Verification of Eligibility for Free and Reduced Price Meals in the National School Lunch and School Breakfast Programs, 76847-76863 [E8-29904]

Agencies

• DEPARTMENT OF AGRICULTURE
• Food and Nutrition Service

[Federal Register Volume 73, Number 244 (Thursday, December 18, 2008)]
[Rules and Regulations]
[Pages 76847-76863]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E8-29904]


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DEPARTMENT OF AGRICULTURE

Food and Nutrition Service

7 CFR Parts 210 and 245

[FNS-2007-0024]
RIN 0584-AD61


Verification of Eligibility for Free and Reduced Price Meals in 
the National School Lunch and School Breakfast Programs

AGENCY: Food and Nutrition Service, USDA.

ACTION: Interim rule.

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SUMMARY: This interim rule implements provisions of the Child Nutrition 
and WIC Reauthorization Act of 2004 relating to verification of 
applications approved for free or reduced price meals in the National 
School Lunch Program and the School Breakfast Program. This interim 
rule includes changes to sample sizes for local education agencies 
(school districts) when conducting verification which include 
alternatives when there is an increase in the number

[[Page 76848]]

of responses to the requests for verification; direct verification 
provisions which allow the local educational agency to contact means-
tested programs to verify the information on applications without 
contacting the applicant household for documentation; and revised 
deadlines for completion of verification efforts. This interim rule 
also establishes a standard sample size of three percent for local 
educational agencies that do not qualify for use of an alternative 
sample size. The direct verification provision will reduce the number 
of households that must be contacted to submit documentation. This 
interim rule incorporates other statutory changes designed to assist 
households in completing the verification process. These changes 
require the local educational agency to have a telephone number that 
households may call, without charge, for questions about verification. 
The local educational agency must also make at least one attempt to 
follow-up with households selected for verification prior to denying 
benefits when the household fails to respond. There is also a provision 
that gives local education agencies the discretion to replace selected 
applications when households are deemed unlikely to respond to the 
verification request. These are safeguards to avoid termination of a 
child's benefits due to misunderstandings or other difficulties that 
may preclude households from effectively complying with the 
verification request. The changes made in this interim rule are 
intended to enhance verification efforts which will improve the 
accuracy of benefit distribution.

DATES: Effective date: This rule is effective February 17, 2009.
    Comment dates: Comments on Rule Provisions: Mailed comments on the 
provisions in this rule must be postmarked on or before March 18, 2009; 
e-mailed or faxed comments must be submitted by 11:59 p.m. March 18, 
2009; and hand-delivered comments must be received by 5 p.m. March 18, 
2009.
    Comments on Paperwork Reduction Act Requirements: Comments on the 
information collection requirements associated with this rule must be 
received by January 20, 2009.

ADDRESSES: The Food and Nutrition Service invites interested persons to 
submit comments on this interim rule. Since comments are being accepted 
simultaneously on several rulemakings, please include the title 
(Verification of Eligibility for Free and Reduced Price Meals in the 
National School Lunch and School Breakfast Programs). Comments may be 
submitted by any of the following methods:
     Federal eRulemaking Portal: Go to https://
www.regulations.gov and follow the instructions for submitting 
comments.
     Fax: 703-305-2879, attention Robert Eadie.
     Mail: Mr. Robert Eadie, Chief, Policy and Program 
Development Branch, Child Nutrition Division, Food and Nutrition 
Service, Department of Agriculture, 3101 Park Center Drive, Room 640, 
Alexandria, Virginia 22302-1594.
     Hand Delivery or Courier: Deliver comments to 3101 Park 
Center Drive, Room 640, Alexandria, Virginia 22302-1594, during normal 
business hours of 8:30 a.m.-5 p.m.
    All comments submitted in response to this interim rule will be 
included in the record and will be made available to the public. Please 
be advised that the substance of the comments and the identity of the 
individuals or entities submitting the comments will be subject to 
public disclosure. All submissions will be available for public 
inspection at this location Monday through Friday, 8:30 a.m.-5 p.m. The 
Food and Nutrition Service may also make the comments available on the 
Federal eRulemaking portal.

FOR FURTHER INFORMATION CONTACT: Address any questions to Robert M. 
Eadie, Child Nutrition Division, Food and Nutrition Service, USDA, 3101 
Park Center Drive, Alexandria, VA 22302 or by telephone at 703-305-
2590. A regulatory cost-benefit analysis was completed for this rule. 
Single copies may be requested from the Food and Nutrition Service's 
official identified above.

SUPPLEMENTARY INFORMATION:

I. Background

Summary of Changes Affecting Verification Procedures Made by Public Law 
108-265

    The Child Nutrition and WIC Reauthorization Act of 2004 (Pub. L. 
108-265, June 30, 2004) amended Section 9(b) of the Richard B. Russell 
National School Lunch Act (NSLA) concerning verification of households' 
applications for free and reduced price meals in the National School 
Lunch Program (NSLP) and the School Breakfast Program (SBP). In 
sections 104 and 105, Public Law 108-265 added a number of provisions 
and also incorporated into the NSLA provisions concerning verification 
activities that were previously addressed only in regulations (7 CFR 
245.6a) or guidance (primarily an instruction entitled ``Eligibility 
Guidance for School Meals Manual,'' August, 2001). New requirements and 
modifications made by Public Law 108-265 to existing procedures are 
discussed in this preamble.
    The primary changes made by Public Law 108-265 concerning 
verification are:
     Transferring the responsibility for conducting 
verification from the school food authority (SFA) to the local 
educational agency (LEA);
     Establishing a new standard verification sample size of 
three percent which is both the maximum and minimum requirement;
     Reducing sample sizes for LEAs that improve their 
verification response rates;
     Permitting LEAs to replace applications in the sample, on 
a case-by-case basis, when complying with the request for verification 
may pose a particular challenge to the selected household;
     Requiring LEAs to conduct a confirmation review of 
applications selected for verification to check for approval errors;
     Requiring LEAs to have a telephone number that households 
may call, at no charge, for assistance with verification;
     Establishing direct verification methods which use records 
from certain public agencies;
     Requiring follow-up by the LEA with households selected 
for verification; and
     Revising deadlines for completing verification activities.
    This preamble discusses these changes in this order to provide the 
reader with a sequential overview of the verification process and an 
understanding of any new procedures as well as how existing procedures 
are affected. Please note that other related provisions of Public Law 
108-265 concerning free and reduced price eligibility and certification 
are addressed in separate rulemakings.

