible action to implement a cost containment 
system before its current system expires but has been unable to do so 
due to procurement delays, disputes with FNS concerning cost containment 
issues during the State Plan approval process or other circumstances 
beyond its control. The written postponement request must be submitted 
to FNS before the expiration of the current system. The postponement 
period may be no longer than 120 days. If a postponement is granted, the 
State agency may extend, renew or otherwise continue an existing system 
during the period of the postponement.
    (g) May a State agency implement cost containment systems for other 
supplemental foods? Yes, when a State agency finds that it is 
practicable and feasible to implement a cost containment system for any 
WIC food other than infant formula, the State agency must fully 
implement that system in accordance with the time frames established by 
the State agency and notification must be given to FNS by means of the 
State agency's State Plan.
    (h) What are the implementation time frames for Indian State 
agencies that lose their exemption from the infant formula cost 
containment requirement? If an Indian State agency operating a retail 
food delivery system expands its program participation above 1000 and 
thereby loses its exemption from the requirements of paragraph (a) of 
this section regarding the method of cost

[[Page 430]]

containment for infant formula, then the Indian State agency must begin 
compliance with paragraph (a) of this section in accordance with time 
frames established by FNS.
    (i) What are the penalties for failure to comply with the cost 
containment requirements? Any State agency that FNS determines to be out 
of compliance with the cost containment requirements of this part must 
not draw down on or obligate any Program grant funds, nor will FNS make 
any further Program funds available to such State agency, until it is in 
compliance with these requirements.
    (j) What provisions are prohibited to be included in cost 
containment contracts? A State agency may not issue bid solicitations or 
enter into contracts which:
    (1) Prescribe conditions that would void, reduce the savings under 
or otherwise limit the original contract if the State agency solicited 
or secured bids for, or entered into, a subsequent cost containment 
contract to take effect after the expiration of the original contract;
    (2) Does not include the registration and certification requirements 
in Sec. 246.10(f); or
    (3) Require infant formula manufacturers to submit bids on more than 
one of the systems specified in the invitation for bids.
    (k) What are the requirements for the national cost containment bid 
solicitation and selection for infant formula? FNS will solicit and 
select bids for infant formula rebates on behalf of State agencies with 
retail food delivery systems based on the following guidelines:
    (1) FNS will solicit bids and select the winning bidder(s) for 
infant formula cost containment contracts only if two or more State 
agencies with retail food delivery systems request FNS to conduct bid 
solicitation and selection on their behalf. FNS will conduct the bid 
solicitation and selection process only and will not award or enter into 
any infant formula cost containment contract on behalf of the individual 
State agencies. Each State agency will individually award and enter into 
infant formula cost containment contract(s) with the winning bidder(s). 
State agencies must obtain the rebates directly from the infant formula 
manufacturer(s). FNS will conduct the bid solicitation in accordance 
with this paragraph (k) and the competitive bidding procurement 
procedures of the State agency with the highest infant participation in 
the bid group on whose behalf bids are being solicited. Any bid protests 
and contractual disputes are the responsibility of the individual State 
agencies to resolve.
    (2) FNS will make a written offer to all State agencies to conduct 
bid solicitation and selection on their behalf at least once every 12 
months. FNS will send State agencies a copy of the draft Request for 
Rebates when making the offer to State agencies. Only State agencies 
that provide the information required by this paragraph (k)(2) in 
writing, signed by a responsible State agency official, by certified 
mail, return receipt requested or by hand delivery with evidence of 
receipt within 15 days of receipt of the offer will be included in the 
national bid solicitation and selection process. Each interested State 
agency must provide:
    (i) A statement that the State agency requests FNS to conduct bid 
solicitation and selection on its behalf;
    (ii) A statement of the State agency's minimum procurement 
procedures applicable to competitive bidding (as defined in Sec. 246.2) 
for infant formula cost containment contracts and supporting 
documentation;
    (iii) A statement of any limitation on the duration of infant 
formula cost containment contracts and supporting documentation;
    (iv) A statement of any contractual provisions required to be 
included in infant formula cost containment contracts by the State 
agency;
    (v) The most recent available average monthly number of infant 
participants less those infant participants who are exclusively 
breastfed and those who are issued exempt infant formula. The average 
monthly participation level must be based on at least 6 months of 
participation data.
    (vi) Infant formula usage rates by type (e.g., milk-based or soy-
based), form (e.g., concentrated, powdered, ready-to-feed), container 
size, and supporting documentation;

[[Page 431]]

    (vii) A statement of the termination date of the State agency's 
current infant formula cost containment contract; and
    (viii) Any other related information that FNS may request.
    (3) If FNS determines that the number of State agencies making the 
request provided for in paragraph (k)(2) of this section so warrants, 
FNS may, in consultation with such State agencies, divide such State 
agencies into more than one group and solicit bids for each group. These 
groups of State agencies are referred to as ``bid groups''. In 
determining the size and composition of the bid groups, FNS will, to the 
extent practicable, take into account the need to maximize the number of 
potential bidders so as to increase competition among infant formula 
manufacturers and the similarities in the State agencies' procurement 
and contract requirements (as provided by the State agencies in 
accordance with paragraphs (k)(2)(ii), (k)(2)(iii) and (k)(2)(iv) of 
this section). FNS reserves the right to exclude a State agency from the 
national bid solicitation and selection process if FNS determines that 
the State agency's procurement requirements or contractual requirements 
are so dissimilar from those of the other State agencies in any bid 
group that the State agency's inclusion in the bid group could adversely 
affect the bids.
    (4) For each bid group formed pursuant to paragraphs (k)(2) and 
(k)(3) of this section, FNS will use for soliciting bids the competitive 
bidding procurement procedures of the State agency in the group with the 
highest infant participation. To the extent not inconsistent with the 
requirements of this paragraph (k), FNS will use that set of procedures 
in soliciting the bids for that bid group of State agencies. FNS will 
notify each State agency in the bid group of the choice and provide them 
each a copy of the procurement procedures of the chosen State agency. 
Each State agency must provide FNS a written statement, signed by a 
responsible State agency official, by certified mail, return receipt 
requested or by hand delivery with evidence of receipt stating whether 
that State agency is legally authorized to award an infant formula cost 
containment contract pursuant to that set of procedures within 10 days 
of the receipt of the notification. If the State agency determines it is 
not legally authorized to award an infant formula cost containment 
contract pursuant to those procedures, that State agency may not 
continue in that round of the national bid solicitation and selection.
    (5) At a minimum, in soliciting bids FNS will address the following:
    (i) Unless FNS determines that doing so would not be in the best 
interest of the Program, bids will be solicited for either:
    (A) A single contract for each State agency under which the winning 
bidder will be required to supply and provide rebates on all infant 
formulas produced by that manufacturer (except exempt infant formulas) 
that are issued by the State agency. If that manufacturer does not 
produce a soy-based infant formula, the winning bidder will be required 
to subcontract with another manufacturer for a soy-based infant formula 
and the winning bidder will be required to pay a rebate on the soy-based 
infant formula; or
    (B) Two separate contracts for each State agency. Under the first 
contract, the winning bidder will supply and provide a rebate on all the 
milk-based infant formulas the winning bidder produces (except exempt 
infant formulas) that are issued by the State agency and under the 
second contract the winning bidder will supply and provide a rebate on 
all the soy-based infant formulas the winning bidder produces (except 
exempt infant formulas) that are issued by the State agency.
    (ii) The infant formula cost containment contract(s) to be entered 
into by the State agencies and infant formula manufacturers must provide 
for a constant net price for infant formula for the full term of the 
infant formula cost containment contract(s).
    (iii) The duration of the infant formula cost containment contracts 
for each bid group will be determined by FNS in consultation with the 
State agencies. The term will be for a period of not less than 2 years, 
unless the law applicable to a State agency regarding the duration of 
infant formula cost

