[Federal Register Volume 72, Number 47 (Monday, March 12, 2007)]
[Rules and Regulations]
[Pages 10885-10902]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E7-4268]



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Rules and Regulations
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Federal Register / Vol. 72, No. 47 / Monday, March 12, 2007 / Rules 
and Regulations

[[Page 10885]]



DEPARTMENT OF AGRICULTURE

Food and Nutrition Service

7 CFR Parts 210, 215, 220, 225, 226, and 245

RIN 0584-AC95


Disclosure of Children's Free and Reduced Price Meals and Free 
Milk Eligibility Information in the Child Nutrition Programs

AGENCY: Food and Nutrition Service, USDA.

ACTION: Final rule.

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SUMMARY: This final rule establishes requirements for the disclosure of 
children's free and reduced price meals or free milk eligibility 
information under the Child Nutrition Programs. The Child Nutrition 
Programs include the National School Lunch Program, School Breakfast 
Program, Special Milk Program, Summer Food Service Program, and Child 
and Adult Care Food Program. Within certain limitations, children's 
free and reduced price meal or free milk eligibility information may be 
disclosed, without parental/guardian consent, to persons directly 
connected to certain education programs, health programs, means-tested 
nutrition programs, the Comptroller General of the United States, and 
some law enforcement officials. Additionally, officials also may 
disclose children's free and reduced price meal or free milk 
eligibility information to persons directly connected with State 
Medicaid (Medicaid) and the State Children's Health Insurance Program 
(SCHIP) when parents/guardians do not decline to have their information 
disclosed. These regulations affect State agencies and local program 
operators that administer the Child Nutrition Programs and households 
which apply for and/or are approved for free and reduced price meals or 
free milk. The final rule reflects the disclosure provisions of the 
Healthy Meals for Healthy Americans Act of 1994 and comments received 
on the proposed rule published in anticipation of implementing those 
provisions. Additionally, this final rule includes the regulatory 
disclosure provisions implementing the Agricultural Risk Protection Act 
of 2000 and comments received on the interim rule issued to implement 
those provisions. This final rule also implements nondiscretionary 
provisions of the Child Nutrition and WIC Reauthorization Act of 2004, 
allowing certain third party contractors access to children's 
eligibility status and will allow school officials to communicate with 
Medicaid and SCHIP officials to verify that children are eligible for 
free and reduced price school meals or free milk. The disclosure 
provisions are intended to reduce paperwork for administrators of 
certain programs that target low-income households and for low-income 
households which may benefit from those programs by allowing some 
sharing of household's free and reduced price meal eligibility 
information. This rule also includes several technical amendments.

DATES: This rule is effective April 11, 2007.

FOR FURTHER INFORMATION CONTACT: Address any questions to Robert Eadie, 
Branch Chief, Policy and Program Development Branch, Child Nutrition 
Division, Food and Nutrition Service, USDA, 3101 Park Center Drive, 
Alexandria, VA 22302 or by telephone at 703-305-2590.

SUPPLEMENTARY INFORMATION:

Background

Chronological History of Legislation and Regulations Concerning the 
Confidentiality of Children's Free and Reduced Price Eligibility 
Information

    November 2, 1994--Public Law 103-448, the Healthy Meals for Healthy 
Americans Act of 1994, amended Section 9 of the Richard B. Russell 
National School Lunch Act (NSLA), 42 U.S.C. 1758, to statutorily 
provide for the first time, some disclosure of children's eligibility 
information, without parental consent, to specified programs, such as 
Federal and State education programs and to certain individuals. The 
provisions of Public Law 103-448 specifically exclude disclosures of 
children's eligibility information to Medicaid but did not address 
disclosures to the State Children's Health Insurance Program (SCHIP), 
which was nonexistent at that time.
    June 20, 2000--Public Law 106-224, the Agricultural Risk Protection 
Act of 2000, amended the NSLA to allow disclosure of children's 
eligibility information to Medicaid and SCHIP, provided that parents/
guardians not decline to have their information disclosed to those 
health insurance programs. Congress directed the Secretary to 
promulgate regulations without regard to the provisions of 
Administrative Procedure Act, the Statement of Policy of the Secretary 
of Agriculture, effective July 24, 1971 (36 FR 13804) and the Paperwork 
Reduction Act.
    July 25, 2000--A proposed rule, with a request for comments, was 
published in the Federal Register (65 FR 45725).
    January 11, 2001--An interim rule, with a request for comments, 
amended a number of program regulations to implement the Medicaid and 
SCHIP disclosure provisions of Public Law 106-224. The regulatory 
provisions were effective October 1, 2000, in accordance with Public 
Law 106-224.
    June 30, 2004--Public Law 108-265, Child Nutrition and WIC 
Reauthorization Act of 2004 (Pub. L. 108-265) further amended the NSLA 
to specify that Medicaid and SCHIP officials may request that 
determining officials for the Child Nutrition Programs verify 
children's eligibility for free and reduced price meal and free milk 
benefits.
    This final rule--Finalizes the current regulations codified by the 
interim rule, which only addressed disclosures to Medicaid and SCHIP, 
and amends the current regulations to add the provisions from the July 
25, 2000 proposed rule and the confidentiality provision from Public 
Law 108-265.
    A detailed discussion of the confidentiality provisions of the 
public laws and the actions taken to address the provisions follows.

Public Law 103-448

    The Healthy Meals for Healthy Americans Act of 1994, Public Law 
103-448, enacted on November 2, 1994, amended section 9(b)(2)(C) of the 
Richard B. Russell National School

[[Page 10886]]

Lunch Act (NSLA) (42 U.S.C. 1758(b)(2)(C)) to allow limited access to 
children's free and reduced price meal information, without parental/
guardian consent. In general, the statute included the following 
provisions:
    1. Authorized disclosure of children's eligibility status only 
(whether children are eligible for free meals or reduced price meals) 
to:
    <bullet> Persons who are directly connected with the administration 
or enforcement of programs under the NSLA or the Child Nutrition Act of 
1966 (CNA) (42 U.S.C. 1771 et seq.) or a regulation issued under either 
of those Acts;
    <bullet> Persons who are directly connected with the administration 
or enforcement of a Federal education program;
    <bullet> Persons who are directly connected with the administration 
or enforcement of a State health or education program (other than 
Medicaid) administered by the State or local education agency; and
    <bullet> Persons who are directly connected with the administration 
or enforcement of a Federal, State or local means-tested nutrition 
program with eligibility standards comparable to the National School 
Lunch Program (NSLP).
    2. Authorized disclosure of all eligibility information for 
children that is obtained through the free and reduced price meal 
application process or through the direct certification process 
(determining children eligible based on information obtained from 
certain other agencies) to:
    <bullet> The Comptroller General of the United States for audit and 
examination; and
    <bullet> Certain law enforcement officials investigating alleged 
program violations.
    3. Specified penalties for unauthorized disclosure or misuse of 
children's eligibility information of a fine of not more than $1000 or 
imprisonment of not more than 1 year, or both.
    Public Law 103-448 specifically excluded disclosure of children's 
eligibility information, without consent, to a program under title XIX 
of the Social Security Act, i.e., Medicaid (42 U.S.C. 1396 et seq.), 
and did not address disclosure of children's eligibility information to 
SCHIP, which was established in later Federal legislation. The 
Department issued a proposed rule, which would have extended the 
provisions to all the Child Nutrition Programs, (65 FR 45725, July 25, 
2000) with a 90-day public comment period to implement the disclosure 
provisions of Public Law 103-448.

Public Law 106-224

    The Agricultural Risk Protection Act of 2000, Public Law 106-224, 
enacted on June 20, 2000, further amended the disclosure provisions in 
section 9(b)(2)(C) of the NSLA (42 U.S.C. 1758(b)(2)(C)). In general, 
Public Law 106-224 included the following provisions:
    1. Authorized disclosure of children's eligibility information to 
Medicaid and SCHIP provided that the following conditions are met:
    <bullet> Both the State agency and school food authority must elect 
to disclose eligibility information to these health insurance programs;
    <bullet> School and health insurance program officials must have a 
written agreement that requires the health insurance program to use the 
information to seek to enroll children in Medicaid and SCHIP; and
    <bullet> Parents/guardians must be notified that their eligibility 
information may be disclosed to Medicaid or SCHIP and given an 
opportunity to decline to have their children's eligibility information 
disclosed.
    2. Directed the Department to promptly promulgate regulations to 
implement the disclosure provisions of Public Law 106-224 without 
regard to the Administrative Procedure Act's notice and comment 
provisions, the Statement of Policy of the Secretary of Agriculture 
effective July 24, 1971 (36 FR 13804) or the Paperwork Reduction Act 
facilitated making health insurance benefits available to low-income 
children as quickly as possible.
    In implementing the provisions of Public Law 106-224, the 
Department issued an interim rule with a request for comments (66 FR 
2195, January 11, 2001). The Department sought comments on the 
disclosure of eligibility information to Medicaid and SCHIP due to the 
sensitivity of household privacy issues and also to gain insights on 
operational experience prior to issuing a final regulation. 
Additionally, at the time, the Department was reviewing comments 
received on its proposed rule to implement the disclosure provisions of 
Public Law 103-448 (discussed above) which would allow the disclosure 
of eligibility information to education and several other programs and 
individuals. The interim rule became effective on October 1, 2000, and 
amended 7 CFR Parts 215, 225, 226, and 245 to allow determining 
agencies (agencies responsible for the determination of free and 
reduced price meals or free milk) to disclose children's eligibility 
information to Medicaid and SCHIP under the conditions mandated by 
Public Law 106-224, as listed above. Issuance of an interim rule 
allowed the Department to comply with the Congressional mandate to 
promulgate regulations regarding disclosures to Medicaid and SCHIP, and 
to collect public comment on these important requirements. As stated in 
the Preamble to the interim rule, it was our clear intent to then 
publish a final rule, incorporating the comments received.

Public Law 108-265

    The Child Nutrition and WIC Reauthorization Act of 2004, enacted 
June 30, 2004, (Pub. L. 108-265) amended the Richard B. Russell 
National School Lunch Act in a number of ways. First, it redesignated 
section 9(b)(2)(C)(iii), which contains the disclosure provisions, to 
section 9(b)(6) and second, titled the section ``Use or Disclosure of 
Information.'' Third, Public Law 108-265 added a provision allowing 
school officials to provide third party contractors access to 
children's free and reduced price meal eligibility status when the 
contractors are assisting school food authorities with contacting 
households which do not respond to the school's verification efforts. 
The amendments were nondiscretionary and are codified in this final 
rule at 7 CFR 215.13a(g)(1), 225.15(g)(1), 226.23(i)(1) and 
245.6(k)(1). Finally, the NSLA now allows Medicaid and SCHIP officials 
to use the eligibility information to verify children's eligibility for 
programs under the NSLA or CNA. Previously, determining officials could 
disclose children's eligibility information to Medicaid and SCHIP 
solely for the purpose of identifying and enrolling eligible children 
in a health insurance program. These statutory provisions were also 
non-discretionary and are codified in this final rule at 7 CFR 215.13a 
(h)(2), 225.15(h)(2), 226.23(j)(2), and 245.6(g)(2).

Summary of Current Disclosure Regulations

    Regulations for the Child Nutrition Programs, as amended by the 
interim rule to implement Public Law 106-224, in general allow the 
disclosure of children's free and reduced price meal eligibility 
information to Medicaid and SCHIP officials when both the State agency 
and school food authority elect to disclose eligibility information to 
these health insurance programs; when determining agencies and health 
insurance program officials have a written agreement that requires the 
health insurance program agency to use the information to seek to 
enroll eligible children in Medicaid and SCHIP; and when parents/
guardians are given an opportunity to decline to have their children's 
eligibility information

[[Page 10887]]

disclosed. Sections 215.2, 225.2, 226.2 and 245.2 include definitions 
for the terms ``Disclosure,'' ``Medicaid'' and ``SCHIP.''
    Current 7 CFR Part 215, as amended by the interim rule, requires 
that the free milk application used in child care centers include a 
Privacy Act notice/statement. Note that schools that participate in the 
SMP follow the provisions contained in 7 CFR Part 245, which includes 
requirements for a Privacy Act notice/statement. Section 215.13a 
provides a prototype Privacy Act notice/statement for the milk 
application and the prototype Privacy Act notices/statements provided 
in 7 CFR Parts 225, 226 and 245 were revised to be consistent with the 
simplified notice/statement added to 7 CFR Part 215.

Summary of Disclosure Provisions Implemented Through Guidance

    Guidance was issued December 1998, to explain the disclosure 
provisions of Public Law 103-448 contained in the proposed rule. The 
proposed rule was published in 2000. Determining agencies are operating 
under that guidance for disclosures to education and certain other 
programs and activities specified in Public Law 103-448. Additionally, 
the Department issued guidance on disclosing eligibility information in 
cases when parents/guardians authorize the disclosure. Parents/
guardians may provide consent for the disclosure of information that 
goes beyond that authorized by the statute.