Implementation Memoranda Issued to Date

    Because the statutory amendments addressed in this interim rule 
became effective on July 1, 2005, the Food and Nutrition Service (FNS) 
issued a series of implementation memoranda, as required by section 
501(a) of Public Law 108-265, to help administering agencies initiate 
implementation of the statutory provisions and assess how these changes 
would affect their existing verification procedures. It was especially 
important for LEAs to know

[[Page 76849]]

how verification efforts conducted for School Year 2004-2005 could 
affect their eligibility for alternative sample sizes in subsequent 
school years. The first memorandum was dated August 25, 2004 (SP-5) 
concerning the period for acceptable verification. Another memorandum 
dated November 15, 2004 (SP-8) concerned direct verification. The 
purpose of that memorandum, which also discussed the provision on 
mandatory direct certification of children who are members of 
households receiving food stamps, was to encourage State child 
nutrition agencies to work with their counterparts in State agencies 
administering means-tested programs that could be sources for direct 
verification. The next memorandum was dated November 19, 2004 (SP-9). 
That memorandum explained that if the non-response rate for School Year 
2004-2005 was less than twenty percent, then the LEA would qualify to 
use an alternative sample size in School Year 2005-2006, the first year 
the new verification procedures were to be followed. It also explained 
that for School Year 2006-2007, an LEA was qualified to use an 
alternative sample size if there was at least a ten percent improvement 
between the non-response rate in School Year 2004-2005 and in School 
Year 2005-2006. Another memorandum was issued on March 10, 2005 (SP-13) 
addressing the new verification activities for LEAs including 
confirmation reviews, substitution of applications and follow-up. An 
April 19, 2005 (SP-14), memorandum discussed State education agency 
agreements with their counterparts to conduct direct verification. 
Other memoranda were issued on August 30, 2005 (SP-16), September 14, 
2005 (SP-22), September 21, 2005 (SP-19), September 26, 2005 (SP-21), 
and September 27, 2005 (SP-18). These memoranda discussed and clarified 
various verification procedures. A July 25, 2006 memorandum (SP-27-
2006) clarified that the standard sample size for verification is both 
a minimum and a maximum. A memorandum dated August 31, 2006 (SP-32-
2006), provided clarification for direct certification. All of these 
memoranda may be found on the Child Nutrition Web site (https://
www.fns.usda.gov/cnd.)

Terminology: Responsible Entity

    Public Law 108-265 specified, in section 105(a), that in newly 
designated section 9(b)(3)(D)(ii) of the NSLA, the LEA must conduct the 
verification activities as well as activities related to certifying 
children as eligible for free or reduced price meals or free milk and 
section 108(b) added a definition of LEA in section 12(d)(4) of the 
NSLA. Prior to this amendment, the NSLA indicated that the SFA, which 
is defined only in regulations, had the responsibility for conducting 
certification and verification activities. An SFA, as provided in 
existing regulations at 7 CFR 210.2, is the governing body responsible 
for the administration of one or more schools and which has the legal 
authority to operate the NSLP and SBP in those schools. Because the 
NSLA now specifies that the LEA is responsible for NSLP and SBP 
certification and verification activities, this rule uses the term LEA. 
While this change may only have modest immediate effect in 
implementation and program operations, it is important because it 
recognizes that income eligibility determinations may be used for a 
broad array of educational-related benefits and are no longer used 
exclusively for meal benefits. We note that this distinction was 
discussed in the House Report 108-445, which accompanied H. R. 3873, a 
bill related to the Senate bill which eventually became Public Law 108-
265. That House Report noted that ``[b]ecause eligibility 
determinations* * *are used for purposes that extend beyond the receipt 
of free or reduced-price school meals, the Committee believes that 
school and district administrators, not food service personnel, should 
be held accountable for the accuracy of meal certifications reported to 
the state and the Secretary of Agriculture.''

Terminology: Timing for Acceptable Documentation

    The existing regulations at 7 CFR 245.6a(a)(1) specify the period 
of time for acceptable income documentation; e.g., the household must 
submit information for the most recent full month available. This rule 
adds a paragraph at 7 CFR 245.6a(f)(2) to permit households to submit 
documentation verifying the source, amount and frequency of their 
income for any point in time within that period. Timing for 
documentation for direct verification purposes is discussed in V. 
Direct Verification.

II. Verification Sample Sizes

Background

    Each school year, LEAs are required to verify the eligibility of 
children in a sample of household applications approved for free or 
reduced price meal benefits. Under the existing regulations at 7 CFR 
245.6a(a), the SFA may verify a sample of randomly selected 
applications or a sample of focused applications. Under random 
sampling, all applications have an equal chance of being selected for 
verification and the sample size is the lesser of three percent (3%) or 
3,000 approved applications. Under focused sampling, the sample size is 
the lesser of one percent (1%) or 1,000 of all approved applications 
selected from applications with household monthly income within $100 
($1200 annually) of the free/reduced price income limit PLUS the lesser 
of one-half of one percent (.5%) or 500 applications with a Food Stamp 
Program, Food Distribution Program on Indian Reservations (FDPIR) or 
Temporary Assistance to Needy Families Program (TANF) case number, 
provided in lieu of household income information.
    Section 105(a) of Public Law 108-265 amended section 9(b)(3) of the 
NSLA, 42 U.S.C. 1758(b)(3), by specifying a new standard sample size as 
well as alternative sample sizes for which LEAs may qualify. The law 
also revised the date for determining the sample size.

Date for Selection of Sample Size

    The existing regulatory date for determining the sample size is 
October 31 of the current school year. Public Law 108-265 amended the 
NSLA at section 9(b)(3)(D), 42 U.S.C. 1758(b)(3)(D), to establish 
October 1 of the current school year as the date for determining the 
sample size based on the number of approved free and reduced price meal 
applications on file for the current school year. This action changes 
the date the sample size is determined from October 31 to October 1. 
The earlier date should assist households selected for verification and 
should result in changes in eligibility status being acted upon more 
quickly. The provision on the date for sample size determination may be 
found in this interim rule at 7 CFR 245.6a(a)(5).
    While LEAs must determine the required sample size based on the 
number of applications on file as of October 1, it may be that they 
begin their verification activities prior to October 1. This should 
assist LEAs in completing verification within the required timeframes.

