Automated Data Processing and Information Retrieval System Requirements: System Testing, 5-16 [2013-31347]

Agencies

• DEPARTMENT OF AGRICULTURE
• Food and Nutrition Service

[Federal Register Volume 79, Number 1 (Thursday, January 2, 2014)]
[Rules and Regulations]
[Pages 5-16]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-31347]


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DEPARTMENT OF AGRICULTURE

Food and Nutrition Service

7 CFR Part 271, 272, 274, 276, and 277

RIN 0584-AD99


Automated Data Processing and Information Retrieval System 
Requirements: System Testing

AGENCY: Food and Nutrition Service, USDA.

ACTION: Final rule.

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SUMMARY: The Food and Nutrition Service (FNS) is adopting as a final 
rule, without substantive changes, the proposed rule that amends the 
Supplemental Nutrition Assistance Program (SNAP) regulations to 
implement Section 4121 of the Food, Conservation, and Energy Act of 
2008 (the Farm Bill), which requires adequate system testing before and 
after implementation of a new State automated data processing (ADP) and 
information retrieval system, including the evaluation of data from 
pilot projects in limited areas for major

[[Page 6]]

systems changes, before the Secretary approves the system to be 
implemented more broadly. The rule also provides that systems be 
operated in accordance with an adequate plan for continuous updating to 
reflect changed policy and circumstances, and for testing the effects 
of the system on access by eligible households and on payment accuracy. 
This final rule specifies the requirements for submission of a test 
plan, and changes the due date of an Advance Planning Document Update 
(APDU) from 90 days after to 60 days prior to the expiration of the 
Federal financial participation (FFP) approval, and revises language 
regarding the federal share of costs in consolidated information 
technology (IT) operations to specify that the threshold for service 
agreements applies to federally aided public assistance programs, 
rather than to SNAP alone. In addition, this rule amends SNAP 
regulations relating to the establishment of an ADP and information 
retrieval system and to provide clarifications and updates, which have 
occurred since this section was last updated in 1996.

DATES: This rule is effective March 3, 2014.

FOR FURTHER INFORMATION CONTACT: Questions regarding this rulemaking 
should be addressed to Karen Painter-Jaquess, Director, State Systems 
Office, Food and Nutrition Service--USDA, 3101 Park Center Drive, 
Alexandria, VA 22302-1500; by telephone at (303) 844-6533; or via the 
Internet at mailto: karen.painter-jaquess@fns.usda.gov.

SUPPLEMENTARY INFORMATION:

Background

    On August 23, 2011, the Department published a proposed rule (76 FR 
52581), which requires adequate system testing before and after 
implementation of a new State ADP and information retrieval system. The 
comment period ended on October 24, 2011, and FNS received 12 comments. 
Eight of those were from State/local agencies, two were from advocacy 
organizations, and two were from associations. Two of the commenters 
supported the rule changes and raised no issues or concerns, and the 
remaining commenters had the following issues/concerns:
    1. Comment: Six comments were received that indicated concern that 
the rule as proposed would impose additional work for States, cause 
potential project delays, and incur additional costs that will be 
caused by requirements for FNS' prior approval of the testing plan, the 
decision to move from user acceptance testing (UAT) to pilot, and the 
decision to move from pilot to statewide implementation.
    Response: Section 4121 of the Food, Conservation, and Energy Act of 
2008 reflects Congress' concern that FNS use the Federal approval 
process to more deliberately review and monitor State agencies' plans 
for major system implementation, and encourage all State agencies to 
implement new systems using sound testing practices. FNS knows that 
many State agencies already include testing and pilot projects as well 
as some form of graduated roll out when implementing major systems and 
that system testing is part of the overall project management and risk 
management planning process. A thorough testing plan, an evaluation of 
the results of UAT before proceeding to pilot, and a pilot evaluation 
prior to wider implementation of the system are components of a well-
managed system project. FNS does not see these requirements as 
additional work for the State agencies in projects where sound 
management practices are in place. FNS anticipates that there should be 
more than adequate time after the initial approval of a project for a 
State agency to submit its testing plan well in advance of the start of 
testing. The testing plan itself does not require approval. It must be 
submitted so that FNS can make a sound determination as to the validity 
of the test results and the State's decision to proceed to pilot, which 
does require FNS concurrence. By submitting the plan well in advance of 
testing, the State enables FNS to be an informed and timely reviewer of 
test results. FNS understands that the typical project timeline for 
testing, pilot and rollout includes specific go/no-go decision points. 
By communicating with FNS throughout the testing and pilot phases 
regarding results and the status of the State's go/no-go criteria, 
State agencies can help ensure that there is no need for additional 
delay at the key decision points. FNS does not anticipate the need for 
a separate test or pilot evaluation period, in addition to the State 
agency's own, if it is kept fully informed throughout the process. This 
regulation will codify the testing standards already found in well 
managed State projects in order to assure that all State agencies meet 
those standards.
    2. Comment: Three commenters stated concerns that the three-month 
recommended minimum pilot period as stated in Sec.  277.18(g)(2)(ii) 
could potentially extend project schedules and drive up project costs.
    Response: The pilot is a key milestone in project development and 
occurs when a fully functional prototype system is available for 
testing, but before statewide implementation. Pilots are when the State 
has the best opportunity to identify defects in either the system or 
the implementation approach before they become costly large-scale 
problems. State agencies must operate pilot projects until a state of 
routine operation is reached with the full caseload in the pilot area. 
FNS has always recommended that there be sufficient time in the pilot 
to thoroughly test all system functionality, including time for 
evaluation prior to beginning the wider implementation of the system. 
FNS believes that a minimum duration of three months to pilot would 
permit the system to work through all functions and potential system 
problems. However, if the pilot is going well early on, then the 
process of evaluation and FNS approval can start during the pilot 
period and lessen or eliminate any delay. Further, the length of the 
pilot can be agreed upon by the State agency and FNS to include such 
factors as the size of the pilot; the rate of phase-in of the pilot 
caseload; and the track record, if any, of the system being 
implemented.
    3. Comment: One comment was received that questioned the 
requirement to pilot the new system in a limited area of the State, 
which would require having two systems operating and synchronized. The 
commenter suggested allowing parallel testing rather than the piloting 
of the fully operational system.
    Response: FNS believes that evaluation of data from pilot projects 
in limited areas provides the greatest opportunity to manage risk 
because it tests the fully operational system in a live production 
environment. Before FNS could approve any alternate testing strategies, 
the State agency would have to demonstrate that the risks associated 
with the proposed alternate strategies, such as parallel testing, would 
accurately test the new system. The comparison of strategies would need 
to be identified in the testing plan, demonstrating how sufficient go/
no-go decision criteria would be met by the proposed pilot and 
conversion methodology.
    4. Comment: There were three commenters who questioned how the 
proposed rule would affect enhancements to systems that are currently 
operational. One commenter stated the rule should only be applicable to 
full-scale development and not to maintenance and operation (M&O) 
efforts, but recommended that if applicable to M&O it should only apply 
to large scale additions of system components (e.g., online application