General Comments on the Proposed and Interim Rules

    We received twelve comments on the proposed rule and eight comments 
on the interim rule. Commenters generally were supportive of the 
proposed and interim rules in that they believe that the provisions are 
in accordance with the statute. Several commenters view the sharing of 
free and reduced price eligibility information as helpful in 
streamlining the enrollment process for other programs that also serve 
low-income individuals. Other commenters oppose any sharing of 
households' free and reduced price meal or free milk eligibility 
information. They cite privacy concerns, the potential for deterring 
participation in the Child Nutrition Programs and additional burdens on 
school food service staff due to requests for children's free and 
reduced price eligibility information. This preamble discusses the 
specific provisions and comments received.

Changes Being Made to Current Regulations in This Final Rule

    In general, no major changes are being made to the current 
regulations relating to the disclosure of children's eligibility 
information to Medicaid and SCHIP. However, Section 104 (b)(i) of 
Public Law 108-265 amended the disclosure provisions contained in the 
NSLA. As a result, Medicaid and SCHIP officials are now allowed to 
verify children's eligibility for a program under the NSLA or Child 
Nutrition Act of 1966. An amendment to current regulations to 
accommodate this nondiscretionary provision is included in this rule.
    Additionally, because this rule adds the disclosure provisions of 
Public Law 103-448 and Public Law 108-265 to the current disclosure 
provisions, the section numbers for many of the provisions are changed 
from the current or proposed designations and obsolete references are 
deleted. Further, several commenters did not like the section headings 
in question format. Because of their concerns, the section headings are 
revised to a statement format consistent with most of the sections 
headings currently in the regulations. For a detailed explanation of 
the provisions, the reader may refer to the interim and proposed rules 
published at 65 FR 45725 and 66 FR 2195, respectively. A discussion of 
the major provisions follows.

Discussion of the Proposed Current Regulations and How the Major 
Provisions Are Being Addressed

    1. Applicability to all the Child Nutrition Programs--Although the 
NSLA addresses the disclosure of children's free and reduced price 
school lunch eligibility information, the interim rule extended the 
provisions to all the Child Nutrition Programs to provide consistency 
among the programs. This was consistent with Food and Nutrition 
Service's (FNS) practices and policies as discussed in the interim 
rule. The proposed rule also would have extended the disclosure 
provisions to all the Child Nutrition Programs. Commenters did not 
address this issue.
    Final rule--The disclosure provisions continue to apply to all the 
Child Nutrition Programs.
    2. Definitions--The interim rule added the terms, ``disclosure,'' 
``Medicaid'' and ``State Children's Health Insurance Program (SCHIP)'' 
to current Sec. Sec.  215.2, 225.2, 226.2, and 245.2 in the 
alphabetical lists of definitions. One commenter addressed the 
definitions and that commenter concurred with the meanings ascribed to 
the terms. The proposed rule did not include any definitions.
    Final Rule-- In Sec. Sec.  215.2, 225.2, 226.2, and 245.2, the 
definitions ``Medicaid'' and ``State Children's Health Insurance 
Program (SCHIP)'' are adopted without change. The definition 
``Disclosure'' is revised in this final rule to improve readability. No 
substantial changes are made to the definition.
    3. Prototype Privacy Act Notice/Statement--The interim rule revised 
the programs' previous regulatory prototype Privacy Act notice/
statement to make the notice/statement more understandable by 
simplifying the wording. The Privacy Act notice/statement must inform 
households whether the information being requested is mandatory or 
voluntary; the authority for the request; how the information may be 
used; and the consequence of not providing the information. Sections 
215.13a(f), 225.15(f)(4)(iv), 226.23(e)(1)(ii)(F) and 245.6(a)(1) 
currently provide a prototype statement. Additionally, Sec. Sec.  
215.13a(g)(6), 225.15(g)(6), 226.23(i)(6), and 245.6(f )(6) require 
schools and institutions intending to disclose social security numbers 
to include additional information in their Privacy Act notices/
statements that inform households of the potential disclosures and the 
planned uses of the numbers. The NSLA permits the disclosure of all 
eligibility information to some entities. This disclosure may include 
the social security number of the adult household member who signs the 
application. Social security numbers also may be disclosed with prior 
notice and parental/guardian consent.
    One commenter addressed the Privacy Act notice/statement and 
expressed agreement with the Department that households should be made 
aware of potential uses of the information. The Department reminds 
readers that State agencies and school food authorities are responsible 
for ensuring that the Privacy Act notice/statement included on their 
applications comply with section 7(b) of the Privacy Act.
    Final Rule--Sections 215.13a(f), 215.13a(i), 225.15(f)(4)(iv), 
225.15(i)(1), 226.23(e)(1)(ii)(F), 226.23(k), and 245.6(a)(1) and 
245.6(h) provide a prototype Privacy Act notice/statement and require 
that households be given adequate notice regarding the request for free 
and reduced price eligibility information and how the information, 
including social security numbers, will be used.
    4. Responsibility for deciding whether to disclose eligibility 
information--Currently, Sec. Sec.  215.13a(g)(1), 225.15(g)(1), 
226.23(i)(1), and 245.6(f)(1) require that

[[Page 10888]]

both the State agency and local agency that determines free and reduced 
price meal or free milk eligibility must agree on whether to disclose 
eligibility information to Medicaid and SCHIP officials. This shared 
responsibility for determining whether to disclose information to 
Medicaid and SCHIP is mandated by the NSLA as amended by Public Law 
106-224 and was included in the interim regulations.
    Unlike with disclosures to Medicaid and SCHIP, the NSLA does not 
address who has the responsibility for deciding whether to disclose 
eligibility information to education and other programs authorized to 
receive eligibility information under Public Law 103-448. The proposed 
rule and this final rule place this responsibility on the determining 
agency. As noted in the preamble to the interim rule, the determining 
agency may be the State agency, when that agency makes the eligibility 
determination, or it may be a school within the school food authority, 
a child care institution, or a Summer Food Service Program sponsor who 
makes the free and reduced price meal or free milk eligibility 
determinations. No comments were received on this provision.
    Two individuals commenting on the proposed rule expressed concern 
that it would be difficult to refuse requests for eligibility 
information. We agree that there often is pressure to disclose 
eligibility information. Determining agencies must evaluate each 
request for information to ensure that, at a minimum, the disclosure is 
in accordance with statutory and regulatory provisions. Additionally, 
determining agencies should consider, along with the agency requesting 
the information, whether aggregate data is sufficient.
    Although currently the National School Lunch Program (NSLP), School 
Breakfast Program (SBP), Special Milk Program (SMP), Child and Adult 
Care Food Program (CACFP), and Summer Food Service Program (SFSP) 
regulations do not address the disclosure of aggregate information, the 
disclosure of aggregate data is allowed because individuals cannot be 
personally identified. This is consistent with longstanding FNS policy 
and practices. As proposed at Sec. Sec.  215.13a(g)(2), 225.15(g)(2), 
226.23(i)(2), and 245.6(f)(2), we would codify this policy. A commenter 
stated that the disclosure of aggregate information could result in the 
disclosure of personal information. The Department acknowledges that it 
might be possible for a determining agency to improperly disclose 
information making a person's identity recognizable. Determining 
officials should be aware of the possibility of inadvertently 
disclosing personally identifiable information when releasing aggregate 
information, carefully reviewing the data to ensure that the identities 
of children or their households are masked or cannot be identified by 
the combining of information or by deduction. This is essential in 
every disclosure.
    Final Rule--Sections 215.13a(g), 225.15(g), 226.23(i), and 245.6(f) 
specify that determining agencies may release aggregate data, without 
parental/guardian consent, provided children cannot be identified 
through disclosure of the data or by deduction and that determining 
agencies are responsible for deciding whether to disclose eligibility 
information; and that, for disclosures to individuals and programs 
other than to Medicaid and SCHIP, determining agencies are responsible 
for deciding whether or not to disclose individual children's 
eligibility. Readers are reminded that State agencies may prohibit the 
disclosure of free and reduced price eligibility information in schools 
and institutions under their jurisdiction at their discretion. For 
disclosures to Medicaid and SCHIP, Sec. Sec.  215.13a(h), 225.15(h), 
226.23(j) and 245.6(g) of this final rule continue to require that both 
the State agency and local determining agency must agree to disclose 
eligibility information to Medicaid and SCHIP.
    5. Notice to parents about potential disclosures--Currently, once 
the joint decision is made by State agencies and local determining 
agencies to release information to Medicaid and SCHIP, the regulations 
at Sec. Sec.  215.13a(g)(5), 225.15(g)(5), 226.23(i)(5), and 
245.6(f)(5) require that parents are notified of the upcoming 
disclosure and given opportunity to decline the disclosure, as mandated 
by the NSLA. For disclosures to education and other programs and 
individuals permitted access to eligibility information by the NSLA 
permits the disclosure without parental/guardian consent and does not 
include a requirement for parental/guardian notification prior to the 
disclosure. The proposed rule would not have required notification to 
parents/guardians of potential disclosures to education and other 
programs and individuals, as long as the disclosure was in accordance 
with the NSLA, i.e., disclosure of names and eligibility status. 
However, the preamble to the proposed rule suggested that officials 
notify parents of how their information will be used. It was suggested 
that officials include the notification in the letter/notice to parents 
that accompanies the free and reduced price meal and free milk 
application; on the application; or in the case of direct 
certification, on the document informing households of their 
eligibility. One commenter addressed this provision. The commenter 
believes that parents should be informed of all disclosures. The 
Department agrees.
    Final Rule--Sections 215.13a(i), 225.15(i), 226.23(k) and 245.6(h) 
require determining agencies to notify parents/guardians of potential 
disclosure of their eligibility information at the time of application 
or when the household is directly certified.
    6. Parental consent/declination to the disclosure of the 
household's eligibility information--As mentioned above, prior to any 
disclosure to Medicaid or SCHIP, parents/guardians must be given the 
opportunity to decline to have their information disclosed to those 
health insurance agencies; i.e., opt out. This opt out provision was 
mandated by a provision in Public Law 106-224 amending the NSLA and is 
currently codified at Sec. Sec.  215.13a(g)(5), 225.15(g)(5), 
226.23(i)(5), and 245.6(f)(5). No specific timeframe for households to 
respond was specified in the NSLA or the rule. Rather the regulations 
require that households be informed that their information may be 
disclosed to Medicaid and SCHIP unless they notify the determining 
agency by a date, chosen by the determining agency, if they do not want 
their information disclosed to those health insurance agencies. No 
response from the parent/guardian by the date specified is considered 
consent, (i.e., passive consent) and allows the determining agency to 
disclose children's eligibility information to Medicaid and SCHIP.
    Previously, amendments to the NSLA by Public Law 103-448 authorized 
determining agencies to disclose certain limited information to 
educational and certain other programs and individuals without 
parental/guardian consent. Therefore, Sec. Sec.  215.13a(g)(8) and 
(g)(9), 225.15(g)(8) and(g)(9), 226.23(i)(8) and (g)(9), and 
245.6(f)(8) and (f)(9) of the proposed rule would have, without 
requiring parental/guardian consent, permitted determining agencies to 
make disclosure consistent with the NSLA.
    An indication of parental/guardian consent, however, would be 
required when the disclosure would go beyond the scope of the statute, 
such as a disclosure to a program or individual not authorized by the 
statute to receive eligibility information or the disclosure of 
information goes beyond the information allowed by the statute to be 
disclosed to a particular entity. For example, a Federal education 
program is

