Management of Donated Foods in Child Nutrition Programs, the Nutrition Services Incentive Program, and Charitable Institutions, 33344-33369 [06-5143]

Agencies

• DEPARTMENT OF AGRICULTURE
• Food and Nutrition Service

[Federal Register Volume 71, Number 110 (Thursday, June 8, 2006)]
[Proposed Rules]
[Pages 33344-33369]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 06-5143]



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Part II





Department of Agriculture





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Food and Nutrition Services



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7 CFR Part 250



Management of Donated Foods in Child Nutrition Programs, the Nutrition 
Services Incentive Programs, and Charitable Institutions; Proposed Rule

Federal Register / Vol. 71 , No. 110 / Thursday, June 8, 2006 / 
Proposed Rules

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DEPARTMENT OF AGRICULTURE

Food and Nutrition Service

7 CFR Part 250

RIN 0584-AD45


Management of Donated Foods in Child Nutrition Programs, the 
Nutrition Services Incentive Program, and Charitable Institutions

AGENCY: Food and Nutrition Service, USDA.

ACTION: Proposed rule.

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SUMMARY: This rule proposes to revise and clarify requirements with 
respect to the distribution, management, and use of donated foods in 
the National School Lunch Program and other child nutrition programs, 
the Nutrition Services Incentive Program, and by charitable 
institutions. Most significantly, it would establish specific 
requirements to ensure that school food authorities and other recipient 
agencies in child nutrition programs receive the value of all donated 
foods provided to food service management companies for use in 
providing school lunches and other meals. The latter requirements are 
proposed in response to an audit of the USDA Office of the Inspector 
General; the proposals relating to the Nutrition Services Incentive 
Program result from amendments to the Older Americans Act of 1965. This 
proposed rule would also include amended regulatory provisions using a 
plain language format, including the addition of new subparts, and 
several new sections under those subparts, in order to make them easier 
to understand.

DATES: To be assured of consideration, comments must be received on or 
before August 7, 2006.

ADDRESSES: The Food and Nutrition Service invites interested persons to 
submit comments on this proposed rule. You may submit comments, 
identified by RIN number 0584-AD45, by any of the following methods:
    E-mail: Send comments to Robert.Delorenzo@fns.usda.gov. Include RIN 
number 0584-AD45 in the subject line of the message.
    Fax: Submit comments by facsimile transmission to (703) 305-2420.
    Disk or CD-ROM: Submit comments on disk or CD-ROM to Lillie F. 
Ragan, Assistant Branch Chief, Policy Branch, Food Distribution 
Division, Food and Nutrition Service, U.S. Department of Agriculture, 
Room 500, 3101 Park Center Drive, Alexandria, Virginia 22302-1594.
    Mail: Send comments to Lillie F. Ragan at the above address.
    Hand Delivery or Courier: Deliver comments to the above address.
    Federal eRulemaking Portal: Go to https://www.regulations.gov. 
Follow the online instructions for submitting comments.
    Further information on the submission of comments, or the review of 
comments submitted, may be found under Part III, Procedural Matters, 
under SUPPLEMENTARY INFORMATION.

FOR FURTHER INFORMATION CONTACT: Lillie F. Ragan at the above address 
or telephone (703) 305-2662. A regulatory impact analysis has been 
prepared for this rule. You may request a copy of the analysis by 
contacting us at the above address or by e-mail to 
Robert.Delorenzo@fns.usda.gov.

SUPPLEMENTARY INFORMATION:

I. Background

    The Department of Agriculture's (the Department or USDA) Food and 
Nutrition Service (FNS) provides donated foods to State distributing 
agencies for distribution to recipient agencies such as schools 
participating in the National School Lunch Program (NSLP) and other 
child nutrition programs, elderly nutrition projects that receive 
donated foods under the Nutrition Services Incentive Program (NSIP), 
and charitable institutions and other local nonprofit organizations 
providing nutritional assistance to recipients. This rule proposes to 
amend provisions contained in 7 CFR part 250 to accomplish several 
objectives, including:
     Incorporation of provisions designed to ensure that 
recipient agencies receive the value of donated foods provided to food 
service management companies in contracts with those recipient agencies 
to conduct a meal service;
     Reduction of the paperwork burden associated with the 
distribution of donated foods to charitable institutions and summer 
camps;
     Streamlining of provisions associated with the 
distribution of donated foods to elderly feeding sites in NSIP to 
reflect the transfer of responsibility for the allocation of resources 
in the program from USDA to the Department of Health and Human Services 
(DHHS).
    To meet the objectives, we are proposing minor changes to current 
Sec. Sec.  250.3, 250.12, 250.19, and 250.24, as well as a major 
restructuring of other sections. We propose to remove the current 
subpart E, which includes only Sec.  250.60, which contains addresses 
of FNS Regional Offices from which to obtain further information. This 
information is readily available on the FNS Web site at https://
www.fns.usda.gov/fdd, and from other sources. We propose to restructure 
the current subpart D into three distinct subparts E, F, and G. We 
propose to include under a revised subpart D new sections describing 
the requirements for the use of donated foods under contracts between 
recipient agencies and food service management companies. The new 
sections would replace the current Sec.  250.12(d). We propose to 
include under a new subpart E new sections describing the distribution 
of donated foods in the National School Lunch Program and other child 
nutrition programs--i.e., the Child and Adult Care Food Program (CACFP) 
and the Summer Food Service Program (SFSP). The new sections would 
replace the current Sec. Sec.  250.48, 250.49, and 250.50.
    We propose to add a new subpart F to include the current Sec. Sec.  
250.45, 250.46, 250.47, and 250.51, which describe the distribution of 
donated foods in household programs--i.e., the Commodity Supplemental 
Food Program (CSFP), the Food Distribution Program in the Trust 
Territory of the Pacific Islands, the Food Distribution Program on 
Indian Reservations (FDPIR), and the Special Supplemental Nutrition 
Program for Women, Infants, and Children (WIC). While the content of 
these sections would not change, we would redesignate them as 
Sec. Sec.  250.63, 250.64, 250.65, and 250.66, respectively. We propose 
to add a new subpart G to include the distribution of donated foods to 
other outlets--i.e., charitable institutions, the Nutrition Services 
Incentive Program, and to organizations assisting in situations of 
disasters and distress. Under this new subpart, we would:
     Include current Sec. Sec.  250.40 and 250.41, revised and 
redesignated as Sec.  250.67, to describe the distribution of donated 
foods to charitable institutions and summer camps.
     Include current Sec.  250.42, revised and redesignated as 
Sec.  250.68, to describe the distribution of donated foods in NSIP.
     Include the current Sec. Sec.  250.43 and 250.44 
unchanged, but redesignated as Sec. Sec.  250.69 and 250.70, 
respectively.
    The following table provides a summary of the proposed locations in 
the restructured 7 CFR part 250 for each of the current sections in 
this part.