[[Page 7]]

system) and not to programmatic changes.
    Response: FNS believes system testing is part of the overall 
project management and risk management planning process and that it is 
essential for successful system implementation outcomes including 
enhancement work. For projects that cross the threshold requiring FNS 
prior approval (if the total project cost is $6 million or more), 
testing plan requirements will be based on the scope, level and risk 
involved in that particular project. A shorter pilot period or no pilot 
at all may be justified for enhancements to current systems that have 
been otherwise adequately tested.
    5. Comment: One commenter pointed out inconsistencies in references 
in the preamble to new systems design and implementation as opposed to 
reprogramming or adding new programming to an existing system. The rule 
references new, then occasionally references reprogramming of an 
existing system or adding new programming to an existing system.
    Response: FNS' intent is for the rule to apply to both new system 
design and implementation, and enhancements or reprogramming of an 
existing system, or adding new programming to an existing system.
    6. Comment: One commenter stated the proposed rule did not 
adequately define enhancements or changes, other than establishing a $6 
million threshold for total project costs, and that failure to 
adequately define enhancements could put the State at risk for failing 
to follow the rules when making maintenance changes in support of 
system processes.
    Response: FNS did provide in the proposed rule a definition for 
enhancements under Sec.  277.18(b), which states that enhancement means 
modifications which change the functions of software and hardware 
beyond their original purposes, not just to correct errors or 
deficiencies which may have been present in the software or hardware, 
or to improve the operational performance of the software or hardware. 
Software enhancements that substantially increase risk or cost or 
functionality, and which cross the $6 million threshold, will require 
submission of an Implementation Advance Planning Document (IAPD) or an 
As Needed IAPD Update (IAPDU).
    7. Comment: One commenter pointed out inconsistencies found in the 
rule relating to the thresholds for prior approval of projects and 
acquisitions. The phrases ``more than $6 million'' and ``$6 million and 
more'' were used interchangeably for the same threshold. The same 
applied to the ``more than $1 million'' non-competitive acquisition 
threshold.
    Response: FNS agrees there were inconsistencies in the proposed 
rule in stating the prior approval thresholds for competitive and non-
competitive acquisitions and has corrected the regulation threshold 
language to read ``$6 million or more'' and ``less than $6 million'' to 
be consistent.
    8. Comment: Two commenters recommended that States be permitted to 
implement the testing provisions of the rule prospectively and not 
retroactively. This is based on the concern that imposing this rule 
retroactively on existing projects and contracts would require 
rewriting schedules to allow sufficient time for FNS involvement and/or 
approval of a test plan prior to system implementation.
    Response: FNS believes Section 4121 of the Food, Conservation, and 
Energy Act of 2008 intended adequate system testing be applied to all 
projects in active development of a new State information system and 
that the testing requirements in this final rule become effective for 
active projects 60 days after publication in the Federal Register. 
Further, FNS believes that current projects should already have 
sufficient time built into the timeline to test and pilot the new 
system.
    9. Comment: Two commenters indicated the rule lacked detail 
regarding documentation that must be submitted to obtain written 
approval from FNS to expand beyond the pilot and stated concern that 
approval requirements could expand at the discretion of FNS.
    Response: In order for FNS to be more responsive to States that are 
implementing information systems, as circumstances warrant, specific 
content and detailed guidance for what type of documentation to submit 
can be found in FNS Handbook 901, ``Advanced Planning Documents''.
    10. Comment: Three commenters questioned FNS' response time for 
review of project documents.
    Response: As stated in Sec.  277.18(c)(5), FNS will reply promptly 
to State agency requests for prior approval. However, FNS has up to 60 
days to provide a written approval, disapproval or a request for 
additional information.
    11. Comment: Under Sec.  277.18(c)(5), it states that FNS will 
reply promptly to State agency requests for prior approval. One 
commenter questioned what does ``promptly reply'' mean.
    Response: Promptly reply would mean as soon as possible but no 
longer than 60 days as specified in regulation.
    12. Comment: Two commenters pointed out that the rule as proposed 
does not address specific timeframes for FNS to complete reviews for 
pre-implementation and post-implementation of the system. Also, one 
commenter was concerned that project schedules will have to accommodate 
FNS review time and could result in months of project delays and added 
costs for FNS and States.
    Response: As noted in the regulation at Sec.  277.18(g)(2) and 
(g)(2)(iii), these pre- and post- implementation reviews are optional, 
and the need for such reviews will be determined on a case-by-case 
basis based on the risk of the project. FNS will work with States to 
the extent possible to ensure project schedules are not adversely 
impacted. It is not FNS' intent to unnecessarily delay project 
implementation nor to add additional costs.
    13. Comment: One commenter expressed concern that FNS would have 
approval over a State's test, pilot, and implementation schedule and 
asked what would happen if FNS is unavailable to participate in go/no-
go decisions. The commenter recommended adding hold harmless language, 
protecting a State's funding or at the very least providing increased 
funding if implementation delays are caused by FNS' unavailability.
    Response: Again, FNS' intent is not to in any way unnecessarily 
delay a State's project timelines. FNS is committed to being available 
and will work with State agencies to provide the most expedited review 
as possible. A State agency can limit the potential impact of FNS 
review by ensuring that FNS is provided with the test plan, test 
results and pilot evaluation results in a timely manner throughout each 
phase.
    14. Comment: FNS regulations at Sec.  277.18(d)(1) currently state 
that the Planning Advance Planning Document (PAPD) shall contain 
adequate documentation to demonstrate the need to undertake a planning 
process. One commenter requested the rule define ``adequate 
documentation''.
    Response: In order for FNS to be more responsive to States that are 
implementing information systems and to revise requirements in the 
future by policy rather than regulation if circumstances warrant, 
specific content and detailed guidance for a PAPD can be found in FNS 
Handbook 901, ``Advanced Planning Documents.'' This is also the same 
for an Implementation APD (IAPD), Annual APDU and As Needed APDU.
    15. Comment: One commenter wanted to know which request for 
proposals (RFP) and contracts are ``specifically