[[Page 10889]]

authorized to have information regarding a student's eligibility status 
but no other information on the application. If an education program 
wanted names of household members, the determining agency must obtain 
parental/guardian consent prior to disclosing that information. 
Additionally, some determining agencies include on the free and reduced 
price meal application a list of other benefits, such as programs or 
services for which a household may be eligible; i.e., free or reduced 
cost bus transportation, text books, eye exams, or other school related 
fees. In those cases, to obtain a listed benefit, the parent/guardian 
must take action, (i.e., check a box to indicate consent (opt in)), 
before their information may be disclosed.
    One individual commenting on the interim rule suggested that the 
parents be given, by regulation, a specified length of time to respond 
before consent to disclose information to Medicaid or SCHIP is assumed. 
Currently, Sec. Sec.  215.13a(g)(5), 245.6(f)(5), 225.15(g)(5) and 
226.23(i)(5) require that parents must be given adequate time to 
respond before information is disclosed, but leaves it to local 
agencies to determine how much time is adequate. The Department has 
determined that local officials are in a better position to assess what 
constitutes adequate time to respond.
    Additionally, a commenter took the position that requiring the 
parent to actively provide consent is preferable to passive consent; 
i.e., assuming consent when the parent/guardian does not notify/
indicate that they do not want their information disclosed. The former 
is the case with disclosures to Medicaid and SCHIP. The commenter 
stated that most other disclosures require the parents to take action 
by providing a check mark, for example, to indicate that their 
information may be disclosed. The commenter believes that consistency 
would be less confusing for parents/guardians. Public Law 106-224 
mandates that disclosures to Medicaid and SCHIP be allowed to occur 
unless parents/guardians decline to have their information disclosed to 
the health insurance programs, (i.e., opt out). Also, it has been the 
Department's long-standing policy and practice to require that 
determining agencies provide parents/guardians the opportunity to opt 
in when the determining agency provides parents/guardians a choice on 
whether they want their free and reduced price eligibility information 
used for other purposes. Providing parents/guardians with the 
opportunity to agree to have their information used for purposes other 
than for the purpose for which the information was originally provided, 
(i.e., for determining eligibility for free and reduced price meals), 
gives parents/guardians greater control over their personal information 
than the opt out approach.
    Final rule--For the reasons cited above, Sec. Sec.  215.13a(i)(2), 
225.15(i)(2), 226.23(k)(2) and 245.6(h)(2) continue to require that 
determining agencies which have decided to disclose information to 
Medicaid and SCHIP provide parents/guardians the opportunity to decline 
to have their information disclosed to those health insurance agencies 
(opt out). Sections 215.13a(j), 225.15(j), 226.23(l) and 245.6(i) 
require that determining agencies that want to use free and reduced 
price meal eligibility information for other purposes or that want to 
disclose the information to programs and individuals who are not 
authorized to have access to household information by the statute must 
provide parents/guardians with the opportunity to consent to having 
their information disclosed. Additionally, no consent is required for 
disclosure to education and other programs permitted access to 
children's eligibility status as provided in the statute.
    7. Disclosure of information obtained through the verification of 
eligibility process--The proposed rule included a provision to allow, 
without parental/guardian consent, the disclosure of household 
information obtained from sources other than the free and reduced price 
application or through direct certification, such as information 
obtained through the verification process. The interim rule did not 
include a similar provision and, therefore, it is not included in 
current regulations. Five commenters to the proposed rule opposed the 
disclosure of information obtained through the verification process 
stating that this went beyond the disclosure provisions in the NSLA. 
The Department agrees that the disclosure of eligibility information 
should be limited to information provided by households on the 
application or obtained through direct certification, as specified in 
the statute and should not include information obtained through the 
verification process.
    Final rule: For the reasons cited above, this final rule does not 
include authority for determining agencies to disclose information 
obtained through the verification of eligibility process.
    8. Persons authorized to receive children's eligibility information 
and how the information must be used--The NSLA specifies that 
individuals authorized access to children's eligibility information for 
health insurance purposes must be directly connected with the 
administration of the Medicaid Program or SCHIP. Additionally, the NSLA 
requires that, for education and the other specified programs or 
activities listed, the individuals must be either directly connected 
with administration of the specified program or activity or directly 
connected to its enforcement. The Department has also specified in 
guidance that these authorized individuals also must have a need to 
know children's eligibility information to carry out their duties, 
since the information must be used for program purposes.
    As mandated by the statute, current regulations specify that 
persons directly connected to the administration of Medicaid or SCHIP 
are permitted access to children's eligibility information to identify 
children eligible for enrollment in Medicaid or SCHIP, provided that 
parents/guardians have not declined to have their information disclosed 
to those health insurance programs. Public Law 108-265 further allows 
determining agencies to communicate with Medicaid and SCHIP officials 
to verify children's eligibility for a Child Nutrition Program. This 
provision is nondiscretionary and is being added to this final rule. 
Currently, Sec. Sec.  215.13a(g)(3), 225.15(g)(3), 226.23(i)(3), and 
245.6(f)(3) define a person directly connected with Medicaid and SCHIP 
as State employees and persons authorized under Federal requirements to 
carry out initial processing of Medicaid or SCHIP applications or to 
make eligibility determinations. Please refer to the interim rule for a 
detailed discussion.
    Persons directly connected with the administration or enforcement 
of Federal and State education programs and several of the other 
programs authorized access to children's eligibility information under 
Public Law 103-448 are not as clearly defined. Also, whereas Public Law 
106-224 had mandated that children's free and reduced price meal 
information must be used specifically to identify and enroll eligible 
children in Medicaid or SCHIP, Public Law 103-448 did not include a 
clear directive that the information must be used for a specific 
purpose. The Department has specified the information must be used for 
a legitimate program purpose of the receiving program.
    In 2002 and 2003, joint memoranda were issued by the Department of 
Education and the Department of Agriculture (USDA) regarding the use of 
free and reduced price meal eligibility in implementing the No Child 
Left

[[Page 10890]]

Behind provisions. The memorandum, Guidance on Implementing the No 
Child Left Behind Act (NCLB), December 17, 2002, can be found on the 
USDA Food and Nutrition Service Web site at http://www.fns.usda.gov/cnd/lunch/ and then click on ``Policy.'' A follow-up memorandum on 
implementing NCLB in Provision 2 and 3 schools was later issued on 
February 20, 2003. However, there remains some confusion regarding the 
Department of Education's requirements under the No Child Left Behind 
Act of 2001 (NCLB) and the relationship to children's free and reduced 
price eligibility information. (NCLB reauthorized Title I, Part A of 
the Elementary and Secondary Education Act.)
    Title I, Part A, as amended by NCLB, requires schools to 
disaggregate information about children, such as by limited English 
proficiency, gender, socio-economic status, etc. Certain educational 
services, such as priority in school choice and remedial programs, are 
required under NCLB to be provided to disadvantaged students.
    Schools tend to use certification for free and reduced price school 
meals to determine that children are economically disadvantaged. The 
question has arisen whether each teacher in a school, because they are 
providing educational services under NCLB, is considered directly 
connected to NCLB administration, a Federal education program. The 
disclosure of meal eligibility information must be limited to as few 
individuals as possible to protect the confidential nature of the 
information. All teachers in the school do not need to know the names 
of all children eligible for free and reduced price meals. Rather, most 
teachers only need to know which children need the additional services. 
A list of children needing services, without identifying the children 
as eligible for free or reduced price meals, may be provided to the 
teachers by someone who was associated with the free and reduced price 
meal eligibility process, such as a determining official.
    Several commenters to the proposed rule requested that the final 
rule clearly define who are persons directly connected with program 
administration or enforcement. Additionally several other commenters 
believe that the need to know criteria are too broad. We acknowledge 
commenters concerns that often it is difficult to determine who are the 
persons directly connected with a program and whether they have a 
legitimate need to know. With that in mind, determining agencies will 
need to make careful and well informed judgments.
    Public Law 108-265 added certain third party contractors as 
eligible recipients of children's free or reduced price eligibility 
status only. These contractors must be assisting in contacting 
households who have not responded to the schools' verification of 
eligibility efforts. Contracts providing for such assistance services 
must include confidentiality assurances, binding contractors to follow 
the provisions of the NSLA and program regulations.
    Final rule--The description of persons directly connected to the 
administration of Medicaid and SCHIP remains as stated in current 
regulations. The description and how the information may be used are 
included in Sec. Sec.  215.13a(h), 225.15(h), 226.23(j) and 245.6(g). 
For persons directly connected to education and other programs and 
activities authorized by Public Law 103-448, the proposed rule is 
adopted in this final rule. These descriptions and how children's 
eligibility information may be used are included at Sec. Sec.  
215.13a(g), 225.15(g), 226.23(i) and 245.6(f).
    9. Agreement/Memorandum of Understanding--Sections 215.13a(g)(7), 
225.15(g)(7), 226.23(i)(7), and 245.6(f)(7) currently require 
determining agencies that choose to disclose children's eligibility 
information to Medicaid and SCHIP to have an agreement or Memorandum of 
Understanding (MOU) with the receiving agency. In the case of 
disclosures to Medicaid or SCHIP, an agreement/MOU is mandated by the 
NSLA and is, therefore, nondiscretionary. The agreement/MOU would 
include such provisions as who will receive the information, how the 
information will be used, how it will be protected from unauthorized 
uses and third party disclosures, and acknowledgement of the penalties 
for misuse of the information. The NSLA does not require or address an 
agreement or MOU between the determining agency and other individuals 
or agencies to which children's eligibility status or other information 
is disclosed. However, in the preamble to the proposed rule, we 
strongly recommended that determining agencies consider using an 
agreement.
    Two commenters advised that an agreement/MOU should be required for 
all disclosures of confidential information. The Department agrees and 
expects that the determining agency should have a written record of 
individuals and programs that are provided children's eligibility 
status and/or all eligibility information. An agreement/MOU or other 
type of written record would serve to advise recipients of their 
responsibilities to maintain the confidential nature of the 
information, guard against its misuse, and put the recipient on notice 
of the penalties for misuse of the information. The Department will let 
determining agencies decide whether a formal or other type of agreement 
is necessary, such as a list of persons and programs granted access to 
eligibility information. Except for disclosure to Medicaid and SCHIP, 
the regulations will continue to recommend, rather than require, that 
determining agencies use an agreement/MOU when disclosing children's 
eligibility information to other individuals or agencies.
    Final rule--Sections 215.13a(k), 225.15(k), 226.23(m), and 245.6 
(j) require that determining agencies have an agreement/MOU for 
disclosures to Medicaid and SCHIP and recommend that the determining 
agency and other recipient agencies enter into an agreement/MOU prior 
to the disclosure of children's free and reduced price eligibility 
information for other purposes.
    10. Penalties--The NSLA specifies a fine of not more than $1000 and 
imprisonment for up to 1 year for unauthorized disclosures and misuse 
of children's eligibility information. This provision is 
nondiscretionary. The provision was included in both the proposed and 
interim rules.
    Final rule--This final rule retains the penalties stated above at 
Sec. Sec.  215.13a(l), 225.15(l), 226.23(n) and 245.6(k).
    11. Technical Amendments--This rule also makes several technical 
amendments to correct or remove obsolete references or provisions. 
Section 210.19(c)(6)(ii) is revised to replace the acronym AFDC (Aid to 
Families with Dependent Children) with the acronym TANF (Temporary 
Assistance for Needy Families), the acronym for the program that 
replaced AFDC, and adding the words ``other FDPIR identifier'' in 
Sec. Sec.  210.19(c)(6)(ii) and 245.2(a-4)(ii) to clarify that in some 
cases households participating in FDPIR do not have a case number, but 
instead are issued another type of identifier. Additionally, 
corrections are made to the definitions ``School'' in Sec.  215.2 and 
``Children'' in Sec. Sec.  210.2 and 220.2 to remove incorrect 
citations or references.

Procedural Matters

Executive Order 12866

    This rule has been determined to be significant and was reviewed by 
the Office of Management and Budget under Executive Order 12866.

[[Page 10891]]

Regulatory Impact Analysis

Need for Action
    This final rule provides for the statutory limitations under which 
children's free and reduced price meal or free milk eligibility 
information may be disclosed, without parental/guardian consent. This 
final rule provides State agencies and local program operators that 
administer the Child Nutrition Programs, as well as households which 
apply for and/or are approved for free and reduced price meals or free 
milk the specifics on how and when information may be disclosed. This 
final rule reflects the disclosure provisions of the Healthy Meals for 
Healthy Americans Act of 1994 as well as the disclosure provisions of 
the Agricultural Risk Protection Act of 2000. Additionally, in 
accordance with the mandates of the Child Nutrition and WIC 
Reauthorization Act of 2004, this final rule will allow certain third 
party contractors access to children's eligibility status and will 
allow school officials to communicate with Medicaid and SCHIP officials 
to verify that children are eligible for free and reduced price school 
meals or free milk.
Benefits
    Potential benefits from the sharing of meal benefit eligibility 
data include reducing redundant means testing, increasing the number of 
needy families being reached by assistance programs, improving 
targeting of U.S. Department of Education's programs for needy 
children, and increasing the integrity of certain assistance programs. 
The disclosure provisions are intended to reduce paperwork for 
administrators of certain programs that target low-income households 
and for low-income households who may benefit from those programs by 
allowing some sharing of household's free and reduced price meal 
eligibility information.
Costs
    Potential costs include an additional administrative burden imposed 
on school food authorities, privacy infringement on some families, and 
an increase in program costs for programs that acquire meal benefit 
eligibility data through this rule. These costs are not expected to be 
significant. Based on the regulatory impact analysis as well as 
comments received on the proposed rule, the potential benefits of the 
final rule are expected to outweigh the potential costs.