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       Current CFR structure               Proposed rule structure
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Subpart A, Sec.  Sec.   250.1-250.3  Same.
Subpart B, Sec.  Sec.   250.10-      Same.
 250.24.
Subpart B, Sec.   250.12(d)........  Subpart D, Sec.  Sec.   250.50
                                      through 250.55.
Subpart C, Sec.   250.30...........  Same.
Subpart D, Sec.  Sec.   250.40 and   Subpart G, Sec.   250.67.
 250.41.
Subpart D, Sec.   250.42...........  Subpart G, Sec.   250.68.
Subpart D, Sec.   250.43...........  Subpart G, Sec.   250.69.
Subpart D, Sec.   250.44...........  Subpart G, Sec.   250.70.
Subpart D, Sec.  Sec.   250.45,      Subpart F, Sec.  Sec.   250.63,
 250.46, 250.47.                      250.64, 250.65.
Subpart D, Sec.   250.48...........  Subpart E, Sec.  Sec.   250.56
                                      through 250.60.
Subpart D, Sec.   250.49...........  Subpart E, Sec.   250.61.
Subpart D, Sec.   250.50...........  Subpart E, Sec.   250.62.
Subpart D, Sec.   250.51...........  Subpart F, Sec.   250.66.
Subpart E, Sec.   250.60...........  No longer exists.
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    In new subparts D and E, and in new Sec. Sec.  250.67 and 250.68 in 
new subpart G, we propose to rewrite the regulations using a plain 
language format, including an increase in the number of subparts and 
sections, to make them easier to read and understand for the general 
public. The proposed changes in content and format to 7 CFR part 250 
are discussed in detail below.

II. Discussion of the Rule's Provisions

Definitions, Sec.  250.3

    Due to recent changes in food distribution programs, and use of the 
plain language initiative, we propose to remove, revise, and add 
definitions in Sec.  250.3 to provide program operators and recipients 
with a better understanding of the requirements contained in 7 CFR part 
250.
    We propose to remove the following definitions:
    Nonprofit summer camps for children. This would be replaced by a 
new definition of ``summer camps'', which may be private nonprofit 
organizations or public institutions.
    Nonresidential child or adult care institution. This would be 
replaced by new definitions of ``child care institution'' and ``adult 
care institution'', which, by definition, must be nonresidential. We 
would clarify that such institutions may participate independently in 
CACFP, or under the auspices of a sponsoring organization, in 
accordance with an agreement with the distributing agency.
    Nutrition program for the elderly. This would be replaced by a new 
definition of ``elderly nutrition project'', to more clearly designate 
the organizations eligible to receive donated foods under NSIP, and to 
avoid confusion with the former Nutrition Program for the Elderly.
    Offer-and-acceptance system. We propose to remove this term and to 
more clearly explain the ordering of donated foods and their provision 
to school food authorities in the proposed Sec.  250.58. There is no 
longer a need for State distributing agencies to maintain an offer-and-
acceptance system since, as discussed in detail later in the preamble, 
they are required by the Richard B. Russell National School Lunch Act 
(42 U.S.C. 1751 et seq.) to permit school food authorities to order 
from the complete list of donated foods available.
    Program. This would be replaced by reference to recipient agencies.
    Students in home economics. This is self-explanatory, and is 
applicable only with respect to the use of donated foods by such 
students participating in general home economics instruction, as 
described in the proposed Sec.  250.60.

    We propose to revise the following definitions:
    Charitable institutions. We propose to revise the definition of 
``charitable institutions'' to mean public institutions or nonprofit 
organizations, as defined in this section, that provide a meal service 
on a regular basis to predominantly needy persons in the same place 
without marked changes. The revised definition would reflect changing 
circumstances and provide greater clarity. The volume and variety of 
donated foods purchased under agriculture support programs and made 
available to charitable institutions has decreased significantly in 
recent years, as the capacity of organizations participating in the 
Emergency Food Assistance Program (TEFAP) to utilize such foods has 
increased, and schools participating in NSLP and other child nutrition 
programs have absorbed more of such foods. Therefore, we are proposing 
to narrow the definition from entities that serve at least some needy 
persons to those that serve predominantly needy persons, so that 
limited resources will be better targeted. The vast majority of 
organizations that currently receive donated foods as charitable 
institutions already serve mostly needy persons. We would retain the 
current requirement that charitable institutions be public institutions 
or nonprofit organizations that provide a meal service on a regular 
basis, and operate in the same place without marked changes. Under the 
revised definition, we would include examples of charitable 
institutions, such as emergency shelters, soup kitchens, hospitals, 
retirement homes, elderly nutrition projects; schools, summer camps, 
service institutions, and child and adult care institutions that do not 
participate in a child nutrition program, or as a commodity school, as 
they are defined in this section; and adult correctional institutions 
that conduct rehabilitation programs for a majority of inmates.
    As with charitable institutions, the volume and variety of donated 
foods available to summer camps has decreased significantly in recent 
years. The proposed definition of ``charitable institution'' explicitly 
includes summer camps that do not participate in child nutrition 
programs. A result of this inclusion is that summer camps wanting to 
receive donated foods as charitable institutions must demonstrate that 
they serve predominantly needy children. Thus, the proposed definition 
would narrow eligibility for summer camps as charitable institutions. 
Their eligibility to participate in child nutrition programs would not 
be altered by this proposal.
    The proposed definition would also remove the current requirement 
that charitable institutions be ``non-penal'' and ``non-educational'', 
in order to make the definition consistent with current regulations. In 
accordance with current Sec.  250.41(a)(2), adult correctional 
facilities that conduct rehabilitation programs for a majority of 
inmates are eligible to receive donated foods as charitable 
institutions. Educational institutions such as schools, service 
institutions, and child care institutions