[[Page 8]]

exempted'' from prior approval under Sec.  277.18(c)(2)(ii)(A) and 
(c)(2)(ii)(B).
    Response: As specified in regulation, any RFP and contract with a 
projected cost that is less than $6 million are exempted and 
noncompetitive acquisitions less than $1 million are exempted.
    16. Comment: One commenter requested clarification under Sec.  
277.18(f)(2) of the meaning of ``other State agency systems.'' 
Currently it states that in no circumstances will funding be available 
for systems which duplicate other State agency systems, whether 
presently operational or planned for future development.
    Response: To clarify, FNS will not fund systems that duplicate 
other State agency systems that already have similar functionality to 
support FNS programs. FNS will fund the ongoing operation (legacy) 
system during the development and implementation of its replacement.
    17. Comment: One comment was received regarding Sec.  277.18(h), 
which questioned if Federal financial participation (FFP) is 
disallowed, how long the suspension of FFP would last and how the 
suspension can be cured.
    Response: This would be determined by FNS on a case-by-case basis.
    18. Comment: One commenter requested additional clarification to 
identify which federal public assistance programs should be included 
when determining the 50 percent threshold for service agreements in 
Sec.  277.18(e)(6).
    Response: Typically FNS would designate programs such as, but not 
limited to, Temporary Assistance for Needy Families, Refugee 
Assistance, Child Support Enforcement, Child Welfare, and Medicaid.
    19. Comment: One commenter questioned how long service agreements 
must be kept as specified under Sec.  277.18(e)(9).
    Response: Supplemental Nutrition Assistance Program regulations at 
Sec.  272.1(f) require fiscal records and accountable documents be 
retained for a period of 3 years from the date of fiscal or 
administrative closure. Therefore, service agreements would be required 
to be kept for a period of 3 years beyond the expiration date.
    20. Comment: One commenter questioned whether the periodic risk 
analysis that the State agency must complete would be subject to review 
by FNS.
    Response: Yes, any documents produced as part of the information 
system security requirements and review process should be maintained by 
the State agency and be available for Federal review upon request.
    21. Comment: One commenter stated concern under Sec.  277.18(k) 
with FNS having access to code in development which raises security 
concerns and wants FNS to acknowledge that their staff will be subject 
to State procedures and policies to protect software and data 
integrity.
    Response: FNS is fully aware that State security procedures and 
policies would need to be followed and would ensure integrity of the 
system.

Procedural Matters

Executive Order 12866 and Executive Order 13563

    Executive Orders 12866 and 13563 direct agencies to assess all 
costs and benefits of available regulatory alternatives and, if 
regulation is necessary, to select regulatory approaches that maximize 
net benefits (including potential economic, environmental, public 
health and safety effects, distributive impacts, and equity). Executive 
Order 13563 emphasizes the importance of quantifying both costs and 
benefits, of reducing costs, of harmonizing rules, and of promoting 
flexibility.
    This final rule has been designated non-significant under section 
3(f) of Executive Order 12866.

Regulatory Flexibility Act

    This rule has been reviewed with regard to the requirements of the 
Regulatory Flexibility Act (5 U.S.C. 601-612). It has been certified 
that this rule would not have significant economic impact on a 
substantial number of small entities. State agencies which administer 
Supplemental Nutrition Assistance Program (SNAP) will be affected to 
the extent that they implement new State automated systems or major 
changes to existing systems.

Unfunded Mandates Reform Act

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

Executive Order 12372

    SNAP is listed in the Catalog of Federal Domestic Assistance under 
No. 10.561. For the reasons set forth in the final rule in 7 CFR part 
3015, Subpart V, and related Notice published at [48 FR 29114 for SNP 
(Special Nutrition Programs); 48 FR 29115 for FSP (Food Stamp 
Program)], June 24, 1983, this Program is excluded from the scope of 
Executive Order 12372, which requires intergovernmental consultation 
with State and local officials.

Executive Order 13132

    Executive Order 13132 requires Federal agencies to consider the 
impact of their regulatory actions on State and local governments. 
Where such actions have federalism implications, agencies are directed 
to provide a statement for inclusion in the preamble to the regulations 
describing the agency's considerations in terms of the three categories 
called for under section (6)(b)(2)(B) of Executive Order 13132 (Prior 
Consultation With State Officials, Nature of Concerns and the Need To 
Issue This Rule, and Extent to Which We Meet Those Concerns). FNS has 
considered the impact of this rule on State and local governments and 
determined that this rule does not have Federalism implications. This 
rule does not impose substantial or direct compliance costs on State 
and local governments. Therefore, under Section 6(b) of the Executive 
Order, a federalism summary impact statement is not required.

Executive Order 12988

    This rule has been reviewed under Executive Order 12988, Civil 
Justice Reform. This rule is intended to have preemptive effect with 
respect to any State or local laws, regulations or policies which 
conflict with its provisions or which would otherwise impede its full 
implementation. Prior to any judicial challenge to the provisions of 
this rule or the application of its provisions, all applicable 
administrative procedures must be exhausted.

[[Page 9]]

Executive Order 13175

    E.O. 13175 requires Federal agencies to consult and coordinate with 
Indian tribes on a government-to-government basis on policies that have 
tribal implications, including regulations, legislative comments or 
proposed legislation, and other policy statements or actions that have 
substantial direct effects on one or more Indian tribes, on the 
relationship between the Federal Government and Indian tribes, or on 
the distribution of power and responsibilities between the Federal 
Government and Indian tribes. In late 2010 and early 2011, USDA engaged 
in a series of consultative sessions to obtain input by Tribal 
officials or their designees concerning the affect of this and other 
rules on tribes or Indian Tribal governments, or whether this rule may 
preempt Tribal law. In regard to this rule, no adverse comments were 
offered at those sessions. Further, the policies contained in this rule 
would not have Tribal implications that preempt Tribal law. Reports 
from the consultative sessions will be made part of the USDA annual 
reporting on Tribal Consultation and Collaboration. FNS is unaware of 
any current Tribal laws that could be in conflict with the rule.

Civil Rights Impact Analysis

    FNS has reviewed this final rule in accordance with the Department 
Regulation 4300-4, ``Civil Rights Impact Analysis,'' to identify and 
address any major civil rights impacts the rule might have on 
minorities, women, and persons with disabilities. After a careful 
review of the rule's intent and provisions, and the characteristics of 
SNAP households and individual participants, FNS has determined that 
there are no civil rights impacts in this rule. All data available to 
FNS indicate that protected individuals have the same opportunity to 
participate in SNAP as non-protected individuals.
    FNS specifically prohibits the State and local government agencies 
that administer the Program from engaging in actions that discriminate 
based on age, race, color, sex, handicap, religious creed, national 
origin, or political beliefs. SNAP nondiscrimination policy can be 
found at Sec.  272.6(a). Where State agencies have options, and they 
choose to implement a certain provision, they must implement it in such 
a way that it complies with the regulations at Sec.  272.6. 
Discrimination in any aspect of program administration is prohibited by 
these regulations, the Food and Nutrition Act of 2008 (Pub. L. 110-
246), as amended (the Act), the Age Discrimination Act of 1975 (Pub. L. 
94-135), the Rehabilitation Act of 1973 (Pub. L. 93-112, section 504), 
and title VI of the Civil Rights Act of 1964 (42 U.S.C. 2000d). 
Enforcement action may be brought under any applicable Federal law. 
Title VI complaints shall be processed in accordance with 7 CFR part 
15.