Regulatory Flexibility Act

    This final rule has been reviewed with regard to the requirements 
of the Regulatory Flexibility Act (5 U.S.C. 601-612). Nancy Montanez 
Johner, Under Secretary for Food, Nutrition and Consumer Services, has 
certified that this rule will not have a significant economic impact on 
a substantial number of small entities. While a regulatory impact 
analysis was conducted to determine the costs and benefits of the rule, 
the potential costs and benefits are too diverse and too uncertain to 
be quantified. The parents and guardians of children applying for free 
or reduced price meal benefits or free milk will be impacted by the 
disclosure provisions as well as school districts required to maintain 
confidentiality.

Unfunded Mandates Reform Act

    Title II of the Unfunded Mandates Reform Act of 1995 (UMRA), Public 
Law 104-4, establishes a requirement for Federal agencies to assess the 
effects of their regulatory actions on State, local, and tribal 
governments and the private sector. Under section 202 of the UMRA, FNS 
generally prepares a written statement, including a cost-benefit 
analysis. This is done for proposed and final rules that have ``Federal 
mandates'' which may result in expenditures of $100 million or more in 
any one year by State, local, or tribal governments, in the aggregate, 
or by the private sector. When this statement is needed for a rule, 
section 205 of the UMRA generally requires FNS to identify and consider 
a reasonable number of regulatory alternatives. It must then adopt the 
least costly, most cost-effective or least burdensome alternative that 
achieves the objectives of the rule.
    This final rule contains no Federal mandates of $100 million or 
more in any one year (under regulatory provisions of Title II of the 
UMRA) for State, local, and tribal governments or the private sector. 
Thus, this final rule is not subject to the requirements of sections 
202 and 205 of the UMRA.

Executive Order 12372

    The School Breakfast Program, National School Lunch Program, 
Special Milk Program, the Summer Food Service Program, and the Child 
and Adult Care Food Program are listed in the Catalog of Federal 
Domestic Assistance under Nos. 10.553, 10.555, 10.556, 10.559, and 
10.558 respectively. These programs are subject to the provisions of 
Executive Order 12372, which requires intergovernmental consultation 
with State and local officials (7 CFR Part 3015, Subpart V, and final 
rule related notice at 48 FR 29115, June 24, 1983).

Federalism Summary Impact Statement

    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 
regulation describing the agency's considerations in terms of the three 
categories called for under section (6)(a)(B) of Executive Order 13132:
Prior Consultation With State Officials
    Prior to drafting this final rule, we received input from State and 
local agencies at various times. The Child Nutrition Programs (CNP) are 
State administered, federally funded programs. Food and Nutrition 
Service headquarters and regional staff have informal and formal 
discussions with State and local officials on an ongoing basis 
regarding program implementation and performance. This arrangement 
allows State and local agencies to provide feedback that forms the 
basis for any discretionary decisions in this and other CNP rules. The 
provisions in this rule are primarily non-discretionary in response to 
Public Law 103-448, Public Law 106-224 and Public Law 108-265. However, 
we received comments to the proposed and interim rules from State 
agencies and school food authorities which were taken into 
consideration in developing this final rule.
Nature of Concerns and the Need To Issue This Rule
    State and local agencies are generally concerned about protecting 
the confidentiality of children's eligibility information. They are 
also concerned about the paperwork and financial burdens placed on food 
service to provide eligibility information to Medicaid and SCHIP 
officials and the numerous Federal and State education and other 
programs that request the information throughout the year.
    The issuance of this regulation is required by amendments made to 
the Richard B. Russell National School Lunch Act by Public Law 103-448, 
Public Law 106-224 and Public Law 108-265. Prior to those amendments, 
program official could only disclose children's eligibility information 
with parental consent. This rule establishes and codifies the 
requirements for any disclosure of children's eligibility information.
Extent to Which We Meet These Concerns
    We believe that we adequately address the issue of State and local 
flexibility. We clarify (consistent with

[[Page 10892]]

the requirements of this rule) that the disclosures of children's 
eligibility information for use other than to determine and verify 
eligibility for free and reduced price meals or free milk is a State 
and local decision. Officials are not required to disclose children's 
eligibility information. When an exchange of information is agreed 
upon, we encourage State and local agencies to work with the receiving 
agency officials to make the exchange of eligibility information as 
streamlined as possible. Additionally, we have issued prototype 
materials, such as a prototype agreement between program operators and 
an agency receiving eligibility information and a prototype 
notification to parents/guardians a school may use to explain to 
parents that their children's eligibility information may be disclosed. 
Additionally, we have clarified through guidance that the school food 
service may require reimbursement for administrative costs of providing 
free and reduced price eligibility information to other programs.
    Federal and State education programs are the most frequent users of 
children's free and reduced price meal eligibility information. We 
encourage food service and the education community to work together to 
minimize the burdens on food service to limit requests for free and 
reduced price meal eligibility information to the extent possible. In 
this regard, Department of Education and Food and Nutrition Service 
officials have issued joint memoranda on the issue of disclosure of 
children's free and reduced price eligibility information. These 
memoranda may be viewed at http://www.fns.usda.gov/cnd/lunch/ and then 
click on ``Policy.''

Executive Order 12988

    This final rule has been reviewed under Executive Order 12988, 
Civil Justice Reform. It 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 impede its full 
implementation. This rule is not intended to have retroactive effect 
unless that is specified in the Effective Date section of the preamble 
of the final rule. Before any judicial challenge to the provisions of 
this rule or the application of its provisions, all administrative 
procedures that apply must be followed. The only administrative appeal 
procedures relevant to this rule are the hearings that FNS must provide 
for decisions relating to eligibility for free and reduced price meals 
and free milk (Sec.  245.7 for the NSLP, SBP, and SMP in schools; Sec.  
225.13 for the SFSP, and Sec.  226.23(e)(5) for the CACFP).

Civil Rights Impact Analysis

    FNS has reviewed this final rule in accordance with the Department 
Regulation 4300-4, ``Civil Rights Impact Analysis,'' to identify any 
major civil rights impacts the rule might have on children on the basis 
of race, color, national origin, sex, age or disability. After a 
careful review of the rule's intent and provisions, FNS has determined 
that it does not affect the participation of protected individuals in 
the Child Nutrition Programs.

Paperwork Reduction Act

    The Paperwork Reduction Act of 1995 (44 U.S.C. Chap. 35; see 5 CFR 
1320) requires that the Office of Management and Budget (OMB) approve 
all collections of information by a Federal agency 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. 
Information collections in this final rule have been approved by OMB 
under OMB control numbers 0584-0005, 0584-0280, 0584-0055, and 0584-
0026.

E-Government Act Compliance

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

List of Subjects

7 CFR Part 210

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

7 CFR Part 215

    Food assistance programs, Grant programs-education, Grant programs-
health, Infants and children, Milk, Reporting and recordkeeping 
requirements.

7 CFR Part 220

    Children, Food assistance programs, Grants programs-social 
programs, Nutrition, Reporting and recordkeeping requirements, School 
Breakfast Program.

7 CFR Part 225

    Food assistance programs, Grant programs-health, Infants and 
children, Labeling, Reporting and recordkeeping requirements.

7 CFR Part 226

    Accounting, Aged, Day care, Food assistance programs, Grant 
programs, Grant programs-health, American Indians, Individuals with 
disabilities, Infants and children, Intergovernmental relations, Loan 
programs, Reporting and recordkeeping requirements, Surplus 
agricultural commodities.

7 CFR Part 245

    Civil rights, Food assistance programs, Grant programs-education, 
Grant programs-health, Infants and children, Milk, Reporting and 
recordkeeping requirements, School breakfast and lunch programs.


0
Accordingly, 7 CFR Parts 210, 215, 220, 225, 226, and 245 are amended 
as follows:

PART 210--NATIONAL SCHOOL LUNCH PROGRAM

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

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


Sec.  210.2  [Amended]

0
2. In Sec.  210.2, remove the phrase ``and (d)'' in paragraph (b) of 
the definition Child in the alphabetical listing.

0
3. In Sec.  210.19, revise paragraph (c)(6)(ii) to read as follows:


Sec.  210.19  Additional responsibilities.

* * * * *
    (c) * * *
    (6) * * *
    (ii) When any review or audit reveals that a school food authority 
is approving applications which indicate that the households' incomes 
are within the Income Eligibility Guidelines issued by the Department 
or the applications contain food stamp or TANF case numbers or FDPIR 
case numbers or other FDPIR identifiers but the applications are 
missing the documentation specified under Sec.  245.2(a-4)(1)(ii); or
* * * * *

PART 215--SPECIAL MILK PROGRAM FOR CHILDREN

0
1. The authority citation for part 215 continues to read as follows:

    Authority: 42 U.S.C. 1772 and 1779.


0
2. In Sec.  215.2, amend paragraph (e-1) by removing the phrase ``and 
4'' and revise paragraph (i-1) to read as follows:


Sec.  215.2  Definitions.

* * * * *
    (i-1) Disclosure means reveal or use individual children's program 
eligibility information obtained through the free

[[Page 10893]]

milk eligibility process for a purpose other than for the purpose for 
which the information was obtained. The term refers to access, release, 
or transfer of personal data about children by means of print, tape, 
microfilm, microfiche, electronic communication or any other means.
* * * * *

0
3. In Sec.  215.13a, revise paragraphs (f) and (g) and add new 
paragraphs (h) through (l) to read as follows:


Sec.  215.13a  Determining eligibility for free milk in child-care 
institutions.

* * * * *
    (f) Privacy Act notice requirements. The free milk application 
provided to households must include a Privacy Act notice/statement 
informing households of how the social security number and other 
information provided on the application will be used. Each free milk 
application must include substantially the following statement, ``The 
Richard B. Russell National School Lunch Act requires the information 
on this application. You do not have to give the information, but if 
you do not, we cannot approve your child for free milk. You must 
include the social security number of the adult household member who 
signs the application. The social security number is not required when 
you apply on behalf of a foster child or you list a Food Stamp, 
Temporary Assistance for Needy Families (TANF) Program or Food 
Distribution Program on Indian Reservations (FDPIR) case number for 
your child or other FDPIR identifier or when you indicate that the 
adult household member signing the application does not have a social 
security number. We will use your information to determine if your 
child is eligible for free milk, and for administration and enforcement 
of the Program.'' When the State agency or child care institution, as 
appropriate, plans to use or disclose children's eligibility 
information for non-program purposes, additional information, as 
specified in paragraph (i) of this section must be added to the Privacy 
Act notice/statement. State agencies and child care institutions are 
responsible for drafting the appropriate notice and ensuring that the 
notice complies with section 7(b) of the Privacy Act of 1974 (5 U.S.C. 
552a note (Disclosure of Social Security Number)).
    (g) Disclosure of children's free milk eligibility information to 
certain programs and individuals without parental consent. The State 
agency or child care institution, as appropriate, may disclose 
aggregate information about children eligible for free milk to any 
party without parental notification and consent when children cannot be 
identified through release of the aggregate data or by means of 
deduction. Additionally, the State agency or child care institution may 
disclose information that identifies children eligible for free milk to 
the programs and the individuals specified in this paragraph (g) 
without parent/guardian consent. The State agency or child care 
institution that makes the free milk eligibility determination is 
responsible for deciding whether to disclose program eligibility 
information.
    (1) Persons authorized to receive eligibility information. Only 
persons directly connected with the administration or enforcement of a 
program or activity listed in paragraphs (g)(2) or (g)(3) of this 
section may have access to children's free milk eligibility 
information, without parental consent. Persons considered directly 
connected with administration or enforcement of a program or activity 
listed in paragraphs (g)(2) or (g)(3) of this section are Federal, 
State, or local program operators responsible for the ongoing operation 
of the program or activity or persons responsible for program 
compliance. Program operators may include persons responsible for 
carrying out program requirements and monitoring, reviewing, auditing, 
or investigating the program. Program operators may include 
contractors, to the extent those persons have a need to know the 
information for program administration or enforcement. Contractors may 
include evaluators, auditors, and others with whom Federal or State 
agencies and program operators contract with to assist in the 
administration or enforcement of their program on their behalf.
    (2) Disclosure of children's names and free milk eligibility 
status. The State agency or child care institution, as appropriate, may 
disclose, without parental consent, only children's names and 
eligibility status (whether they are eligible for free milk) to persons 
directly connected with the administration or enforcement of:
    (i) A Federal education program;
    (ii) A State health program or State education program administered 
by the State or local education agency;
    (iii) A Federal, State, or local means-tested nutrition program 
with eligibility standards comparable to the National School Lunch 
Program (i.e., food assistance programs for households with incomes at 
or below 185 percent of the Federal poverty level); or
    (iv) A third party contractor assisting in verification of 
eligibility efforts by contacting households who fail to respond to 
requests for verification of their eligibility.
    (3) Disclosure of all eligibility information. In addition to 
children's names and eligibility status, the State agency or child care 
institution, as appropriate, may disclose, without parental consent, 
all eligibility information obtained through the free milk eligibility 
process (including all information on the application or obtained 
through direct certification) to:
    (i) Persons directly connected with the administration or 
enforcement of programs authorized under the Richard B. Russell 
National School Lunch Act or the Child Nutrition Act of 1966. This 
means that all eligibility information obtained for the Special Milk 
Program may be disclosed to persons directly connected with 
administering or enforcing regulations under the National School Lunch 
Program, School Breakfast Program, Child and Adult Care Food Program, 
Summer Food Service Program and the Special Supplemental Nutrition 
Program for Women, Infants and Children (WIC) (Parts 210, 220, 226, 
225, and 246, respectively, of this chapter);
    (ii) The Comptroller General of the United States for purposes of 
audit and examination; and
    (iii) Federal, State, and local law enforcement officials for the 
purpose of investigating any alleged violation of the programs listed 
in paragraphs (g)(2) and (g)(3) of this section.
    (4) Use of free milk eligibility information by programs other than 
Medicaid or the State Children's Health Insurance Program (SCHIP). 
State agencies and child care institutions may use children's free milk 
eligibility information for administering or enforcing the Special Milk 
Program. Additionally, any other Federal, State, or local agency 
charged with administering or enforcing the Special Milk Program may 
use the information for that purpose. Individuals and programs to which 
children's free milk eligibility information has been disclosed under 
this section may use the information only in the administration or 
enforcement of the receiving program. No further disclosure of the 
information may be made.
    (h) Disclosure of children's free milk eligibility information to 
Medicaid and/or SCHIP, unless parents decline. Children's free milk 
eligibility information only may be disclosed to Medicaid or SCHIP when 
both the State agency and the child care institution so elect, the 
parent/guardian does not decline to have their eligibility information 
disclosed and the other provisions described in paragraph (h)(1)