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that do not participate in child nutrition programs are included in the 
current definition of ``charitable institution.''
    Child nutrition program. We would revise this definition to include 
the acronyms of the respective programs.
    Commodity school. We propose to clarify and define ``commodity 
school'' as a school operating a nonprofit food service, in accordance 
with 7 CFR part 210, but that receives additional donated food 
assistance rather than the general cash assistance available to it 
under section 4 of the Richard B. Russell National School Lunch Act (42 
U.S.C. 1753). We propose to include further detail on the provision of 
assistance to such schools in the proposed Sec.  250.57.
    End product. We propose to clarify that an ``end product'' is a 
food product that contains processed donated foods.
    Food service management company. We propose to clarify the current 
definition of ``food service management company'' by stating that a 
food service management company is a commercial enterprise, nonprofit 
organization, or public institution that is, or may be, contracted with 
by a recipient agency, to manage any aspect of a recipient agency's 
food service, in accordance with 7 CFR parts 210, 225, 226, or, with 
respect to charitable institutions, in accordance with this part. To 
the extent that such management includes the use of donated foods, the 
food service management company would be subject to the requirements 
proposed in the new subpart D of this rule. We propose to clarify, 
however, that a school food authority participating in NSLP that 
performs such functions is not considered a food service management 
company. Additionally, we propose to clarify that, in accordance with 
the definition in Sec.  250.3, a commercial enterprise that uses 
donated foods to prepare meals at a commercial facility, or to perform 
other activities that meet the definition of processing in this 
section, is considered a processor, and is subject to the requirements 
for processors in subpart C of 7 CFR part 250. We also make this 
distinction in the proposed Sec.  250.50(a).
    Processing. We propose to revise the current definition of 
``processing'' by restricting it to the currently described activities 
at a commercial facility, by a commercial enterprise, and not at a 
recipient agency facility; and, to specifically include the use of 
donated foods in the preparation of meals at a commercial facility as 
processing. Under the current definition, the use of donated foods to 
prepare meals at a recipient agency facility may be considered 
processing, as explained in the following paragraph.
    Processor. We propose to revise the current definition of 
``processor'' by clarifying that it is a commercial enterprise that 
processes donated foods at a commercial facility. We propose to retain 
the current statement that commercial enterprises that process donated 
foods on-site (i.e., at a recipient agency facility) are not included 
as processors. Under the current definition of ``processor'', recipient 
agencies that prepare meals for one or more other recipient agencies 
are categorized as processors unless they maintain separate records 
accounting for the donated foods that they handle on behalf of other 
recipient agencies. Their categorization as processors, which was 
implemented in a final rule published in the Federal Register on 
December 7, 1994 at 59 FR 62973, was intended to ensure that such 
recipient agencies properly accounted for donated foods, in accordance 
with Federal requirements in place at the time. However, as discussed 
later in the preamble, in a final rule published in the Federal 
Register on October 23, 2002 at 67 FR 65011, such recipient agencies 
were permitted, with the approval of the distributing agency, to 
maintain a single inventory management system, thus making it 
impossible for the recipient agencies to account for the donated foods 
separately from commercially purchased foods. Hence, it would no longer 
be logical or reasonable for regulations to impose the inventory and 
recordkeeping requirements required of processors on such recipient 
agencies. We propose to describe the situation in which a school food 
authority provides donated foods to another school food authority to 
conduct food service activities using donated foods in the proposed 
Sec.  250.60.
    Recipient agencies. We propose to clarify that the definition of 
``recipient agencies'' means agencies or organizations that receive 
donated foods, in accordance with an agreement signed with the 
distributing agency or with another recipient agency.
    Recipients. We propose to revise the definition of ``recipients'' 
to include persons receiving donated foods, or meals containing donated 
foods, provided by recipient agencies. The current definition includes 
only persons receiving donated foods for household consumption.
    Section 311. We propose to revise the definition to reflect 
amendments to the Older Americans Act of 1965 (42 U.S.C. 3030a), which 
now permits State Agencies on Aging to receive all, or part, of their 
NSIP grant as donated foods.
    Service institutions. We propose to clarify by defining ``service 
institutions'' as recipient agencies that participate in SFSP.
    State Agency on Aging. We propose to revise this definition to 
refer to the State agencies and Indian tribal organizations 
administering NSIP.
    We propose to add definitions of Adult care institution, AoA, Bonus 
foods, CACFP, Child care institution, Commodity offer value, DHHS, 
Elderly nutrition project, Entitlement, Entitlement foods, National 
per-meal value, Nonprofit organization, Nonprofit school food service 
account, NSIP, NSLP, Reimbursable meals, SBP, 7 CFR part 3016, 7 CFR 
part 3019, SFSP, Single inventory management, and Summer camp. 
Inclusion of the acronyms would alert the reader to the programs or 
agencies referred to in the regulations. Definitions of Adult care 
institution, Child care institution, and Summer camp would replace 
similar definitions currently included in this section without 
substantial change, as previously indicated.
    Definitions of Bonus foods and Entitlement foods would clearly 
distinguish between those donated foods purchased and provided to 
distributing agencies in addition to legislatively authorized levels of 
assistance, and those donated foods purchased and provided in 
accordance with levels of assistance mandated by program legislation. 
Similarly, Entitlement is the value of donated foods a distributing 
agency is authorized to receive in a specific food distribution or 
child nutrition program, in accordance with program legislation. A 
definition of National per-meal value would help the reader to 
understand the determination of the value of donated foods provided to 
distributing agencies in NSLP and CACFP each year, while Commodity 
offer value describes the minimum value of donated foods that the 
distributing agency must offer to a school food authority in NSLP each 
school year. A definition of Reimbursable meals would further explain 
the per-meal value of donated food assistance in NSLP and other child 
nutrition programs. A definition of Nonprofit school food service 
account would help the reader to understand the role of donated foods 
in the nonprofit school food service.
    Elderly nutrition project categorizes a recipient agency eligible 
to receive donated foods in NSIP, while Nonprofit organization 
clarifies that such an organization must have tax-exempt status under 
the Internal Revenue Code to meet the definition. Additionally, it 
clarifies that a nonprofit organization

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operated exclusively for religious purposes is automatically tax-exempt 
under the Internal Revenue Code.
    A definition of 7 CFR part 3016 would alert the reader to the 
departmental regulations relevant to administrative requirements for 
grants and cooperative agreements with State, local, and Indian tribal 
governments, while a definition of 7 CFR part 3019 would reference 
those regulations with applicability to private non-profit 
organizations, institutions of higher education, and hospitals. A 
definition of Single inventory management would help to describe the 
current option for school food authorities and other recipient agencies 
in the storage and inventory management of donated foods.