[[Page 432]]

containment contracts is more restrictive than this paragraph 
(k)(5)(iii). In such cases, the term of the contract for only that State 
agency will be for one year, with the option provided to the State 
agency to extend the contract for a specified number of additional years 
(to be determined by FNS in consultation with the State agency). The 
date on which the individual State agencies' current infant formula cost 
containment contracts terminate may vary, so the infant formula cost 
containment contracts awarded by the State agencies within a bid group 
may begin on different dates.
    (iv) FNS will not prescribe conditions that are prohibited under 
paragraph (j) of this section.
    (v) FNS will solicit bids for rebates only from infant formula 
manufacturers. FNS may limit advertising to contacting in writing each 
infant formula manufacturer which has registered with the Secretary of 
Health and Human Services under the Federal Food, Drug, and Cosmetic Act 
(21 U.S.C. 321 et seq.).
    (6) FNS will select the winning bidder(s). The winning bidder(s) 
will be the responsive and responsible bidder(s) meeting the 
specifications and all bid terms and conditions which offers the lowest 
net price weighted to take into account infant formula usage rates and 
infant participation. In all instances the winning bidder(s) will be 
those which singly or in combination yield the greatest aggregate 
savings based on the net price weighted to take into account the infant 
formula usage rates. To break a tie between 2 equally low bids, FNS will 
select the bidder to be awarded the infant formula cost containment 
contract by a drawing by lot limited to the bidders which submitted 
those bids.
    (7) Once FNS has conducted bid selection, a State agency may decline 
to award the infant formula cost containment contract(s) only if the 
State agency determines that awarding the contract(s) would not be in 
the best interests of its Program, taking into account whether the 
national bid solicitation and selection would achieve a lower aggregate 
savings.
    (8) As soon as practicable after selecting the winning bid(s), FNS 
will notify the affected State agencies in writing of the bid results, 
including the name(s) of the winning bidder(s). If a State agency 
chooses to request approval to decline to award the infant formula cost 
containment contract(s) in accordance with paragraph (k)(7) of this 
section, it must notify FNS in writing, signed by a responsible State 
agency official, together with supporting documentation, by certified 
mail, return receipt requested or by hand delivery with evidence of 
receipt within 10 days of the State agency's receipt of this 
notification of bid results.
    (9) If FNS approves any State agency's request to decline to award 
the infant formula cost containment contract(s) in accordance with 
paragraphs (k)(7) and (k)(8) of this section, FNS will notify the 
bidders of the decision. If two or more State agencies remain in the 
group, FNS will require the bidders to indicate in writing whether they 
wish to withdraw or modify their bids within 5 days of receipt of this 
notification. FNS will again permit State agencies to decline to award 
the infant formula cost containment contract(s) in accordance with 
paragraphs (k)(7) and (k)(8) of this section. If FNS approves these 
additional State agency requests to decline contract awards, FNS may 
conduct a resolicitation of bids in accordance with this paragraph (k).

[65 FR 51224, Aug. 23, 2000]

Sec. 246.17  Closeout procedures.

    (a) General. State agencies shall submit preliminary and final 
closeout reports for each fiscal year. All obligations shall be 
liquidated before closure of a fiscal year grant. Obligations shall be 
reported for the fiscal year in which they occur.
    (b) Fiscal year closeout reports. State agencies--
    (1) Shall submit to FNS, within 30 days after the end of the fiscal 
year, preliminary financial reports which show cumulative actual 
expenditures and obligations for the fiscal year, or part thereof, for 
which Program funds were made available;
    (2) Shall submit to FNS, within 120 days after the end of the fiscal 
year, final fiscal year closeout reports;

[[Page 433]]

    (3) May submit revised closeout reports. FNS will reimburse State 
agencies for additional costs claimed in a revised closeout report up to 
the State's original grant level, if costs are properly justified and if 
funds are available for the fiscal year pertaining to the request. FNS 
will not be responsible for reimbursing State agencies for unreported 
expenditures later than one year after the end of the fiscal year in 
which they were incurred.
    (c) Grant closeout procedures. When grants to State agencies are 
terminated, the following procedures shall be performed in accordance 
with 7 CFR part 3016.
    (1) FNS may disqualify a State agency's participation under the 
Program, in whole or in part, or take such remedies as may be legal and 
appropriate, whenever FNS determines that the State agency failed to 
comply with the conditions prescribed in this part, in its Federal-State 
Agreement, or in FNS guidelines and instructions. FNS will promptly 
notify the State agency in writing of the disqualification together with 
the effective date. A State agency shall disqualify a local agency by 
written notice whenever it is determined by FNS or the State agency that 
the local agency has failed to comply with the requirements of the 
Program.
    (2) FNS or the State agency may disqualify the State agency or 
restrict its participation in the Program when both parties agree that 
continuation under the Program would not produce beneficial results 
commensurate with the further expenditure of funds. The State agency or 
the local agency may disqualify the local agency or restrict its 
participation in the Program under the same conditions. The two parties 
shall agree upon the conditions of disqualification, including the 
effective date thereof, and, in the case of partial disqualification, 
the portion to be disqualified.
    (3) Upon termination of a grant, the affected agency shall not incur 
new obligations for the disqualified portion after the effective date, 
and shall cancel as many outstanding obligations as possible. FNS will 
allow full credit to the State agency for the Federal share of the 
noncancellable obligations properly incurred by the State agency prior 
to disqualification, and the State agency shall do the same for the 
local agency.
    (4) A grant closeout shall not affect the retention period for, or 
Federal rights of access to, grant records as specified in Sec. 246.25. 
The closeout of a grant does not affect the State or local agency's 
responsibilities regarding property or with respect to any Program 
income for which the State or local agency is still accountable.
    (5) A final audit is not a required part of the grant closeout and 
should not be needed unless there are problems with the grant that 
require attention. If FNS considers a final audit to be necessary, it 
shall so inform OIG. OIG will be resonsible for ensuring that necessary 
final audits are performed and for any necessary coordination with other 
Federal cognizant audit agencies or the State or local auditors. Audits 
performed in accordance with Sec. 246.20 may serve as final audits 
providing such audits meet the needs of requesting agencies. If the 
grant is closed out without the audit, FNS reserves the right to 
disallow and recover an appropriate amount after fully considering any 
recommended disallowances resulting from an audit which may be conducted 
later.

[50 FR 6121, Feb. 13, 1985, as amended at 71 FR 56731, Sept. 27, 2006]

Sec. 246.18  Administrative review of State agency actions.

    (a) Adverse actions subject to administrative reviews--(1) Vendor 
appeals. (i) Adverse actions subject to full administrative reviews. 
Except as provided elsewhere in paragraph (a)(1) of this section, the 
State agency must provide full administrative reviews to vendors that 
appeal the following adverse actions:
    (A) Denial of authorization based on the vendor selection criteria 
for competitive price or for minimum variety and quantity of authorized 
supplemental foods (Sec. 246.12(g)(3)(i) and (g)(3)(ii)) or on a 
determination that the vendor is attempting to circumvent a sanction 
(Sec. 246.12(g)(4));
    (B) Termination of an agreement for cause;
    (C) Disqualification; and

[[Page 434]]