Standard Sample Size

    Section 105(a) of Public Law 108-265 amended section 9(b) of the 
NSLA, which specified that the new standard sample size is the lesser 
of three percent (3%) of all applications approved by the LEA for the 
School Year as of October 1 or 3,000 error prone applications approved 
by the LEA for the School Year as of October 1. Public Law 108-265 also 
added a definition of error prone application at section

[[Page 76850]]

9(b)(3)(D)(i)(I), which is all household applications approved by the 
LEA as of October 1 that indicate monthly income within $100 of the 
monthly limit or annual income within $1200 of the annual limit of the 
applicable income eligibility guidelines. This is similar to the way 
income applications are selected under the existing focused sampling.
    The new standard verification requirement established in Section 
105(a) of Public Law 108-265 amended section 9(b) of the NSLA, which 
concentrates on error prone applications in the interest of improved 
accuracy of eligibility determinations. The definitions of error prone 
applications and standard sample size may be found in this interim rule 
at 7 CFR 245.6a(a)(2) and 7 CFR 245.6a(c)(3), respectively.
    Section 105(a) of Public Law 108-265 amended section 
9(b)(3)(D)(i)(I)(bb) of the NSLA to permit the Secretary to establish 
other criteria for error prone applications in lieu of the error prone 
application standards. At this time, we are not establishing any other 
criteria and are requesting suggestions on potential criteria for error 
prone applications. Some possible parameters include different 
thresholds depending on household size, or different triggers for 
consideration as an error prone application. Commenters should keep in 
mind the limited amounts of household information included on the meal 
benefit application.

Mandatory Standard Sample Size

    The NSLA, as amended by Public Law 108-265, specifies that the 
sample size is three percent or 3,000 applications, whichever is less. 
This is both a minimum and a maximum sample size. Local educational 
agencies may no longer choose to verify a larger sample of applications 
as part of their normal verification activity. This includes LEAs with 
a small number of free or reduced price applications that have 
previously verified all applications.
    However, LEAs are encouraged, on a case-by-case basis, to verify 
``for cause'' any application which is questionable. Verification for 
cause may include situations in which a household reports zero income 
or when the LEA is aware of additional income or persons in the 
household. If the LEA verifies a household's application for cause, the 
household must be notified in accordance with existing regulatory 
procedures and, if there is a decrease in benefits, the household would 
receive a notice of adverse action and would have the opportunity to 
appeal the LEA's decision. This interim rule is codifying this 
procedure at 7 CFR 245.6a(c)(7) which previously was only specified in 
program guidance.

Alternative Sample Sizes

    Section 105(a) of Public Law 108-265 amended section 9(b)(3)(d)(iv) 
to provide two alternative sample sizes available to an LEA which 
qualifies through its efforts to improve the verification response rate 
(see below). The alternative sample sizes available to LEAs that 
qualify are: The lesser of 3,000 or three percent of all approved 
applications selected at random; or the lesser of 1,000 or one percent 
of error prone applications plus the lesser of 500 or one-half of one 
percent (0.5%) of approved applications with a Food Stamp Program, 
FDPIR or TANF case number provided in lieu of income information. These 
alternatives are also based on the number of approved applications as 
of October 1. The alternative sample sizes may be found at 7 CFR 
245.6a(c)(4) in this interim rule.

Completing the Sample Size

    Some LEAs will not have enough error prone applications to meet the 
standard or the 1000/1% element of that alternative sample size, as 
applicable. Section 9(b)(3)(D)(v) of the NSLA, as amended by section 
105(a) of Public Law 108-265, states that the LEA must select 
additional approved applications at random to meet the applicable 
standard sample size or the 1000/1% element of that alternative. This 
provision is included in this interim rule at 7 CFR 245.6a(c)(5).

Qualifications Applicable to All LEAs

    An LEA may qualify for an alternative verification sample size if 
it has a non-response rate for the preceding school year of less than 
twenty percent (20%). This requirement may be found in this interim 
rule at 7 CFR 245.6a(d)(2). In recognition of the effect of a 
household's failure to respond to verification requests, Section 105 of 
Public Law 108-265 added incentives to LEAs to decrease their non-
response rates. In 2002, FNS conducted a review of nearly 3,500 
applications selected for verification in 14 large SFAs. A key finding 
of this review was that non-response to the verification process 
accounted for the most changes in benefits. Seventy-seven to eighty 
percent (77-80%) of reductions/terminations of benefits were the result 
of non-response. In an effort to determine the extent of verification 
non-responses, FNS added a regulatory requirement (68 FR 53483; 
September 11, 2003) that SFAs report information on verification 
activities, including the number of non-responses to their State 
agency. Non-response rates are then reported annually by each State to 
FNS on the FNS-742, the Verification Summary Report. FNS will use the 
data from these reports to determine the effects on changes in non-
response rates as a result of States' efforts to decrease the number of 
children who lose benefits because of the household's failure to 
respond.
    The existing regulations do not define non-response rate. Section 
105 of Public Law 108-265 added a definition of non-response rate. The 
statutory definition of non-response rate is the percentage of approved 
applications for which verification was not obtained after all required 
attempts; this definition may be found at 7 CFR 245.6a(a)(3) of this 
interim rule. (Also see the discussion in this preamble concerning what 
constitutes a non-response for the purposes of the LEAs' obligation for 
follow-up activities.)

Qualifications Applicable to Large LEAs

    Section 105 of Public Law 108-265 amended section 
9(b)(3)(D)(iv)(IV) to provide criteria by which large LEAs may qualify 
for sample size alternatives. A large LEA is defined as one with more 
than 20,000 children approved by application (excluding children 
eligible through the direct certification process) as eligible for free 
or reduced price meals as of October 1 of the school year. To qualify 
for this alternative, a large LEA must have a non-response rate in the 
preceding school year which is at least ten percent (10%) below the 
rate for the second preceding school year. To meet this criterion, a 
large LEA would compare its non-response rates from one school year to 
another and determine if there is adequate improvement (at least ten 
percent (10%)) between the second preceding school year and the 
preceding school year.
    For example, in School Year 2004-2005, the LEA had:
     21,000 children approved for free and reduced price meal 
benefits based on a total of 6,000 approved applications; therefore, 
180 household applications (3% of 6,000) are subject to verification;
     45 households failed to respond to verification requests;
     Therefore, the non-response rate is 25% (45 / 180 as a 
percentage).
    The LEA would then calculate the level of improvement needed for 
School Year 2005-2006 as follows:
     The LEA must improve the non-response by at least 10%, 
with the 10% improvement determined by taking the previous non-response 
rate of 25% and multiplying it by 10%, which is 2.5%;

[[Page 76851]]

     The improvement level of 2.5% is then subtracted from the 
previous non-response rate (25.0% -2.5%) which is 22.5%;
     Therefore, the LEA needs a non-response rate of 22.5% or 
less to meet the 10% minimum improvement level in order to qualify to 
use an alternative sample size.
    In School Year 2005-2006:
     The LEA again had 6,000 approved applications, so the 
sample size is 180 (3% of 6,000);
     The number of non-respondents is 40 which is a non-
response rate of 22.2% (40 / 180 as a percentage);
     22.2% is less than the minimum non-response rate of 22.5% 
needed to qualify for this option; therefore, this LEA may use the 
alternative sample sizes in School Year 2006-07.
    This provision may be found at 7 CFR 245.6a(d)(4) of this interim 
rule.