Paperwork Reduction Act

    The Paperwork Reduction Act of 1995 (44 U.S.C. Chapter 35; see 5 
CFR part 1320) requires OMB approve all collections of information by a 
Federal agency from the public before they can be implemented. 
Respondents are not required to respond to any collection of 
information unless it displays a current valid OMB control number. This 
final rule contains information collections that are subject to review 
and approval by OMB. Therefore, FNS has submitted an information 
collection under 0584-0083, which contains the changes in burden from 
adoption of the proposed rule, for OMB's review and approval. When the 
information collection requirements have been approved, FNS will 
publish a separate action in the Federal Register announcing OMB's 
approval.
    Title: Program and Budget Summary Statement (Forms FNS-366A & FNS-
366B).
    OMB Number: 0584-0083.
    Expiration Date: 12/31/2013.
    Type of Request: Revision of a currently approved collection.
    Abstract: This final rule will have no impact on the State agency 
workload with regard to the additional testing requirements, as 
rigorous testing is already part of any well-managed systems project. 
Most State agencies will recognize the similarities between the 
documents already prepared during customary System Development Life 
Cycle (SDLC) processes, and those required by the Supplemental 
Nutrition Assistance Program (SNAP) Advance Planning Document (APD) 
approval processes. Although FNS is requiring information from State 
agencies on their plans for adequate system testing, FNS believes this 
information is already part of the regular SDLC process; it should 
already be in the State agencies' possession and only needs to be 
submitted to FNS for review and approval.
    Further, information collections associated with maintenance and 
operation (M&O) procurements, prescribed under Sec.  277.18, would be 
reduced as systems move past their implementation phase. Currently, 
State agencies are required to submit to FNS Implementation APDs (IAPD) 
for M&O of their ADP systems. This rule finalized that State agencies 
would no longer be required to submit this IAPD information unless they 
contain significant changes such as system development through 
modifications and/or enhancements. State agencies will continue to be 
asked to provide copies to FNS of the requests for proposals and 
contracts relating to system M&O.
    Currently it is estimated that up to 53 State agencies may submit 
an average of five (5) APD, Plan, or Update submissions for a total of 
265 annual responses. At an average estimate of 2.5 hours per response, 
the reporting burden is 662.5 hours. The recordkeeping burden, to 
maintain records of the approximately 265 annual responses, is 
estimated to average .11 minutes per record, for a total of 29.15 
recordkeeping burden hours. Since this rule will lessen the burden for 
submittal and recordkeeping of M&O IAPDs, it is now estimated that the 
burden will lessen to four (4) APD, Plan or Update submittals annually. 
This results in a reduction of 138.3 burden hours for reporting and 
recordkeeping.
    OMB number 0584-0083 includes burden hours for four information 
collection activities: form FNS-366A; form FNS-366B; the plan of 
operation updates submitted as attachments to the FNS-366B or waivers; 
and APD, Plan or Update submissions. As described above, the estimated 
burden for APD, Plan, or Update submissions will be reduced by this 
rulemaking. The other information collection burden estimates for 0584-
0083 remain unchanged. The estimated total annual burden for this 
collection is 2,728 (2,696 reporting hours and 32 recordkeeping hours). 
A summary of information collection burden appears in the table below:

[[Page 10]]



                                                           Burden Summary Table for 0584-0083
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                             Time per         Annual
              Affected public                  Information collection        Number of     Frequency of    Total annual      response        reporting
                                                     activities             respondents      response        responses        (hours)      burden hours
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                        Reporting
--------------------------------------------------------------------------------------------------------------------------------------------------------
State Agencies............................  FNS-366A....................           53               1              53              13.00          689.00
                                            FNS-366B....................           53               1              53              17.93          950.29
                                            Plan of Operation Updates              53               1              53               6.58          348.99
                                             (366B).
                                            Plan of Operation Updates              45               3.94          177.3             1.00          177.30
                                             (Waivers).
                                            Other APD Plan or Update....           53               4             212               2.5           530
Reporting Burden..........................                                         53     ..............          548.3   ..............        2,695.58
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                      Recordkeeping
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                            FNS-366A....................           53.00            1.00           53.00            0.05            2.65
                                            FNS-366B....................           53.00            1.00           53.00            0.05            2.65
                                            Plan of Operations..........           53.00            1.00           53.00            0.07            3.71
                                            Other APD Plan or Update....           53.00            4.00          212               0.11           23.32
Recordkeeping Burden......................                                         53.00  ..............          371     ..............           32.33
                                                                         -------------------------------------------------------------------------------
    Grand Total...........................                                         53              17.35          919.30            2.97        2,727.91
--------------------------------------------------------------------------------------------------------------------------------------------------------

E-Government Act Compliance

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

List of Subjects

7 CFR Part 271

    Food stamps, Grant programs-social programs, Reporting and 
recordkeeping requirements.

7 CFR Part 272

    Alaska, Civil rights, Claims, Food stamps, Grant programs-social 
programs, Reporting and recordkeeping requirements, Unemployment 
compensation, Wages.

7 CFR Part 274

    Food stamps, Grant programs-social programs, Reporting and 
recordkeeping requirements.

7 CFR Part 276

    Administrative practice and procedure, Food stamps, Fraud, Grant 
programs-social programs.

7 CFR Part 277

    Food stamps, Fraud, Grant programs-social programs, Reporting and 
recordkeeping requirements.

    Accordingly, 7 CFR Parts 271, 272, 274, 276 and 277 are amended as 
follows:

PART 271--GENERAL INFORMATION AND DEFINITIONS

0
1. The authority citation for part 271 continues to read as follows:

    Authority: 7 U.S.C. 2011-2036a.


0
2. Section 271.8 is amended by revising the entry for Sec.  277.18 to 
read as follows:


Sec.  271.8  Information collection/recordkeeping--OMB assigned control 
numbers.

------------------------------------------------------------------------
                                                            Current OMB
     7 CFR section where requirements are described         control No.
------------------------------------------------------------------------
 
                                * * * * *
277.18 (a), (c), (d), (f), (i)..........................       0584-0083
 
                                * * * * *
------------------------------------------------------------------------

PART 272--REQUIREMENTS FOR PARTICIPATING STATE AGENCIES

0
3. The authority citation for part 272 continues to read as follows:

    Authority: 7 U.S.C. 2011-2036a.


0
4. Section 272.1 is amended by revising the second sentence of 
paragraph (g)(159) to read as follows:


Sec.  272.1  General terms and conditions.

* * * * *
    (g) * * *
    (159) * * * The conforming amendment to Food Stamp Program 
regulations in Sec. Sec.  272.1(g), 272.2(c)(3), 272.11(d) and (e), 
274.12(k), 277.4(b) and (g), 277.9(b), 277.18(b), (d), and (f), and OMB 
Circular A-87 (2 CFR Part 225) are effective June 23, 2000.
* * * * *

0
5. Section 272.2 is amended by revising paragraph (f)(1)(i)(D) to read 
as follows:


Sec.  272.2  Plan of operation.