[[Page 10894]]

of this section are met. The State agency or child care institution, as 
appropriate, may disclose children's names, eligibility status (whether 
they are eligible for free milk), and any other eligibility information 
obtained through the free milk application or obtained through direct 
certification to persons directly connected with the administration of 
Medicaid or SCHIP. Persons directly connected to the administration of 
Medicaid and SCHIP are State employees and persons authorized under 
Federal and State Medicaid and SCHIP requirements to carry out initial 
processing of Medicaid or SCHIP applications or to make eligibility 
determinations for Medicaid or SCHIP.
    (1) The State agency must ensure that:
    (i) The child care institution and health insurance program 
officials have a written agreement that requires the health insurance 
program agency to use the eligibility information to seek to enroll 
children in Medicaid and SCHIP; and
    (ii) Parents/guardians are notified that their eligibility 
information may be disclosed to Medicaid or SCHIP and given an 
opportunity to decline to have their children's eligibility information 
disclosed, prior to any disclosure.
    (2) Use of children's free milk eligibility information by 
Medicaid/SCHIP. Medicaid and SCHIP agencies and health insurance 
program operators receiving children's free milk eligibility 
information must use the information to identify eligible children and 
enroll them in Medicaid or SCHIP. The Medicaid and SCHIP enrollment 
process may include targeting and identifying children from low-income 
households who are potentially eligible for Medicaid or SCHIP for the 
purpose of seeking to enroll them in Medicaid or SCHIP. No further 
disclosure of the information may be made. Medicaid and SCHIP agencies 
and health insurance program operators also may verify children's 
eligibility in a program under the Child Nutrition Act of 1966 or the 
Richard B. Russell National School Lunch Act.
    (i) Notifying households of potential uses and disclosures of 
children's free milk eligibility information. Households must be 
informed that the information they provide on the free milk application 
will be used to determine eligibility for free milk and that their 
eligibility information may be disclosed to other programs.
    (1) For disclosures to programs, other than Medicaid or SCHIP, that 
are permitted access to children's eligibility information without 
parent/guardian consent, the State agency or child care institution, as 
appropriate, must notify parents/guardians at the time of application 
that their children's free milk eligibility information may be 
disclosed. The State agency or child care institution, as appropriate, 
must add substantially the following statement to the Privacy Act 
notice/statement required under paragraph (f) of this section, ``We may 
share your eligibility information with education, health, and 
nutrition programs to help them evaluate, fund, or determine benefits 
for their programs; auditors for program reviews; and law enforcement 
officials to help them look into violations of program rules.'' For 
children determined eligible for free milk through direct 
certification, the notice of potential disclosure may be included in 
the document informing parents/guardians of their children's 
eligibility for free milk through direct certification process.
    (2) For disclosure to Medicaid or SCHIP, the State agency or child 
care institution, as appropriate, must notify parents/guardians that 
their children's free milk eligibility information will be disclosed to 
Medicaid and/or SCHIP unless the parent/guardian elects not to have 
their information disclosed and notifies the State agency or child care 
institution, as appropriate, by a date specified by the State agency or 
child care institution, as appropriate. Only the parent or guardian who 
is a member of the household or family for purposes of the free milk 
application may decline the disclosure of eligibility information to 
Medicaid or SCHIP. The notification must inform parents/guardians that 
they are not required to consent to the disclosure, that the 
information, if disclosed, will be used to identify eligible children 
and seek to enroll them in Medicaid or SCHIP, and that their decision 
will not affect their children's eligibility for free milk. The 
notification may be included in the letter/notice to parents/guardians 
that accompanies the free milk application, on the application itself 
or in a separate notice provided to parents/guardians. The notice must 
give parents/guardians adequate time to respond if they do not want 
their information disclosed. The State agency or child care 
institution, as appropriate, must add substantially the following 
statement to the Privacy Act notice/statement required under paragraph 
(f) of this section, ``We may share your information with Medicaid or 
the State Children's Health Insurance Program, unless you tell us not 
to. The information, if disclosed, will be used to identify eligible 
children and seek to enroll them in Medicaid or SCHIP.'' For children 
determined eligible for free milk through direct certification, the 
notice of potential disclosure and opportunity to decline the 
disclosure may be included in the document informing parents/guardians 
of their children's eligibility for free milk through direct 
certification.
    (j) Other disclosures. State agencies and child care institutions 
that plan to use or disclose identifying information about children 
eligible for free milk to programs or individuals not specified in this 
section must obtain written consent from children's parents or 
guardians prior to the use or disclosure.
    (1) The consent must identify the information that will be shared 
and how the information will be used.
    (2) There must be a statement informing parents and guardians that 
failing to sign the consent will not affect the child's eligibility for 
free milk and that the individuals or programs receiving the 
information will not share the information with any other entity or 
program.
    (3) Parents/guardians must be permitted to limit the consent only 
to those programs with which they wish to share information.
    (4) The consent statement must be signed and dated by the child's 
parent or guardian who is a member of the household for purposes of the 
free milk application.
    (k) Agreements with programs/individuals receiving children's free 
milk eligibility information. Agreements or Memoranda of Understanding 
(MOU) are recommended or required as follows:
    (1) The State agency or child care institution, as appropriate, 
should have a written agreement or MOU with programs or individuals 
receiving eligibility information, prior to disclosing children's free 
milk eligibility information. The agreement or MOU should include 
information similar to that required for disclosures to Medicaid and 
SCHIP specified in paragraph (k)(2) of this section.
    (2) For disclosures to Medicaid or SCHIP, the State agency or child 
care institution, as appropriate, must have a written agreement with 
the State or local agency or agencies administering Medicaid or SCHIP 
prior to disclosing children's free milk eligibility information to 
those agencies. At a minimum, the agreement must:
    (i) Identify the health insurance program or health agency 
receiving children's eligibility information;
    (ii) Describe the information that will be disclosed;
    (iii) Require that the Medicaid or SCHIP agency use the information

[[Page 10895]]

obtained and specify that the information must be used to seek to 
enroll children in Medicaid or SCHIP;
    (iv) Require that the Medicaid or SCHIP agency describe how they 
will use the information obtained;
    (v) Describe how the information will be protected from 
unauthorized uses and disclosures;
    (vi) Describe the penalties for unauthorized disclosure; and
    (vii) Be signed by both the Medicaid or SCHIP program or agency and 
the State agency or child care institution, as appropriate.
    (l) Penalties for unauthorized disclosure or misuse of children's 
free milk eligibility information. In accordance with section 
9(b)(6)(C) of the Richard B. Russell National School Lunch Act (42 
U.S.C. 1758(b)(6)(C)), any individual who publishes, divulges, 
discloses or makes known in any manner, or to any extent not authorized 
by statute or this section, any information obtained under this section 
will be fined not more than $1,000 or imprisoned for up to 1 year, or 
both.

PART 220--SCHOOL BREAKFAST PROGRAM

0
1. The authority citation for Part 220 continues to read as follows:

    Authority: 42 U.S.C. 1773, 1779, unless otherwise noted.


Sec.  220.2  [Amended]

0
2. In Sec.  220.2, amend paragraph (c) by removing phrase ``and (4)''.

PART 225--SUMMER FOOD SERVICE PROGRAM

0
1. The authority citation for Part 225 is amended to read as follows:

    Authority: Secs. 9, 13, and 14, Richard B. Russell National 
School Lunch Act, as amended (42 U.S.C. 1758, 1761 and 1762a).


0
2. In Sec.  225.2, revise the definition Disclosure in the alphabetical 
list to read as follows:


Sec.  225.2  Definitions.

* * * * *
    Disclosure means reveal or use individual children's program 
eligibility information obtained through the free and reduced price 
meal eligibility process for a purpose other than for the purpose for 
which the information was obtained. The term refers to access, release, 
or transfer of personal data about children by means of print, tape, 
microfilm, microfiche, electronic communication or any other means.
* * * * *


Sec.  225.6  [Amended]

0
3. In Sec.  225.6:
0
a. Amend paragraph (c)(2)(ii)(C) by removing the reference ``Sec.  
225.15(g)'' and adding the reference ``Sec.  225.15(h)'' in its place;
0
b. Amend paragraph (h)(1) by removing the references ``Sec. Sec.  
225.15(g) and 225.17'' and adding the references ``Sec. Sec.  225.15(h) 
and 225.17'' in their place;
0
c. Amend paragraph (h)(2) (xvi) by removing the reference ``Sec.  
225.15(g)(6)--(8)'' and adding the reference ``Sec.  225.15 (h)(6) 
through (h)(8)'' in its place; and
0
d. Amend paragraph (h)(7) by removing the reference ``Sec.  
225.15(g)(1)'' and adding the reference ``Sec.  225.15(h)(1)'' in its 
place.

0
4. In Sec.  225.15:
0
a. Revise paragraphs (f)(4)(iv) and (g); and
0
b. Redesignate paragraphs (h) and (i) as paragraphs (m) and (n), 
respectively, and add new paragraphs (h) through (l).
    The revisions and additions read as follows:


Sec.  225.15  Management responsibilities of sponsors.

* * * * *
    (f) * * *
    (4) * * *
    (iv) A Privacy Act notice informing households of how the social 
security number and other information provided on the application will 
be used. Each free and reduced price meal application must include 
substantially the following statement, ``The Richard B. Russell 
National School Lunch Act requires the information on this application. 
You do not have to give the information, but if you do not, we cannot 
approve your child for free or reduced price meals. You must include 
the social security number of the adult household member who signs the 
application. The social security number is not required when you apply 
on behalf of a foster child or you list a Food Stamp, Temporary 
Assistance for Needy Families (TANF) Program or Food Distribution 
Program on Indian Reservations (FDPIR) case number for your child or 
other (FDPIR) identifier or when you indicate that the adult household 
member signing the application does not have a social security number. 
We will use your information to determine if your child is eligible for 
free or reduced price meals, and for administration and enforcement of 
the Program.'' When the State agency or sponsor, as appropriate, plans 
to use or disclose children's eligibility information for non-program 
purposes, additional information, as specified in paragraph (i) of this 
section, must be added to the Privacy Act notice/statement. State 
agencies and sponsors are responsible for drafting the appropriate 
notice and ensuring that the notice complies with section 7(b) of the 
Privacy Act of 1974 (5 U.S.C. 552a note (Disclosure of Social Security 
Number)).
* * * * *
    (g) Disclosure of children's free and reduced price meal 
eligibility information to certain programs and individuals without 
parental consent. The State agency or sponsor, as appropriate, may 
disclose aggregate information about children eligible for free and 
reduced price meals to any party without parental notification and 
consent when children cannot be identified through release of the 
aggregate data or by means of deduction. Additionally, the State agency 
or sponsor may disclose information that identifies children eligible 
for free and reduced price meals to the programs and the individuals 
specified in this paragraph (g) without parent/guardian consent. The 
State agency or sponsor that makes the free and reduced price meal 
eligibility determination is responsible for deciding whether to 
disclose program eligibility information.
    (1) Persons authorized to receive eligibility information. Only 
persons directly connected with the administration or enforcement of a 
program or activity listed in paragraphs (g)(2) or (g)(3) of this 
section may have access to children's free and reduced price meal 
eligibility information, without parental consent. Persons considered 
directly connected with administration or enforcement of a program or 
activity listed in paragraphs (g)(2) or (g)(3) of this section are 
Federal, State, or local program operators responsible for the ongoing 
operation of the program or activity or persons responsible for program 
compliance. Program operators may include persons responsible for 
carrying out program requirements and monitoring, reviewing, auditing, 
or investigating the program. Program operators may include 
contractors, to the extent those persons have a need to know the 
information for program administration or enforcement. Contractors may 
include evaluators, auditors, and others with whom Federal or State 
agencies and program operators contract with to assist in the 
administration or enforcement of their program in their behalf.
    (2) Disclosure of children's names and free or reduced price meal 
eligibility status. The State agency or sponsor, as appropriate, may 
disclose, without parental consent, only children's names