    (D) Imposition of a fine or a civil money penalty in lieu of 
disqualification.
    (ii) Adverse actions subject to abbreviated administrative reviews. 
The State agency must provide abbreviated administrative reviews to 
vendors that appeal the following adverse actions, unless the State 
agency decides to provide full administrative reviews for any of these 
types of adverse actions:
    (A) Denial of authorization based on the vendor selection criteria 
for business integrity or for a current Food Stamp Program 
disqualification or civil money penalty for hardship (Sec. 
246.12(g)(3)(iii) and (g)(3)(iv));
    (B) Denial of authorization based on a State agency-established 
vendor selection criterion if the basis of the denial is a WIC vendor 
sanction or a Food Stamp Program withdrawal of authorization or 
disqualification;
    (C) Denial of authorization based on the State agency's vendor 
limiting criteria (Sec. 246.12(g)(2));
    (D) Denial of authorization because a vendor submitted its 
application outside the timeframes during which applications are being 
accepted and processed as established by the State agency under Sec. 
246.12(g)(7);
    (E) Termination of an agreement because of a change in ownership or 
location or cessation of operations (Sec. 246.12(h)(3)(xvii));
    (F) Disqualification based on a trafficking conviction (Sec. 
246.12(l)(1)(i));
    (G) Disqualification based on the imposition of a Food Stamp Program 
civil money penalty for hardship (Sec. 246.12(l)(2)(ii)); and
    (H) Disqualification or a civil money penalty imposed in lieu of 
disqualification based on a mandatory sanction imposed by another WIC 
State agency (Sec. 246.12(l)(2)(iii)).
    (iii) Actions not subject to administrative reviews. The State 
agency may not provide administrative reviews pursuant to this section 
to vendors that appeal the following actions:
    (A) The validity or appropriateness of the State agency's vendor 
limiting or selection criteria (Sec. 246.12(g)(2) and (g)(3));
    (B) The validity or appropriateness of the State agency's vendor 
peer group criteria and the criteria used to identify vendors that are 
above-50-percent vendors or comparable to above-50-percent vendors;
    (C) The validity or appropriateness of the State agency's 
participant access criteria and the State agency's participant access 
determinations;
    (D) The State agency's determination whether a vendor had an 
effective policy and program in effect to prevent trafficking and that 
the ownership of the vendor was not aware of, did not approve of, and 
was not involved in the conduct of the violation (Sec. 
246.12(l)(1)(i)(B));
    (E) Denial of authorization if the State agency's vendor 
authorization is subject to the procurement procedures applicable to the 
State agency;
    (F) The expiration of a vendor's agreement;
    (G) Disputes regarding food instrument payments and vendor claims 
(other than the opportunity to justify or correct a vendor overcharge or 
other error, as permitted by Sec. 246.12(k)(3); and
    (H) Disqualification of a vendor as a result of disqualification 
from the Food Stamp Program (Sec. 246.12(l)(1)(vii)).
    (2) Effective date of adverse actions against vendors. The State 
agency must make denials of authorization and disqualifications imposed 
under Sec. 246.12(l)(1)(i) effective on the date of receipt of the 
notice of adverse action. The State agency must make all other adverse 
actions effective no earlier than 15 days after the date of the notice 
of the adverse action and no later than 90 days after the date of the 
notice of adverse action or, in the case of an adverse action that is 
subject to administrative review, no later than the date the vendor 
receives the review decision.
    (3) Local agency appeals--(i) Adverse actions subject to full 
administrative reviews. Except as provided in paragraph (a)(3)(ii) of 
this section, the State agency must provide full administrative reviews 
to local agencies that appeal the following adverse actions:
    (A) Denial of a local agency's application;
    (B) Disqualification of a local agency; and
    (C) Any other adverse action that affects a local agency's 
participation.

[[Page 435]]

    (ii) Actions not subject to administrative reviews. The State agency 
may not provide administrative reviews pursuant to this section to local 
agencies that appeal the following actions:
    (A) Expiration of the local agency's agreement; and
    (B) Denial of a local agency's application if the State agency's 
local agency selection is subject to the procurement procedures 
applicable to the State agency;
    (iii) Effective date of adverse actions against local agencies. The 
State agency must make denials of local agency applications effective 
immediately. The State agency must make all other adverse actions 
effective no earlier than 60 days after the date of the notice of the 
adverse action and no later than 90 days after the date of the notice of 
adverse action or, in the case of an adverse action that is subject to 
administrative review, no later than the date the local agency receives 
the review decision.
    (b) Full administrative review procedures. The State agency must 
develop procedures for a full administrative review of the adverse 
actions listed in paragraphs (a)(1)(i) and (a)(3) of this section. At a 
minimum, these procedures must provide the vendor or local agency with 
the following:
    (1) Written notification of the adverse action, the procedures to 
follow to obtain a full administrative review and the cause(s) for and 
the effective date of the action. When a vendor is disqualified due in 
whole or in part to violations in Sec. 246.12(l)(1), such notification 
must include the following statement: ``This disqualification from WIC 
may result in disqualification as a retailer in the Food Stamp Program. 
Such disqualification is not subject to administrative or judicial 
review under the Food Stamp Program.''
    (2) The opportunity to appeal the adverse action within a time 
period specified by the State agency in its notification of adverse 
action.
    (3) Adequate advance notice of the time and place of the 
administrative review to provide all parties involved sufficient time to 
prepare for the review.
    (4) The opportunity to present its case and at least one opportunity 
to reschedule the administrative review date upon specific request. The 
State agency may set standards on how many review dates can be 
scheduled, provided that a minimum of two review dates is allowed.
    (5) The opportunity to cross-examine adverse witnesses. When 
necessary to protect the identity of WIC Program investigators, such 
examination may be conducted behind a protective screen or other device 
(also referred to as an ``in camera'' examination).
    (6) The opportunity to be represented by counsel.
    (7) The opportunity to examine prior to the review the evidence upon 
which the State agency's action is based.
    (8) An impartial decision-maker, whose determination is based solely 
on whether the State agency has correctly applied Federal and State 
statutes, regulations, policies, and procedures governing the Program, 
according to the evidence presented at the review. The State agency may 
appoint a reviewing official, such as a chief hearing officer or 
judicial officer, to review appeal decisions to ensure that they conform 
to approved policies and procedures.
    (9) Written notification of the review decision, including the basis 
for the decision, within 90 days from the date of receipt of a vendor's 
request for an administrative review, and within 60 days from the date 
of receipt of a local agency's request for an administrative review. 
These timeframes are only administrative requirements for the State 
agency and do not provide a basis for overturning the State agency's 
adverse action if a decision is not made within the specified timeframe.
    (c) Abbreviated administrative review procedures. Except when the 
State agency decides to provide full administrative reviews for the 
adverse actions listed in paragraph (a)(1)(ii) of this section, the 
State agency must develop procedures for an abbreviated administrative 
review of the adverse actions listed in paragraph (a)(1)(ii) of this 
section. At a minimum, these procedures must provide the vendor with the 
following:
    (1) Written notification of the adverse action, the procedures to 
follow

[[Page 436]]

to obtain an abbreviated administrative review, the cause(s) for and the 
effective date of the action, and an opportunity to provide a written 
response; and
    (2) A decision-maker who is someone other than the person who 
rendered the initial decision on the action and whose determination is 
based solely on whether the State agency has correctly applied Federal 
and State statutes, regulations, policies, and procedures governing the 
Program, according to the information provided to the vendor concerning 
the cause(s) for the adverse action and the vendor's response; and
    (3) Written notification of the review decision, including the basis 
for the decision, within 90 days of the date of receipt of the request 
for an administrative review. This timeframe is only an administrative 
requirement for the State agency and does not provide a basis for 
overturning the State agency's adverse action if a decision is not made 
within the specified timeframe.
    (d) Continuing responsibilities. Appealing an action does not 
relieve a local agency or a vendor that is permitted to continue program 
operations while its appeal is in process from the responsibility of 
continued compliance with the terms of any written agreement with the 
State agency.
    (e) Finality and effective date of decisions. The State agency 
procedures must provide that review decisions rendered under both the 
full and abbreviated review procedures are the final State agency 
action. If the adverse action under review has not already taken effect, 
the State agency must make the action effective on the date of receipt 
of the review decision by the vendor or the local agency.
    (f) Judicial review. If the review decision upholds the adverse 
action against the vendor or local agency, the State agency must inform 
the vendor or local agency that it may be able to pursue judicial review 
of the decision.

