[Federal Register Volume 77, Number 82 (Friday, April 27, 2012)]
[Rules and Regulations]
[Pages 25024-25036]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2012-10229]


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DEPARTMENT OF AGRICULTURE

Food and Nutrition Service

7 CFR Part 210

[FNS-2011-0025]
RIN 0584-AE15


Certification of Compliance With Meal Requirements for the 
National School Lunch Program Under the Healthy, Hunger-Free Kids Act 
of 2010

AGENCY: Food and Nutrition Service, USDA.

ACTION: Interim final rule.

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SUMMARY: This interim rule amends National School Lunch Program 
regulations to conform to requirements contained in the Healthy, 
Hunger-Free Kids Act of 2010 regarding performance-based cash 
assistance for school food authorities certified compliant with meal 
pattern and nutrition standards. This rule requires State agencies to 
certify participating school food authorities (SFAs) that are in 
compliance with meal pattern and nutrition standard requirements as 
eligible to receive performance-based cash assistance for each 
reimbursable lunch served (an additional six cents per lunch available 
beginning October 1, 2012 and adjusted annually thereafter). This rule 
also requires State agencies to disburse performance-based cash 
assistance to certified SFAs, and withhold the performance-based cash 
assistance if the SFA is determined to be out of compliance with meal 
pattern or nutrition standards during a subsequent administrative 
review. The intended effect of this rule is to provide additional 
funding for SFAs to implement new meal pattern requirements, thus 
increasing the healthfulness of meals served to school children.

DATES: Effective date: This interim rule is effective July 1, 2012.
    Comment dates: Comments on rule provisions: Mailed comments on the 
provisions in this rule must be postmarked on or before July 26, 2012; 
emailed or faxed comments must be submitted by 11:59 p.m. on July 26, 
2012; and hand-delivered comments must be received by 5 p.m. July 26, 
2012 to be assured of consideration.
    Comments on Paperwork Reduction Act requirements: Comments on the 
information collection requirements associated with this rule must be 
received by June 26, 2012.

ADDRESSES: The Food and Nutrition Service (FNS) invites interested 
persons to submit comments on this interim rule. Comments may be 
submitted by any of the following methods:
    <bullet> Federal eRulemaking Portal: Go to http://www.regulations.gov. Follow the online instructions for submitting 
comments.
    <bullet> Mail: Julie Brewer, Chief, Policy and Program Development 
Branch, Child Nutrition Division, FNS, Department of Agriculture, 3101 
Park Center Drive, Room 640, Alexandria, Virginia 22302-1594.
    <bullet> Hand Delivery or Courier: Deliver comments to 3101 Park 
Center Drive, Room 640, Alexandria, Virginia 22302-1594, during normal 
business hours of 8:30 a.m.-5 p.m. All submissions received in response 
to this interim rule will be included in the record and will be 
available to the public. Please be advised that the substance of the 
comments and the identity of the individuals or entities submitting 
comments will be subject to public disclosure. FNS will also make the 
comments publicly available by posting a copy of all comments on http://www.regulations.gov.

FOR FURTHER INFORMATION CONTACT: Julie Brewer, Chief, Policy and 
Program Development Branch, Child Nutrition Division, FNS, 3101 Park 
Center Drive, Alexandria, Virginia 22302, or by telephone at (703) 305-
2590.

SUPPLEMENTARY INFORMATION:

I. Background

    The National School Lunch Program (NSLP) provides cash assistance 
to States to assist schools in providing nutritious lunches for school 
children. In order to receive reimbursement, schools must serve lunches 
that meet program requirements, including statutory and regulatory 
nutrition standards.
    Prior to the enactment of the Healthy, Hunger-Free Kids Act of 2010 
(Pub. L. 111-296), on December 13, 2010, the Richard B. Russell 
National School Lunch Act (NSLA) (42 U.S.C. 1751 et al.) authorized 
only general and special cash assistance for lunches served in the 
NSLP. Section 4 of the NSLA authorizes the Secretary to provide two 
levels of general cash assistance for all lunches served, including 
lunches to children whose family income is above 185 percent of the 
Federal poverty guidelines. The lower cash assistance level applies to 
lunches served by SFAs in which less than 60 percent of the lunches 
served in the school lunch program during the second preceding school 
year were served free or at a reduced price. The higher payment level 
applies to lunches served by SFAs in which 60 percent or more of the 
lunches served during the second preceding school year were served free 
or at a reduced price.
    To supplement the general cash assistance payments, section 11 of 
the NSLA (42 U.S.C. 1759a) authorizes the Secretary to provide special 
cash assistance payments to schools providing free and reduced price 
meals. Children from families with income at or below 130 percent of 
the Federal poverty level are eligible for free meals, while those from 
families with incomes between 130 and 185 percent are eligible for 
reduced price meals. As a result, lunches served to those students are 
reimbursable at a higher, special assistance rate.
    In accordance with section 11 of the NSLA, both the general and 
special cash assistance reimbursement rates are adjusted annually on 
July 1 of each year. Annual adjustments reflect changes in the cost of 
operating the NSLP, as indicated by the change in the Food Away From 
Home series of the Consumer Price Index for All Urban Consumers, 
published by the Bureau of Labor Statistics of the Department of Labor. 
Each year, the Department of Agriculture (the Department) publishes a 
Notice specifying the annual adjustments.

The Healthy, Hunger-Free Kids Act of 2010

    The Healthy, Hunger-Free Kids Act of 2010 (the HHFKA) made 
significant changes to the NSLA. Section 201 of the HHFKA amended 
section 4(b) of the NSLA, 42 U.S.C. 1753(b), by requiring the Secretary 
to update the meal patterns and nutrition standards for the NSLP and 
School Breakfast Program (SBP) and to issue regulations requiring all 
SFAs to comply with the updated meal patterns and nutrition standards.
    On January 13, 2011, the Department published a proposed rule, 
Nutrition Standards in the National School Lunch and School Breakfast 
Programs (76 FR 2494), which proposed to update the meal patterns and 
nutrition requirements for the NSLP and SBP, as required by the NSLA. 
The Department received over 132,000 comments from the public on the 
proposed rule. Subsequently, on January 26, 2012, the

[[Page 25025]]

Department issued a final rule, also entitled Nutrition Standards in 
the National School Lunch and School Breakfast Programs, (77 FR 4088) 
(hereafter referred to in this preamble as ``the updated meal pattern 
rule''). The implementation date of the final rule is July 1, 2012.
    Section 201 of the HHFKA also amended the NSLA to provide for 
additional assistance payments in the form of performance-based 
reimbursement of 6 cents per lunch served beginning on October 1, 2012. 
Performance-based cash reimbursement is in addition to the general and 
special cash assistance described above and is to be provided for each 
lunch served in SFAs certified by the State agency to be in compliance 
with the updated meal patterns and nutrition standards (hereafter 
referred to in this preamble as ``updated meal patterns'').
    In recognition of the significance of changes necessitated by the 
new statutory requirements, section 201 of the HHFKA also amended 
section 4(b) of the NSLA to provide $50 million for each of two years 
to assist in the implementation of the updated meal patterns. During 
each of those two years, $47 million of the $50 million will be made 
available to State agencies for training, technical assistance, 
certification, and oversight activities. The remaining $3 million will 
be used to support Federal implementation of the new requirements. This 
is in addition to the annual allocation of State administrative expense 
funds made available to State agencies in accordance with section 7 of 
the Child Nutrition Act of 1966, 42 U.S.C. 1776, and 7 CFR Part 235.

Performance-Based Reimbursement

    As noted above, Section 201 authorized the provision of 
performance-based cash assistance (performance-based reimbursement) for 
each lunch served in SFAs certified to be in compliance with the 
updated meal patterns. Specifically, section 201 added subparagraphs 
(D) and (E) to section 4(b)(3) of the NSLA which read as follows:
    <bullet> ELIGIBLE SCHOOL FOOD AUTHORITY.--To be eligible to receive 
an additional reimbursement described in this paragraph, a school food 
authority shall be certified by the State to be in compliance with the 
interim or final regulations described in subparagraph (A)(ii).
    <bullet> FAILURE TO COMPLY.--Beginning on the later of the date 
described in subparagraph (A)(ii)(II), the date of enactment of this 
paragraph, or October 1, 2012, school food authorities found to be out 
of compliance with the meal patterns or nutrition standards established 
by the implementing regulations shall not receive the additional 
reimbursement for each lunch served described in this paragraph.
    Congress clearly intended that each SFA recognized as complying 
with updated meal patterns should be certified and should receive 
performance-based reimbursement for each eligible meal served. However, 
the method for assessing such compliance and determining such 
eligibility for performance-based reimbursement was not clearly 
enunciated in the above-cited provisions. Further, in subparagraph (E), 
it is not clear whether the reference to ``meal patterns or nutrition 
standards established by the implementing regulations'' refers to both 
the SBP and the NSLP or just the NSLP, especially considering that the 
provision reinforces the concept that the performance reimbursement is 
only applied to lunches served. As a result, it was necessary for the 
Secretary to develop an interpretation of this provision in order to 
determine how to implement it in this interim rule. Key to that 
determination was establishing the extent to which failure to comply 
with the updated meal patterns in SBP would jeopardize a SFA's ability 
to continue to receive the performance-based reimbursement. First, the 
Department considered the overall purposes of the HHFKA, as Congress 
articulated them in the legislative history:

    In summary, it is evident that tremendous needs exist to reduce 
childhood hunger and food insecurity, as well as to improve the 
diets and overall health of American children more generally. The 
purpose of this bill is to address those needs in order that fewer 
low-income children have to go without food, and to ensure that more 
children from all income levels adopt the kind of healthful eating 
habits and lifestyles that will enable them to live longer, more 
productive lives. (Senate Report 111-178, page 5.)