[[Page 10896]]

and eligibility status (whether they are eligible for free meals or 
reduced price meals) to persons directly connected with the 
administration or enforcement of:
    (i) A Federal education program;
    (ii) A State health program or State education program administered 
by the State or local education agency;
    (iii) A Federal, State, or local means-tested nutrition program 
with eligibility standards comparable to the National School Lunch 
Program (i.e., food assistance programs for households with incomes at 
or below 185 percent of the Federal poverty level); or
    (3) Disclosure of all eligibility information. In addition to 
children's names and eligibility status, the State agency or sponsor, 
as appropriate, may disclose, without parental consent, all eligibility 
information obtained through the free and reduced price meal 
eligibility process (including all information on the application or 
obtained through direct certification) to:
    (i) Persons directly connected with the administration or 
enforcement of programs authorized under the Richard B. Russell 
National School Lunch Act or the Child Nutrition Act of 1966. This 
means that all eligibility information obtained for the Summer Food 
Service Program may be disclosed to persons directly connected with 
administering or enforcing regulations under the National School Lunch 
Program, Special Milk Program, School Breakfast Program, Child and 
Adult Care Food Program, and the Special Supplemental Nutrition Program 
for Women, Infants and Children (WIC) (parts 210, 215, 220, 226 and 
246, respectively, of this chapter);
    (ii) The Comptroller General of the United States for purposes of 
audit and examination; and
    (iii) Federal, State, and local law enforcement officials for the 
purpose of investigating any alleged violation of the programs listed 
in paragraphs (g)(2) and (g)(3) of this section.
    (4) Use of free and reduced price meals eligibility information by 
programs other than Medicaid or the State Children's Health Insurance 
Program (SCHIP). State agencies and sponsors may use children's free 
and reduced price meal eligibility information for administering or 
enforcing the Summer Food Service Program. Additionally, any other 
Federal, State, or local agency charged with administering or enforcing 
the Summer Food Service Program may use the information for that 
purpose. Individuals and programs to which children's free or reduced 
price meal eligibility information has been disclosed under this 
section may use the information only in the administration or 
enforcement of the receiving program. No further disclosure of the 
information may be made.
    (h) Disclosure of children's free or reduced price meal eligibility 
information to Medicaid and/or SCHIP, unless parents decline. 
Children's free or reduced price meal eligibility information only may 
be disclosed to Medicaid or SCHIP when both the State agency and the 
sponsor so elect, the parental/guardian does not decline to have their 
eligibility information disclosed and the other provisions described in 
paragraph (h)(1) of this section are met. The State agency or sponsor, 
as appropriate, may disclose children's names, eligibility status 
(whether they are eligible for free or reduced price meals), and any 
other eligibility information obtained through the free and reduced 
price meal applications or obtained through direct certification to 
persons directly connected with the administration of Medicaid or 
SCHIP. Persons directly connected to the administration of Medicaid and 
SCHIP are State employees and persons authorized under Federal and 
State Medicaid and SCHIP requirements to carry out initial processing 
of Medicaid or SCHIP applications or to make eligibility determinations 
for Medicaid or SCHIP.
    (1) The State agency must ensure that:
    (i) The sponsors and health insurance program officials have a 
written agreement that requires the health insurance program agency to 
use the eligibility information to seek to enroll children in Medicaid 
and SCHIP; and
    (ii) Parents/guardians are notified that their eligibility 
information may be disclosed to Medicaid or SCHIP and given an 
opportunity to decline to have their children's eligibility information 
disclosed, prior to any disclosure.
    (2) Use of children's free and reduced price meal eligibility 
information by Medicaid/SCHIP. Medicaid and SCHIP agencies and health 
insurance program operators receiving children's free and reduced price 
meal eligibility information must use the information to seek to enroll 
children in Medicaid or SCHIP. The Medicaid and SCHIP enrollment 
process may include targeting and identifying children from low-income 
households who are potentially eligible for Medicaid or SCHIP for the 
purpose of seeking to enroll them in Medicaid or SCHIP. No further 
disclosure of the information may be made. Medicaid and SCHIP agencies 
and health insurance program operators also may verify children's 
eligibility in a program under the Child Nutrition Act of 1966 or the 
Richard B. Russell National School Lunch Act.
    (i) Notifying households of potential uses and disclosures of 
children's free and reduced price meal eligibility information. 
Households must be informed that the information they provide on the 
free and reduced price meal application will be used to determine 
eligibility for free or reduced price meals and that their eligibility 
information may be disclosed to other programs.
    (1) For disclosures to programs, other than Medicaid or the State 
Children's Health Insurance Program (SCHIP), that are permitted access 
to children's eligibility information, without parental/guardian 
consent, the State agency or sponsor, as appropriate, must notify 
parents/guardians at the time of application that their children's free 
or reduced price meal eligibility information may be disclosed. The 
State agency or sponsor, as appropriate, must add substantially the 
following statement to the Privacy Act notice/statement required under 
paragraph (f)(4)(iv) of this section, ``We may share your eligibility 
information with education, health, and nutrition programs to help them 
evaluate, fund, or determine benefits for their programs; auditors for 
program reviews; and law enforcement officials to help them look into 
violations of program rules.'' For children determined eligible for 
free meals through the direct certification, the notice of potential 
disclosure may be included in the document informing parents/guardians 
of their children's eligibility for free meals through direct 
certification.
    (2) For disclosure to Medicaid or SCHIP, the State agency or 
sponsor, as appropriate, must notify parents/guardians that their 
children's free or reduced price meal eligibility information will be 
disclosed to Medicaid and/or SCHIP unless the parent/guardian elects 
not to have their information disclosed and notifies the State agency 
or sponsor, as appropriate, by a date specified by the State agency or 
sponsor, as appropriate. Only the parent or guardian who is a member of 
the household or family for purposes of the free and reduced price meal 
application may decline the disclosure of eligibility information to 
Medicaid or SCHIP. The notification must inform parents/guardians that 
they are not required to consent to the disclosure, that the 
information, if disclosed, will be used to identify eligible children 
and seek to enroll them in Medicaid or SCHIP, and that their decision 
will not affect their children's eligibility for free or reduced price 
meals. The notification

[[Page 10897]]

may be included in the letter/notice to parents/guardians that 
accompanies the free and reduced price meal application, on the 
application itself or in a separate notice provided to parents/
guardians. The notice must give parents/guardians adequate time to 
respond if they do not want their information disclosed. The State 
agency or sponsor, as appropriate, must add substantially the following 
statement to the Privacy Act notice/statement required under paragraph 
(f) of this section, ``We may share your information with Medicaid or 
the State Children's Health Insurance Program, unless you tell us not 
to. The information, if disclosed, will be used to identify eligible 
children and seek to enroll them in Medicaid or SCHIP.'' For children 
determined eligible for free meals through direct certification, the 
notice of potential disclosure and opportunity to decline the 
disclosure may be included in the document informing parents/guardians 
of their children's eligibility for free meals through direct 
certification process.
    (j) Other disclosures. State agencies and sponsors that plan to use 
or disclose information about children eligible for free and reduced 
price meals in ways not specified in this section must obtain written 
consent from children's parents or guardians prior to the use or 
disclosure.
    (1) The consent must identify the information that will be shared 
and how the information will be used.
    (2) There must be a statement informing parents and guardians that 
failing to sign the consent will not affect the child's eligibility for 
free meals and that the individuals or programs receiving the 
information will not share the information with any other entity or 
program.
    (3) Parents/guardians must be permitted to limit the consent only 
to those programs with which they wish to share information.
    (4) The consent statement must be signed and dated by the child's 
parent or guardian who is a member of the household for purposes of the 
free and reduced price meal application.
    (k) Agreements with programs/individuals receiving children's free 
or reduced price meal eligibility information. Agreements or Memoranda 
of Understanding (MOU) are recommended or required as follows:
    (1) The State agency or sponsor, as appropriate, should have a 
written agreement or MOU with programs or individuals receiving 
eligibility information, prior to disclosing children's free and 
reduced price meal eligibility information. The agreement or MOU should 
include information similar to that required for disclosures to 
Medicaid and SCHIP specified in paragraph (k)(2) of this section.
    (2) For disclosures to Medicaid or SCHIP, the State agency or 
sponsor, as appropriate, must have a written agreement with the State 
or local agency or agencies administering Medicaid or SCHIP prior to 
disclosing children's free or reduced price meal eligibility 
information to those agencies. At a minimum, the agreement must:
    (i) Identify the health insurance program or health agency 
receiving children's eligibility information;
    (ii) Describe the information that will be disclosed;
    (iii) Require that the Medicaid or SCHIP agency use the information 
obtained and specify that the information must be used to seek to 
enroll children in Medicaid or SCHIP;
    (iv) Require that the Medicaid or SCHIP agency describe how they 
will use the information obtained;
    (v) Describe how the information will be protected from 
unauthorized uses and disclosures;
    (vi) Describe the penalties for unauthorized disclosure; and
    (vii) Be signed by both the Medicaid or SCHIP program or agency and 
the State agency or sponsor, as appropriate.
    (l) Penalties for unauthorized disclosure or misuse of children's 
free and reduced price meal eligibility information. In accordance with 
section 9(b)(6)(C) of the Richard B. Russell National School Lunch Act 
(42 U.S.C. 1758(b)(6)(C)), any individual who publishes, divulges, 
discloses or makes known in any manner, or to any extent not authorized 
by statute or this section, any information obtained under this section 
will be fined not more than $1,000 or imprisoned for up to 1 year, or 
both.
* * * * *

PART 226--CHILD AND ADULT CARE FOOD PROGRAM

0
1. The authority citation for part 226 continues to read as follows:

    Authority: SECS. 9, 11, 14, 16, and 17, Richard B. Russell 
National School Lunch Act, as amended (42 U.S.C. 1758, 1759a, 1762a, 
1765 and 1766).


0
2. In Sec.  226.2, revise the definition Disclosure in the alphabetical 
list to read as follows:


Sec.  226.2  Definitions.

* * * * *
    Disclosure means reveal or use individual children's program 
eligibility information obtained through the free and reduced price 
meal eligibility process for a purpose other than for the purpose for 
which the information was obtained. The term refers to access, release, 
or transfer of personal data about children by means of print, tape, 
microfilm, microfiche, electronic communication or any other means.
* * * * *

0
3. In Sec.  226.23, revise paragraphs (e)(1)(ii) (F) and (i) and add 
new paragraphs (j) through (n) at the end to read as follows:


Sec.  226.23  Free and reduced-price meals.