Qualifying for Alternative Sample Sizes

    As discussed above, Section 105 of Public Law 108-265 permits LEAs 
to qualify for alternative sample sizes by improving the rate of 
household responses to their verification efforts. An LEA must annually 
determine if it can qualify to use an alternative sample size. If the 
LEA does not reevaluate its eligibility for alternative sample sizes on 
an annual basis, it must use the standard sample size in 7 CFR 
245.6a(c)(3) of this interim rule. Once the LEA determines that it 
qualifies, it must notify the State agency of the intended use of an 
alternative sample size, specify which option and indicate the basis 
for qualifying. The State agency may establish a deadline for 
notification and may establish criteria for reviewing and approving use 
of alternative sample sizes. This provision is found at 7 CFR 
245.6a(d)(1) of this interim rule.

Declining and Substituting Applications Selected for Verification

    Section 105 of Public Law 108-265 amended section 9(b)(3)(J) of the 
NSLA to allow an LEA to replace up to five percent of approved 
applications selected for verification upon individual review in 
accordance with criteria established by the Secretary. This provision 
effectively allows the LEA some flexibility in verifying applications 
from families/households that the LEA determines may not be able to 
satisfactorily respond to the verification request because of 
instability or communication difficulties. This should minimize the 
possibility that truly needy families may lose benefits simply due to 
their inability to fully understand the requirements of the 
verification process. This interim rule is adopting this approach as 
the criteria that LEAs would use to remove applications and then select 
substitutes.
    This procedure would be conducted, if the LEA chooses to use this 
option, once the applications are selected for verification. For each 
application removed from the verification sample, the LEA would replace 
it with another approved application. The maximum number of 
replacements is five percent of the sample selected. Prior to any 
contact with the selected households, the LEA would consider which 
households may have difficulties with completing the verification 
process and replace those applications. Replacement applications would 
be selected in accordance with the LEA's applicable procedures (i.e., 
an error-prone application that is selected must be replaced with an 
error-prone application). Once the replacement process is complete, the 
LEA would notify the remaining households of the verification process. 
This provision does not permit an LEA to replace an application once 
the household is notified of its selection for verification. Further, 
this provision does not permit the LEA to eliminate a category of 
applications such as those from a particular group or community. The 
Department of Agriculture (the Department) will provide additional 
assistance to LEAs in selecting specific applications if it proves 
necessary. This provision may be found at 7 CFR 245.6a(e)(2) of this 
interim final rule.

III. Verification Process/Procedures

    Section 105(a) of Public Law 108-265 added provisions concerning 
follow-up with households selected for verification. These provisions 
are designed to improve and streamline the process for LEAs as well as 
to provide additional ways to assist households with completing the 
verification process, and reduce the non-response rate. Section 105(a) 
of Public Law 108-265 also added a requirement that LEAs must review 
applications selected for accuracy of each eligibility determination 
including math or other errors, prior to contacting the household. 
Section 105(a) also added section 9(b)(3)(F) allowing LEAs to use 
direct verification--a process in which information from specific 
means-tested programs is used as the basis for verifying application 
data.

Preliminary/Confirmation Reviews

    Section 105(a) of Public Law 108-265 added a requirement that the 
LEA check the accuracy of the certification before proceeding with 
verification of any application. In the statute, this is referred to as 
a ``preliminary review.'' The Department is using the term 
``confirmation review'' in this preamble and in the regulatory language 
to emphasize that, while this review is the first verification activity 
conducted by the LEA, it is a confirmation of the original decision 
made on the application. The confirmation review must be made by 
someone other than the person who made the original determination. This 
procedure is intended to detect any arithmetic or other errors prior to 
beginning verification so that the LEA can appropriately review the 
documentation submitted by the household. Please note that any LEA or 
school that conducts confirmation reviews of all applications as part 
of its certification process meets this requirement.
    The LEA must document that confirmation reviews were conducted. To 
this end, the prototype free/reduced price application developed by FNS 
includes a signature line for the person who conducted the confirmation 
review. The LEA may also maintain a list of applications and their 
disposition with the reviewer's signature attesting to completing this 
requirement. The person who conducts the confirmation review must not 
be the person who makes the initial eligibility determination. However, 
the provision does not preclude the person who completes the 
confirmation review from conducting the verification process. These 
provisions are found at 7 CFR 245.6a(e)(1) in this interim rule.
    Section 105(a) of Public Law 108-265 also recognizes that some LEAs 
use electronic data systems that provide a high level of accuracy in 
making the initial eligibility determination, in accordance with the 
certification requirements of the NSLP, on applications for free or 
reduced price meals. If an LEA uses an electronic data system that 
rejects inconsistent or incomplete application information and that 
accurately determines eligibility based on income level and household 
size or other information establishing categorical eligibility for free 
meals, it is not subject to the requirement to conduct separate 
confirmation reviews.
    An LEA with such a system must notify the State agency that it is 
not conducting confirmation reviews because its initial eligibility 
system accurately processes applications consistent with the income 
eligibility guidelines. State agencies may require additional 
documentation of the accuracy of the system and may require the LEA to 
conduct confirmation

[[Page 76852]]

reviews if they consider the system to be inadequate. This provision 
may be found at 7 CFR 245.6a(e)(1)(ii) of this interim rule.