    It was apparent that in considering the HHFKA, Congress noted that 
participation in the SBP was substantially lower than participation in 
the NSLP and that the need for both of these programs is growing as a 
large segment of America's school aged children face food 
insecurity.\1\ Congress also explicitly discussed the need to raise 
nutrition standards for both SBP and NSLP, noting in pertinent part 
that ``considerable work remains to be done to improve children's diets 
and to bring Federally-subsidized meals in line with USDA nutritional 
guidelines.'' \2\ The HHFKA performance-based reimbursement provisions 
were intended to facilitate the raising of nutritional standards in 
these programs.
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    \1\ Senate Report 111-178, page 2.
    \2\ The legislative history of the HHFKA contains the following:
    In addition to their importance in addressing food insecurity, 
Federal child nutrition programs play a critical role in providing 
nutritious, balanced meals to children and promoting healthy 
lifestyles. Major strides have been made in recent years to improve 
the quality of meals served to children through child nutrition 
programs. According to the third USDA School Nutrition Dietary 
Assessment (SNDA III), in school year 2004-2005, over 95 percent of 
NSLP lunches offered and served by most schools met USDA goals for 
cholesterol over a typical week and were lower in saturated fat than 
meals served in school year 1998-1999, when the last SNDA was 
conducted. Larger proportions of elementary schools met the 
standards for total fat and saturated fat, and a larger proportion 
of secondary schools met the standard for saturated fat.
    Despite this significant progress, however, considerable work 
remains to be done to improve children's diets and to bring 
Federally-subsidized meals in line with USDA nutritional guidelines. 
According to USDA, roughly 99 percent of lunches included amounts of 
sodium above the recommended levels. And, only 26 percent and 34 
percent of schools served lunches that met USDA guidelines for total 
fat and saturated fat, respectively. Additionally, available 
research has consistently shown that the diets of U.S. children do 
not meet current national dietary recommendations for nutrition and 
health. Overall, children today have diets that are low in fruits, 
vegetables, whole grains, and dairy foods, and high in sodium, fat 
and added sugars. The 2005 Dietary Guidelines recommend that 
Americans consume half of their grains as whole grains, but 
according to the U.S. Department of Health and Human Services 
report, Healthy People 2010, only 7 percent of children ages two to 
19 years currently meet this recommendation. (Senate Report 111-178, 
page 4.)
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    After consideration of expressed Congressional intent and given the 
dual focus of the HHFKA on raising nutritional standards and improving 
program access in order to address food insecurity, the Department 
adopted a balanced approach in implementing the performance-based 
reimbursement provisions in this interim rule. The Department is of the 
view that the burden on SFAs should not be too onerous in scope nor too 
rapid in implementation insofar as either result could lead SFAs to 
decide not to make the changes necessary to receive the performance-
based reimbursement or to cease SBP participation and focus solely on 
raising the nutritional standards for lunches served in the NSLP. On 
the other hand, the Department is committed to implementing the 
provisions in a way that is robust enough to ensure that SFAs receiving 
the performance-based reimbursement have implemented improved 
nutritional standards. The approach taken in this interim rule, then, 
is to strike the appropriate implementation balance to achieve both the 
goal of expanding

[[Page 25026]]

participation and of raising nutritional standards of the school meals 
served to America's children.
    Thus, in formulating regulations to implement the performance-based 
reimbursement, the Department sought to further the overall goals of 
the HHFKA as expressed by Congress and the ultimate purposes of the 
performance-based reimbursement. Specifically, the Department views 
section 4(b)(3)(D) and (E) as establishing two separate requirements. 
Subparagraph (D) requires that at the time an SFA is certified by the 
State agency to receive the 6 cents per lunch performance-based 
reimbursement, the State agency must determine that the SFA is in 
compliance with the updated meal patterns and nutrition requirements in 
effect at the time of certification for the NSLP (and for the SBP if 
the SFA participates in that program). That is, for an SFA to be 
eligible for the performance-based reimbursement, it must meet the 
improved nutritional standards then in effect for the lunches and 
breakfasts it serves under these programs. The Department believes that 
this approach to the certification requirement of subparagraph (D) 
meets the overall goals of the HHFKA, comports with the expectations of 
Congress, and incentivizes SFAs to raise the nutritional standards for 
all meals served.
    In subparagraph (E), the HHFKA provides that an SFA which falls out 
of compliance with the meal patterns or nutritional requirements is 
precluded from receiving the 6 cents per lunch performance-based 
reimbursement. In considering the implementation of this provision, the 
Department focused on the statutory intent of the phrase ``school food 
authorities found to be out of compliance with the meal patterns or 
nutrition standard.'' As discussed above, in examining this phrase, the 
Department determined that it is unclear whether ``meal patterns or 
nutrition standards'' encompasses the patterns and standards in both 
the SBP and the NSLP or refers solely to those of the NSLP. The 
determination is especially important given that the 6 cents 
performance-based reimbursement may only be provided to an SFA for the 
service of eligible lunches. There is no legislative history that 
provides additional insight or explanation as to the intent of Congress 
regarding the interpretation of this key phrase in the provision. Thus, 
after analysis and in consideration of the other changes to the NSLP 
and SBP accomplished in accordance with section 201 of the HHFKA, the 
Department shaped its interpretation of this phrase in light of the 
overall intent of the HHFKA and in keeping with federal experience in 
administering these programs.
    State agencies currently conduct regular administrative reviews of 
participating SFAs for both the NSLP and the SBP. In instances in which 
a State agency finds that the SFA has violated one of more critical 
areas of review, program regulations require that the SFA implement 
corrective action. The State agency may withhold program payments 
during the corrective action period, but will also provide technical 
and other assistance to the SFA and confirm corrective action through 
one or more follow up reviews. Pursuant to program regulations and 
consistent with the general policy of the Department, only in the rare 
instance in which an SFA fails to complete corrective action in a 
critical area of review does a State agency disallow meal 
reimbursements. The regulatory framework reflects the reality that a 
reduction in program payments of any amount is most likely to have an 
adverse impact on those who these programs are designed to help, the 
children receiving these school meals.
    Accordingly, in interpreting subparagraph (E) for the purposes of 
developing the implementing regulations in the interim rule, the 
Department has taken the following factors into account:
    (1) As explained above, it is clear that the 6 cents performance-
based reimbursement and the compliance requirements of subparagraph (E) 
have a dual intent--to expand SFA participation in the NSLP and SBP and 
to encourage SFAs to raise nutritional standards for both the NSLP and 
SBP. In implementing the statute, the Department must balance the need 
effectively to encourage compliance with the increased nutritional 
standards for both programs without imposing unnecessary burdens likely 
to discourage SFAs from raising their breakfast and lunch nutrition 
standards or from participating in SBP. Neither of these outcomes would 
be compatible with the purposes of the HHFKA.
    (2) The implementation of the meal patterns and nutrition standards 
developed pursuant to the HHFKA will be phased in over a period of 
several years with SBP implementation likely to be more dynamic over 
the course of the next several years.
    Taking into account all of these factors and balancing the overall 
goals of the HHFKA-mandated performance-based reimbursement, the 
Department concluded that for the purposes of the interim rule, 
Congress' use of the phrase ``the meal patterns or nutrition 
standards'' in subparagraph (E) of the HHFKA means the meal patterns or 
nutrition standards of the NSLP but not the SBP. As a result, this 
interim rule provides that if the SFA is certified to receive the 
performance-based reimbursement and, during a State agency's 
administrative review, is found to be in violation of a review area of 
the updated meal patterns for the SBP established in program 
regulations, the SFA is not in jeopardy of losing the performance-based 
reimbursement for eligible lunches served under the NSLP. Conversely, 
if the SFA is found to be out of compliance with the updated meal 
patterns for the NSLP, the SFA is at risk of losing the performance-
based reimbursement. In addition, if the State agency finds a SFA out 
of compliance with the updated meal patterns for either SBP or the 
NSLP, the State agency is required to follow the standard operating 
procedures for administrative reviews. This means that a SFA could be 
subject to fiscal sanctions if the State agency determines that the SFA 
has not completed timely the corrective action as required by the 
regulations.
    The Department has determined that this approach strikes the right 
balance regarding the implementation of the requirements the HHFKA 
added to NSLA in sections 4(b)(3)(D) and (E) and reflects the intent of 
Congress as clarified in pertinent legislative history regarding the 
goals of the HHFKA. Consistent with the HHFKA provisions, the interim 
rule clearly requires SFAs that participate in the SBP and the NSLP to 
meet the higher nutritional standards in effect for both programs at 
the time the SFAs are certified. Existing regulations continue to 
require State agencies to establish corrective action plans and work 
with SFAs to timely complete corrective actions for any violations 
identified during administrative reviews relating to either program. On 
balance, the implementation of performance-based reimbursement and the 
higher nutrition standards will allow the performance-based 
reimbursement and compliance tools to serve as an effective incentive 
for SFAs to increase participation in these programs while raising 
nutritional standards.