* * * * *
    (f) * * *
    (1) * * *
    (i) * * *
    (D) The revisions pertain to the addition of items requiring prior 
approval by FNS in accordance with the provisions of the applicable 
cost principles specified in OMB Circular A-87 (available on OMB's Web 
site at https://www.whitehouse.gov/omb/circulars_default/).
* * * * *

PART 274--ISSUANCE AND USE OF PROGRAM BENEFITS

0
6. The authority citation for part 274 continues to read as follows:

    Authority: 7 U.S.C. 2011-2036a.


0
7. Section 274.1 is amended by revising paragraph (e)(2), the last 
sentence of paragraph (f)(2)(vi), and paragraph (k)(2) to read as 
follows:


Sec.  274.1  Issuance system approval standards.

* * * * *
    (e) * * *
    (2) The State agency shall comply with the procurement standards 
prescribed under Sec.  277.18(c)(2)(iii) of this chapter. Under service 
agreements,

[[Page 11]]

the procurement of equipment and services which will be utilized in the 
SNAP EBT system shall be conducted in accordance with the provisions 
set forth under Sec.  277.18(e) of this chapter.
    (f) * * *
    (2) * * *
    (vi) * * * The contingency plan shall be incorporated into the 
State system security plan after FNS approval as prescribed at Sec.  
277.18(m) of this chapter.
* * * * *
    (k) * * *
    (2) The State agency shall comply with the provisions set forth 
under Sec.  277.18 of this chapter and OMB Circular A-87 (available on 
OMB's Web site at https://www.whitehouse.gov/omb/circulars_default/) in 
determining and claiming allowable costs for the EBT system.
* * * * *
0
8. Section 274.8 is amended by revising the introductory text of 
paragraph (b)(3) and the first sentence of paragraph (b)(3)(v) to read 
as follows:


Sec.  274.8  Function and technical EBT system requirements.

* * * * *
    (b) * * *
    (3) System security. As an addition to or component of the Security 
Program required of Automated Data Processing systems prescribed under 
Sec.  277.18(m) of this chapter, the State agency shall ensure that the 
following EBT security requirements are established:
* * * * *
    (v) A separate EBT security component shall be incorporated into 
the State agency Security Program for Automated Data Processing (ADP) 
systems where appropriate as prescribed under Sec.  277.18(m) of this 
chapter. * * *
* * * * *

PART 276--STATE AGENCY LIABILITIES AND FEDERAL SANCTIONS

0
9. The authority citation for part 276 continues to read as follows:

    Authority: 7 U.S.C. 2011-2036a.


0
10. Section 276.4 is amended by revising the first sentence in 
paragraph (d) to read as follows:


Sec.  276.4  Suspension/disallowance of administrative funds.

* * * * *
    (d) Warning process. Prior to taking action to suspend or disallow 
Federal funds, except those funds which are disallowed when a State 
agency fails to adhere to the cost principles of part 277 and OMB 
Circular A-87 (available on OMB's Web site at https://www.whitehouse.gov/omb/circulars_default/), FNS shall provide State 
agencies with written advance notification that such action is being 
considered. * * *
* * * * *

PART 277--PAYMENTS OF CERTAIN ADMINISTRATIVE COSTS OF STATE 
AGENCIES

0
11. The authority citation for part 277 continues to read as follows:

     Authority: 7 U.S.C. 2011-2036a.


0
12. Section 277.6(b)(6) is revised to read as follows:


Sec.  277.6  Standards for financial management systems.

* * * * *
    (b) * * *
    (6) Procedures to determine the reasonableness, allowability, and 
allocability of costs in accordance with the applicable provisions 
prescribed in OMB Circular A-87 (available on OMB's Web site at https://www.whitehouse.gov/omb/circulars_default/).
* * * * *

0
13. Section 277.9(c)(2) is revised to read as follows:


Sec.  277.9  Administrative cost principles.

* * * * *
    (c) * * *
    (2) Indirect cost. Allowable indirect costs may also be claimed at 
the 50 percent or higher reimbursement funding level as specified in 
this part and OMB Circular A-87 (available on OMB's Web site at https://www.whitehouse.gov/omb/circulars_default/).
* * * * *

0
14. In Sec.  277.13:
0
a. Revise the introductory text of paragraph (b)(2)(iii);
0
b. Revise paragraph (b)(2)(iii)(A);
0
c. Revise paragraph (b)(3);
0
d. Revise paragraph (c)(1);
0
e. Revise paragraph (e)(3); and
0
f. Revise the last sentence of paragraph (g).
    The revisions read as follows:


Sec.  277.13  Property.

* * * * *
    (b) * * *
    (2) * * *
    (iii) When the State agency no longer has need for such property in 
any of its federally financed activities, the property may be used for 
the State agency's own official activities in accordance with the 
following standards:
    (A) If the property had a total acquisition cost of less than 
$5,000, the State agency may use the property without reimbursement to 
FNS.
* * * * *
    (3) Disposition. If the State agency has no need for the property, 
disposition of the property shall be made as follows:
    (i) If the property had a total acquisition cost of less than 
$5,000 per unit, the State agency may sell the property and retain the 
proceeds.
    (ii) If the property had an acquisition cost of $5,000 or more per 
unit, the State agency shall:
    (A) If instructed to ship the property elsewhere, the State agency 
shall be reimbursed with an amount which is computed by applying the 
percentage of the State agency's participation in the cost of the 
property to the current fair market value of the property, plus any 
shipping or interim storage costs incurred.
    (B) If instructed to otherwise dispose of the property, the State 
agency shall be reimbursed by FNS for the cost incurred in such 
disposition.
    (C) If disposition or other instructions are not issued by FNS 
within 120 days of a request from the State agency, the State agency 
shall sell the property and reimburse FNS an amount which is computed 
by applying the percentage of FNS participation in the cost of the 
property to the sales proceeds. The State agency may, however, deduct 
and retain from FNS' share $500 or 10 percent of the proceeds, 
whichever is greater, for the State agency's selling and handling 
expenses.
    (c) Transfer of title to certain property. (1) Where FNS determines 
that an item of nonexpendable personal property with an acquisition 
cost of $5,000 or more which is to be wholly borne by FNS is unique, 
difficult, or costly to replace, FNS may reserve the right to require 
the State agency to transfer title of the property to the Federal 
Government or to a third party named by FNS.
* * * * *
    (e) * * *
    (3) Disposition. When there is no longer a need for the property in 
the program and there is a residual inventory exceeding $5,000 the 
State agency shall:
    (i) Use the property in other federally sponsored projects or 
programs;
    (ii) Retain the property for use on non-federally sponsored 
activities; or
    (iii) Sell it.
* * * * *
    (g) * * * This includes copyrights on ADP software as specified in 
OMB Circular A-87 (available on OMB's Web site at https://www.whitehouse.gov/omb/circulars_default/).

[[Page 12]]


0
15. Revise Sec.  277.16(b)(2) to read as follows:


Sec.  277.16  Suspension, disallowance and program closeout.