Agreements and Contracts, Sec.  250.12

    Section 217 of the Consolidated Appropriations Resolution, 2003 
(Pub. L. 108-7) amended section 311 of the Older Americans Act of 1965 
(42 U.S.C. 3030a) by transferring the responsibility for the allocation 
of resources in NSIP from USDA to DHHS. Under the amended Older 
Americans Act, State Agencies on Aging may still choose to receive all, 
or part, of their NSIP grants in the form of donated foods (rather than 
funds), on behalf of their participating elderly nutrition projects. 
However, USDA is responsible only for the purchase of the foods and 
their delivery to the appropriate State agency. Therefore, we propose 
to amend Sec.  250.12(a) by removing reference to agreements between 
the Department and State Agencies on Aging that elect to receive cash 
in lieu of commodities.
    As mentioned earlier in the preamble, we are proposing to revise 
current requirements associated with food service management company 
contracts to ensure that schools and other recipient agencies that 
participate in child nutrition programs receive the value of donated 
foods used by those commercial enterprises in conducting the food 
service. We propose to include these revised requirements in the new 
subpart D. Therefore, we propose to remove Sec.  250.12(d). We propose 
to remove, without replacement, the current requirements in Sec.  
250.12(d) that, for nonprofit summer camps for children, charitable 
institutions, and nutrition programs for the elderly, a contract with a 
food service management company: (1) May not exceed one year, with an 
option for four additional one-year periods; and, (2) must include the 
provision that it may be terminated for cause by either party upon 30 
days notice. Summer camps and charitable institutions do not receive 
Federal funds for distribution of donated foods or other administrative 
activities. Hence, Federal regulations in 7 CFR part 3019 relating to 
contracts do not apply to them. Additionally, donated foods are only a 
very small part of the food service provided by such recipient 
agencies. Thus, it is unreasonable to require specific provisions in 
their contracts with food service management companies. As indicated 
above, USDA would not oversee the use of donated foods in NSIP, as it 
is now responsible only for procurement and delivery of donated foods 
in the program. Therefore, current contract requirements with food 
service management companies, as well as those proposed in this rule, 
do not apply to donated foods provided in NSIP.
    We also propose to remove Sec.  250.12(e) and (f), as requirements 
relative to storage facility and processor contracts are currently 
addressed in Sec. Sec.  250.14 and 250.30, respectively. As the changes 
proposed above would remove all reference to contract requirements in 
this section, we propose to revise the section heading to Agreements.

Reviews, Sec.  250.19

    We propose to amend the current review requirements for 
distributing agencies in Sec.  250.19(b), primarily as they relate to 
management reviews of elderly nutrition projects, and of food service 
management companies under contract with several types of recipient 
agencies that receive donated foods for use in their food service.
    We propose to amend the introductory text of Sec.  250.19(b)(1) to 
state that the distributing agency must establish review procedures 
encompassing the listed activities as they apply to specific programs. 
For example, the distributing agency would not be expected to establish 
procedures to review donated food inventories for school food 
authorities utilizing a single inventory management system.
    As previously mentioned, under the amended Older Americans Act the 
responsibility for the allocation of resources in NSIP now rests with 
DHHS, and not USDA; hence, program funds are appropriated to DHHS for 
allocation to State Agencies on Aging. USDA is now responsible only for 
the purchase of donated foods for those State Agencies on Aging that 
choose to receive donated foods as part of their NSIP grant, and for 
delivering those foods to State or local agencies. USDA may also 
provide bonus foods to such outlets, although their availability for 
donation has increasingly diminished. Therefore, we propose to remove 
Sec.  250.19(b)(1)(i), which requires on-site reviews of nutrition 
programs for the elderly (i.e., elderly nutrition projects, as proposed 
in this rule) participating in NSIP. Consequently, current Sec.  
250.19(b)(1)(ii), (b)(1)(iii), (b)(1)(iv), and (b)(1)(v), which address 
reviews of charitable institutions, processors, distributing agency 
storage facilities, and food service management companies, would be 
redesignated as Sec.  250.19(b)(1)(i), (b)(1)(ii), (b)(1)(iii), and 
(b)(1)(iv) respectively, but otherwise without change, except as noted 
below.
    We propose to revise the redesignated Sec.  250.19(b)(1)(i) to 
retain the current review requirement for charitable institutions and 
summer camps, and the food service management companies under contract 
with them, in a more streamlined form. The revised language would 
require on-site reviews of charitable institutions (which include 
summer camps), or the food service management companies under contract 
with them, whenever the distributing agency identifies actual or 
probable deficiencies in the use of donated foods by such institutions, 
or by their contractors, through audits, investigations, complaints, or 
any other information.
    We propose to revise the redesignated Sec.  250.19(b)(1)(iv) to 
require the distributing agency to conduct an on-site review of 
recipient agencies in NSLP, CACFP, and SFSP, to ensure compliance with 
the requirements for the use of donated foods in contracts with food 
service management companies. We propose to require such a review at a 
frequency established in 7 CFR parts 210, 225, or 226, as applicable, 
for the State administering agency, in the conduct of its reviews. 
Lastly, we propose to permit the distributing agency to enter into an 
agreement with the appropriate State administering agency to include 
its review as part of the State administering agency's review. An 
integrated review of all aspects of the food service operation has the 
potential to be more effective and efficient than piecemeal reviews by 
two separate agencies.
    We propose to remove Sec.  250.19(d), which requires the monitoring 
of cash disbursements to nutrition programs for the elderly by State 
Agencies on Aging to ensure purchase of only U.S. agricultural 
products. Under the amended Older Americans Act, this responsibility 
now rests with DHHS.

Distributing Agency Performance Standards, Sec.  250.24

    As discussed in detail later in the preamble, we propose to revise 
current regulatory provisions associated with

[[Page 33348]]

the ordering of donated foods and their distribution to school food 
authorities in the proposed Sec.  250.58. In conjunction with these 
proposals, we are also proposing here to revise current distributing 
agency performance standards in Sec.  250.24(d) relating to these 
areas. We propose to consolidate the content of Sec.  250.24(d)(8) and 
(d)(10) in a revised Sec.  250.24(d)(8) to state that distributing 
agencies are responsible for providing recipient agencies with ordering 
options and commodity values, and considering the specific needs and 
capabilities of such agencies in ordering donated foods. We propose to 
revise Sec.  250.24(d)(9) to state that distributing agencies are 
responsible for offering school food authorities participating in NSLP, 
at a minimum, the commodity offer value of donated food assistance, and 
for determining an adjusted assistance level in consultation with 
school food authorities, as appropriate, in accordance with the 
proposed Sec.  250.58. We propose to include a new Sec.  250.24(d)(10) 
to state that distributing agencies are responsible for providing each 
school food authority in NSLP with the opportunity to order, or select, 
donated foods from the full list of available foods, and to distribute 
the selected donated foods to each school food authority, to the extent 
that distribution of such foods to, and within, the State would be 
cost-effective, in accordance with the proposed Sec.  250.58.