II. Overview

    This interim rule amends 7 CFR part 210, the regulations governing 
the NSLP, to add the procedures for performance-based certifications, 
required documentation and timeframes, validation reviews, compliance 
and administrative reviews, reporting and recordkeeping, and technical 
assistance.

[[Page 25027]]

Performance-Based Certification Requirements

    In accordance with the HHFKA, State agencies must provide 
performance-based reimbursements for each lunch served in eligible 
SFAs, i.e., SFAs certified by the State agency to be in compliance with 
the updated meal patterns for the NSLP (as well as for the SBP, if the 
SFA participates in the SBP). Section 210.7(d) has been revised to set 
forth the procedures for performance-based certifications for both 
State agencies and SFAs.
(1) State Agency Certification Responsibilities
    Section 210.7(d)(1) of this interim rule requires State agencies to 
establish procedures to certify SFAs for performance-based cash 
reimbursement in accordance with guidance established by the Food and 
Nutrition Service (FNS). State agencies must provide guidance to 
facilitate the certification process, including making SFAs aware of 
certification protocol and documentation required to demonstrate 
compliance with updated meal patterns set forth in Sec.  210.10 and for 
those SFAs participating in the SBP, 7 CFR 220.8 or 220.23. Compliance 
with both NSLP and SBP updated meal patterns is necessary to be 
certified for performance-based cash reimbursements for lunch. However, 
because some aspects of the updated meal patterns are phased in over 
several years, SFAs must demonstrate compliance with requirements in 
effect at the time of certification.
    In school years subsequent to the school year of certification, 
through School Year 2014-2015, State agencies must require SFAs to 
submit an annual attestation of compliance with meal pattern 
requirements as new requirements are phased in. The phase in timeline 
for meal pattern requirements is established in the updated meal 
pattern rule.FNS will provide SFAs with a prototype attestation which 
includes a statement attesting compliance with each of the phased in 
meal pattern requirements. The attestation must be provided to the 
State agency as an addendum to the written agreement required in Sec.  
210.9(b). Additionally, this interim rule requires in new Sec.  
210.18(g) that compliance with new requirements in subsequent years 
will be confirmed during State administrative reviews.
    This interim regulation also requires that State agencies' 
procedures must also include a protocol for timely review of 
certification documents and disbursement of funds to eligible SFAs. 
Once a SFA is certified, a State agency must promptly disburse 
performance-based reimbursement to the SFA beginning with the start of 
certification. State agencies must begin making performance-based 
reimbursement payments for lunches served in certified SFAs in the 
calendar month for which the SFA is certified. However, because 
performance-based cash reimbursement is not available until October 1, 
2012, State agency procedures must ensure that no performance-based 
reimbursement is provided for meals served by SFAs prior to October 1, 
2012.
    Finally, during School Year 2012-2013, State agencies must conduct 
on-site validation reviews for a sample of certified SFAs to ensure 
that submitted certification documentation accurately reflects the meal 
service.
    These requirements are discussed in more detail below.
(2) SFA Responsibilities
    Section 210.7(d)(2)of this interim rule establishes requirements 
for SFAs seeking to obtain performance-based reimbursement. SFAs must 
submit certification materials to the State agency in accordance with 
State agency certification procedures, including documentation to 
support receipt of performance-based reimbursement. SFAs must attest 
that the documentation provided is representative of the ongoing meal 
service within the SFA. Required documentation is described below. SFAs 
certified to earn performance-based reimbursement must maintain 
documentation of compliance, including production and menu records, and 
other records, and SFAs must make appropriate records available to 
State agencies upon request.

Required Documentation and Timeframes

    SFAs may demonstrate compliance with the updated meal patterns to 
the State agency in a variety of ways, briefly described below. FNS 
developed the following options for certification using, to the maximum 
extent possible, existing processes and information available to the 
State agency and SFAs. This flexible approach is intended to facilitate 
the timely completion of certification activities with a reasonable 
burden on State agencies and SFAs. Additionally, the approach ensures 
that an SFA's compliance with the updated meal patterns is assessed 
accurately.
    Option 1: Menus and nutrient analysis. Approximately two-thirds of 
SFAs currently plan menus using nutrient analysis software. Although 
SFAs will no longer be required to conduct a nutrient analysis once 
updated nutrition standards are in effect, those using software to plan 
menus may use the software's nutrient analysis function to document 
compliance with updated meal patterns. SFAs that select this option 
must submit to the State agency one week of each type of menu offered 
in the schools under its jurisdiction, nutrient analyses of the 
submitted menus, and a detailed menu worksheet which shows food items 
and quantities (as specified by FNS) which will be used to assess 
compliance with updated meal patterns.
    Option 2: Menus and a simplified nutrient assessment. In lieu of 
showing compliance with updated meal patterns via a full menu nutrient 
analysis, SFAs may perform a simplified nutrient assessment related to 
foods offered on school menus to demonstrate to the State agency 
compliance with updated meal patterns. SFAs that exercise this 
certification option must submit to the State agency, a simplified 
nutrient assessment (as specified by FNS), one week of each type of 
menu offered, and a detailed menu worksheet with food items and 
quantities (as specified by FNS).
    Option 3: State agency review findings. An SFA may also demonstrate 
compliance with updated meal patterns during the course of a regular 
State agency-conducted administrative review, if the State offers this 
option. A detailed menu worksheet with food items and quantities (as 
specified by FNS) is required as part of the materials used to 
demonstrate compliance. When conducting an administrative review, a 
State agency may certify an SFA to receive performance-based 
reimbursement if the State agency can confirm compliance with all meal 
pattern and nutrition standards. The State agency may document 
certification in lieu of asking the SFA to submit documentation.
    SFAs may choose whether to submit menus with a nutrient analysis 
(option 1), or with the simplified nutrient assessment (option 2). The 
option to certify SFA compliance during the course of an administrative 
review is left to the State agency. State agencies that wish to use 
this approach for some or all of their SFAs should notify these SFAs 
promptly.
    To ensure that certification documentation accurately reflect 
current SFA practices, menus submitted for certification after October 
1, 2012 must be submitted for certification at or around the time of 
planned usage. To facilitate disbursement of performance-based 
reimbursement as soon as it becomes available (October 1, 2012),

[[Page 25028]]

State agencies should begin preparing for certification activities upon 
publication of this interim rule, so that the certification process for 
SFAs may begin as soon as possible following the beginning of SY 2012-
2013. SFA-submitted certification materials submitted prior to October 
1, 2012 should include menus that will be served October 1, 2012 or 
later. If a SFA submits certification materials to the State agency and 
is found to be out of compliance, the State agency may not authorize 
the performance-based reimbursement, must provide technical assistance 
in non-compliant areas, and encourage the SFA to take corrective action 
and reapply for certification. The SFA may reapply for certification as 
soon as corrective action is taken. If, in reviewing performance-based 
certification materials, the State agency finds a significant 
noncompliance violation (e.g., a missing meal component), the State 
agency must require the SFA to undergo an administrative review early 
in the review cycle.
    In years subsequent to the year certified, through School Year 
2014-2015, SFA's will be required to submit an annual attestation of 
compliance with meal pattern requirements as new requirements are 
phased in. The phase in timeline for meal pattern requirements is 
established in the updated meal pattern rule. The attestation must be 
provided to the State agency as an addendum to the written agreement 
required in Sec.  210.9(b).