Disposition of Applications After the Confirmation Review

    The confirmation review can occur at one of two times--immediately 
after the initial review which makes it part of the certification 
process or as part of the verification process as a double check on 
only those applications selected for verification. When the 
confirmation review is part of the application process, the notice of 
eligibility reflects any adjustments made to the initial determination 
made as a result of the ``up-front'' confirmation review.
    However, when the confirmation review is part of the verification 
process, the following requirements apply--
     If the confirmation review indicates that there should be 
an increase in benefits, the LEA must make the change as soon as 
possible, notify the household and proceed with verification;
     If the confirmation review shows that there should be a 
decrease in benefits from free to reduced price, the LEA should proceed 
with and complete verification before any notification of a new 
eligibility status is given. If the decrease is substantiated by the 
documentation submitted by the household or the household fails to 
respond (subsequent to at least one follow-up attempt by the LEA), the 
LEA will then provide the household with a notice of adverse action 
which will inform the household of the pending action and of their 
appeal rights.
     If the confirmation review indicates that the application 
should have been denied initially, the LEA would remove that 
application from the verification sample, select another like 
application (for example, another error prone application) and would 
provide the household with a notice of adverse action which will inform 
the household of the pending action to terminate their free or reduced 
price benefits and of their appeal rights.
    These procedures are designed to avoid a possible unnecessary 
reduction in benefits. The verification notice requirements are not 
changed by adoption of the confirmation review; that is, the 
verification notice continues to explain that the application was 
selected, to detail the process and required documentation, to assign a 
deadline for receipt of documentation, and to provide a no-charge phone 
number to call for assistance. These provisions may be found at 7 CFR 
245.6a(f) of this interim rule.

Direct Verification: Background

    Section 105(a) of Public Law 108-265 provides for a procedure 
called ``direct verification.'' The NSLA was amended to include, at 
section 9(b)(3)(F), an option for LEAs to directly verify applications 
selected for verification. This procedure is similar to the existing 
direct certification process. Direct verification allows the LEA to 
request information from an agency administering one of the means-
tested programs listed in the NSLA without contacting the household. 
Contact with one of the means-tested programs is the first verification 
effort. Although existing regulations do not specifically include 
direct verification, existing 7 CFR 245.6a(b)(3) provides for use of 
agency records from a State or local agency that administers the Food 
Stamp Program, FDPIR or TANF program which have similar eligibility 
limits and information maintained by the State employment office. This 
procedure is discussed in detail in this preamble under V. Direct 
Verification.

Telephone Assistance With Verification

    As indicated earlier, the existing regulatory provision requiring 
that the LEA notify the household in writing of its selection for 
verification (except for those households' whose eligibility status is 
verified through direct verification) did not change. However, Section 
105(a) of Public Law 108-265 added provisions concerning contacts with 
households selected for verification.
    The existing regulations do not require that the SFA provide a 
telephone number for households to call concerning verification, but 
the prototype application and verification forms as well as guidance 
encourage SFAs to provide a telephone contact for verification 
activities. Section 105(a) of Public Law 108-265 amended the NSLA to 
require that the written notification to households concerning 
verification include a telephone number that the household may call 
without charge. The telephone number could be toll-free. The toll-free 
telephone number must be to a source that can respond to the 
household's questions about the verification process. This provision is 
found at 7 CFR 245.6a(f)(5) of this interim rule.

Requirement for Follow-Up With Non-respondents

    Section 105(a) of Public Law 108-265 also added a requirement that 
the LEA make at least one follow-up attempt to contact any household 
that fails to respond to a request for verification. This rule does not 
specify the method of follow-up or the timing; the follow-up attempt 
may be in writing, via e-mail, through a telephone call or in person. 
The LEA must document the attempt. Many LEAs already perform follow-up 
contacts.
    As permitted in section 9(b)(3)(G)(iv) of the NSLA, this rule 
allows the LEA to contract with a third party to conduct the follow-up 
activity. Any use of a third party is subject to the confidentiality 
requirements in Section 9(b) of the NSLA and 7 CFR Part 245. Any 
contract is also subject to the procurement requirements in existing 7 
CFR 210.21. The provision on third party contracts may be found in 7 
CFR 245.6a(f)(6) of this interim rule. The use of a third party to 
perform follow-up contacts would facilitate this process for LEAs which 
may not have the staff resources to readily absorb this required 
function. It is important to note, however, that the information the 
contractors will be using is subject to the use and disclosure 
requirements in the NSLA and program regulations. All such information 
must be carefully controlled, remains the property of the LEA and may 
not be used by the contractor for any other purpose.

Non-Response in Relation to Follow-Up Contacts

    A non-response, for the purposes of a follow-up contact, would 
arise when the LEA is unable to verify the household's status for 
school meal benefits for which it was certified. A non-respondent 
household would be a household that failed to provide documentation 
that enables the LEA to resolve or confirm its eligibility status.
    Follow-up contacts can assist families in continuing meal benefits 
for their children as well as improve LEAs' verification completion 
rates. Examples of situations which indicate the need for a follow-up 
contact by the LEA would be--
     The household has not, in any way, contacted the LEA 
concerning its initial request for verification documentation.
     The household contacted the LEA and has submitted some but 
not all needed documentation. This could include needed written 
material from the household itself or the inability of the LEA to 
complete a collateral contact. In the latter situation, the household 
may need to indicate another collateral contact or provide other 
written evidence.
     The household contacted the LEA but the communication was

[[Page 76853]]

inconclusive and the LEA needs additional information.
     Information obtained from a public agency is incomplete or 
inconsistent with information on the application.

IV. Deadlines/Extensions

Deadlines for Completing Verification

    The existing regulations establish the deadline for completing 
verification as December 15. Section 105(a) of Public Law 108-265 
changed this date to November 15. This change will result in more 
timely determinations of the accuracy of children's eligibility for 
free or reduced price meals or free milk. Shifting this date closer to 
the beginning of the school year will allow LEAs to more promptly make 
necessary adjustments to eligibility status and thus target meal 
benefits more appropriately. The deadline is found at 7 CFR 
245.6a(b)(1) of this interim rule.
    Please note that the October 31 date for reporting data on the 
number of children eligible for free and reduced price meals and free 
milk has not changed. This date is a point in time used to ensure 
consistent data on program participants. The reference to the 
verification deadline in 7 CFR 210.18(h)(1)(iv) is also revised by this 
interim rule.

Extending the Verification Deadline

    Section 105(a) of Public Law 108-265 also amended the NSLA to allow 
the State agency to extend the verification deadline to December 15 
under criteria established by the Department. The regulations will now 
permit extensions of the verification deadline on a case-by-case basis, 
depending on justification submitted by the LEA. Reasons for extensions 
may include, but are not limited to, strikes or labor disputes or 
natural disasters. This provision is found at 7 CFR 245.6a(b)(2)(i) of 
this interim rule.