Subpart D--Donated Foods in Contracts With Food Service Management 
Companies

    Over the last 10-15 years, school food authorities have 
increasingly entered into contracts with food service management 
companies to provide the school meals and to conduct other food service 
activities. As cited in the Department's Office of Inspector General 
(OIG) audit referenced below, 905 school food authorities participating 
in NSLP contracted with a food service management company in school 
year 1991, while in school year 2000, 1,648 school food authorities had 
such contracts. In providing the school meals, food service management 
companies may use the donated foods provided to school food 
authorities.
    Currently, in Sec.  250.12(d), a contract between a recipient 
agency and a food service management company must ensure that donated 
foods provided to the food service management company are used solely 
for the benefit of the recipient agency's food service. Additionally, 
the recipient agency must demonstrate that the full value of the 
donated foods is utilized for its benefit. However, the regulations do 
not require that the contract indicate what actions must be taken to 
ensure that donated foods benefit the recipient agency, or how the 
recipient agency is to demonstrate that the full donated food value has 
been received.
    In April 2002, OIG conducted an audit (27601-0027-CH) of 
several school food authorities under contract with food service 
management companies. The OIG found that, for contracts in which the 
food service management company charges a fixed price per meal, school 
food authorities did not always receive the full value of the donated 
foods provided for use in the school food service. The OIG found this 
to result, in part, from the lack of specific instructions in Federal 
regulations regarding the means by which the contract with the food 
service management company must incorporate requirements that ensure 
school food authorities receive the full value of the donated foods. To 
correct this, the OIG recommended that, for fixed-price contracts, the 
donated food value be deducted on monthly invoices. The OIG also 
recommended that bid documents to procure food service management 
company services reflect that this type of crediting is required.
    In the absence of specific regulatory requirements, school food 
authorities have developed different means to ensure that they receive 
the benefit of the donated foods provided by the Department. Some 
school food authorities require the food service management company to 
credit them for the value of donated foods used in the food service 
through reductions on monthly invoices or other means. However, food 
service management companies have not always used and credited donated 
foods in an expeditious or accurate manner. Some school food 
authorities may ensure the receipt of the donated food benefit through 
a review of production or inventory records, or a review of menu plans 
or the meals served. Other school food authorities allow the food 
service management company to ``pre-credit'' for donated foods in the 
contracted fixed price per meal. Under a pre-credit method, the value 
of donated foods is deducted from the cost of the food service upfront, 
at the per-meal value of donated food assistance established for that 
school year. However, the full amount of donated foods received by the 
school food authority is often not established until later in the year, 
for several reasons. For example, initial donated food entitlements are 
based on preliminary meal counts that are adjusted when final meal 
counts become available later in the year. Additionally, the bonus 
foods that are to be provided are generally not known at the beginning 
of the school year. Furthermore, donated food assistance in NSLP is 
sometimes augmented to ensure, in accordance with section 6(e) of the 
National School Lunch Act (42 U.S.C. 1755), that the total amount of 
such assistance equals at least 12 per cent of the total assistance 
provided under sections 4, 6, and 11 of that Act. Hence, unless end-of-
year adjustments are made, a pre-crediting system would not include 
crediting for all donated foods received in a school year.
    In its response to the OIG recommendation, FNS agreed that Federal 
regulations must be revised to include specific requirements to ensure 
that school food authorities receive the full benefit of the donated 
foods provided in NSLP. However, before developing specific regulatory 
proposals, FNS indicated that it would seek input from State 
distributing agencies, school food authorities, food service management 
companies, and industry consultants. On October 24, 2002, FNS conducted 
a public meeting at its headquarters office in Alexandria, Virginia to 
allow interested parties the opportunity for dialogue. In advance of 
the meeting, FNS presented the OIG recommendations for regulatory 
revision in a notice published in the Federal Register on October 8, 
2002 at 67 FR 62683. The meeting was attended by several food service 
management companies and a number of industry consultants, as well as a 
few State distributing agency directors or staff members. Some of the 
issues or concerns expressed at this meeting include the following:
     Food service management companies do not always receive 
donated foods that are easily utilized in the food service.
     Food service management companies are sometimes able to 
purchase foods on the commercial market for a lower price than the 
price the Department paid for the same, or similar, food.
     In the absence of standard contract language, school food 
authorities are not sure what provisions relating to donated foods must 
be included in a contract with a food service management company.
     The uncertainty of donated food availability or deliveries 
presents difficulties in utilization of donated foods, and may result 
in an increase in the price charged by food service management 
companies for the food service.

[[Page 33349]]

    We propose to address the concerns raised in the OIG audit by 
proposing specific requirements to ensure that recipient agencies in 
child nutrition programs receive the value of all donated foods 
provided to food service management companies with which they have 
contracts, in a new subpart D, which is discussed below. As mentioned 
previously, this new subpart would replace the current Sec.  250.12(d). 
Subpart D would contain the following 6 new sections:

Sec.  250.50, Food service management companies.
Sec.  250.51, Contracts and procurement.
Sec.  250.52, Crediting for, and use of, donated foods.
Sec.  250.53, Storage and inventory management of donated foods.
Sec.  250.54, Contract provisions.
Sec.  250.55, Recordkeeping and reviews.