* * * * *
    (b) * * *
    (1) * * *
    (2) FNS may also disallow costs and institute recovery of Federal 
funds when a State agency fails to adhere to the cost principles of 
this part and OMB Circular A-87 (available on OMB's Web site at https://www.whitehouse.gov/omb/circulars_default/).
* * * * *

0
16. Revise Sec.  277.18 to read as follows:


Sec.  277.18  State Systems Advance Planning Document (APD) process.

    (a) Scope and application. This section establishes conditions for 
initial and continuing authority to claim Federal financial 
participation (FFP) for the costs of the planning, development, 
acquisition, installation and implementation of Information System (IS) 
equipment and services used in the administration of the Supplemental 
Nutrition Assistance Program (SNAP) and as prescribed by appropriate 
Food and Nutrition Service (FNS) directives and guidance (i.e., FNS 
Handbook 901, OMB Circulars, etc.).
    (b) Definitions. As used in this section:
    Acquisition means obtaining supplies or services through a purchase 
or lease, regardless of whether the supplies or services are already in 
existence or must be developed, created or evaluated.
    Advance Planning Document for project planning or Planning APD (APD 
or PAPD) means a brief written plan of action that requests FFP to 
accomplish the planning activities necessary for a State agency to 
determine the need for, feasibility of, projected costs and benefits of 
an IS equipment or services acquisition, plan the acquisition of IS 
equipment and/or services, and to acquire information necessary to 
prepare an Implementation APD.
    Advance Planning Document Update (APDU) means a document submitted 
annually (Annual APDU) by the State agency to report the status of 
project activities and expenditures in relation to the approved 
Planning APD or Implementation APD; or on an as needed basis (As Needed 
APDU) to request funding approval for project continuation when 
significant project changes occur or are anticipated.
    Commercial Off-the-Shelf (COTS) means proprietary software products 
that are ready-made and available for sale to the general public at 
established catalog or market prices in which the software vendor is 
not positioned as the sole implementer or integrator of the product.
    Enhancement means modifications which change the functions of 
software and hardware beyond their original purposes, not just to 
correct errors or deficiencies which may have been present in the 
software or hardware, or to improve the operational performance of the 
software or hardware. Software enhancements that substantially increase 
risk or cost or functionality will require submission of an IAPD or an 
As Needed IAPDU.
    Implementation Advance Planning Document or Implementation APD 
(IAPD) means a written plan of action requesting FFP to acquire and 
implement information system (IS) services and/or equipment. The 
Implementation APD includes the design, development, testing and 
implementation phases of the project.
    Information System (IS) means a combination of hardware and 
software, data and telecommunications that performs specific functions 
to support the State agency, or other Federal, State or local 
organization.
    Project means a related set of information technology related 
tasks, undertaken by a State, to improve the efficiency, economy and 
effectiveness of administration and/or operation of its human services 
programs. A project may also be a less comprehensive activity such as 
office automation, enhancements to an existing system, or an upgrade of 
computer hardware.
    Request for Proposal (RFP) means the document used for public 
solicitations of competitive proposals from qualified sources as 
outlined in Sec.  277.14(g)(3).
    (c) Requirements for FNS prior approval of IS projects--(1) General 
prior approval requirements. The State agency shall request prior FNS 
approval by submitting the Planning APD, the Implementation APD, an APD 
Update, the draft acquisition instrument, and/or the justification for 
the sole source acquisition if applicable, as specified in paragraph 
(c)(2) of this section. A State agency must obtain written approval 
from FNS to receive FFP of any of the following activities:
    (i) When it plans a project to enhance or replace its IS that it 
anticipates will have total project costs in Federal and State funds of 
$6 million or more.
    (ii) Any IS competitive acquisition that costs $6 million or more 
in Federal and State funds.
    (iii) When the State agency plans to acquire IS equipment or 
services non-competitively from a nongovernmental source, and the total 
State and Federal cost is more than $1 million.
    (iv) For the acquisition of IS equipment or services to be utilized 
in an Electronic Benefit Transfer (EBT) system regardless of the cost 
of the acquisition in accordance with Sec.  274.12 (EBT issuance system 
approval standards).
    (2) Specific prior approval requirements. (i) For IS projects which 
require prior approval, as specified in paragraph (c)(1) of this 
section, the State agency shall obtain the prior written approval of 
FNS for:
    (A) Conducting planning activities, entering into contractual 
agreements or making any other commitment for acquiring the necessary 
planning services;
    (B) Conducting design, development, testing or implementation 
activities, entering into contractual agreements or making any other 
commitment for the acquisition of IS equipment or services.
    (ii) For IS equipment and services acquisitions requiring prior 
approval as specified in paragraph (c)(1) of this section, prior 
approval of the following documents associated with such acquisitions 
is also required:
    (A) Requests for Proposals (RFPs). Unless specifically exempted by 
FNS, the State agency shall obtain prior written approval of the RFP 
before the RFP may be released. However, RFPs for acquisitions 
estimated to cost less than $6 million or competitive procurements from 
non-governmental sources and that are an integral part of the approved 
APD, need not receive prior approval from FNS. The State agency shall 
submit a written request to get prior written approval to acquire IS 
equipment or services non-competitively from a nongovernmental source 
when the total State and Federal cost is $1 million or more. State 
agencies shall submit RFPs under this threshold amount on an exception 
basis. The State agency shall obtain prior written approval from FNS 
for RFPs which are associated with an EBT system regardless of the 
cost.
    (B) Contracts. All contracts must be submitted to FNS. Unless 
specifically exempted by FNS, the State agency shall obtain prior 
written approval before the contract may be signed by the State agency. 
However, contracts for competitive procurements costing less than $6 
million and for noncompetitive acquisitions from nongovernmental 
sources costing less than $1 million and that are an integral part of 
the approved APD need not be submitted to FNS. State agencies shall 
submit contracts under this threshold amount on an exception basis. The 
State agency shall obtain prior written approval from FNS