State Agency Timeframes

    Because of the short implementation timeline prior to performance-
based reimbursement becoming available, FNS seeks to ensure that 
certification activities are conducted in a timely manner. This interim 
rule requires in the new Sec.  210.7(d)(1) that State agencies must 
review certification materials and make a certification determination 
within 60 days of receipt from the SFA or as otherwise authorized by 
FNS.
    Upon certification, the State agency must reimburse the certified 
SFA with the additional performance-based reimbursement for each lunch 
served beginning in the start of the month in which the certified menus 
are served. For example, if menus for the first week of October are 
certified in December, the State agency must retroactively reimburse 
the additional performance-based reimbursement for all lunches served 
on or after October 1.
    Documentation must reflect current meal service, i.e., meal service 
in the calendar month the certification materials are submitted or, in 
the month preceding the calendar month of submission. For the time 
period prior to the availability of funds (July 1, 2012-September 30, 
2012), SFAs may submit documentation of compliance reflecting planned 
meal service beginning October 1, 2012. However, in no case can 
reimbursement be made for meals served prior to October 1, 2012.
    Provision of the performance-based reimbursement is added by this 
interim rule at Sec.  210.7(d).

State Agency Validation Reviews

    For School Year 2012-2013, State agencies also must conduct on-site 
validation reviews for a sample of certified SFAs to validate the 
information submitted for certification. This interim rule requires in 
Sec.  210.7(d)(1)(vi)(A) State agencies to conduct on-site validation 
reviews for a random sample of 25 percent of certified SFAs, except 
that the sample must include all large certified SFAs, as defined in 
210.18(b)(6). Because certifications will be ongoing throughout School 
Year 2012-2013, State agencies should select SFAs for validation 
reviews throughout the year to ensure that all certified SFAs are 
included in the sample universe. During on-site validation reviews, 
State agencies must observe a meal service for each type of certified 
menu, review the production records for observed meals to ensure they 
are consistent with the menus on which the certification determination 
was based, and review the documentation submitted for certification to 
ensure that ongoing meal service operations are consistent with 
certification documentation. These requirements are added by this rule 
at Sec.  210.7(d)(vi).
    The Department is mindful of State agency concerns about increased 
administrative burden related to implementing new meal pattern 
requirements, training and technical assistance, increased review 
frequency, and performance-based reimbursement certifications and 
validation reviews. In response to these concerns, for School Year 
2012-2013, Sec.  210.18(a) of this rule permit State agencies to 
conduct performance-based reimbursement certifications and validation 
reviews in lieu of administrative reviews, unless an SFA is determined 
by the State agency to be at-risk for improper payments. This 
flexibility for the 2012-2013 School Year is discussed later in this 
preamble.
    FNS anticipates that SFAs in compliance with updated standards will 
seek certification by the State agency in a timely manner in order to 
receive performance-based reimbursement at the earliest possible date. 
An SFA that either does not voluntarily submit certification 
documentation or that submits materials that do not support 
certification will not receive the performance-based reimbursement. 
Further, Sec.  210.18(d)(3) and (e)(4) require State agencies to 
conduct an administrative review of a non-compliant school food 
authority earlier in the review cycle. For these SFAs, compliance with 
the updated meal patterns will be evaluated at the next administrative 
review, at which time the State agency will assess compliance with the 
updated meal patterns and determine eligibility for the performance-
based reimbursement. This provision is established by this rule in 
Sec.  210.18(e)(4). State agencies are strongly encouraged to include 
those SFAs not certified in School Year 2012-2013 in the first year of 
the administrative review cycle (which is School Year 2013-2014).

Ongoing Compliance and Subsequent Administrative Reviews

    The updated meal pattern rule increases the scope of State agency 
administrative reviews of SFAs by eliminating School Meals Initiative 
(SMI) reviews and revising the Performance Standard 2 portion of the 
administrative review (commonly referred to as, Coordinated Review 
Effort) to reflect new meal pattern requirements. The final rule also 
increases review frequency to once every three years beginning School 
Year 2013-2014, requires that breakfasts be reviewed during 
administrative reviews, and establishes requirements for fiscal action 
related to specific meal pattern violations.
    Administrative reviews will continue to assess both general and 
critical areas. The critical areas contain two performance standards: 
Performance Standard 1 assesses certification, counting, and claiming 
procedures to ensure that all free, reduced, and paid lunches are 
served to eligible children and that lunches are counted correctly to 
yield accurate claims; and Performance Standard 2 assesses whether 
lunches meet the updated meal patterns set forth in Sec.  210.10 and 
breakfast meets Sec.  220.8 or Sec.  220.23, as applicable. The rule 
also establishes requirements for when State agencies must take fiscal 
action for specific meal pattern violations.
    After the initial certification to receive performance-based 
reimbursement, State agencies will assess continued compliance with the 
lunch and breakfast patterns at subsequent administrative reviews, as 
described

[[Page 25029]]

above. If the SFA is certified to receive the performance-based 
reimbursement and, on an administrative review, is found to be non-
compliant with the updated meal patterns for lunch established in Sec.  
210.10,the State agency must follow the standard operating procedures 
set forth in Sec. Sec.  210.18 and 210.19. As a result of this interim 
rule, these procedures include cessation of the performance-based 
reimbursement for noncompliance with lunch requirements until the SFA 
demonstrates to the satisfaction of the SA that corrective action has 
taken place. Absent immediate corrective action, the State agency must 
turn off the 6 cents per lunch reimbursement with the beginning of the 
month following the administrative review and, at State discretion, may 
turn off the 6 cent per lunch reimbursement for the month under review. 
As always, the State agency may recover any funds improperly paid back 
through the beginning of the certification period. Non-compliance with 
the breakfast requirements would be handled in the usual review 
procedure and would not be a basis for cessation of the performance-
based reimbursement. As required by the updated meal pattern rule, 
breakfast requirements are now part of the administrative review 
process which means that violations of the breakfast requirements will 
now result in fiscal action until such time as corrective action 
occurs. This requirement is established by this interim rule in Sec.  
210.18(m)(3) and Sec.  210.19(c)(2)(iv).

School Year 2012-2013 Monitoring Adjustments

    The Department recognizes updating the school meal patterns and 
implementing the new performance-based reimbursement certification 
process will require a significant effort on the part of the State 
agencies, and local SFAs. To help ensure State agencies provide SFAs 
with the training and technical assistance needed to implement the 
updated meal patterns and performance-based funding requirements, the 
Department has reduced the administrative review requirements for 
School Year 2012-2013, as indicated above.
    The previously mentioned final rule, Nutrition Standards in the 
National School Lunch and School Breakfast Programs, eliminated the 
School Meal Initiative reviews (formerly required under Sec.  210.19), 
effective with the beginning of School Year 2012-2013.
    This interim rule revises Sec.  210.18(a) to permit State agencies 
to conduct administrative Coordinated Review Effort reviews scheduled 
for School Year 2012-2013 in either School Year 2012-2013 or 2013-2014, 
with one exception: State agencies must conduct a scheduled School Year 
2012-2013 review in that year of any school food authority at risk for 
improper payments, as determined by the State agency. State agencies 
are advised that any reviews moved to School Year 2013-2014 count 
toward, and are not in addition to, the required number of reviews for 
the first three-year administrative review cycle.
    State agencies must continue to conduct additional administrative 
reviews (AARs) of selected local educational agencies that have a 
demonstrated level of, or are at high risk for, administrative error. 
On November 4, 2010, State agencies were provided guidance on the 
implementation of AARs in school year 2010-2011 (Additional 
Administrative Reviews and State Retention, SP--07--2011 (Revised)). 
Because AARs target local educational agencies that have a demonstrated 
level of, or are at high risk for, administrative error, the Department 
has determined AARs are an essential review activity and this interim 
rule does not modify their use.
    These changes are expected to provide State agencies with the 
flexibility needed to conduct necessary training, technical assistance, 
and certification activities while exercising proper stewardship of 
federal funds.

Reporting and Recordkeeping

    To facilitate disbursement of performance-based reimbursement to 
State agencies and, ultimately, SFAs, this interim rule establishes 
performance-based reimbursement reporting requirements for State 
agencies and SFAs.
    In addition to incorporating meal counts earning the performance-
based reimbursement on the Report of School Program Operations (FNS-
10), State agencies must submit a quarterly report, as specified by 
FNS, detailing the disbursement of performance-based reimbursement, 
including the total number of SFAs in the State, the names and 
locations of certified SFAs, and, for each school food authority, the 
total number of lunches earning the performance-based reimbursement for 
each month. In addition, this rule requires SFAs to submit to the State 
agency documentation to demonstrate compliance and support the receipt 
of performance-based reimbursement and an annual attestation of 
compliance with the meal pattern as new requirements become effective. 
The new reporting requirements for SFAs and State agencies, 
respectively, are contained in Sec.  210.5(d)(2)(ii) and Sec.  
210.15(b)(2).