[65 FR 83266, Dec. 29, 2000, as amended at 70 FR 71724, Nov. 29, 2005]

    Effective Date Note: At 72 FR 68997, Dec. 6, 2007, Sec. 246.18 was 
amended by amending paragraph (a)(1)(iii)(G) by removing the words 
``food instrument'' and adding in their place the words ``food 
instrument or cash-value voucher'', paragraph (d) by removing the words 
``local agency or a vendor'' and adding in their place the words ``local 
agency, farmer or vendor'', paragraph (e) by removing the words ``vendor 
or the local agency'' and adding in their place the words ``vendor, 
farmer or local agency'', and paragraph (f) by removing the words 
``vendor or local agency'' wherever they appear and adding in their 
place the words ``vendor, farmer or local agency'', by adding paragraph 
(a)(4), and by revising the introductory text of paragraph (b), 
effective February 4, 2008. For the convenience of the user, the added 
and revised text is set forth as follows:

Sec. 246.18  Administrative review of State agency actions.

    (a) * * *
    (4) Farmer appeals--(i) Adverse Actions. The State agency shall 
provide a hearing procedure whereby farmers adversely affected by 
certain actions of the State agency may appeal those actions. A farmer 
may appeal an action of the State agency denying its application to 
participate, imposing a sanction, or disqualifying it from participation 
in the program. Expiration of an agreement is not subject to appeal.
    (ii) Effective date of adverse actions against farmers. The State 
agency must make denials of authorization and disqualifications 
effective on the date of receipt of the notice of adverse action. The 
State agency must make all other adverse actions effective no earlier 
than 15 days after the date of the notice of the adverse action and no 
later than 90 days after the date of the notice of adverse action or, in 
the case of an adverse action that is subject to administrative review, 
no later than the date the farmer receives the review decision.
    (b) Full administrative review procedures. The State agency must 
develop procedures for a full administrative review of the adverse 
actions listed in paragraphs (a)(1)(i), (a)(3) and (a)(4) of this 
section. At a minimum, these procedures must provide the vendor, farmer 
or local agency with the following:

                                * * * * *

                     Subpart F_Monitoring and Review

Sec. 246.19  Management evaluation and monitoring reviews.

    (a) Management evaluations and reviews. (1) FNS and each State 
agency shall establish a management evaluation system in order to assess 
the accomplishment of Program objectives as provided under this part, 
FNS guidelines, instructions, and the Federal-State agreement with the 
Department.

[[Page 437]]

FNS will provide assistance to States in discharging this 
responsibility, establish standards and procedures to determine how well 
the objectives of this part are being accomplished, and implement 
sanction procedures as warranted by State Program performance.
    (2) The State agency must submit a corrective action plan, including 
implementation timeframes, within 60 days of receipt of an FNS 
management evaluation report containing a finding that the State agency 
did not comply with program requirements. If FNS determines through a 
management evaluation or other means that during a fiscal year the State 
agency has failed, without good cause, to demonstrate efficient and 
effective administration of its program, or has failed to comply with 
its corrective action plan, or any other requirements contained in this 
part or the State Plan, FNS may withhold an amount up to 100 percent of 
the State agency's nutrition services and administration funds for that 
year.
    (3) Sanctions imposed upon a State agency by FNS in accordance with 
this section (but not claims for repayment assessed against a State 
agency) may be appealed in accordance with the procedures established in 
Sec. 246.22. Before carrying out any sanction against a State agency, 
the following procedures will be followed:
    (i) FNS will notify the Chief State Health Officer or equivalent in 
writing of the deficiencies found and of FNS' intention to withhold 
nutrition services and administration funds unless an acceptable 
corrective action plan is submitted by the State agency to FNS within 60 
days after mailing of notification.
    (ii) The State agency shall develop a corrective action plan with a 
schedule according to which the State agency shall accomplish various 
actions to correct the deficiencies and prevent their future recurrence.
    (iii) If the corrective action plan is acceptable, FNS will notify 
the Chief State Health Officer or equivalent in writing within 30 days 
of receipt of the plan. The letter approving the corrective action plan 
will describe the technical assistance that is available to the State 
agency to correct the deficiencies. The letter will also advise the 
Chief State Health Officer or equivalent of the sanctions to be imposed 
if the corrective action plan is not implemented according to the 
schedule set forth in the approved plan.
    (iv) Upon notification from the State agency that corrective action 
as been taken, FNS will assess such action, and, if necessary, will 
perform a follow-up review to determine if the noted deficiencies have 
been corrected. FNS will then advise the State agency of whether the 
actions taken are in compliance with the corrective action plan, and 
whether the deficiency is resolved or further corrective action is 
needed.
    (v) If an acceptable corrective action plan is not submitted within 
60 days, or if corrective action is not completed according to the 
schedule established in the corrective action plan, FNS may withhold 
nutrition services and administration funds through a reduction of the 
State agency Letter of Credit or by assessing a claim against the State 
agency. FNS will notify the Chief State Health Officer or equivalent of 
this action.
    (vi) If compliance is achieved before the end of the fiscal year in 
which the nutrition services and administration funds are withheld, the 
funds withheld shall be restored to the State agency's Letter of Credit. 
FNS is not required to restore funds withheld if compliance is not 
achieved until the subsequent fiscal year. If the 60-day warning period 
ends in the fourth quarter of a fiscal year, FNS may elect not to 
withhold funds until the next fiscal year.
    (b) State agency responsibilities. (1) The State agency shall 
establish an on-going management evaluation system which includes at 
least the monitoring of local agency operations, the review of local 
agency financial and participation reports, the development of 
corrective action plans to resolve Program deficiencies, the monitoring 
of the implementation of corrective action plans, and on-site visits. 
The results of such actions shall be documented.
    (2) Monitoring of local agencies must encompass evaluation of 
management, certification, nutrition education, participant services, 
civil rights compliance, accountability, financial management systems, 
and food delivery systems. If the State agency delegates

[[Page 438]]

the signing of vendor agreements, vendor training, or vendor monitoring 
to a local agency, it must evaluate the local agency's effectiveness in 
carrying out these responsibilities.
    (3) The State agency shall conduct monitoring reviews of each local 
agency at least once every two years. Such reviews shall include on-site 
reviews of a minimum of 20 percent of the clinics in each local agency 
or one clinic, whichever is greater. The State agency may conduct such 
additional on-site reviews as the State agency determines to be 
necessary in the interest of the efficiency and effectiveness of the 
program.
    (4) The State agency must promptly notify a local agency of any 
finding in a monitoring review that the local agency did not comply with 
program requirements. The State agency must require the local agency to 
submit a corrective action plan, including implementation timeframes, 
within 60 days of receipt of a State agency report of a monitoring 
review containing a finding of program noncompliance. The State agency 
must monitor local agency implementation of corrective action plans.
    (5) As part of the regular monitoring reviews, FNS may require the 
State agency to conduct in-depth reviews of specified areas of local 
agency operations, to implement a standard form or protocol for such 
reviews, and to report the results to FNS. No more than two such areas 
will be stipulated by FNS for any fiscal year and the areas will not be 
added or changed more often than once every two fiscal years. These 
areas will be announced by FNS at least six months before the beginning 
of the fiscal year.
    (6) The State agency shall require local agencies to establish 
management evaluation systems to review their operations and those of 
associated clinics or contractors.

[50 FR 6121, Feb. 13, 1985, as amended at 59 FR 11508, Mar. 11, 1994]

Sec. 246.20  Audits.

    (a) Federal audit responsibilities. (1) OIG reserves the right to 
perform audits of State and local agencies and other organizations 
involved in the Program as determined by OIG to be necessary. In 
performing such audits, OIG will rely to the extent feasible on audit 
work performed by other Federal and non-Federal auditors.
    (2) The State agency may take exception to particular audit findings 
and recommendations. The State agency shall submit a response or 
statement to FNS as to the action taken or a proposed corrective action 
plan regarding the findings. A proposed corrective action plan developed 
and submitted by the State agency shall include specific timeframes for 
its implementation and for completion of correction of deficiencies and 
their causes.
    (3) FNS will determine whether Program deficiencies have been 
adequately corrected. If additional corrective action is necessary, FNS 
shall schedule a follow-up review, allowing a reasonable time for such 
corrective action to be taken.
    (b) State audit responsibilities. (1) State agencies must obtain 
annual audits in accordance with part 3052 of this title. In addition, 
States must require local agencies under their jurisdiction to obtain 
audits in accordance with part 3052 of this title.
    (2) Each State agency shall make all State or local agency sponsored 
audit reports of Program operations under its jurisdiction available for 
the Department's review upon request. The cost of these audits shall be 
considered a part of nutrition services and administration costs and may 
be funded from the State or local agency nutrition services and 
administration funds, as appropriate. For purposes of determining the 
Program's pro rata share of indirect costs associated with organization-
wide audits, the cost of food shall not be considered in the total 
dollar amount of the Program.