[[Page 13]]

for contracts which are associated with an EBT system regardless of the 
cost.
    (C) Contract amendments. All contract amendments must be submitted 
to FNS. Unless specifically exempted by FNS, the State agency shall 
obtain prior written approval from FNS of any contract amendments which 
cumulatively exceed 20 percent of the base contract costs before being 
signed by the State agency. The State agency shall obtain prior written 
approval from FNS for contracts which are associated with an EBT system 
regardless of the cost.
    (iii) Procurement requirements.--(A) Procurements of IS equipment 
and services are subject to Sec.  277.14 (procurement standards) 
regardless of any conditions for prior approval contained in this 
section, except the requirements of Sec.  277.14(b)(1) and (b)(2) 
regarding review of proposed contracts. Those procurement standards 
include a requirement for maximum practical open and free competition 
regardless of whether the procurement is formally advertised or 
negotiated.
    (B) The standards prescribed by Sec.  277.14, as well as the 
requirement for prior approval in this paragraph (c), apply to IS 
services and equipment acquired primarily to support SNAP regardless of 
the acquiring entity.
    (C) The competitive procurement policy prescribed by Sec.  277.14 
shall be applicable except for IS services provided by the agency 
itself, or by other State or local agencies.
    (iv) The State agency must obtain prior written approval from FNS, 
as specified in paragraphs (c)(2)(i) and (c)(2)(ii) of this section, to 
claim and receive reimbursement for the associated costs of the IS 
acquisition.
    (3) Document submission requirements.--(i) For IS projects 
requiring prior approval as specified in paragraphs (c)(1) and (c)(2) 
of this section, the State agency shall submit the following documents 
to FNS for approval:
    (A) Planning APD as described in paragraph (d)(1) of this section.
    (B) Implementation APD as described in paragraph (d)(2) of this 
section.
    (C) Annual APDU as described in paragraph (d)(3) of this section. 
The Annual APDU shall be submitted to FNS 60 days prior to the 
expiration of the FFP approval, unless the submission date is 
specifically altered by FNS. In years where an As Needed APDU is 
required, as described in paragraph (c)(3)(i)(D) of this section, FNS 
may waive or modify the requirement to submit the annual APDU.
    (D) As Needed APDU as described in paragraph (d)(4) of this 
section. As Needed APDU are required to obtain a commitment of FFP 
whenever significant project changes occur. Significant project changes 
are defined as changes in cost, schedule, scope or strategy which 
exceed FNS-defined thresholds or triggers. Without such approval, the 
State agency is at risk for funding of project activities which are not 
in compliance with the terms and conditions of the approved APD and 
subsequently approved APDU until such time as approval is specifically 
granted by FNS.
    (E) Acquisition documents as described in Sec.  277.14(g).
    (F) Emergency Acquisition Requests as described in paragraph (i) of 
this section.
    (ii) The State agency must obtain prior FNS approval of the 
documents specified in paragraph (c)(3)(i) of this section in order to 
claim and receive reimbursement for the associated costs of the IS 
acquisition.
    (4) Approval by the State agency. Approval by the State agency is 
required for all documents and acquisitions specified in Sec.  277.18 
prior to submission for FNS approval. However, the State agency may 
delegate approval authority to any subordinate entity for those 
acquisitions of IS equipment and services not requiring prior approval 
by FNS.
    (5) Prompt action on requests for prior approval. FNS will reply 
promptly to State agency requests for prior approval. If FNS has not 
provided written approval, disapproval or a request for additional 
information within 60 days of FNS' acknowledgment of receipt of the 
State agency's request, the request will be deemed to have 
provisionally met the prior approval requirement in this paragraph (c). 
However, provisional approval will not exempt a State agency from 
having to meet all other Federal requirements which pertain to the 
acquisition of IS equipment and services. Such requirements remain 
subject to Federal audit and review.
    (d) APD content requirements--(1) Planning APD (PAPD). The PAPD is 
a written plan of action to acquire proposed services or equipment and 
to perform necessary activities to investigate the feasibility, system 
alternatives, requirements and resources needed to replace, modify or 
upgrade the State agency's IS. The PAPD shall contain adequate 
documentation to demonstrate the need to undertake a planning process, 
as well as a thorough description of the proposed planning activities, 
and estimated costs and timeline, as specified by FNS in Handbook 901.
    (2) Implementation APD (IAPD). The IAPD is a written plan of action 
to acquire the proposed IS services or equipment and to perform 
necessary activities to design, develop, acquire, install, test, and 
implement the new IS. The IAPD shall contain detailed documentation of 
planning and preparedness for the proposed project, as enumerated by 
FNS in Handbook 901, demonstrating the feasibility of the project, 
thorough analysis of system requirements and design, a rigorous 
management approach, stewardship of federal funds, a realistic schedule 
and budget, and preliminary plans for key project phases.
    (3) Annual APDU content requirements. The Annual APDU is a yearly 
update to ongoing IS projects when planning or implementation 
activities occur. The Annual APDU shall contain documentation on the 
project activity status and a description of major tasks, milestones, 
budget and any changes, as specified by FNS in Handbook 901.
    (4) As Needed APDU content requirements. The As Needed APDU 
document shall contain the items as defined in paragraph (c)(3)(i)(D) 
of this section with emphasis on the area(s) where changes have 
occurred or are anticipated that triggered the submission of the APDU, 
as detailed by FNS in Handbook 901.
    (e) Service agreements. The State agency shall execute service 
agreements when IS services are to be provided by a State central IT 
facility or another State or local agency. Service Agreement means the 
document signed by the State or local agency and the State or local 
central IT facility whenever an IT facility provides IT services to the 
State or local agency. Service agreements shall:
    (1) Identify the IS services that will be provided;
    (2) Include a schedule of rates for each identified IS service, and 
a certification that these rates apply equally to all users;
    (3) Include a description of the method(s) of accounting for the 
services rendered under the agreement and computing services charges;
    (4) Include assurances that services provided will be timely and 
satisfactory;
    (5) Include assurances that information in the IS as well as 
access, use and disposal of IS data will be safeguarded in accordance 
with provisions of Sec.  272.1(c) (disclosure) and Sec.  277.13 
(property);
    (6) Require the provider to obtain prior approval from FNS pursuant 
to paragraph (c)(1) of this section for IS equipment and IS services 
that are

[[Page 14]]