* * * * *
    (e)(1) * * *
    (ii) * * *
    (F) A statement that includes substantially the following 
information, ``The Richard B. Russell National School Lunch Act 
requires the information on this application. You do not have to give 
the information, but if you do not, we cannot approve your child for 
free or reduced price meals. You must include the social security 
number of the adult household member who signs the application. The 
social security number is not required when you apply on behalf of a 
foster child or you list a Food Stamp, Temporary Assistance for Needy 
Families (TANF) Program or Food Distribution Program on Indian 
Reservations (FDPIR) case number for your child or other (FDPIR) 
identifier or when you indicate that the adult household member signing 
the application does not have a social security number. We will use 
your information to determine if your child is eligible for free or 
reduced price meals, and for administration and enforcement of the 
Program.'' When the State agency or child care institution, as 
appropriate, plans to use or disclose children's eligibility 
information for non-program purposes, additional information, as 
specified in paragraph (k) of this section, must be added to the 
Privacy Act notice/statement. State agencies and child care 
institutions are responsible for drafting the appropriate notice and 
ensuring that the notice complies with section 7(b) of the Privacy Act 
of 1974 (5 U.S.C. 552a note (Disclosure of Social Security Number)); 
and
* * * * *
    (i) Disclosure of children's free and reduced price meal 
eligibility information to certain programs and individuals without 
parental consent. The State agency or child care institution, as 
appropriate, may disclose aggregate information about children eligible 
for free and reduced price meals to any party without parental 
notification and consent when children cannot be identified through 
release of

[[Page 10898]]

the aggregate data or by means of deduction. Additionally, the State 
agency or institution may disclose information that identifies children 
eligible for free and reduced price meals to the programs and the 
individuals specified in this paragraph (i) without parental/guardian 
consent. The State agency or child care institution that makes the free 
and reduced price meal eligibility determination is responsible for 
deciding whether to disclose program eligibility information.
    (1) Persons authorized to receive eligibility information. Only 
persons directly connected with the administration or enforcement of a 
program or activity listed in paragraphs (i)(2) or (i)(3) of this 
section may have access to children's free milk eligibility 
information, without parental consent. Persons considered directly 
connected with administration or enforcement of a program or activity 
listed in paragraphs (i)(2) or (i)(3) of this section are Federal, 
State, or local program operators responsible for the ongoing operation 
of the program or activity or persons responsible for program 
compliance. Program operators may include persons responsible for 
carrying out program requirements and monitoring, reviewing, auditing, 
or investigating the program. Program operators may include 
contractors, to the extent those persons have a need to know the 
information for program administration or enforcement. Contractors may 
include evaluators, auditors, and others with whom Federal or State 
agencies and program operators contract with to assist in the 
administration or enforcement of their program in their behalf.
    (2) Disclosure of children's names and free or reduced price meal 
eligibility status. The State agency or child care institution, as 
appropriate, may disclose, without parental consent, only children's 
names and eligibility status (whether they are eligible for free meals 
or reduced price meals) to persons directly connected with the 
administration or enforcement of:
    (i) A Federal education program;
    (ii) A State health program or State education program administered 
by the State or local education agency;
    (iii) A Federal, State, or local means-tested nutrition program 
with eligibility standards comparable to the National School Lunch 
Program (i.e., food assistance programs for households with incomes at 
or below 185 percent of the Federal poverty level); or
    (iv) A third party contractor assisting in verification of 
eligibility efforts by contacting households who fail to respond to 
requests for verification of their eligibility.
    (3) Disclosure of all eligibility information. In addition to 
children's names and eligibility status, the State agency or child care 
institution, as appropriate, may disclose, without parental/guardian 
consent, all eligibility information obtained through the free and 
reduced price meal eligibility process (including all information on 
the application or obtained through direct certification) to:
    (i) Persons directly connected with the administration or 
enforcement of programs authorized under the Richard B. Russell 
National School Lunch Act or the Child Nutrition Act of 1966. This 
means that all eligibility information obtained for the Child and Adult 
Care Food Program may be disclosed to persons directly connected with 
administering or enforcing regulations under the National School Lunch 
Program, Special Milk Program, School Breakfast Program, Summer Food 
Service Program, and the Special Supplemental Nutrition Program for 
Women, Infants and Children (WIC) (Parts 210, 215, 220, 225 and 246, 
respectively, of this chapter);
    (ii) The Comptroller General of the United States for purposes of 
audit and examination; and
    (iii) Federal, State, and local law enforcement officials for the 
purpose of investigating any alleged violation of the programs listed 
in paragraphs (i)(2) and (i)(3) of this section.
    (4) Use of free and reduced price meals eligibility information by 
programs other than Medicaid or the State Children's Health Insurance 
Program (SCHIP). State agencies and child care institutions may use 
children's free milk eligibility information for administering or 
enforcing the Child and Adult Care Food Program. Additionally, any 
other Federal, State, or local agency charged with administering or 
enforcing the Child and Adult Care Food Program may use the information 
for that purpose. Individuals and programs to which children's free or 
reduced price meal eligibility information has been disclosed under 
this section may use the information only in the administration or 
enforcement of the receiving program. No further disclosure of the 
information may be made.
    (j) Disclosure of children's free or reduced price meal eligibility 
information to Medicaid and/or SCHIP, unless parents decline. 
Children's free or reduced price meal eligibility information only may 
be disclosed to Medicaid or SCHIP when both the State agency and the 
child care institution so elect, the parent/guardian does not decline 
to have their eligibility information disclosed and the other 
provisions described in paragraph (j)(1) of this section are met. The 
State agency or child care institution, as appropriate, may disclose 
children's names, eligibility status (whether they are eligible for 
free or reduced price meals), and any other eligibility information 
obtained through the free and reduced price meal application or 
obtained through direct certification to persons directly connected 
with the administration of Medicaid or SCHIP. Persons directly 
connected to the administration of Medicaid and SCHIP are State 
employees and persons authorized under Federal and State Medicaid and 
SCHIP requirements to carry out initial processing of Medicaid or SCHIP 
applications or to make eligibility determinations for Medicaid or 
SCHIP.
    (1) The State agency must ensure that:
    (i) The child care institution and health insurance program 
officials have a written agreement that requires the health insurance 
program agency to use the eligibility information to seek to enroll 
children in Medicaid and SCHIP; and
    (ii) Parents/guardians are notified that their eligibility 
information may be disclosed to Medicaid or SCHIP and given an 
opportunity to decline to have their children's eligibility information 
disclosed, prior to any disclosure.
    (2) Use of children's free and reduced price meal eligibility 
information by Medicaid/SCHIP. Medicaid and SCHIP agencies and health 
insurance program operators receiving children's free and reduced price 
meal eligibility information must use the information to seek to enroll 
children in Medicaid or SCHIP. The Medicaid and SCHIP enrollment 
process may include targeting and identifying children from low-income 
households who are potentially eligible for Medicaid or SCHIP for the 
purpose of seeking to enroll them in Medicaid or SCHIP. No further 
disclosure of the information may be made. Medicaid and SCHIP agencies 
and health insurance program operators also may verify children's 
eligibility in a program under the Child Nutrition Act of 1966 or the 
Richard B. Russell National School Lunch Act.
    (k) Notifying households of potential uses and disclosures of 
children's free and reduced price meal eligibility information. 
Households must be informed that the information they provide on the 
free and reduced price meal application will be used to determine 
eligibility for free or reduced price meals and that their eligibility

[[Page 10899]]

information may be disclosed to other programs.
    (1) For disclosures to programs, other than Medicaid or SCHIP, that 
are permitted access to children's eligibility information, without 
parent/guardian consent, the State agency or child care institution, as 
appropriate, must notify parents/guardians at the time of application 
that their children's free or reduced price meal eligibility 
information may be disclosed. The State agency or child care 
institution, as appropriate, must add substantially the following 
statement to the Privacy Act notice/statement required under paragraph 
(e)(1)(ii)(F) of this section, ``We may share your eligibility 
information with education, health, and nutrition programs to help them 
evaluate, fund, or determine benefits for their programs; auditors for 
program reviews; and law enforcement officials to help them look into 
violations of program rules.'' For children determined eligible for 
free meals through direct certification, the notice of potential 
disclosure may be included in the document informing parents/guardians 
of their children's eligibility for free meals through direct 
certification.
    (2) For disclosure to Medicaid or SCHIP, the State agency or child 
care institution, as appropriate, must notify parents/guardians that 
their children's free or reduced price meal eligibility information 
will be disclosed to Medicaid and/or SCHIP unless the parent/guardian 
elects not to have their information disclosed and notifies the State 
agency or child care institution, as appropriate, by a date specified 
by the State agency or child care institution, as appropriate. Only the 
parent or guardian who is a member of the household or family for 
purposes of the free and reduced price meal application may decline the 
disclosure of eligibility information to Medicaid or SCHIP. The 
notification must inform parents/guardians that they are not required 
to consent to the disclosure, that the information, if disclosed, will 
be used to identify eligible children and seek to enroll them in 
Medicaid or SCHIP, and that their decision will not affect their 
children's eligibility for free or reduced price meals. The 
notification may be included in the letter/notice to parents/guardians 
that accompanies the free and reduced price meal application, on the 
application itself or in a separate notice provided to parents/
guardians. The notice must give parents/guardians adequate time to 
respond if they do not want their information disclosed. The State 
agency or child care institution, as appropriate, must add 
substantially the following statement to the Privacy Act notice/
statement required under paragraph (e)(1)(ii)(F) of this section, ``We 
may share your information with Medicaid or the State Children's Health 
Insurance Program, unless you tell us not to. The information, if 
disclosed, will be used to identify eligible children and seek to 
enroll them in Medicaid or SCHIP.'' For children determined eligible 
for free meals through direct certification, the notice of potential 
disclosure and opportunity to decline the disclosure may be included in 
the document informing parents/guardians of their children's 
eligibility for free meals through direct certification process.
    (l) Other disclosures. State agencies and child care institutions 
that plan to use or disclose information about children eligible for 
free and reduced price meals in ways not specified in this section must 
obtain written consent from children's parents or guardians prior to 
the use or disclosure.
    (1) The consent must identify the information that will be shared 
and how the information will be used.
    (2) There must be a statement informing parents and guardians that 
failing to sign the consent will not affect the child's eligibility for 
free or reduced price meals and that the individuals or programs 
receiving the information will not share the information with any other 
entity or program.
    (3) Parents/guardians must be permitted to limit the consent only 
to those programs with which they wish to share information.
    (4) The consent statement must be signed and dated by the child's 
parent or guardian who is a member of the household for purposes of the 
free and reduced price meal application.
    (m) Agreements with programs/individuals receiving children's free 
or reduced price meal eligibility information. Agreements or Memoranda 
of Understanding (MOU) are recommended or required as follows:
    (1) The State agency or child care institution, as appropriate, 
should have a written agreement or MOU with programs or individuals 
receiving eligibility information, prior to disclosing children's free 
and reduced price meal eligibility information. The agreement or MOU 
should include information similar to that required for disclosures to 
Medicaid and SCHIP specified in paragraph (m)(2) of this section.
    (2) For disclosures to Medicaid or SCHIP, the State agency or child 
care institution, as appropriate, must have a written agreement with 
the State or local agency or agencies administering Medicaid or SCHIP 
prior to disclosing children's free or reduced price meal eligibility 
information to those agencies. At a minimum, the agreement must:
    (i) Identify the health insurance program or health agency 
receiving children's eligibility information;
    (ii) Describe the information that will be disclosed;
    (iii) Require that the Medicaid or SCHIP agency use the information 
obtained and specify that the information must be used to seek to 
enroll children in Medicaid or SCHIP;
    (iv) Require that the Medicaid or SCHIP agency describe how they 
will use the information obtained;
    (v) Describe how the information will be protected from 
unauthorized uses and disclosures;
    (vi) Describe the penalties for unauthorized disclosure; and
    (vii) Be signed by both the Medicaid or SCHIP program or agency and 
the State agency or child care institution, as appropriate.
    (n) Penalties for unauthorized disclosure or misuse of children's 
free and reduced price meal eligibility information. In accordance with 
section 9(b)(6)(C) of the Richard B. Russell National School Lunch Act 
(42 U.S.C. 1758(b)(6)(C)), any individual who publishes, divulges, 
discloses or makes known in any manner, or to any extent not authorized 
by statute or this section, any information obtained under this section 
will be fined not more than $1,000 or imprisoned for up to 1 year, or 
both.

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

0
1. The authority citation for Part 245 continues to read as follows:

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


0
2. In Sec.  245.2, revise paragraph (a-3) to read as follows and amend 
paragraph (a-4)(1)(ii) by adding the word ``FDPIR'' between the word 
``other'' and the word ``identifier'':


Sec.  245.2  Definitions.

* * * * *
    (a-3) Disclosure means reveal or use individual children's program 
eligibility information obtained through the free and reduced price 
meal or free milk eligibility process for a purpose other than for the 
purpose for which the information was obtained. The term refers to 
access, release, or transfer of personal data about children by means 
of print, tape, microfilm, microfiche,

[[Page 10900]]

electronic communication or any other means.
* * * * *


Sec.  245.5  [Amended]

0
3. In Sec.  245.5, amend paragraphs (a)(1)(iii) and (a)(1)(iv) by 
removing the references ``Sec.  245.2(a-4)(1)(i)'' and ``Sec.  245.2(a-
4)(1)(ii)'', respectively, and by adding in their place the reference 
``Sec.  245.2(a-4)''.

0
4. In Sec.  245.6:
0
a. Revise paragraph (a)(1);
0
b. Revise paragraph (f) and add new paragraphs (g) through (k) at the 
end.
    The revisions and additions read as follows:


Sec.  245.6  Certification of children for free and reduced price meals 
and free milk.