[50 FR 6121, Feb. 13, 1985, as amended at 71 FR 56731, Sept. 27, 2006]

Sec. 246.21  Investigations.

    (a) Authority. The Department may make an investigation of any 
allegation of noncompliance with this part and FNS guidelines and 
instructions. The investigation may include, where appropriate, a review 
of pertinent practices and policies of any State or local agency, the 
circumstances under which the possible noncompliance with this

[[Page 439]]

part occurred, and other factors relevant to a determination as to 
whether the State or local agency has failed to comply with the 
requirements of this part.
    (b) Confidentiality. No State or local agency, participant, or other 
person shall intimidate, threaten, coerce, or discriminate against any 
individual for the purpose of interfering with any right or privilege 
under this part because that person has made a complaint or formal 
allegation, or has testified, assisted, or participated in any manner in 
an investigation, proceeding, or hearing under this part. The identity 
of every complainant shall be kept confidential except to the extent 
necessary to carry out the purposes of this part, including the 
conducting of any investigation, hearing, or judicial proceeding.

                   Subpart G_Miscellaneous Provisions

Sec. 246.22  Administrative appeal of FNS decisions.

    (a) Right to appeal. When FNS asserts a sanction against a State 
agency under the provisions of Sec. 246.19, the State agency may appeal 
and must be afforded a hearing or review by an FNS Administrative Review 
Officer. The right of appeal shall not apply to claims for repayment 
assessed by FNS against the State agency under Sec. 246.23(a). A State 
agency shall have the option of requesting a hearing to present its 
position or a review of pertinent documents and records including any 
additional written submission prepared by the State agency.
    (1) FNS will send a written notice by Certified Mail-Return Receipt 
Requested to the state agency or otherwise ensure receipt of such notice 
by the agency when asserting a sanction against a State agency as 
specified in Sec. 246.19(a).
    (2) A State agency aggrieved by a sanction asserted against it may 
file a written request with the Director, Administrative Review 
Division, U.S. Department of Agriculture, Food and Nutrition Service, 
3101 Park Center Drive, Alexandria, Va. 22302, for a hearing or a review 
of the record. Such request shall be sent by Certified Mail-Return 
Receipt Requested and postmarked within 30 days of the date of receipt 
of the sanction notice. The envelope containing the request shall be 
prominently marked ``REQUEST FOR REVIEW OR HEARING.'' The request shall 
clearly identify the specific FNS sanction(s) being appealed and shall 
include a photocopy of the FNS notice of sanction. If the State agency 
does not request a review of hearing within 30 days of receipt of the 
notice, the administrative decision on the sanctions will be considered 
final.
    (b) Acknowledgment of request. Within 15 days of receipt by the 
Director of the Administrative Review Division of a request for review 
or hearing, the Director will provide the State agency with a written 
acknowledgment of the request.
    (1) The acknowledgment will include the name and address of the FNS 
Administrative Review Officer to review the sanction;
    (2) The acknowledgment will also notify the State agency that within 
30 days of the receipt of the acknowledgment, the State agency shall 
submit three sets of the following information to the Administrative 
Review Officer--
    (i) A clear, concise identification of the issue(s) in dispute;
    (ii) The State agency's position with respect to the issue(s) in 
dispute;
    (iii) The pertinent facts and reasons in support of the State 
agency's position with respect to the issue(s) in dispute and a copy of 
the specific sanction notice provided by FNS;
    (iv) All pertinent documents, correspondence and records which the 
State agency believes are relevant and helpful toward a more thorough 
understanding of the issue(s) in dispute;
    (v) The relief sought by the State agency;
    (vi) The identity of the person(s) presenting the State agency's 
position when a hearing is involved; and
    (vii) A list of prospective State agency witnesses when a hearing is 
involved.
    (c) FNS action. (1) When a hearing is requested pursuant to this 
section, the Administrative Review Officer will, within 60 days after 
receipt of the State agency's information, schedule and conduct the 
hearing. The State

[[Page 440]]

agency will be advised of the time, date and location of the hearing at 
least 10 days in advance.
    (2) When a hearing is requested, the FNS Administrative Review 
Officer will make a final determination within 30 days after the 
hearing, and the final determination will take effect upon delivery of 
the written notice of this final decision to the State agency.
    (3) When a review is requested, the FNS Administrative Review 
Officer will review information presented by a State agency and will 
make a final determination within 30 days after receipt of that 
information. The final determination will take effect upon delivery of 
the written notice of this final decision to the State agency.

Sec. 246.23  Claims and penalties.

    (a) Claims against State agencies. (1) If FNS determines through a 
review of the State agency's reports, program or financial analysis, 
monitoring, audit, or otherwise, that any Program funds provided to a 
State agency for supplemental foods or nutrition services and 
administration purposes were, through State or local agency negligence 
or fraud, misused or otherwise diverted from Program purposes, a formal 
claim will be assessed by FNS against the State agency. The State agency 
shall pay promptly to FNS a sum equal to the amount of the nutrition 
services and administration funds or the value of supplemental foods or 
food instruments so misused or diverted.
    (2) If FNS determines that any part of the Program funds received by 
a State agency; or supplemental foods, either purchased or donated 
commodities; or food instruments, were lost as a result of thefts, 
embezzlements, or unexplained causes, the State agency shall, on demand 
by FNS, pay to FNS a sum equal to the amount of the money or the value 
of the supplemental foods or food instruments so lost.
    (3) The State agency shall have full opportunity to submit evidence, 
explanation or information concerning alleged instances of noncompliance 
or diversion before a final determination is made in such cases.
    (4) FNS will establish a claim against any State agency that has not 
accounted for the disposition of all redeemed food instruments and taken 
appropriate follow-up action on all redeemed food instruments that 
cannot be matched against valid enrollment and issuance records, 
including cases that may involve fraud, unless the State agency has 
demonstrated to the satisfaction of FNS that it has:
    (i) Made every reasonable effort to comply with this requirement;
    (ii) Identified the reasons for its inability to account for the 
disposition of each redeemed food instrument; and
    (iii) Provided assurances that, to the extent considered necessary 
by FNS, it will take appropriate actions to improve its procedures.
    (b) Interest charge on claims against State agencies. If an 
agreement cannot be reached with the State agency for payment of its 
debts or for offset of debts on its current Letter of Credit within 30 
days from the date of the first demand letter from FNS, FNS will assess 
an interest (late) charge against the State agency. Interest accrual 
shall begin on the 31st day after the date of the first demand letter, 
bill or claim, and shall be computed monthly on any unpaid balance as 
long as the debt exists. From a source other than the Program, the State 
agency shall provide the funds necessary to maintain Program operations 
at the grant level authorized by FNS.
    (c) Claims--(1) Claims against participants. (i) Procedures. If the 
State agency determines that program benefits have been obtained or 
disposed of improperly as the result of a participant violation, the 
State agency must establish a claim against the participant for the full 
value of such benefits. For all claims, the State agency must issue a 
letter demanding repayment. If full restitution is not made or a 
repayment schedule is not agreed on within 30 days of receipt of the 
letter, the State agency must take additional collection actions until 
restitution is made or a repayment schedule is agreed on, unless the 
State agency determines that further collection actions would not be 
cost-effective. The State agency must establish standards, based on a 
cost benefit analysis, for determining when collection actions are no 
longer cost-effective. At the time the State agency