Food Service Management Companies, Sec.  250.50

    In the new Sec.  250.50(a), we propose to clarify that, in 
accordance with the definition in Sec.  250.3, as we are proposing to 
revise it in this rule, a food service management company is a 
commercial enterprise, nonprofit organization, or public institution 
that is, or may be, contracted with by a recipient agency to manage any 
aspect of a recipient agency's food service, in accordance 7 CFR parts 
210, 225, or 226, or, with respect to charitable institutions, in 
accordance with 7 CFR part 250. We propose to require that, to the 
extent that such management includes the use of donated foods, the food 
service management company is subject to the applicable requirements 
proposed in this subpart. We propose to clarify, however, that a school 
food authority participating in NSLP that performs such functions is 
not considered a food service management company. We also propose to 
indicate, for the sake of clarity, that a commercial enterprise that 
uses donated foods to prepare meals at a commercial facility, or to 
perform other activities that meet the definition of processing in 
Sec.  250.3, is considered a processor in this part, and is subject to 
the requirements in subpart C of 7 CFR part 250, rather than the 
requirements of this proposed subpart.
    In Sec.  250.50(b), we propose to indicate the food service 
activities using donated foods that a food service management company 
is permitted to perform, in accordance with its contract. We propose to 
permit a food service management company to perform the following 
activities:
    (1) Preparing and serving meals;
    (2) Ordering or selection of donated foods, in coordination with 
the recipient agency, and in accordance with Sec.  250.58(c);
    (3) Storage and inventory management of donated foods, in 
accordance with the proposed Sec.  250.53;
    (4) Payment of processing fees or costs on behalf of the recipient 
agency, in accordance with the requirements in the proposed Sec.  
250.52(e); and
    (5) Submittal of refund applications to the processor, and the 
remittance of refunds to the recipient agency, for donated foods 
contained in processed end products, in accordance with the current 
Sec.  250.30(k).
    All of these activities are currently performed by some food 
service management companies. Their performance helps school food 
authorities and other recipient agencies to conduct the food service in 
the most cost-efficient manner. However, we propose to clarify that, in 
ordering or selecting donated foods for use in preparing meals, the 
food service management company must coordinate with the recipient 
agency, in accordance with the proposed requirements in Sec.  
250.58(c).

Contracts and Procurement, Sec.  250.51

    In the new Sec.  250.51(a), we propose to require that, prior to 
donated foods being made available to a food service management 
company, a recipient agency must enter into a written contract with a 
food service management company to allow it to perform food service 
activities, including the use of donated foods. We propose to require 
that the contract ensure that all donated foods received by the 
recipient agency for use in its food service in a school year or a 
fiscal year, as applicable, be used to benefit the recipient agency's 
food service. We propose to require that recipient agencies in child 
nutrition programs (i.e., NSLP and commodity schools, CACFP, SFSP, and 
SBP) meet additional requirements in this subpart, as discussed below, 
and also indicate that such recipient agencies must comply with Federal 
regulations in 7 CFR parts 210, 220, 225, and 226, (which concern, 
respectively, NSLP, SBP, SFSP, and CACFP), and 7 CFR parts 3016 or 3019 
(the Department's regulations establishing administrative requirements 
for grants to governmental entities and nonprofit organizations, 
respectively), as applicable, in the procurement of such contracts.
    In Sec.  250.51(b), we propose to indicate that recipient agencies 
may enter into a fixed-price or a cost-reimbursable contract with food 
service management companies, except that recipient agencies in CACFP 
are prohibited from entering into cost-reimbursable contracts, in 
accordance with 7 CFR part 226. Under a fixed-price contract, the 
recipient agency pays a fixed cost per meal provided or a fixed cost 
for a certain time period. Under a cost-reimbursable contract, the food 
service management company charges the recipient agency for food 
service operating costs, and also charges fixed fees for management or 
services. We include a reference to the FNS guidance entitled 
``Contracting with Food Service Management Companies: Guidance for 
School Food Authorities'', which contains more detail on the 
distinguishing characteristics of the two allowable types of contracts, 
as well as their procurement.
    In Sec.  250.51(c), we propose to indicate that recipient agencies 
in child nutrition programs must adhere to the Federal regulations 
referenced above in the procurement of food service management 
companies. We also state that the required contract provisions proposed 
in Sec.  250.54 of this rule must also be included in the contract 
solicitation documents, as required in 7 CFR parts 3016 and 3019. Such 
provisions include the method used to determine the donated food values 
to be used in crediting, or the actual values assigned, in accordance 
with the proposed Sec.  250.52. The method used to determine the 
donated food values cannot be established through a post-award 
negotiation, or by another method that may directly or indirectly alter 
the terms and conditions of the solicitation or contract.
    In Sec.  250.51(d), we propose to prohibit a food service 
management company from entering into a contract or agreement with a 
processor to process donated foods or end products for use in the 
recipient agency's food service. In accordance with Sec.  250.30, 
processing of donated foods must take place under a contract or 
agreement between a processor and the distributing or recipient agency, 
in order to ensure that the requirements in that section are met.

Crediting for, and Use of, Donated Foods, Sec.  250.52

    In the new Sec.  250.52, we propose to describe how the recipient 
agency must ensure that it receives the value of donated foods in the 
meal service provided. In Sec.  250.52(a), we propose to state that, in 
both fixed-price and cost-reimbursable contracts, the recipient agency 
must require the food service management company to credit it for the 
value of all donated foods received for use in the recipient agency's 
food

[[Page 33350]]