Additional Extensions Due to Local Conditions

    Section 105(a) of Public Law 108-265 amended the NSLA to address 
verification alternatives when local conditions warrant. Section 
9(b)(3)(I) specifies that the Department may allow alternatives to the 
sample size, the sample size selection criteria and to the verification 
deadline when a natural disaster, civil disorder, strike or other 
similar conditions exist. This allows LEAs flexibility in completing 
verification activities when circumstances prevent timely or complete 
compliance with the requirements. The law directs the Secretary to 
establish criteria for extensions and alternatives. Requests under this 
provision would be necessary only if the LEA were requesting different 
sample size and selection criteria and/or an extension for completing 
verification beyond December 15. We emphasize that these requests would 
be made on a case-by-case basis and that approval would be given only 
when necessitated by unusual circumstances. Section 245.6a(b)(1)(ii) 
will now allow the State agency to request use of alternative sample 
sizes or sample selection and/or an extension of the deadline beyond 
December 15 through a written request to FNS.

V. Direct Verification

    As discussed briefly above, section 105(a) of Public Law 108-265 
amended section 9(b)(3)(F) of the NSLA to permit LEAs to directly 
verify households through information obtained from the State agency 
administering the Food Stamp Program, FDPIR, TANF or State Medicaid 
programs under title XIX of the Social Security Act (42 U.S.C. 1396 et 
seq.) and any similar income-tested program or other source of 
information determined by the Secretary.
    Direct verification is a procedure that uses information directly 
obtained from an agency that administers a means-tested program (such 
as the Food Stamp Program) or that maintains information about income 
or wages (such as the State unemployment offices). Direct verification 
is similar to using agency records as a means of verification of 
information on a household's application. However, direct verification 
is conducted prior to contacting the household of its selection for 
verification. If the source of the direct verification information 
confirms the household's eligibility status, the household will not 
need to be notified of its selection as verification was completed 
through the agency contacts.
    The use of direct verification can help LEAs in completing the 
verification process in a timely manner and lower the non-response rate 
since households do not need to be contacted if the eligibility status 
can be verified through extant data sources.
    The direct verification process is discussed below as follows: (1) 
Information sources and the age and type of acceptable data; (2) direct 
verification using Food Stamp Program, FDPIR and TANF sources; (3) 
direct verification using state Medicaid program sources; (4) direct 
verification using State Children's Health Insurance Program (SCHIP) 
sources; and (5) using Medicaid/SCHIP information in States with higher 
income limits.

Sources for Direct Verification and Timing

    Section 9(b)(3)(F)(i) of the NSLA specifies that direct 
verification may be achieved through systems of records maintained by 
the public agency administering the Food Stamp Program, FDPIR, TANF, or 
the State Medicaid program. It also permits the Department to include 
similar means-tested programs or sources of information. This interim 
rule incorporates the statutorily identified programs at 7 CFR 
245.6a(g). Please note that while children are categorically eligible 
for free meals if they are in a Food Stamp Program or FDPIR household 
or in most TANF households (see below for a discussion of the 
exception), Medicaid recipients are not categorically eligible. In 
addition, because income eligibility limits for Medicaid vary from 
State to State and may exceed the threshold for free/reduced price meal 
benefits, a State agency must first determine what the limits are in 
its State. It must then determine whether the Medicaid office is able 
to provide household income information or an indication (such as the 
percentage of the Federal poverty line) of whether the household's 
income is within the limits for either free or reduced price benefits. 
These are the first steps in implementing direct verification with 
Medicaid.
    Under the authority in the NSLA, we have determined that SCHIP, 
which is authorized under title XXI of the Social Security Act, should 
be included as a potential source for direct verification as it is an 
adjunct of the Medicaid program. As with the Medicaid program, SCHIP 
recipients are not categorically eligible for free or reduced price 
benefits and the income limits vary by State. Again, the first step for 
a State agency would be to determine how the SCHIP program is 
structured in its state. SCHIP is defined in 7 CFR 245.2 of the 
existing regulations.
    Public Law 108-265 specified that the direct verification 
information from public agencies must be the most recent information 
available. The ``most recently available information'' is described in 
the NSLA as information reflecting program participation or income 
during the 180-day period immediately prior to the date of school meals 
application. The data need only indicate eligibility for the program at 
that point in time, not that the child was certified for that program's 
benefits within the 180-day period.
    In order to be consistent with the documentation permitted for 
households notified of their selection for verification, LEAs have 
flexibility

[[Page 76854]]

with identifying acceptable documentation for direct verification 
purposes. As discussed earlier, household being verified may provide 
documentation for any point in time between the month prior to 
application and the time the household is required to provide income 
documentation. For consistency between verification and direct 
verification activities, this interim rule, at 7 CFR 245.6a(g)(5), 
therefore states that direct verification efforts may use information 
from any point in time between the month prior to application and the 
time direct verification is conducted. In other words, for direct 
verification LEAs must use information (which may never be more than 
180 days old) that is the most recent available information; 
information from any one month from the period one month prior to 
application through the month direct verification is conducted; or 
information for all months from the month prior to application through 
the month direct verification is conducted.

Names Provided to Direct Verification Sources

    LEAs or State agencies conducting direct verification must only 
submit the names of the eligible children and not names of other 
members of the household, such as parents, grandparents or non-school 
age siblings. This provision may be found at 7 CFR 245.6a(g)(1) of this 
interim rule.

How Direct Verification Is Conducted Using Food Stamp Program, FDPIR, 
and TANF Records

    Under section 9(b)(3)(F)(i)(I)-(III) of the NSLA, as amended by 
Public Law 108-265, LEAs may submit a list of identifiers for children 
listed on applications selected for verification to the agencies that 
administer the Food Stamp Program, FDPIR or TANF.
    These programs would then indicate if they have information that 
supports the child's eligibility for free or reduced meal benefits. 
This may be done even if the school meals application does not indicate 
receipt of benefits from one of these programs. This ``direct 
verification'' contact would occur prior to notifying the household of 
its selection for verification. If the data obtained was within the 
time frames discussed above and shows that a child was a member of a 
household participating in one of these programs, the child's 
eligibility for free meals is validated. If data indicates that one 
eligible child is a member of a household participating in the FSP, 
FDPIR, TANF, or Medicaid, all eligible children in that child's 
household are verified. If none of the children's participation is 
confirmed by the direct verification source, regular verification 
procedures must be followed. For consistency, this approach is now 
applied to applications selected for verification that contain case 
numbers. This change may be found at 7 CFR 245.6a(f)(3) in this interim 
rule.
    With respect to the TANF program, eligibility for that program 
continues to be subject to the provision in the NSLA concerning TANF 
eligibility standards in place in 1995. Section 9(d)(2)(C) of the NSLA 
specifies that a child is eligible for free meals if the standards used 
for the State's TANF program are comparable to or more restrictive than 
the eligibility standards in effect on June 1, 1995. Therefore, direct 
verification to determine eligibility for free meals based on TANF 
information may be used only in those States that currently meet this 
criterion or in States that can provide the household's income level or 
indicate that the family's income is less than 130% of the applicable 
poverty guideline. Please note that while this section of the NSLA also 
addresses eligibility for reduced price meals, children in households 
receiving Food Stamp Program, TANF or FDPIR benefits are categorically 
eligible for free meal benefits.