[[Page 441]]

issues the demand letter, the State agency must advise the participant 
of the procedures to follow to obtain a fair hearing pursuant to Sec. 
246.9 and that failure to pay the claim may result in disqualification. 
In addition to establishing a claim, the State agency must determine 
whether disqualification is required by Sec. 246.12(u)(2).
    (ii) Types of restitution. In lieu of financial restitution, the 
State agency may allow participants or parents or caretakers of infant 
or child participants for whom financial restitution would cause undue 
hardship to provide restitution by performing in-kind services 
determined by the State agency. Restitution may not include offsetting 
the claim against future program benefits, even if agreed to by the 
participant or the parent or caretaker of an infant or child 
participant.
    (iii) Disposition of claims. The State agency must document the 
disposition of all participant claims.
    (2) Claims against the State agency. FNS will assert a claim against 
the State agency for losses resulting from program funds improperly 
spent as a result of dual participation, if FNS determines that the 
State agency has not complied with the requirements in Sec. 
246.7(l)(1).
    (3) Delegation of claims responsibility. The State agency may 
delegate to its local agencies the responsibility for collecting 
participant claims.
    (d) Penalties. In accordance with section 12(g) of the National 
School Lunch Act, whoever embezzles, willfully misapplies, steals or 
obtains by fraud any funds, assets or property provided under section 17 
of the Child Nutrition Act of 1966, as amended, whether received 
directly or indirectly from USDA, or whoever receives, conceals or 
retains such funds, assets or property for his or her own interest, 
knowing such funds, assets or property have been embezzled, willfully 
misapplied, stolen, or obtained by fraud shall, if such funds, assets or 
property are of the value of $100 or more, be fined not more than 
$25,000 or imprisoned not more than five years, or both, or if such 
funds, assets or property are of a value of less than $100, shall be 
fined not more than $1,000 or imprisoned for not more than one year, or 
both.

[50 FR 6121, Feb. 13, 1985, as amended at 52 FR 21238, June 4, 1987; 65 
FR 83288, Dec. 29, 2000; 71 FR 56731, Sept. 27, 2006]

    Effective Date Note: At 72 FR 68998, Dec. 6, 2007, Sec. 246.23 was 
amended by revising (a)(4), effective February 4, 2008. For the 
convenience of the user, the revised text is set forth as follows:

Sec. 246.23  Claims and penalties.

    (a) * * *
    (4) FNS will establish a claim against any State agency that has not 
accounted for the disposition of all redeemed food instruments and cash-
value vouchers and taken appropriate follow-up action on all redeemed 
food instruments and cash-value vouchers that cannot be matched against 
valid enrollment and issuance records, including cases that may involve 
fraud, unless the State agency has demonstrated to the satisfaction of 
FNS that it has:
    (i) Made every reasonable effort to comply with this requirement;
    (ii) Identified the reasons for its inability to account for the 
disposition of each redeemed food instrument or cash-value voucher; and
    (iii) Provided assurances that, to the extent considered necessary 
by FNS, it will take appropriate actions to improve its procedures.

                                * * * * *

Sec. 246.24  Procurement and property management.

    (a) Requirements. State and local agencies shall ensure that 
subgrantees comply with the requirements of 7 CFR part 3016, the 
nonprocurement debarment/suspension requirements of 7 CFR part 3017, and 
if applicable, the lobbying restrictions as required in 7 CFR part 3018 
concerning the procurement and allowability of food in bulk lots, 
supplies, equipment and other services with Program funds. These 
requirements are adopted to ensure that such materials and services are 
obtained for the Program in an effective manner and in compliance with 
the provisions of applicable law and executive orders.
    (b) Contractual responsibilities. The standards contained in A-130 
and 7 CFR part 3016 do not relieve the State or local agency of the 
responsibilities arising under its contracts. The State agency is the 
responsible authority, without recourse to FNS, regarding the

[[Page 442]]

settlement and satisfaction of all contractual and administrative issues 
arising out of procurements entered into in connection with the Program. 
This includes, but is not limited to, disputes, claims, protests of 
award, source evaluation, or other matters of a contractual nature. 
Matters concerning violation of law are to be referred to such local, 
State or Federal authority as may have proper jurisdiction.
    (c) State regulations. The State or local agency may use its own 
procurement regulations which reflect applicable State and local 
regulations, provided that procurements made with Program funds adhere 
to the standards set forth in A-130 and 7 CFR part 3016.
    (d) Property acquired with Program funds. State and local agencies 
shall observe the standards prescribed in 7 CFR part 3016 in their 
utilization and disposition of real property and equipment, including 
automated data processing equipment, acquired in whole or in part with 
Program funds.

[50 FR 6121, Feb. 13, 1985, as amended at 59 FR 11508, Mar. 11, 1994]

Sec. 246.25  Records and reports.

    (a) Recordkeeping requirements. Each State and local agency shall 
maintain full and complete records concerning Program operations. Such 
records shall comply with 7 CFR part 3016 and the following 
requirements:
    (1) Records shall include, but not be limited to, information 
pertaining to financial operations, food delivery systems, food 
instrument issuance and redemption, equipment purchases and inventory, 
certification, nutrition education, civil rights and fair hearing 
procedures.
    (2) All records shall be retained for a minimum of three years 
following the date of submission of the final expenditure report for the 
period to which the report pertains. If any litigation, claim, 
negotiation, audit or other action involving the records has been 
started before the end of the three-year period, the records shall be 
kept until all issues are resolved, or until the end of the regular 
three-year period, whichever is later. If FNS deems any of the Program 
records to be of historical interest, it may require the State or local 
agency to forward such records to FNS whenever either agency is 
disposing of them.
    (3) Records for nonexpendable property acquired in whole or in part 
with Program funds shall be retained for three years after its final 
disposition.
    (4) All records shall be available during normal business hours for 
representatives of the Department and the Comptroller General of the 
United States to inspect, audit, and copy. Any reports or other 
documents resulting from the examination of such records that are 
publicly released may not include confidential applicant or participant 
information.
    (b) Financial and participation reports--(1) Monthly reports. (i) 
State agencies must submit financial and program performance data on a 
monthly basis, as specified by FNS, to support program management and 
funding decisions. Such information must include, but may not be limited 
to:
    (A) Actual and projected participation;
    (B) Actual and projected food funds expenditures;
    (C) A listing by source year of food and NSA funds available for 
expenditure; and,
    (D) NSA expenditures and unliquidated obligations.
    (ii) State agencies must require local agencies to report such 
financial and participation information as is necessary for the 
efficient management of food and NSA funds expenditures.
    (2) Annual reports. (i) Every year, State agencies must report to 
FNS the average number of migrant farmworker household members 
participating in the Program during a 12-month period of time specified 
by FNS.
    (ii) State agencies must submit itemized NSA expenditure reports 
annually as an addendum to their WIC Program closeout reports, as 
required by Sec. 246.17(b)(2).
    (3) Biennial reports. (i) Participant characteristics report. State 
and local agencies must provide such information as may be required by 
FNS to provide a biennial participant characteristics report. This 
includes, at a minimum, information on income and nutritional risk 
characteristics of participants, information on breastfeeding incidence 
and duration, and participation

[[Page 443]]

in the Program by category (i.e., pregnant, breastfeeding and postpartum 
women, infants and children) within each priority level (as established 
in Sec. 246.7(e)(4)) and by migrant farmworker households.
    (ii) Civil rights report. Racial and ethnic participation data 
contained in the biennial participant characteristics report will also 
be used to fulfill civil rights reporting requirements.
    (c) Other reports. State agencies must submit reports to reflect 
additions and deletions of local agencies administering the WIC Program 
and local agency address changes as these events occur.
    (d) Source documentation. To be acceptable for audit purposes, all 
financial and Program performance reports shall be traceable to source 
documentation.
    (e) Certification of reports. Financial and Program reports shall be 
certified as to their completeness and accuracy by the person given that 
responsibility by the State agency.
    (f) Use of reports. FNS will use State agency reports to measure 
progress in achieving objectives set forth in the State Plan, and this 
part, or other State agency performance plans. If it is determined, 
through review of State agency reports, Program or financial analysis, 
or an audit, that a State agency is not meeting the objectives set forth 
in its State Plan, FNS may request additional information including, but 
not limited to, reasons for failure to achieve its objectives.
    (g) Extension of reporting deadline. FNS may extend the due date for 
any Financial and Participation Report upon receiving a justified 
request from the State agency. The State agency should not wait until 
the due date if an extension is to be requested, but should submit the 
request as soon as the need is known. Failure by a State agency to 
submit a report by its due date may result in appropriate enforcement 
actions by FNS in accordance with Sec. 246.19(a)(2), including 
withholding of further grant payments, suspension or termination of the 
grant.