service in a school year or fiscal year (including both entitlement and 
bonus foods). We propose to require that crediting be performed through 
invoice reductions, refunds, discounts, or by another means of 
crediting.
    The above proposals would permit the use of pre-crediting for 
donated foods in fixed-price contracts. If provided for in the contract 
between a recipient agency and food service management company, the 
recipient agency may permit the food service management company to 
deduct the value of donated foods from the established fixed price per 
meal. However, as noted previously in this preamble, the use of pre-
crediting has not always resulted in crediting of recipient agencies 
for all donated foods received for the school or fiscal year. This has 
resulted because availability of some donated foods is not established 
until later in the year. Hence, we propose to clarify that the 
recipient agency must require the food service management company to 
provide an additional credit for the value of any donated foods not 
accounted for in the fixed-price per meal. Additionally, we propose to 
clarify that, in cost-reimbursable contracts, crediting may be 
performed by disclosure: i.e., the food service management company may 
indicate the value of donated foods credited for the period in which it 
bills the recipient agency for food costs.
    To ensure that the food service management company credits the 
recipient agency for all donated foods received in the school or fiscal 
year, in the new Sec.  250.55(c) we are proposing to require that the 
recipient agency conduct a reconciliation of such crediting at least 
annually in its review of food service management company activities. 
In Sec.  250.52(a), we also propose to require that all forms of 
crediting, including pre-crediting, provide clear documentation of the 
value received from donated foods. For example, in crediting by invoice 
reductions, the value of donated foods must be included as separate 
line item entries on invoices.
    In Sec.  250.52(b), we propose to require that crediting be 
performed not less frequently than annually, and that such frequency be 
determined by the recipient agency. The frequency must be provided for 
in the contract between the recipient agency and the food service 
management company. For example, a food service management company that 
billed a school food authority for all meals provided in a quarter 
could include a reduction on the invoice for the value of all donated 
foods received by the school food authority in that quarter. Or, as 
another example, the food service management company may simply provide 
a refund at the end of the school year for the value of all donated 
foods received by the school food authority for that year. In 
determining the frequency of crediting, the recipient agency must 
ensure that the specified method of valuation of donated foods, as 
described in the following paragraphs, permits crediting to be achieved 
in the time period established. Additionally, a school food authority 
must ensure that the method, and timing, of crediting does not cause 
its cash resources to exceed the limits established in 7 CFR 
210.9(b)(2).
    In Sec.  250.52(c), we propose to establish the donated food values 
that must be used in crediting. We propose to require that the 
recipient agency ensure that the food service management company uses 
the donated food values determined by the distributing agency, in 
accordance with the proposed Sec.  250.58(g), or, if approved by the 
distributing agency, donated food values determined by an alternate 
means of the recipient agency's choosing. For example, the recipient 
agency may, with the approval of the distributing agency, specify that 
the value will be the average price per pound for a food, or for a 
group or category of foods (e.g., all frozen foods or cereal products), 
as listed in market journals over a specified period of time. This 
flexibility in valuing donated foods for the purpose of crediting would 
help to ensure that donated foods always provide a good value to the 
recipient agency, when compared, for example, to the cost of the same, 
or similar, foods in the commercial market.
    In Sec.  250.52(d), we propose to clarify that the actual donated 
food values are not required to be included in the solicitation and 
contract, but that the method of determining the donated food values to 
be used in crediting must be included in the solicitation and contract. 
For example, the solicitation and contract may stipulate that the 
average USDA purchase price for purchases made during the duration of 
the contract with the food vendor will be utilized, or the average 
price per pound listed in market journals over a specified period of 
time. Although the actual donated food values may also be included, the 
donated foods that a recipient agency will receive often are not known 
until after the procurement has taken place. However, we propose to 
require that the method of valuation specified must result in the 
determination of actual values, and may not permit any negotiation of 
such values. Additionally, we propose to state that the method of 
valuation must ensure that crediting may be achieved in accordance with 
the time frame established in the solicitation and contract (e.g., 
quarterly or annually).
    In Sec.  250.52(e), we propose to indicate that the food service 
management company is not required to credit the recipient agency for 
donated foods contained in processed end products. In accordance with 
current Sec.  250.30, the processor must credit the recipient agency 
for donated foods contained in end products through a discount or 
refund sales system, or charge the recipient agency a fee-for-service 
to produce the end product, either directly or through a distributor. 
However, as indicated in proposed Sec.  250.50(c), the food service 
management company, under its contract with the recipient agency, may 
be responsible for the payment of processing costs on behalf of the 
recipient agency, or the submittal of refund applications and 
remittance of refunds for donated foods contained in processed end 
products. In order to ensure that the recipient agency is credited for 
donated foods in such cases, we propose to require the recipient agency 
to ensure that the food service management company:
    (1) Bills the recipient agency separately for processing costs, and 
not include these costs in a fixed-price charge for the food service; 
and
    (2) Submits refund applications to processors, in accordance with 
the requirements in Sec.  250.30(k), and remits refunds to the 
recipient agency in an expeditious manner.
    In Sec.  250.52(f), we propose to indicate that, with certain 
exceptions, as listed below, the food service management company is not 
required to use the donated foods received, or a commercial substitute 
of the same generic identity, in the recipient agency's meal service, 
unless the contract specifically stipulates that such foods must be 
used. However, the food service management company must ensure that:
    (1) Donated ground beef and ground pork products, and all end 
products received from processors, are used in the recipient agency's 
meal service, for the benefit of eligible program recipients; and,
    (2) If menu plans include foods of the same generic identity as the 
donated foods received, then such donated foods, or commercially 
purchased foods of the same generic identity, of U.S. origin, and 
identical or superior in quality, must be used in the recipient 
agency's food service.
    The proposals described above would provide the recipient agency 
and its contractor with the flexibility needed to integrate donated 
foods into the food

[[Page 33351]]

service with minimal time and effort. Hence, as long as the food 
service management company credits the recipient agency for the donated 
foods, it would not be obligated to use those foods in the food 
service, with the following exceptions. Since USDA specifications for 
ground beef and ground pork include more stringent requirements for 
grading and testing for microbial pathogens than such products produced 
for the commercial market, we want to ensure that these donated foods 
are used in the recipient agency's food service. For the same reason, 
processors are currently prohibited from substituting commercial beef 
and pork for donated beef and pork. Additionally, since recipient 
agencies provide donated foods to processors for processing into 
specific end products in accordance with processing agreements or 
contracts, they must be assured of receiving those end products for use 
in their food service. Lastly, if menu plans include foods of the same 
generic identity as the donated foods received, then such donated 
foods, or commercially purchased foods of the same generic identity, of 
U.S. origin, and identical or superior in quality to the donated foods, 
must be used in the food service. For example, we would not want 
commercial canned corn of Grade B quality to be included in meals in 
place of the donated canned corn of Grade A quality that the recipient 
agency has received.
    In Sec.  250.52(g), we propose to require that, when a contract 
terminates, and is not extended, the food service management company 
must return any unused donated ground beef and ground pork products, 
and end products received from processors, to the recipient agency. 
This proposal is in accordance with the requirement that these foods 
must be used in the recipient agency's food service, for the reasons 
indicated above. We propose to state that the food service management 
company must, at the discretion of the recipient agency, return other 
donated foods for which the recipient agency has not been credited, or 
pay the recipient agency the value of such donated foods.

Storage and Inventory Management of Donated Foods, Sec.  250.53

    In the new Sec.  250.53, we propose to include requirements for 
food service management companies to follow in the storage and 
inventory management of donated foods. In Sec.  250.53(a), we propose 
to include the requirement that food service management companies must 
meet the general requirements in Sec.  250.14 for the storage and 
inventory management of donated foods.
    In Sec.  250.53(b), we propose to allow the food service management 
company to store and inventory donated foods together with commercially 
purchased foods--i.e., utilize a single inventory management system, as 
defined in this part--if allowed in its contract with the recipient 
agency. The use of single inventory management would reduce the time 
and effort required of food service management companies in the 
management and use of donated foods, and could result in reduced costs 
to schools. However, the food service management company must ensure 
that donated ground beef and ground pork products, and end products 
received from processors, are stored in a manner that assures they will 
be used in the recipient agency's food service.
    We would also include a statement that, in cost-reimbursable 
contracts, the food service management company must ensure that its 
system of inventory management does not result in the recipient agency 
being charged for donated foods. Under such contracts, the food service 
management company often charges the recipient agency for food costs by 
measuring changes in its inventory records, which, under single 
inventory management, may result in a charge for donated foods in its 
billings for food costs. The food service management company may 
prevent this by checking inventory records against its actual costs for 
food purchases, or by differentiating between donated foods and end 
products, and commercially purchased foods, in its inventory records.