Direct Verification Using State Medicaid Program Sources

    Public Law 108-265 amended the NSLA at section 9(b)(3)(F) to allow 
use of State Medicaid income and program participation information as 
sources of direct verification. The NSLA specifies that eligibility for 
free meals may be confirmed when the Medicaid income limit is 133% or 
less of the official poverty line and that eligibility for reduced 
price meals may be confirmed when the Medicaid income eligibility limit 
is no more than 185% of the official poverty line.
    The LEA may verify children's eligibility for either free or 
reduced price meals based on Medicaid data. Medicaid and SCHIP (as 
added under the discretion provided to the Secretary) eligibility 
standards vary from State to State. If the State's Medicaid limit is 
between 133% and 185% of poverty, the Medicaid/SCHIP agency must also 
be able to provide a household's income and size or the percentage of 
the official poverty line that the household's income represents; 
otherwise, direct verification may not be feasible when there are 
different eligibility standards for receipt of Medicaid.

Verification of Eligibility for Free Meal Benefits

    If the State's Medicaid program's eligibility standards are 133% or 
under of the poverty limits, the LEA can use information from the 
Medicaid agency to verify free status. While the income limit for free 
meals is 130% of the applicable poverty guideline, section 105(a) of 
Public Law 108-265 permits use of the greater percentage. The 133% 
figure was used because this is the Medicaid limit in a number of 
states for school-age children. When the Medicaid agency can identify 
which households are participating, the LEA has documented the child's 
eligibility for free meals. No additional individual documentation is 
needed. In states with Medicaid limits of 133% or below, there is no 
need to have the household's income because eligibility status is 
confirmed solely through Medicaid participation. These provisions may 
be found at 7 CFR 245.6a(g)(3) of this interim rule.

Verification of Eligibility for Free or Reduced Price Benefits

    If the State's Medicaid limit is between 133% and 185% of the 
poverty limits and the Medicaid agency can provide the percentage or 
amount of income used, the LEA could use Medicaid information to verify 
the child's eligibility either for free or for reduced rice benefits, 
depending on the basis for the child's Medicaid eligibility. In these 
states, the agency administering the Medicaid program must be able to 
provide the income amount and household size used to determine Medicaid 
eligibility or the percentage of the applicable poverty guideline for 
that income. That information can be used to confirm the child's status 
for free or reduced price meals, as appropriate. These provisions may 
be found at 7 CFR 245.6a(g)(4) of this interim rule.

Direct Verification Using SCHIP

    Some States have used their SCHIP grants to expand their Medicaid 
coverage for children through higher income limits. Other States have 
separate SCHIP programs. For the latter States, the State agency must 
determine the income limits and establish the same type of parameters 
discussed above for State Medicaid programs.

Resolving Discrepancies Between the Application and Information 
Received Through Direct Verification

    For the purposes of direct verification, the LEA submits the names 
and other identifiers, such as birthdates and addresses for a child 
certified for free or reduced price meals and selected for

[[Page 76855]]

verification. Therefore, direct verification potentially establishes a 
child's participation in one of the eligible programs, thereby 
confirming their eligibility for free or reduced price meals. Any child 
listed on the application who is certified for free or reduced price 
school meals who is established as participating in one or more sources 
of direct verification (within the applicable limits for the various 
programs) is verified. The LEA has completed verification for that 
household and household contact is not required. If the information 
received from sources of direct verification is inconsistent or 
inconclusive, the LEA must notify the household that it is subject to 
verification and the household must provide documentation of their 
income.

Use of Direct Verification Is an LEA Option

    Public Law 108-265 expanded Section 9(b)(3)(F) of the NSLA to 
permit the use of direct verification by LEAs, although it is still 
optional. The law specifies that the decision to use direct 
verification is made at the LEA level. State agencies must support and 
assist any LEA's decision to use direct verification. State agencies 
should also work towards establishing contacts with their state-level 
counterparts to coordinate direct verification use and to develop a 
State-wide system to encourage the use of direct verification by LEAs.
    If an LEA chooses to use direct verification, the State agency must 
work with the LEA in determining the best method for doing direct 
verification and assist in facilitating contacts with State-level 
agencies, as needed, to establish the mechanism for doing direct 
verification. Because administrative systems vary greatly among States, 
the Department is not establishing any specific procedural criteria in 
the regulations for conducting direct verification. This will provide 
State agencies with flexibility in developing procedures that best meet 
their needs.

Agreements To Conduct Direct Verification

    Section 104(b) of Public Law 108-265 amended the Food Stamp Act of 
1977 by adding Section 11(u), 7 U.S.C. 2020 (u), to require an 
agreement between the State agency administering the school meals 
programs and the State agency administering the Food Stamp Program. The 
Food Stamp Act of 1977 requires that State agencies to establish 
procedures to conduct direct verification for children eligible for 
free or reduced price school meals. All States have such agreements in 
place. For direct verification with other programs, the Department 
suggests that the State education agency enter into an agreement 
spelling out procedures, available data, etc., with each different 
State agency that will be a direct verification source.

Additional Programs for Direct Verification

    Public Law 108-265 allows the Secretary to permit direct 
verification with similar means-tested programs or other sources of 
information. Prior to extending direct verification to additional 
programs, the Department would need to determine which programs have 
comparable eligibility standards and which are accessible to State 
agencies and/or LEAs. As mentioned above, we have extended direct 
verification to SCHIP. To assist us in expanding this provision 
further, we are requesting comments on any additional programs that 
could be included as sources for direct verification.