Technical Assistance

    FNS will work with State agencies to facilitate transition to the 
new meal requirements and assist SFAs in becoming eligible to receive 
performance-based reimbursement. FNS and the National Food Service 
Management Institute are developing technical assistance resources and 
training to help school foodservice staff improve menus, order 
appropriate foods to meet the new meal requirements, and control costs 
while maintaining quality. Resources and training materials being 
developed include identifying and purchasing whole grain-rich foods, 
lowering sodium in menus, and understanding and meeting the new meal 
pattern requirements. Training will be available through a variety of 
methods including webinars and online learning modules.
    In addition, Section 201 of the HHFKA amended Section 9(b)(3)(F) of 
the NSLA, by providing $50 million for each of two years to help FNS 
and State agencies implement new requirements implemented by this 
interim rule, including training, technical assistance, and conducting 
performance-based certifications. As provided for in HHFKA, we expect 
that all but $3 million of each year's funds (which will be used to 
support Federal implementation) will be made available to State 
agencies for those purposes. These funds, combined with subsequent 
increases in State Administrative Expense funding, aim to provide 
resources that State agencies may use to assist local program operators 
to improve the quality of school meals provided to children and come 
into compliance with the new meal patterns.
    FNS is also developing guidance, resources, and necessary forms to 
assist with the timely execution of performance-based certifications, 
and will make these materials available on a centralized Web site. 
These materials will be available at: http://www.fns.usda.gov/cnd/Governance/Legislation/CNR_resources.htm.

III. Procedural Matters

Issuance of an Interim Rule and Date of Effectiveness

    The Department, under the provisions of the Administrative 
Procedure Act at 5 U.S.C. 553(b)(B), finds for good cause that use of 
prior notice and comment procedures for issuing this interim rule is 
impracticable. Section 201 of the Healthy, Hunger-Free Kids Act of 
2010, Public Law 111-296, enacted on

[[Page 25030]]

December 13, 2010, requires provision of the performance-based 
reimbursement to SFAs determined to be eligible beginning on October 1, 
2012. Because the provision of performance-based reimbursement is 
dependent on the publication and implementation of the final meal 
pattern requirements, the Department concludes that there is 
insufficient time to issue both a proposed rule and final rule prior to 
the statutory implementation deadline. As a result, this interim rule 
is necessary to comply with the requirements of Section 201 of Public 
Law 111-296 and ensure that those provisions are implemented and 
effected by State agencies and SFAs by October 1, 2012.
    The Department invites public comment on this interim rule, and 
will consider amendments to the interim rule based on comments 
submitted during the 90-day comment period. The Department will address 
comments and affirm or amend the interim rule in a final rule.

Executive Order 12866 and Executive Order 13563

    Executive Orders 12866 and 13563 direct agencies to assess all 
costs and benefits of available regulatory alternatives and, if 
regulation is necessary, to select regulatory approaches that maximize 
net benefits (including potential economic, environmental, public 
health and safety effects, distributive impacts, and equity). Executive 
Order 13563 emphasizes the importance of quantifying both costs and 
benefits, of reducing costs, of harmonizing rules, and of promoting 
flexibility.
    This interim rule has been designated an ``economically significant 
regulatory action,'' under section 3(f) of Executive Order 12866. 
Accordingly, the rule has been reviewed by the Office of Management and 
Budget. As required for all rules that have been designated significant 
by the Office of Management and Budget, a Regulatory Impact Analysis 
(RIA) was developed for this interim rule. The following is a summary 
of the RIA. The complete RIA is published in this docket (FNS-2011-
0025) on www.regulations.gov.

Need for Action

    Section 201 of the Healthy Hunger-Free Kids Act of 2010 (HHFKA) 
provides for a 6 cent per lunch performance-based reimbursement to SFAs 
that comply with NSLP and SBP meal standards that take effect on July 
1, 2012. This rule provides the regulatory framework for establishing 
initial school food authority (SFA) compliance with the new meal 
standards and for monitoring ongoing compliance.

Benefits

    This rule establishes procedures that will result in a transfer 
from the Federal government to SFAs of as much as $1.4 billion through 
FY 2016 to implement improved NSLP and SBP meal patterns that are more 
fully aligned with the Dietary Guidelines for Americans. The 2010 
Dietary Guidelines Advisory Committee emphasizes the importance of a 
diet consistent with DGA recommendations as a contributing factor to 
overall health and a reduced risk of chronic disease. The new meal 
patterns are intended not only to improve the quality of meals consumed 
at school, but to encourage healthy eating habits generally. Those 
goals of the meal patterns rule are furthered by the funding made 
available by this interim rule.

Costs

    In addition to the estimated $1.4 billion 5-year transfer from the 
Federal government to SFAs in NSLP meal reimbursements, SFAs will incur 
some minor costs to prepare materials to document and certify their 
compliance with the new meals patterns. State agencies will incur costs 
to review that documentation, make certification decisions, conduct on-
site SFA verification reviews, and provide technical assistance to the 
SFAs. Through FY 2016, these administrative functions are expected to 
cost $3.7 million. Finally, the interim rule provides for an additional 
$100 million over fiscal years 2012 and 2013 to fund technical 
assistance, oversight, monitoring, and certification activity by the 
States.

Accounting Statement

    The following accounting statement gives the estimated discounted, 
annualized costs and transfers of the rule. The figures are computed 
from nominal 5-year estimates developed in the full RIA. The accounting 
statement contains figures computed with 7 percent and 3 percent 
discount rates under two scenarios. The first scenario estimates the 
cost of full and immediate SFA compliance with the new meal patterns. 
Under that upper bound scenario, summarized in the preceding 
paragraphs, the nominal 5-year increase in NSLP reimbursements totals 
$1.4 billion, and State and SFA administrative expenses equal $3.7 
million. The second scenario models full SFA compliance within 3 years. 
Under that alternate scenario, the nominal 5-year increase in NSLP 
reimbursements totals $1.2 billion, and State and SFA administrative 
expenses are $3.8 million.
    The figures in the accounting statement rows labeled ``costs'' 
include State and SFA administrative expenses as well as the $3 million 
retained by USDA in each of the fiscal years 2012 and 2013 out of the 
$100 million provided by HHFKA for State technical assistance, 
certification, and monitoring activity.
    The figures in the rows labeled ``transfers'' include Federal NSLP 
reimbursements to SFAs plus the $47 million in Federal assistance ($50 
million less $3 million retained for Federal expenses) in each of the 
fiscal years 2012 and 2013 for State technical assistance, 
certification, and monitoring activity.

----------------------------------------------------------------------------------------------------------------
                                     Primary     Alternate                  Discount
                                     estimate     estimate   Year dollar      rate          Period  covered
----------------------------------------------------------------------------------------------------------------
Benefits:
Qualitative: This rule encourages SFA compliance with the NSLP and SBP meal standards that take effect on July
 1, 2012 by providing an additional 6 cent reimbursement for lunches served that meet the new requirements. The
 additional funds will help offset about 30 percent of the costs incurred by SFAs to serve meals that comply
 with the new requirements..
----------------------------------------------------------------------------------------------------------------
Costs:
    Annualized Monetized                  $2.2         $2.2         2012           7%  FY2012-2016.
     ($millions/year).
                                           2.0          2.0         2012           3%
----------------------------------------------------------------------------------------------------------------

[[Page 25031]]

 
Costs shown here are a combination of State, SFA, and Federal costs. State and SFA costs are the administrative
 costs associated with submitting and processing SFA documentation to support SFA claims of compliance with the
 meal standards rule. Federal costs are equal to the $3 million retained by the USDA in each of the years FY
 2012 and FY 2013 from the $100 million made available by HHFKA for State agency technical assistance,
 certification, and monitoring activity.
----------------------------------------------------------------------------------------------------------------
Transfers:
    Annualized Monetized                   288          260         2012           7%  FY2012-2016.
     ($millions/year).
                                           292          264         2012           3%
----------------------------------------------------------------------------------------------------------------
There are two transfers included in these figures. The first is the $47 million transfer from the Federal
 government to State agencies each of the years FY 2012 and FY 2013 to support State agency technical
 assistance, certification, and monitoring activity. The second is the transfer from the Federal government to
 SFAs for increased NSLP meal reimbursements.
----------------------------------------------------------------------------------------------------------------

Regulatory Flexibility Act

    This interim rule has been reviewed with regard to the requirements 
of the Regulatory Flexibility Act of 1980 (5 U.S.C. 601-612). Pursuant 
to that review, it has been determined that this rule will not have a 
significant impact on a substantial number of small entities.
    While there may be some SFA burden associated with initial 
certification for the performance-based reimbursement in this rule, the 
burdens will not be significant and will be outweighed by the benefits 
of increased Federal reimbursement for school lunches.