    (a) * * *
    (1) ``The Richard B. Russell National School Lunch Act requires the 
information on this application. You do not have to give the 
information, but if you do not, we cannot approve your child for free 
or reduced price meals. You must include the social security number of 
the adult household member who signs the application. The social 
security number is not required when you apply on behalf of a foster 
child or you list a Food Stamp, Temporary Assistance for Needy Families 
(TANF) Program or Food Distribution Program on Indian Reservations 
(FDPIR) case number for your child or other FDPIR identifier or when 
you indicate that the adult household member signing the application 
does not have a social security number. We will use your information to 
determine if your child is eligible for free or reduced price meals, 
and for administration and enforcement of the lunch and breakfast 
programs.'' When the State agency or school food authority, as 
appropriate, plans to use or disclose children's eligibility 
information for non-program purposes, additional information, as 
specified in paragraph (h) of this section, must be added to the 
Privacy Act notice/statement. State agencies and school food 
authorities are responsible for drafting the appropriate notice and 
ensuring that the notice complies with section 7(b) of the Privacy Act 
of 1974 (5 U.S.C. 552a note (Disclosure of Social Security Number)).
* * * * *
    (f) Disclosure of children's free and reduced price meal or free 
milk eligibility information to education and certain other programs 
and individuals without parental consent. The State agency or school 
food authority, as appropriate, may disclose aggregate information 
about children eligible for free and reduced price meals or free milk 
to any party without parental notification and consent when children 
cannot be identified through release of the aggregate data or by means 
of deduction. Additionally, the State agency or school food authority 
also may disclose information that identifies children eligible for 
free and reduced price meals or free milk to persons directly connected 
with the administration or enforcement of the programs and the 
individuals specified in this paragraph (f) without parent/guardian 
consent. The State agency or school food authority that makes the free 
and reduced price meal or free milk eligibility determination is 
responsible for deciding whether to disclose children's free and 
reduced price meal or free milk eligibility information.
    (1) Persons authorized to receive eligibility information. Only 
persons directly connected with the administration or enforcement of a 
program or activity listed in paragraphs (f)(2) or (f)(3) of this 
section may have access to children's eligibility information, without 
parental consent. Persons considered directly connected with 
administration or enforcement of a program or activity listed in 
paragraphs (f)(2) or (f)(3) of this section are Federal, State, or 
local program operators responsible for the ongoing operation of the 
program or activity or responsible for program compliance. Program 
operators may include persons responsible for carrying out program 
requirements and monitoring, reviewing, auditing, or investigating the 
program. Program operators may include contractors, to the extent those 
persons have a need to know the information for program administration 
or enforcement. Contractors may include evaluators, auditors, and 
others with whom Federal or State agencies and program operators 
contract with to assist in the administration or enforcement of their 
program in their behalf.
    (2) Disclosure of children's names and eligibility status only. The 
State agency or school food authority, as appropriate, may disclose, 
without parental consent, children's names and eligibility status 
(whether they are eligible for free or reduced price meals or free 
milk) to persons directly connected with the administration or 
enforcement of:
    (i) A Federal education program;
    (ii) A State health program or State education program administered 
by the State or local education agency;
    (iii) A Federal, State, or local means-tested nutrition program 
with eligibility standards comparable to the National School Lunch 
Program (i.e., food assistance programs for households with incomes at 
or below 185 percent of the Federal poverty level); or
    (iv) A third party contractor assisting in verification of 
eligibility efforts by contacting households who fail to respond to 
requests for verification of their eligibility.
    (3) Disclosure of all eligibility information in addition to 
eligibility status. In addition to children's names and eligibility 
status, the State agency or school food authority, as appropriate, may 
disclose, without parental consent, all eligibility information 
obtained through the free and reduced price meals or free milk 
eligibility process (including all information on the application or 
obtained through direct certification) to:
    (i) Persons directly connected with the administration or 
enforcement of programs authorized under the Richard B. Russell 
National School Lunch Act or the Child Nutrition Act of 1966. This 
means that all eligibility information obtained for the National School 
Lunch Program, School Breakfast Program or Special Milk Program may be 
disclosed to persons directly connected with administering or enforcing 
regulations under the National School Lunch or School Breakfast 
Programs (Parts 210 and 220, respectively, of this chapter), Child and 
Adult Care Food Program (Part 226 of this chapter), Summer Food Service 
Program (Part 225 of this chapter) and the Special Supplemental 
Nutrition Program for Women, Infants and Children (WIC) (Part 246 of 
this chapter);
    (ii) The Comptroller General of the United States for purposes of 
audit and examination; and
    (iii) Federal, State, and local law enforcement officials for the 
purpose of investigating any alleged violation of the programs listed 
in paragraphs (g)(3) and (g)(4) of this section.
    (4) Use of free and reduced price meal or free milk eligibility 
information by other programs other than Medicaid or the State 
Children's Health Insurance Program (SCHIP). State agencies and school 
food authorities may use free and reduced price meal or free milk 
eligibility information for administering or enforcing the National 
School Lunch, Special Milk or School Breakfast Programs (Parts 210, 215 
and 220, respectively, of this chapter). Additionally, any other 
Federal, State, or local agency charged with administering or enforcing 
these programs may use the information for that purpose. Individuals 
and programs to which children's free and reduced price meal 
eligibility information has been disclosed under this section may

[[Page 10901]]

use the information only in the administration or enforcement of the 
receiving program. No further disclosure of the information may be 
made.
    (g) Disclosure of children's eligibility information to Medicaid 
and/or SCHIP, unless parents decline. Children's free or reduced price 
meal or free milk eligibility information only may be disclosed to 
Medicaid or SCHIP when both the State agency and the school food 
authority so elect, the parent/guardian does not decline to have their 
eligibility information disclosed and the other provisions described in 
paragraph (i) of this section are met. Provided that both the State 
agency and school food authority opt to allow the disclosure of 
eligibility information to Medicaid and/or SCHIP, the State agency or 
school food authority, as appropriate, may disclose children's names, 
eligibility status (whether they are eligible for free or reduced price 
meals or free milk), and any other eligibility information obtained 
through the free and reduced price meal or free milk application or 
obtained through direct certification to persons directly connected 
with the administration of Medicaid or SCHIP. Persons directly 
connected to the administration of Medicaid and SCHIP are State 
employees and persons authorized under Federal and State Medicaid and 
SCHIP requirements to carry out initial processing of Medicaid or SCHIP 
applications or to make eligibility determinations for Medicaid or 
SCHIP.
    (1) The State agency must ensure that:
    (i) The child care institution and health insurance program 
officials have a written agreement that requires the health insurance 
program agency to use the eligibility information to seek to enroll 
children in Medicaid and SCHIP; and
    (ii) Parents/guardians are notified that their eligibility 
information may be disclosed to Medicaid or SCHIP and given an 
opportunity to decline to have their children's eligibility information 
disclosed, prior to any disclosure.
    (2) Use of children's free and reduced price meal eligibility 
information by Medicaid/SCHIP. Medicaid and SCHIP agencies and health 
insurance program operators receiving children's free and reduced price 
meal or free milk eligibility information may use the information to 
seek to enroll children in Medicaid or SCHIP. The Medicaid and SCHIP 
enrollment process may include targeting and identifying children from 
low-income households who are potentially eligible for Medicaid or 
SCHIP for the purpose of seeking to enroll them in Medicaid or SCHIP. 
No further disclosure of the information may be made. Medicaid and 
SCHIP agencies and health insurance program operators also may verify 
children's eligibility in a program under the Child Nutrition Act of 
1966 or the Richard B. Russell National School Lunch Act.
    (h) Notifying households of potential uses and disclosures of 
children's eligibility information. Households must be informed that 
the information they provide on the free and reduced price meal or free 
milk application will be used to determine eligibility for free and 
reduced price meals or free milk and that eligibility information may 
be disclosed to other programs.
    (1) For disclosures to programs, other than Medicaid or SCHIP, that 
are permitted access to children's eligibility information, without 
parent/guardian consent, the State agency or school food authority, as 
appropriate, must notify parents/guardians at the time of application 
that their children's free and reduced price meal or free milk 
eligibility information may be disclosed. The State agency or school 
food authority, as appropriate, must add substantially the following 
statement to the Privacy Act notice/statement required under paragraph 
(a)(1) of this section, ``We may share your eligibility information 
with education, health, and nutrition programs to help them evaluate, 
fund, or determine benefits for their programs; auditors for program 
reviews; and law enforcement officials to help them look into 
violations of program rules.'' For children determined eligible through 
direct certification, the notice of potential disclosure may be 
included in the document informing parents/guardians of their 
children's eligibility for free meals or free milk through direct 
certification.
    (2) For disclosure to Medicaid or SCHIP, the State agency or school 
food authority, as appropriate, must notify parents/guardians that 
their children's free and reduced price meal or free milk eligibility 
information will be disclosed to Medicaid and/or SCHIP unless the 
parent/guardian elects not to have their information disclosed. 
Additionally, the State agency or school food authority, as 
appropriate, must give parents/guardians an opportunity to elect not to 
have their information disclosed to Medicaid or SCHIP. Only the parent 
or guardian who is a member of the household or family for purposes of 
the free and reduced price meal or free milk application may decline 
the disclosure of eligibility information to Medicaid or SCHIP. The 
notification must inform parents/guardians that they are not required 
to consent to the disclosure, that the information, if disclosed, will 
be used to identify children eligible for and to seek to enroll 
children in a health insurance program, and that their decision will 
not affect their children's eligibility for free and reduced price 
meals or free milk. The notification may be included in the letter/
notice to parents/guardians that accompanies the free and reduced price 
meal or free milk application, on the application itself or in a 
separate notice provided to parents/guardians. The notice must give 
parents/guardians adequate time to respond. The State agency or school 
food authority, as appropriate, must add substantially the following 
statement to the Privacy Act notice/statement required under paragraph 
(a)(1) of this section, ``We may share your information with Medicaid 
or the State Children's Health Insurance Program, unless you tell us 
not to. The information, if disclosed, will be used to identify 
eligible children and seek to enroll them in Medicaid or SCHIP.'' For 
children determined eligible through direct certification, the notice 
of potential disclosure and opportunity to decline the disclosure may 
be included in the document informing parents/guardians of their 
children's eligibility for free meal or free milk through direct 
certification.
    (i) Other disclosures. State agencies and school food authorities 
that plan to use or disclose information about children eligible for 
free or reduced price meals or free milk in ways not specified in this 
section must obtain written consent from the child's parent or guardian 
prior to the use or disclosure. Only a parent or guardian who is a 
member of the child's household for purposes of the free and reduced 
price meal or free milk application may give consent to the disclosure 
of free and reduced price meal eligibility information.
    (1) The consent must identify the information that will be shared 
and how the information will be used.
    (2) The consent statement must be signed and dated by the child's 
parent or guardian who is a member of the household for purposes of the 
free and reduced price meal or free milk application.
    (3) There must be a statement informing parents and guardians that 
failing to sign the consent will not affect the child's eligibility for 
free or reduced price meals or free milk and that the individuals or 
programs receiving the information will not share the information with 
any other entity or program.
    (4) Parents/guardians must be permitted to limit the consent only 
to

[[Page 10902]]

those programs with which they wish to share information.
    (j) Agreements with programs/individuals receiving children's free 
and reduced price meal or free milk eligibility information.
    (1) An agreement with programs or individuals receiving free and 
reduced price meal or free milk eligibility information is recommended 
for programs other than Medicaid or SCHIP. The agreement or MOU should 
include information similar to that required for disclosures to 
Medicaid and SCHIP specified in paragraph (j)(2) of this section.
    (2) The State agency or school food authorities, as appropriate, 
must have a written agreement with the State or local agency or 
agencies administering Medicaid or SCHIP prior to disclosing children's 
free and reduced price meal or free milk eligibility information. At a 
minimum, the agreement must:
    (i) Identify the health insurance program or health agency 
receiving children's eligibility information;
    (ii) Describe the information that will be disclosed;
    (iii) Require that the Medicaid or SCHIP agency use the information 
obtained and specify that the information must be used to seek to 
enroll children in Medicaid or SCHIP;
    (iv) Require that the Medicaid or SCHIP agency describe how they 
will use the information obtained;
    (v) Describe how the information will be protected from 
unauthorized uses and disclosures;
    (vi) Describe the penalties for unauthorized disclosure; and
    (vii) Be signed by both the Medicaid or SCHIP program or agency and 
the State agency or child care institution, as appropriate.
    (k) Penalties for unauthorized disclosure or misuse of information. 
In accordance with section 9(b)(6)(C) of the Richard B. Russell 
National School Lunch Act (42 U.S.C. 1758(b)(6)(C)), any individual who 
publishes, divulges, discloses or makes known in any manner, or to any 
extent not authorized by statute or this section, any information 
obtained under this section will be fined not more than $1,000 or 
imprisoned for up to 1 year, or both.

    Dated: March 1, 2007.
Nancy Montanez Johner,
Under Secretary, Food, Nutrition and Consumer Services.
 [FR Doc. E7-4268 Filed 3-9-07; 8:45 am]
BILLING CODE 3410-30-P