[50 FR 6121, Feb. 13, 1985, as amended at 52 FR 21238, June 4, 1987; 53 
FR 15653, May 3, 1988; 59 FR 11508, Mar. 11, 1994; 65 FR 53528, Sept. 5, 
2000; 71 FR 56731, Sept. 27, 2006; 72 FR 24183, May 2, 2007]

Sec. 246.26  Other provisions.

    (a) No aid reduction. The value of benefits or assistance available 
under the Program shall not be considered as income or resources of 
participants or their families for any purpose under Federal, State, or 
local laws, including, but not limited to, laws relating to taxation, 
welfare and public assistance programs.
    (b) Statistical information. FNS reserves the right to use 
information obtained under the Program in a summary, statistical or 
other form which does not identify particular individuals.
    (c) Medical information. FNS may require the State or local agencies 
to supply medical data and other information collected under the Program 
in a form that does not identify particular individuals, to enable the 
Secretary or the State agencies to evaluate the effect of food 
intervention upon low-income individuals determined to be at nutritional 
risk.
    (d) Confidentiality of applicant and participant information--(1) 
WIC purposes. (i) Confidential applicant and participant information is 
any information about an applicant or participant, whether it is 
obtained from the applicant or participant, another source, or generated 
as a result of WIC application, certification, or participation, that 
individually identifies an applicant or participant and/or family 
member(s). Applicant or participant information is confidential, 
regardless of the original source and exclusive of previously applicable 
confidentiality provided in accordance with other Federal, State or 
local law.
    (ii) Except as otherwise permitted by this section, the State agency 
must restrict the use and disclosure of confidential applicant and 
participant information to persons directly connected with the 
administration or enforcement of the WIC Program whom the State agency 
determine have a

[[Page 444]]

need to know the information for WIC Program purposes. These persons may 
include, but are not limited to: personnel from its local agencies and 
other WIC State or local agencies; persons under contract with the State 
agency to perform research regarding the WIC Program, and persons 
investigating or prosecuting WIC Program violations under Federal, State 
or local law.
    (2) Non-WIC purposes. (i) Use by WIC State and local agencies. Any 
WIC State or local agency may use confidential applicant and participant 
information in the administration of its other programs that serve 
persons eligible for the WIC Program in accordance with paragraph (h) of 
this section.
    (ii) Disclosure to public organizations. The State agency and its 
local agencies may disclose confidential applicant and participant 
information to public organizations for use in the administration of 
their programs that serve persons eligible for the WIC Program in 
accordance with paragraph (h) of this section.
    (3) Child abuse and neglect reporting. Staff of the State agency and 
its local agencies who are required by State law to report known or 
suspected child abuse or neglect may disclose confidential applicant and 
participant information without the consent of the participant or 
applicant to the extent necessary to comply with such law.
    (4) Release forms. Except in the case of subpoenas or search 
warrants (see paragraph (i) of this section), the State agency and its 
local agencies may disclose confidential applicant and participant 
information to individuals or entities not listed in this section only 
if the affected applicant or participant signs a release form 
authorizing the disclosure and specifying the parties to which the 
information may be disclosed. The State or local agency must permit 
applicants and participants to refuse to sign the release form and must 
notify the applicants and participants that signing the form is not a 
condition of eligibility and refusing to sign the form will not affect 
the applicant's or participant's application or participation in the WIC 
Program. Release forms authorizing disclosure to private physicians or 
other health care providers may be included as part of the WIC 
application or certification process. All other requests for applicants 
or participants to sign voluntary release forms must occur after the 
application and certification process is completed.
    (5) Access to information by applicants and participants. The State 
or local agency must provide applicants and participants access to all 
information they have provided to the WIC Program. In the case of an 
applicant or participant who is an infant or child, the access may be 
provided to the parent or guardian of the infant or child, assuming that 
any issues regarding custody or guardianship have been settled. However, 
the State or local agency need not provide the applicant or participant 
(or the parent or guardian of an infant or child) access to any other 
information in the file or record such as documentation of income 
provided by third parties and staff assessments of the participant's 
condition or behavior, unless required by Federal, State, or local law 
or policy or unless the information supports a State or local agency 
decision being appealed pursuant to Sec. 246.9.
    (e) Confidentiality of vendor information. Confidential vendor 
information is any information about a vendor (whether it is obtained 
from the vendor or another source) that individually identifies the 
vendor, except for vendor's name, address and authorization status. 
Except as otherwise permitted by this section, the State agency must 
restrict the use or disclosure of confidential vendor information to:
    (1) Persons directly connected with the administration or 
enforcement of the WIC Program or the Food Stamp Program who the State 
agency determines have a need to know the information for purposes of 
these programs. These persons may include personnel from its local 
agencies and other WIC State and local agencies and persons 
investigating or prosecuting WIC or Food Stamp Program violations under 
Federal, State, or local law;
    (2) Persons directly connected with the administration or 
enforcement of any Federal or State law. Prior to releasing the 
information to one of these parties (other than a Federal agency),

[[Page 445]]

the State agency must enter into a written agreement with the requesting 
party specifying that such information may not be used or redisclosed 
except for purposes directly connected to the administration or 
enforcement of a Federal, or State law; and
    (3) A vendor that is subject to an adverse action, including a 
claim, to the extent that the confidential information concerns the 
vendor subject to the adverse action and is related to the adverse 
action.
    (f) Confidentiality of Food Stamp Program retailer information. 
Except as otherwise provided in this section, the State agency must 
restrict the use or disclosure of information about Food Stamp Program 
retailers obtained from the Food Stamp Program, including information 
provided pursuant to Section 9(c) of the Food Stamp Act of 1977 (7 
U.S.C. 2018(c)) and Sec. 278.1(q) of this chapter, to persons directly 
connected with the administration or enforcement of the WIC Program.
    (g) USDA and the Comptroller General. The State agency must provide 
the Department and the Comptroller General of the United States access 
to all WIC Program records, including confidential vendor, applicant and 
participant information, pursuant to Sec. 246.25(a)(4).
    (h) Requirements for use and disclosure of confidential applicant 
and participant information for non-WIC purposes. The State or local 
agency must take the following steps before using or disclosing 
confidential applicant or participant information for non-WIC purposes 
pursuant to paragraph (d)(2) of this section.
    (1) Designation by chief State health officer. The chief State 
health officer (or, in the case of an Indian State agency, the governing 
authority) must designate in writing the permitted non-WIC uses of the 
information and the names of the organizations to which such information 
may be disclosed.
    (2) Notice to applicants and participants. The applicant or 
participant must be notified either at the time of application (in 
accordance with Sec. 246.7(i)(11)) or through a subsequent notice that 
the chief State health officer (or, in the case of an Indian State 
agency, the governing authority) may authorize the use and disclosure of 
information about their participation in the WIC Program for non-WIC 
purposes. This statement must also indicate that such information will 
be used by State and local WIC agencies and public organizations only in 
the administration of their programs that serve persons eligible for the 
WIC Program.
    (3) Written agreement and State plan. The State or local agency 
disclosing the information must enter into a written agreement with the 
other public organization or, in the case of a non-WIC use by a State or 
local WIC agency, the unit of the State or local agency that will be 
using the information. The State agency must also include in its State 
plan, as specified in Sec. 246.4(a)(24), a list of all organizations 
(including units of the State agency or local agencies) with which the 
State agency or its local agencies has executed or intends to execute a 
written agreement. The written agreement must:
    (i) Specify that the receiving organization may use the confidential 
applicant and participant information only for:
    (A) Establishing the eligibility of WIC applicants or participants 
for the programs that the organization administers;
    (B) Conducting outreach to WIC applicants and participants for such 
programs;
    (C) Enhancing the health, education, or well-being of WIC applicants 
or participants who are currently enrolled in such programs, including 
the reporting of known or suspected child abuse or neglect that is not 
otherwise required by State law;
    (D) Streamlining administrative procedures in order to minimize 
burdens on staff, applicants, or participants in either the receiving 
program or the WIC Program; and/or
    (E) Assessing and evaluating the responsiveness of a State's health 
system to participants' health care needs and health care outcomes; and
    (ii) Contain the receiving organization's assurance that it will not 
use the information for any other purpose or disclose the information to 
a third party.
    (i) Subpoenas and search warrants. The State agency may disclose 
confidential