Unfunded Mandates Reform Act

    Title II of the Unfunded Mandates Reform Act of 1995 (UMRA), Public 
Law 104-4, establishes requirements for Federal agencies to assess the 
effects of their regulatory actions on State, local, and tribal 
governments and the private sector. Under section 202 of the UMRA, the 
Department generally must prepare a written statement, including a 
cost/benefit analysis, for proposed and final rules with Federal 
mandates that may result in expenditures to State, local, or tribal 
governments, in the aggregate, or to the private sector, of $100 
million or more in any one year. When such a statement is needed for a 
rule, section 205 of the UMRA generally requires the Department to 
identify and consider a reasonable number of regulatory alternatives 
and adopt the least costly, more cost-effective or least burdensome 
alternative that achieves the objectives of the rule. This rule does 
not contain Federal mandates (under the regulatory provisions of Title 
II of the UMRA) that impose costs on State, local, or tribal 
governments or to the private sector of $100 million or more in any one 
year. This rule is, therefore, not subject to the requirements of 
sections 202 and 205 of the UMRA.

Executive Order 12372

    The National School Lunch Program and School Breakfast Program are 
listed in the Catalog of Federal Domestic Assistance under No. 10.555. 
For the reasons set forth in the final rule in 7 CFR part 3015, subpart 
V and related notice (48 FR 29115, June 24, 1983), this program is 
included in the scope of Executive Order 12372, which requires 
intergovernmental consultation with State and local officials. In 
developing this regulation, FNS gathered input from State and local 
program operators, and other stakeholders, via listening sessions held 
at the School Nutrition Association Legislative Action Conference in 
March 2011, and at the School Nutrition Association Annual National 
Conference in July 2011.

Executive Order 13132

    Executive Order 13132 requires Federal agencies to consider the 
impact of their regulatory actions on State and local governments. 
Where such actions have federalism implications, agencies are directed 
to provide a statement for inclusion in the preamble to the regulations 
describing the agency's considerations in terms of the three categories 
called for under section (6)(b)(2)(B) of Executive Order 13132.
Prior Consultation With State Officials
    Prior to drafting this interim rule, FNS staff received informal 
input from various stakeholders while participating in various State, 
regional, national, and professional conferences. The School Nutrition 
Association, the Center for Science in the Public Interest, and the 
American Dietetic Association shared their views about performance-
based reimbursement. Numerous stakeholders, including State and local 
program operators, also provided input at public meetings held by the 
School Nutrition Association.
Nature of Concerns and the Need To Issue This Rule
    State Agencies and SFAs want to provide the best possible school 
meals through the NSLP and SBP but are concerned about the costs and 
administrative burden associated with increased program oversight. 
While FNS is aware of these concerns, the National School Lunch Act, 42 
U.S.C. 1753(b)(a)(4) requires that State agencies certify whether SFAs 
are in compliance with meal pattern and nutrition standards, and 
disburse performance-based reimbursement to eligible SFAs.
Extent to Which We Meet Those Concerns
    FNS has considered the impact of this interim rule on State and 
local program operators and has attempted to develop a rule that would 
implement the performance-based reimbursement in the most effective and 
least burdensome manner. FNS recognizes that implementing the new 
performance-based reimbursement certification process will require a 
significant effort on the part of State and local program operators. To 
ensure State agencies conduct performance-based funding requirements 
and provide SFAs with the training and technical assistance needed to 
implement the improved school meal patterns, FNS has reduced the 
administrative review requirements for School Year 2012-2013. Per the 
requirements of the HHFKA, FNS will provide $47 million to States for 
each of two years to assist with meal pattern implementation, training, 
technical assistance, and performance-based certification activities. 
FNS is also exploring additional approaches to alleviate program 
operators' administrative burden, including support for implementation 
and certification activities.

Executive Order 12988

    This rule has been reviewed under Executive Order 12988, Civil 
Justice

[[Page 25032]]

Reform. This rule is intended to have preemptive effect with respect to 
any State or local laws, regulations or policies which conflict with 
its provisions or which would otherwise impede its full implementation. 
This rule is not intended to have a retroactive effect unless specified 
in the DATES section of the final rule. Prior to any judicial challenge 
to the provisions of this rule or the application of its provisions, 
all applicable administrative procedures must be exhausted.

Civil Rights Impact Analysis

    FNS has reviewed this rule in accordance with Departmental 
Regulations 4300-4, ``Civil Rights Impact Analysis'', and 1512-1, 
``Regulatory Decision Making Requirements.'' After a careful review of 
the rule's intent and provisions, FNS has determined that this rule is 
not intended to limit or reduce in any way the ability of protected 
classes of individuals to receive benefits on the basis of their race, 
color, national origin, sex, age or disability nor is it intended to 
have a differential impact on minority owned or operated business 
establishments, and woman- owned or operated business establishments 
that participate in the Child Nutrition Programs.

Paperwork Reduction Act

    The Paperwork Reduction Act of 1995 (44 U.S.C. Chap. 35; see 5 CFR 
part 1320), requires that the Office of Management and Budget (OMB) 
approve all collections of information by a Federal agency from the 
public before they can be implemented. Respondents are not required to 
respond to any collection of information unless it displays a current, 
valid OMB control number. This is a new collection. The new provisions 
in this rule, which increase burden hours, affect the information 
collection requirements that will be merged into the National School 
Lunch Program, OMB Control Number 0584-0006, expiration date 5/31/2012. 
The current collection burden inventory for the National School Lunch 
Program is 12,654,440. These changes are contingent upon OMB approval 
under the Paperwork Reduction Act of 1995. When the information 
collection requirements have been approved, FNS will publish a separate 
action in the Federal Register announcing OMB's approval.
    Comments on the information collection in this interim rule must be 
received by June 26, 2012.
    Send comments to the Office of Information and Regulatory Affairs, 
OMB, Attention: Desk Officer for FNS, Washington, DC 20503. Please also 
send a copy of your comments to Lynn Rodgers-Kuperman, Program Analysis 
and Monitoring Brach, Child Nutrition Division, 3101 Park Center Drive, 
Alexandria, VA 22302. For further information, or for copies of the 
information collection requirements, please contact Lynn Rodgers-
Kuperman at the address indicated above. Comments are invited on: (1) 
Whether the interim collection of information is necessary for the 
proper performance of the Agency's functions, including whether the 
information will have practical utility; (2) the accuracy of the 
Agency's estimate of the interim information collection burden, 
including the validity of the methodology and assumptions used; (3) 
ways to enhance the quality, utility and clarity of the information to 
be collected; and (4) ways to minimize the burden of the collection of 
information on those who are to respond, including use of appropriate 
automated, electronic, mechanical, or other technological collection 
techniques or other forms of information technology.
    All responses to this request for comments will be summarized and 
included in the request for OMB approval. All comments will also become 
a matter of public record.
    Title: Certification of Compliance with Meal Requirements for the 
National School Lunch Program Under the Healthy, Hunger-Free Kids Act 
of 2010.
    OMB Number: 0584-NEW.
    Expiration Date: Not yet determined.
    Type of Request: New collection.
    Abstract: This rule amends National School Lunch Program 
regulations to conform to requirements contained in the Healthy, 
Hunger-Free Kids Act of 2010 (Pub. L. 111-296) regarding performance-
based reimbursement for SFAs certified compliant with meal patterns and 
nutrition standards. This rule requires State agencies to certify 
whether participating SFAs are in compliance with meal requirements 
and, therefore, eligible to receive performance-based reimbursement for 
each reimbursable lunch served (an additional six cents per lunch 
available beginning October 1, 2012, adjusted annually thereafter). 
This rule also requires States to disburse performance-based cash 
assistance to certified SFAs, and withhold the performance-based 
reimbursement if an SFA is found to be out of compliance with meal 
pattern or nutrition standards during a subsequent administrative 
review. The intended effect of this rule is to incentivize SFAs to 
implement new meal pattern requirements to increase the healthfulness 
of meals served to school children.
    Those respondents participating in the School Breakfast Program 
also participate in the National School Lunch Program, thus the burden 
associated with the School Breakfast Program will be carried in the 
National School Lunch Program. The average burden per response and the 
annual burden hours are explained below and summarized in the charts 
which follow.
    Respondents for this Interim Rule: State administering agencies 
(56) and School Food Authorities (20,858).
    Estimated Number of Respondents for this Interim Rule: 20,914.
    Estimated Number of Responses per Respondent for This Interim Rule: 
4.9960.
    Estimated Total Annual Responses: 104,488.
    Estimated Time per Respondent: 1.4988.
    Estimated Total Annual Reporting and Recordkeeping Burden on 
Respondents for this Interim Rule: 156,608.