VI. Miscellaneous

Effect of Public Law 108-265 on Existing Verification Provisions

    Some of the existing regulations in 7 CFR 245.6a are modified by 
this interim rule while others are unchanged but may be relocated. 
Under existing regulations, directly certified households are not 
subject to verification because their status was already determined 
through contact with the appropriate agency. This exception is not 
changed. However, the following categories of children were added as 
not subject to verification as authorized by Public Law 108-265--
children who are homeless, as defined under section 725(2) of the 
McKinney-Vento Homeless Assistance Act (42 U.S.C. 11434a(2)); children 
served by a runaway and homeless youth grant program established under 
the Runaway and Homeless Youth Act (42 U.S.C. 5701 et seq.); or 
migratory children as defined in section 1309 of the Elementary and 
Secondary Education Act of 1965 (ESEA) (20 U.S.C. 6399). These groups 
will also be addressed in separate rulemakings. This provision is 
relocated by this interim rule from existing 7 CFR 245.6a(a)(5) to 7 
CFR 245.6a(c)(2).
    Existing regulations also provide for other exceptions from 
verification for children in residential child care institutions and 
schools. Further, LEAs using the special certification/reimbursement 
procedures in 7 CFR 245.9 are not required to conduct verification 
except in the base year when applications are submitted. These 
exceptions remain in effect but are relocated from 7 CFR 245.6a(a)(5) 
to 7 CFR 245.6a(c)(2) by this interim rule.

Clarifying What Information Is Submitted on the Verification Report

    LEAs, through their State agencies, submit the FNS-742, School Food 
Authority Verification Summary Report. We are clarifying, in newly 
redesignated 7 CFR 245.6a(h), that LEAs and State agencies only report 
on statutorily required verification activities. For example, an LEA 
would only report on the results of verifying the required three 
percent (up to 3,000 applications) of error prone applications. The 
verification report would not include any applications verified for 
cause as permitted in 7 CFR 245.6a(c)(7) as set forth in this interim 
rule.

Unchanged Provisions

    The following chart shows other existing verification provisions 
that have been relocated and rewritten to improve their clarity and 
conformity with the provisions revised by this interim rule. These 
policies and procedures provided in these provisions are otherwise 
unchanged.

------------------------------------------------------------------------
          Provision             Existing citation       New citation
------------------------------------------------------------------------
State agency conducting       7 CFR 245.6a(a)       7 CFR
 verification.                 Introductory Text.    245.6a(c)(1)(i).
Approval with essential       7 CFR 245.6a(a)(1)..  7 CFR
 documentation.                                      245.6a(c)(1)(ii).
Notification of households    7 CFR 245.6a(a)(2)    7 CFR 245.6a(f)(1).
 selected for verification.    Introductory Text.
Notification of households/   7 CFR                 7 CFR
 social security numbers.      245.6a(a)(2)(i)       245.6a(f)(1)(i)
                               through (a)(2)(iv).   through (f)(1)(v).
Sources of information......  7 CFR 245.6a(b)       7 CFR 245.6a(a)(7).
                               Introductory Text.
Verification reporting......  7 CFR 245.6a(c).....  7 CFR 245.6a(h).

[[Page 76856]]

 
Nondiscrimination...........  7 CFR 245.6a(d).....  7 CFR 245.6a(i).
Adverse action..............  7 CFR 245.6a(e).....  7 CFR 245.6a(j).
------------------------------------------------------------------------

VII. Procedural Matters

Executive Order 12866

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

Regulatory Impact Analysis

Need for Action
    This interim rule amends regulations to reflect changes made to the 
NSLA by Public Law 108-265, the Child Nutrition and WIC Reauthorization 
Act of 2004, regarding the verification of applications approved for 
free or reduced price meals in the NSLP and SBP. The provisions of this 
interim rule are expected to enhance verification efforts which will 
improve the accuracy of benefits distribution. FNS estimates that the 
net increase in administrative burden from implementing the provisions 
of this interim rule will be outweighed by the benefits of improved 
accuracy in the targeting of benefits.
Benefits
    The interim rule is expected to better target NSLP and SBP benefits 
to eligible children. The rule's requirement that LEAs make greater use 
of an error-prone sampling method to select applications for 
verification is expected to reduce the value of improper federal 
reimbursements. Increased reliance on focused sampling should also 
reduce the loss of benefits to otherwise eligible applicants who fail 
to respond to verification requests. Other provisions, such as moving 
the verification process closer to the beginning of the school year, 
and requiring LEAs to help applicants through the verification process, 
are also expected to better align benefit approval with applicant 
eligibility. Over the fiscal year 2008-2012 period, FNS estimates that 
the verification process will reduce improper federal meal 
reimbursements by $19.7 million. This estimate considers only the 
direct savings that result from recertifying a subset of children whose 
applications were selected for verification. Additional savings are 
expected to follow as the data collected from the verification process, 
and from the FNS' Access, Participation, Eligibility and Certification 
(APEC) study, facilitates the development of guidance, training, and 
policy options to further reduce certification error.
Costs
    FNS estimates that the net increase in administrative burden to 
LEAs will total $0.13 million over the fiscal year 2008-2012 period.

Regulatory Flexibility Act

    This interim 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. Local educational agencies 
already must conduct verification of a sample of applications for free 
and reduced school meals. This interim regulation provides additional 
options for local educational agencies that improve their verification 
techniques. The Department of Agriculture (the Department) does not 
anticipate any adverse fiscal impact resulting from implementation of 
this rulemaking; rather, the Department anticipates that benefits will 
be more targeted towards eligible children and that local educational 
agencies will have incentives to work towards improvements in their 
verification efforts to be able to have more flexibility. Although 
there may be some burdens associated with this rule, the burdens would 
not be significant and would be outweighed by the benefits of improved 
accuracy in the targeting of benefits and in enhanced flexibility for 
local school districts.

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, the 
Department 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 the Department 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 interim 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 interim rule is not subject to the requirements of sections 
202 and 205 of the UMRA.

Executive Order 12372

    The National School Lunch Program and the School Breakfast Program 
are listed in the Catalog of Federal Domestic Assistance under Nos. 
10.555 and 10.553, respectively. For the reasons set forth in the final 
rule in 7 CFR Part 3015, Subpart V, and final rule related notice at 48 
FR 29114, June 24, 1983, these programs are included in the scope of 
Executive Order 12372, which requires intergovernmental consultation 
with State and local officials.

Federalism Summary Impact Statement

    Executive Order 13