[[Page 446]]

applicant, participant, or vendor information pursuant to a valid 
subpoena or search warrant in accordance with the following procedures:
    (1) Subpoena procedures. In determining how to respond to a subpoena 
duces tecum (i.e., a subpoena for documents) or other subpoena for 
confidential information, the State or local agency must use the 
following procedures:
    (i) Upon receiving the subpoena, immediately notify its State 
agency;
    (ii) Consult with legal counsel for the State or local agency and 
determine whether the information requested is in fact confidential and 
prohibited by this section from being used or disclosed as stated in the 
subpoena;
    (iii) If the State or local agency determines that the information 
is confidential and prohibited from being used or disclosed as stated in 
the subpoena, attempt to quash the subpoena unless the State or local 
agency determines that disclosing the confidential information is in the 
best interest of the Program. The determination to disclose confidential 
information without attempting to quash the subpoena should be made only 
infrequently; and,
    (iv) If the State or local agency seeks to quash the subpoena or 
decides that disclosing the confidential information is in the best 
interest of the Program, inform the court or the receiving party that 
this information is confidential and seek to limit the disclosure by:
    (A) Providing only the specific information requested in the 
subpoena and no other information; and,
    (B) Limiting to the greatest extent possible the public access to 
the confidential information disclosed.
    (2) Search warrant procedures. In responding to a search warrant for 
confidential information, the State or local agency must use the 
following procedures:
    (i) Upon receiving the search warrant, immediately notify its State 
agency;
    (ii) Immediately notify legal counsel for the State or local agency;
    (iii) Comply with the search warrant; and,
    (iv) Inform the individual(s) serving the search warrant that the 
information being sought is confidential and seek to limit the 
disclosure by:
    (A) Providing only the specific information requested in the search 
warrant and no other information; and
    (B) Limiting to the greatest extent possible the public access to 
the confidential information disclosed.
    (j) Data collection related to local agencies. (1) Each State agency 
must collect data related to local agencies that have an agreement with 
the State agency to participate in the program for each of Federal 
fiscal years 2006 through 2009, including those local agencies that 
participated only for part of the fiscal year. Such data shall include:
    (i) The name of each local agency;
    (ii) The city in which each local agency was headquartered and the 
name of the state;
    (iii) The amount of funds provided to the participating 
organization, i.e., the amount of federal funds provided for nutrition 
services and administration to each participating local agency; and
    (iv) The type of participating organization, e.g., government 
agency, educational institution, non-profit organization/secular, non-
profit organization/faith-based, and ``other.''
    (2) On or before August 31, 2007, and each subsequent year through 
2010, State agencies must report to FNS data as specified in paragraph 
(j)(1) of this section for the prior Federal fiscal year. State agencies 
must submit this data in a format designated by FNS.

[50 FR 6121, Feb. 13, 1985, as amended at 53 FR 35301, Sept. 13, 1988; 
65 FR 83288, Dec. 29, 2000; 71 FR 56731, Sept. 27, 2006; 72 FR 24184, 
May 2, 2007]

Sec. 246.27  Program information.

    Any person who wishes information, assistance, records or other 
public material shall request such information from the State agency, or 
from the FNS Regional Office serving the appropriate State as listed 
below:
    (a) Connecticut, Maine, Massachusetts, New Hampshire, New York, 
Rhode Island, Vermont: U.S. Department of Agriculture, FNS, Northeast 
Region, 10 Causeway Street, room 501, Boston, Massachusetts 02222-1066.
    (b) Delaware, District of Columbia, Maryland, New Jersey, 
Pennsylvania, Puerto Rico, Virginia, Virgin Islands,

[[Page 447]]

West Virginia: U.S. Department of Agriculture, FNS, Mid-Atlantic Region, 
Mercer Corporate Park, 300 Corporate Boulevard, Robbinsville, New Jersey 
08691-1598.
    (c) Alabama, Florida, Georgia, Kentucky, Mississippi, North 
Carolina, South Carolina, Tennessee: U.S. Department of Agriculture, 
FNS, Southeast Region, 61 Forsyth Street, SW., room 8T36, Atlanta, 
Georgia 30303.
    (d) Illinois, Indiana, Michigan, Minnesota, Ohio, Wisconsin: U.S. 
Department of Agriculture, FNS, Midwest Region, 77 West Jackson 
Boulevard--20th Floor, Chicago, Illinois 60604-3507.
    (e) Arkansas, Louisiana, New Mexico, Oklahoma, Texas: U.S. 
Department of Agriculture, FNS, Southwest Region, 1100 Commerce Street, 
room 5-C-30, Dallas, Texas 75242.
    (f) Colorado, Iowa, Kansas, Missouri, Montana, Nebraska, North 
Dakota, South Dakota, Utah, Wyoming: U.S. Department of Agriculture, 
FNS, Mountain Plains Region, 1244 Speer Boulevard, suite 903, Denver, 
Colorado 80204.
    (g) Alaska, American Samoa, Arizona, California, the Commonwealth of 
the Northern Mariana Islands, Guam, Hawaii, Idaho, Nevada, Oregon, 
Washington: U.S. Department of Agriculture, FNS, Western Region, 550 
Kearny Street, room 400, San Francisco, California 94108.

[50 FR 6121, Feb. 13, 1985; 50 FR 8098, Feb. 28, 1985, as amended at 59 
FR 11508, Mar. 11, 1994; 71 FR 56733, Sept. 27, 2006]

Sec. 246.28  OMB control numbers.

    The following control numbers have been assigned to the information 
collection requirements in 7 CFR part 246 by the Office of Management 
and Budget pursuant to the Paperwork Reduction Act of 1980, Pub. L. 96-
511.

------------------------------------------------------------------------
                                                               Currrent
  7 CFR part 246 section where requirements are described    OMB control
                                                                 no.
------------------------------------------------------------------------
.4(a) (8), (9), (11).......................................    0584-0386
.5.........................................................    0584-0043
.6.........................................................    0584-0043
.7(a)......................................................    0584-0386
.7(e), (h), (j)............................................    0584-0043
.7(n)......................................................    0584-0386
.7(i)......................................................    0584-A536
.10........................................................    0584-A536
.11(a)(3)..................................................    0584-0386
.11(d).....................................................    0584-0043
.12(f), (i), (i)(3), (j)...................................    0584-0043
.14(d)(1)..................................................    0584-0043
.16(c).....................................................    0584-0043
.17(c)(1)..................................................    0584-0043
.19........................................................    0584-0043
.20(a).....................................................    0584-0043
.25(a), (b)................................................   0584-0043,
                                                               0584-0347
------------------------------------------------------------------------

[50 FR 6121, Feb. 13, 1985, as amended at 53 FR 15653, May 3, 1988; 54 
FR 51295, Dec. 14, 1989; 58 FR 11507, Feb. 26, 1993]