                                           Estimated Annual Burden for 0584-New, 6 Cents Rule, 7 CFR Part 210
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                             Estimated
                                                   Section                   number of     Frequency of   Average annual  Average burden   Annual burden
                                                                            respondents      response        responses     per response        hours
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                        Reporting
--------------------------------------------------------------------------------------------------------------------------------------------------------
SAs review submitted certification   210.7(d)(1)(iv)....................              56             372          20,832               2          41,664
 materials and notify SFAs of the
 certification determination.

[[Page 25033]]

 
SAs submit a quarterly report to     210.5(d)(2)(ii)....................              56               4             224             1.0             224
 FNS detailing the disbursement of
 performance-based reimbursement to
 SFAs.
                                                                         -------------------------------------------------------------------------------
    Total SA Reporting.............  ...................................              56             376          21,056          1.9894          41,888
--------------------------------------------------------------------------------------------------------------------------------------------------------
SFAs must submit certification       210.7(d)(2)........................          20,858               1          20,858             4.5          93,861
 materials to State agency to
 support receipt of performance
 based reimbursement.
SFAs must submit an annual           210.7(d)(2)........................          20,858               1          20,858            0.25           5,215
 attestation of compliance with
 meal pattern requirements as new
 requirements are phased in.
                                    --------------------------------------------------------------------------------------------------------------------
    Total SFA Reporting............  ...................................          20,858               1          20,858            4.75          99,076
--------------------------------------------------------------------------------------------------------------------------------------------------------
    Total Reporting for 6 cents      ...................................          20,914          2.0041          41,914       3.3631603         140,964
     Interim rule.
    Total Existing Reporting Burden  ...................................  ..............  ..............  ..............  ..............       2,912,745
     for Part 210.
                                                                         -------------------------------------------------------------------------------
    Total Reporting Burden for Part  ...................................  ..............  ..............  ..............  ..............       3,053,709
     210 with 6 cents interim rule.
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                      Recordkeeping
--------------------------------------------------------------------------------------------------------------------------------------------------------
SFAs maintain documentation to       210.7(d)(2)........................          20,858               2          41,716            0.25          10,429
 support performance-based
 reimbursement.
SFAs maintain documentation related  210.7(d)(2)........................          20,858               1          20.858            0.25           5,215
 to the attestation of compliance
 submitted to the SA as an
 attachment to the written
 agreement required in 210.9(b).
                                                                         -------------------------------------------------------------------------------
    Total Recordkeeping for 6 cents  ...................................          20,858             3.0          62,574            0.25          15,644
     interim rule.
--------------------------------------------------------------------------------------------------------------------------------------------------------
    Total Existing Recordkeeping     ...................................  ..............  ..............  ..............  ..............       8,893,821
     Burden for 0584-0006, Part 210.
                                                                         -------------------------------------------------------------------------------
    Total Recordkeeping Burden for   ...................................  ..............  ..............  ..............  ..............       8,909,465
     0584-0006, Part 210 with 6
     cents interim rule.
--------------------------------------------------------------------------------------------------------------------------------------------------------


                Summary of Burden (OMB <greek-i>0584-NEW)
------------------------------------------------------------------------
 
------------------------------------------------------------------------
TOTAL NO. RESPONDENTS......................................       20,914
AVERAGE NO. RESPONSES PER RESPONDENT.......................      4.99608
TOTAL ANNUAL RESPONSES.....................................      104,488
AVERAGE HOURS PER RESPONSE.................................      1.49880
TOTAL BURDEN HOURS FOR PART 210 WITH INTERIM RULE..........   11,963,174
CURRENT OMB INVENTORY FOR PART 210.........................   11,806,566
DIFFERENCE (NEW BURDEN REQUESTED WITH INTERIM RULE)........      156,608
------------------------------------------------------------------------

E-Government Act Compliance

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

Executive Order 13175--Consultation and Coordination With Indian Tribal 
Governments

    Executive Order 13175 requires Federal agencies to consult and 
coordinate with tribes on a government-to-government basis on policies 
that have tribal implications, including regulations, legislative 
comments or proposed legislation, and other policy statements or 
actions that have substantial direct effects on one or more Indian 
tribes, on the relationship between the Federal Government and Indian 
tribes, or on the distribution of

[[Page 25034]]

power and responsibilities between the Federal Government and Indian 
tribes, or distribution of power and responsibilities between the 
Federal government and Indian tribes. In spring 2011, FNS offered 
opportunities for consultation with Tribal officials or their designees 
to discuss the impact of the Healthy Hunger Free Kids Act of 2010 on 
Tribes or Indian Tribal governments. The consultation sessions were 
coordinated by FNS and held on the following dates and locations:
    1. HHFKA Webinar & Conference Call--April 12, 2011.
    2. Mountain Plains--HHFKA Consultation, Rapid City, SD--March 23, 
2011.
    3. HHFKA Webinar & Conference Call--June, 22, 2011.
    4. Tribal Self-Governance Annual Conference in Palm Springs, CA--
May 2, 2011.
    5. National Congress of American Indians Mid-Year Conference, 
Milwaukee, WI--June 14, 2011.
    There were no comments about this regulation received during any of 
the aforementioned Tribal Consultation sessions.
    Reports from these consultations are part of the USDA annual 
reporting on Tribal consultation and collaboration. FNS will respond in 
a timely and meaningful manner to Tribal government requests for 
consultation concerning this rule. Currently, FNS provides regularly 
scheduled quarterly consultation sessions through the end of FY2012 as 
a venue for collaborative conversations with Tribal officials or their 
designees.

List of Subjects in 7 CFR Part 210

    Grant programs--education; Grant programs--health; Infants and 
children; Nutrition; Penalties; Reporting and recordkeeping 
requirements; School breakfast and lunch programs; Surplus agricultural 
commodities.

    Accordingly, 7 CFR part 210 is amended as follows:

PART 210--NATIONAL SCHOOL LUNCH PROGRAM

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

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


0
2. Amend Sec.  210.4 by revising paragraph (b)(1) to read as follows:


Sec.  210.4  Cash and donated food assistance to States.

* * * * *
    (b) * * *
    (1) Cash assistance will be made available to each State agency 
administering the National School Lunch Program as follows:
    (i) General: Cash assistance payments are composed of a general 
cash assistance payment and a performance-based cash assistance 
payment, authorized under section 4 of the Act, and a special cash 
assistance payment, authorized under section 11 of the Act. General 
cash assistance is provided to each State agency for all lunches served 
to children in accordance with the provisions of the National School 
Lunch Program. Performance-based cash assistance is provided to each 
State agency for lunches served in accordance with Sec.  210.7(d). 
Special cash assistance is provided to each State agency for lunches 
served under the National School Lunch Program to children determined 
eligible for free or reduced price lunches in accordance with part 245 
of this chapter.
    (ii) Cash assistance for lunches. The total general cash assistance 
paid to each State for any fiscal year shall not exceed the lesser of 
amounts reported to FNS as reimbursed to school food authorities in 
accordance with Sec.  210.5(d)(3) or the total calculated by 
multiplying the number of lunches reported in accordance with Sec.  
210.5(d)(1) for each month of service during the fiscal year, by the 
applicable national average payment rate prescribed by FNS. The total 
performance-based cash assistance paid to each State for any fiscal 
year shall not exceed the lesser of amounts reported to FNS as 
reimbursed to school food authorities in accordance with Sec.  
210.5(d)(3) or the total calculated by multiplying the number of 
lunches reported in accordance with Sec.  210.5(d)(1) for each month of 
service during the fiscal year, by 6 cents for school year 2012-2013, 
adjusted annually thereafter as specified in paragraph (b)(1)(iii) of 
this section. The total special assistance paid to each State for any 
fiscal year shall not exceed the lesser of amounts reported to FNS as 
reimbursed to school food authorities in accordance with Sec.  
210.5(d)(3) or the total calculated by multiplying the number of free 
and reduced price lunches reported in accordance with Sec.  210.5(d)(1) 
for each month of service during the fiscal year by the applicable 
national average payment rate prescribed by FNS.
    (iii) Annual adjustments. In accordance with section 11 of the Act, 
FNS will prescribe annual adjustments to the per meal national average 
payment rate (general cash assistance), the performance-based cash 
assistance rate (performance-based cash assistance), and the special 
assistance national average payment rates (special cash assistance) 
which are effective on July 1 of each year. These adjustments, which 
reflect changes in the food away from home series of the Consumer Price 
Index for all Urban Consumers, are annually announced by Notice in July 
of each year in the Federal Register.
    (iv) Maximum per meal rates. FNS will also establish maximum per 
meal rates of reimbursement within which a State may vary reimbursement 
rates to school food authorities. These maximum rates of reimbursement 
are established at the same time and announced in the same Notice as 
the national average payment rates.
* * * * *

0
3. Amend Sec.  210.5 by revising paragraph (d)(2) to read as follows:


Sec.  210.5  Payment process to States.