Contract Provisions, Sec.  250.54

    In the new Sec.  250.54, we propose to require specific contract 
provisions relating to donated foods in fixed-price and cost-
reimbursable contracts. We would stipulate, again, that such provisions 
must also be included in the contract solicitation documents. In Sec.  
250.54(a), we propose to require the following provisions in fixed-
price contracts:
    (1) A statement that the food service management company will 
credit the recipient agency for all donated foods received for use in 
the recipient agency's food service in the school year or fiscal year, 
as applicable.
    (2) The method and frequency by which crediting will occur--e.g., 
through invoice reductions, refunds, discounts, or other means of 
crediting--and the means of documentation to be utilized to verify that 
that the value of all donated foods has been credited.
    (3) The method of determining the donated food values to be used in 
crediting, in accordance with Sec.  250.52(c), or the actual donated 
food values;
    (4) If applicable, a statement that the food service management 
company will ensure that the recipient agency receives the full benefit 
of all refunds and discounts received from processors and distributors 
for processed end products, and will not charge the recipient agency 
for processing costs paid on its behalf as part of a fixed-price charge 
for the food service.
    (5) Any activities relating to donated foods that the food service 
management company will be responsible for, such as the payment of 
processing fees, or the remittance of refunds to the recipient agency 
for donated foods contained in processed end products.
    (6) A statement that donated ground beef and ground pork products, 
and all end products received from processors, will be used in the food 
service, and will not be substituted with commercial products.
    (7) A statement that, if menu plans include foods of the same 
generic identity as donated foods received, then those donated foods, 
or commercially purchased foods of the same generic identity, of U.S. 
origin, and identical or superior in quality to the donated foods, will 
be used.
    (8) An assurance that the food service management company will use 
donated foods in accordance with the requirements in 7 CFR part 250.
    (9) An assurance that the food service management company will not 
enter into a contract or agreement with a processor to process donated 
foods or end products for use in the recipient agency's food service.
    (10) A statement that the distributing agency, subdistributing 
agency, or recipient agency, the Comptroller General, the Department of 
Agriculture, or their duly authorized representatives, may perform on-
site reviews of the food service management company's food service 
operation to ensure that all activities relating to donated foods are 
performed in accordance with the requirements in 7 CFR part 250.
    (11) A statement that the food service management company will 
maintain records to document that crediting for all donated foods 
received for the school year or fiscal year, as applicable, has been 
achieved, and will meet other recordkeeping requirements in 7 CFR part 
250; and
    (12) A statement that extensions or renewals of the contract, if 
applicable, are contingent upon the fulfillment of all contract 
provisions relating to donated foods.
    In Sec.  250.54(b), we propose to require the same provisions in 
cost-

[[Page 33352]]

reimbursable contracts as those listed in paragraph (a) of new Sec.  
250.54, but to propose, in addition, that the food service management 
company assure that its system of inventory management will not result 
in the recipient agency being charged for donated foods.

Recordkeeping and Reviews, Sec.  250.55

    In the new Sec.  250.55, we propose to include the recordkeeping 
and review requirements for distributing and recipient agencies in 
contracts with food service management companies, to ensure that the 
use and management of donated foods is in accordance with the 
requirements of this part. In Sec.  250.55(a), we propose to require 
that the recipient agency maintain the following records:
    (1) The donated foods and end products received and provided to the 
food service management company for use in the food service.
    (2) Crediting for donated foods by the food service management 
company, including documentation verifying that the full donated food 
value has been credited.
    (3) The donated food values used in crediting.
    In Sec.  250.55(b), we propose to require that the food service 
management company maintain the following records:
    (1) The donated foods and end products received from, or on behalf 
of, the recipient agency, for use in its food service.
    (2) Documentation that all donated foods received for use in the 
recipient agency's food service have been credited.
    In Sec.  250.55(c), we propose to require that the recipient agency 
include a review of food service management company activities relating 
to the use and management of donated foods as part of its monitoring of 
the food service operation required in 7 CFR parts 210, 220, 225, or 
226, as applicable. We also propose to require that the recipient 
agency conduct a reconciliation of the food service management 
company's crediting for donated foods at least annually to ensure that 
it has received credit for all donated foods received in the school 
year.
    In Sec.  250.55(d), we propose to require that the distributing 
agency conduct an on-site review of the recipient agency's use of 
donated foods in its food service in contracts with food service 
management companies, in accordance with the management reviews 
required in Sec.  250.19(b)(1), as we propose to revise it in this 
rule. In accordance with the proposed Sec.  250.19(b)(1)(iv), the 
distributing agency would be permitted to enter into an agreement with 
the State administering agency (if a different agency) for NSLP, SFSP, 
or CACFP, to include its review as part of the administrative review 
required of the State administering agency in 7 CFR parts 210, 225, or 
226, as applicable.
    Lastly, in Sec.  250.55(e), we propose to state that USDA may 
conduct reviews of food service management company operations with 
respect to the use and management of donated foods, to ensure 
compliance with the requirements of this part.

Subpart E--National School Lunch Program (NSLP) and Other Child 
Nutrition Programs

    As described earlier in the preamble, we propose to provide a 
clearer, more comprehensive, description of the requirements relating 
to donated foods in NSLP and other child nutrition programs in a new 
subpart E, which is described below. This new subpart would include 
seven new sections, which would replace the current Sec. Sec.  250.48, 
250.49, and 250.50. The new sections under subpart E would include the 
following:

Sec.  250.56, Provision of donated foods in NSLP.
Sec.  250.57, Commodity schools.
Sec.  250.58, Ordering donated foods and their provision to school food 
authorities.
Sec.  250.59, Storage and inventory management of donated foods.
Sec.  250.60, Use of donated foods in the school food service.
Sec.  250.61, Child and Adult Care Food Program (CACFP).
Sec.  250.62, Summer Food Service Program (SFSP).

Provision of Donated Foods in NSLP, Sec.  250.56

    In the new Sec.  250.56, we propose to describe the basis for 
providing donated foods for use in NSLP, and for determining the types 
and amounts provided. In Sec.  250.56(a), we propose to include the 
current regulatory provisions regarding the distribution of donated 
foods to distributing agencies, which provide them to school food 
authorities that participate in NSLP. The distributing agency must 
confirm the participation of school food authorities in NSLP with the 
State education agency (if different from the distributing agency). We 
would also indicate that, in addition to the requirements of this part 
relating to donated foods, distributing agencies, subdistr