* * * * *
    (d) * * *
    (2) Quarterly report. Each State agency administering the National 
School Lunch Program shall submit quarterly reports to FNS as follows:
    (i) Each State agency shall submit to FNS a quarterly Financial 
Status Report (FNS-777) on the use of Program funds. Such reports shall 
be postmarked and/or submitted no later than 30 days after the end of 
each fiscal year quarter.
    (ii) Each State agency shall also submit a quarterly report, as 
specified by FNS, detailing the disbursement of performance-based cash 
assistance described in Sec.  210.4(b)(1). Such report shall be 
submitted no later than 30 days after the end of each fiscal year 
quarter. The report shall include the total number of school food 
authorities in the State, the names and locations of certified school 
food authorities, and for each school food authority, the total number 
of lunches earning the performance-based cash assistance for each 
month.
* * * * *

0
4. Amend Sec.  210.7 by redesignating paragraph (d) as paragraph (e) 
and adding a new paragraph (d) to read as follows:


Sec.  210.7  Reimbursement for school food authorities.

* * * * *
    (d) Performance-based cash assistance. The State agency must 
provide performance-based cash assistance as authorized under Sec.  
210.4(b)(1) for lunches served in school food authorities certified by 
the State agency to be in compliance with meal pattern and nutrition 
requirements set forth in Sec.  210.10 and, if the school food 
authority participates in the School

[[Page 25035]]

Breakfast Program (7 CFR part 220), Sec.  220.8 or Sec.  220.23, as 
applicable.
    (1) State agency requirements. State agencies must establish 
procedures to certify school food authorities for performance-based 
cash assistance in accordance with guidance established by FNS. Such 
procedures must ensure State agencies:
    (i) Make certification procedures readily available to school food 
authorities and provide guidance necessary to facilitate the 
certification process.
    (ii) Require school food authorities to submit documentation to 
demonstrate compliance with meal pattern requirements set forth in 
Sec.  210.10 and Sec.  220.8 or Sec.  220.23, as applicable. Such 
documentation must reflect meal service at or about the time of 
certification.
    (iii) Certification procedures must ensure that no performance-
based cash assistance is provided to school food authorities for meals 
served prior to October 1, 2012.
    (iv) Within 60 calendar days of a certification submission or as 
otherwise authorized by FNS, review submitted materials and notify 
school food authorities of the certification determination, the date 
that performance-based cash assistance is effective, and consequences 
for non-compliance;
    (v) Disburse performance-based cash assistance for all lunches 
served beginning with the start of certification provided that 
documentation reflects meal service in the calendar month the 
certification materials are submitted or, in the month preceding the 
calendar month of submission; and
    (vi) For school year 2012-2013, State agencies must conduct on-site 
validation reviews for a sample of certified school food authorities. 
State agencies must:
    (A) Ensure that all certified school food authorities are subject 
to review and randomly select at least 25 percent of certified school 
food authorities for an on-site validation review; except that, all 
large school food authorities, as defined in Sec.  210.18(b)(6) must be 
included in the sample selected; and
    (B) Conduct validation reviews that include, at a minimum, 
observation of a meal service for each type of certified menu, review 
of production records for observed meals to ensure they are consistent 
with the menus on which certification was based, and a review of 
documentation submitted for certification to ensure that ongoing meal 
operations are consistent with certification documentation.
    (vii) In years subsequent to the year certified, through School 
Year 2014-2015, State agencies must require school food authorities to 
submit an annual attestation of compliance with meal pattern 
requirements as new requirements are phased in. The attestation must be 
provided to the State agency as an addendum to the written agreement 
required in Sec.  210.9(b).
    (2) School food authority requirements. School food authorities 
seeking to obtain performance-based cash assistance must submit 
certification documentation to the State agency in accordance with 
State agency certification procedures, including documentation to 
support receipt of performance-based cash assistance. School food 
authorities must attest that the documentation provided is 
representative of the ongoing meal service within the school food 
authority. Required documentation includes a nutrient analysis and a 
detailed menu work sheet with food items and quantities or, a 
simplified nutrient assessment as well as a detailed menu worksheet 
with food items and quantities, and/or other materials specified in 
guidance issued by FNS. In years subsequent to the year of 
certification, through School Year 2014-2015, school food authorities 
must submit an annual attestation of compliance with meal pattern 
requirements as new requirements are phased in. The attestation must be 
provided to the State agency as an addendum to the written agreement 
required in Sec.  210.9(b). School food authorities certified to earn 
performance-based cash assistance must maintain documentation of 
compliance, including production and menu records, and other records, 
as specified by FNS. School food authorities must make appropriate 
records available to State agencies upon request.
* * * * *

0
5. Amend Sec.  210.15 by revising paragraph (b)(2) to read as follows:


Sec.  210.15  Reporting and recordkeeping.

* * * * *
    (b) * * *
    (2) Production and menu records as required under Sec.  210.10 and 
documentation to support performance-based cash assistance, as required 
under Sec.  210.7(d)(2).
* * * * *

0
6. Amend Sec.  210.18 by:
0
a. Revising paragraph (a);
0
b. Revising paragraph (d)(3);
0
c. Adding paragraph (e)(4);
0
d. Adding paragraph (g)(2)(v);
0
e. Revising paragraph (m)(2) introductory text; and
0
f. Adding paragraph (m)(2)(iv).
    The revisions and additions read as follows:


Sec.  210.18  Administrative reviews.

    (a) Implementation dates. Each State agency must follow the 
requirements of this section to conduct administrative reviews of 
school food authorities serving meals under parts 210 and 220 of this 
chapter. For school food authorities selected for administrative review 
in school year 2012-2013, State agencies may conduct the administrative 
reviews in school year 2012-13 or 2013-14; except that, State agencies 
must conduct reviews of those school food authorities identified as at-
risk school food authorities in school year 2012-2013.
* * * * *
    (d) * * *
    (3) Exceptions. (i) In any school year in which FNS or OIG conducts 
a review or investigation of a school food authority in accordance with 
Sec.  210.19(a)(5) of this part, the State agency shall, unless 
otherwise authorized by FNS, delay conduct of a scheduled 
administrative review until the following school year. The State agency 
shall document any exception authorized under this paragraph.
    (ii) Any school food authority that was not reviewed in the review 
cycle for school year 2007-2008 through school year 2012-2013, shall be 
reviewed in the first year of the 3-year review cycle set forth in 
paragraph (c) of this section (school year 2013-2014).
    (e) * * *
    (4) Noncompliance with meal pattern requirements. If the State 
agency determines there is significant noncompliance with the meal 
pattern and nutrition requirements as set forth in Sec.  210.10 and 
Sec.  220.8 and Sec.  220.23, as applicable, the State agency must 
select the school food authority for administrative review earlier in 
the review cycle.
* * * * *
    (g) * * *
    (2) * * *
    (v) If the school food authority is receiving performance-based 
cash assistance under Sec.  210.7(d), assess the school food 
authority's meal service and documentation of lunches served and 
determine whether performance-based cash assistance should continue to 
be provided.
* * * * *
    (m) * * *
    (2) Performance Standard 2 violations. Except as noted under 
paragraph (m)(2)(iv) of this section, a State agency is required to 
take fiscal

[[Page 25036]]

action for violations of Performance Standard 2 as follows:
* * * * *
    (iv) Performance-based cash assistance. In addition to fiscal 
action described in paragraphs (m)(2)(i) through (iii) of this section, 
school food authorities may not earn performance-based cash assistance 
authorized under Sec.  210.4(b)(1) unless immediate corrective action 
occurs. School food authorities will not be eligible for the 6 cents 
per lunch reimbursement, as adjusted, with the beginning of the month 
following the administrative review and, at State discretion, for the 
month of review. Performance-based cash assistance may resume beginning 
in the first full month the school food authority demonstrates to the 
satisfaction of the State agency that corrective action has taken 
place.
* * * * *

0
7. Amend Sec.  210.19 by revising the second sentence of paragraph 
(c)(1) as follows:


Sec.  210.19  [Amended]

* * * * *
    (c) * * *
    (1) * * * Fiscal action also includes disallowance of funds for 
failure to take corrective action to meet the meal requirements in 
parts 210 and 220 of this chapter, including the disallowance of 
performance-based cash assistance described in Sec.  210.4(b)(1). * * *
* * * * *

    Dated: April 20, 2012.
Kevin Concannon,
Under Secretary, Food, Nutrition and Consumer Services.
[FR Doc. 2012-10229 Filed 4-26-12; 8:45 am]
BILLING CODE 3410-30-P