acquired from commercial sources primarily to support federally aided 
public assistance programs and require the provider to comply with 
Sec.  277.14 (procurement standards) for procurements related to the 
service agreement. IS equipment and services are considered to be 
primarily acquired to support federally aided public assistance 
programs when the Programs may reasonably be expected to either be 
billed for more than 50 percent of the total charges made to all users 
of the IS equipment and services during the time period covered by the 
service agreement, or directly charged for the total cost of the 
purchase or lease of IS equipment or services;
    (7) Include the beginning and ending dates of the period of time 
covered by the service agreement; and
    (8) Include a schedule of expected total charges to the Program for 
the period of the service agreement.
    (9) State Agency Maintenance of Service Agreements. The State 
agency shall maintain a copy of each service agreement in its files for 
Federal review upon request.
    (f) Conditions for receiving Federal financial participation 
(FFP).--(1) A State agency may receive FFP at the 50 percent 
reimbursement rate for the costs of planning, design, development or 
installation of IS and information retrieval systems if the proposed 
system will:
    (i) Assist the State agency in meeting the requirements of the Food 
and Nutrition Act of 2008, as amended;
    (ii) Meet the Automation of Data Processing/Computerization of 
Information Systems Model Plan program standards specified in Sec.  
272.10(b)(1) through (b)(3) of this chapter, except the requirements in 
Sec.  272.10(b)(2)(vi), (b)(2)(vii), and (b)(3)(ix) of this chapter to 
eventually transmit data directly to FNS;
    (iii) Be likely to provide more efficient and effective 
administration of the program; and
    (iv) Be compatible with such other systems utilized in the 
administration of other State agency programs including the program of 
Temporary Assistance for Needy Families (TANF).
    (2) State agencies seeking FFP for the planning, design, 
development or installation of IS shall develop State wide systems 
which are integrated with TANF. In cases where a State agency can 
demonstrate that a local, dedicated, or single function (issuance or 
certification only) system will provide for more efficient and 
effective administration of the program, FNS may grant an exception to 
the State wide integrated requirement. These exceptions will be based 
on an assessment of the proposed system's ability to meet the State 
agency's need for automation. Systems funded as exceptions to this 
rule, however, should be capable to the extent necessary, of an 
automated data exchange with the State agency system used to administer 
TANF. In no circumstances will funding be available for systems which 
duplicate other State agency systems, whether presently operational or 
planned for future development.
    (g) Basis for continued Federal financial participation (FFP).--(1) 
FNS will continue FFP at the levels approved in the Planning APD and 
the Implementation APD provided that project development proceeds in 
accordance with the conditions and terms of the approved APD and that 
IS resources are used for the purposes authorized. FNS will use the 
APDU to monitor IS project development. The submission of the Update as 
prescribed in Sec.  277.18(d) for the duration of project development 
is a condition for continued FFP. In addition, periodic onsite reviews 
of IS project development and State and local agency IS operations may 
be conducted by or for FNS to assure compliance with approved APDs, 
proper use of IS resources, and the adequacy of State or local agency 
IS operations.
    (2) Pre-implementation. The State agency must demonstrate through 
thorough testing that the system meets all program functional and 
performance requirements. FNS may require a pre-implementation review 
of the system to validate system functionality prior to State agency 
testing.
    (i) Testing. The State agency must provide a complete test plan 
prior to the start of the testing phase. The State agency must provide 
documentation to FNS of the results of User Acceptance Testing (UAT) 
before the system is piloted in a production environment. FNS 
concurrence to advance from testing to pilot is a condition for 
continued FFP. All aspects of program eligibility must be tested to 
ensure that the system makes accurate eligibility determinations in 
accordance with federal statutes and regulations and approved State 
policies, and that system functionality meets the required functional 
specifications. The State agency shall describe how all system testing 
will be conducted and the resources to be utilized in order to verify 
the system complies with SNAP requirements, system design 
specifications, and performance standards including responsiveness, 
usability, capacity and security. Testing includes but is not limited 
to unit testing, integration testing, performance testing, end-to-end 
testing, UAT and regression testing. During UAT detailed scripts 
covering all areas of program functionality shall be used so that any 
errors identified can be replicated, corrected and re-tested. At a 
minimum, the Test Plan shall address:
    (A) The types of testing to be performed;
    (B) The organization of the test team and associated 
responsibilities;
    (C) Test database generation;
    (D) Test case development;
    (E) Test schedule;
    (F) Documentation of test results;
    (G) Acceptance testing, to include functional requirements testing, 
error condition handling and destructive testing, security testing, 
recovery testing, controls testing, stress and throughput performance 
testing, and regression testing; and
    (H) The decision criteria, including specific test results which 
must be met before the State may exit the testing phase, the roles or 
titles of the individuals responsible for verifying that these criteria 
have been met, and the sign-off process which will document that the 
criteria have been met.
    (I) FNS may require any or all of these tests to be repeated in 
instances where significant modifications are made to the system after 
these tests are initially completed or if problems that surfaced during 
initial testing warrant a retest. FNS reserves the right to participate 
and conduct independent testing, as necessary, during UAT and at 
appropriate times during system design, development, implementation and 
operations.
    (ii) Pilot. Prior to statewide rollout of the system there must be 
a test of the fully operational system in a live production 
environment. Pilots must operate until a state of routine operation is 
reached with the full caseload in the pilot area. The design of this 
pilot shall provide an opportunity to test all components of the system 
as well as the data conversion process and system performance. The 
duration of the pilot must be for a sufficient period of time to 
thoroughly evaluate the system (usually a minimum duration of three 
months). The State agency must provide documentation to FNS of the 
pilot evaluation. FNS approval to implement the system more broadly is 
a condition for continued FFP.
    (iii) Post-implementation Review. After the system is fully 
implemented, FNS may conduct a review to validate that program policy 
is correctly applied, whether project goals and objectives were met, 
that IS equipment and

[[Page 15]]

services are being properly used and accurate inventory records exist, 
and the actual costs of the project.
    (h) Disallowance of Federal financial participation (FFP). If FNS 
finds that any acquisition approved under the provisions of paragraph 
(c) of this section fails to comply with the criteria, requirements and 
other undertakings described in the approved or modified APD, payment 
of FFP may be suspended or may be disallowed in whole or in part.
    (i) Emergency acquisition requirements. The State agency may 
request FFP for the costs of IS equipment and services acquired to meet 
emergency situations in which the State agency can demonstrate to FNS 
an immediate need to acquire IS equipment or services in order to 
continue operation of SNAP; and the State agency can clearly document 
that the need could not have been anticipated or planned for and 
precludes the State from following the prior approval requirements of 
paragraph (c) of this section. FNS may provide FFP in emergency 
situations if the following conditions are met:
    (1) The State agency must submit a written request to FNS prior to 
the acquisition of any IS equipment or services. The written request 
shall include:
    (i) A brief description of the IS equipment and/or services to be 
acquired and an estimate of their costs;
    (ii) A brief description of the circumstances which result in the 
State agency's need to proceed with the acquisition prior to fulfilling 
approval requirements at paragraph (c) of this section; and
    (iii) A description of the adverse impact which would result if the 
State agency does not immediately acquire the IS equipment and/or 
services.
    (2) Upon receipt of a written request for emergency acquisition FNS 
shall provide a written response to the State agency within 14 days. 
The FNS response shall:
    (i) Inform the State agency that the request has been disapproved 
and the reason for disapproval; or,
    (ii) FNS recognizes that an emergency situation exists and grants 
conditional approval pending receipt of the State agency's formal 
submission of the IAPD information specified at paragraph (d)(2) of 
this section within 90 days from the date of the State agency's initial 
written request.
    (iii) If FNS approves the request submitted under paragraph (i)(1) 
of this section, FFP will be available from the date the State agency 
acquires the IS equipment and services.
    (iv) If the complete IAPD submission required by paragraph (d)(2) 
of this section is not received by FNS within 90 days from the date of 
the initial written request, costs may be subject to disallowance.
    (j) General cost requirements. -- (1) Cost determination. Actual 
costs must be determined in compliance with OMB Circular A-87 
(available on OMB's Web site at https://www.whitehouse.gov/omb/circulars_default/) and an FNS approved budget, and must be 
reconcilable with the approved FNS funding level. A State agency shall 
not claim reimbursement for costs charged to any other Federal program 
or uses of IS systems for purposes not connected with SNAP. The 
approved APD cost allocation plan includes the methods which will be 
used to identify and classify costs to be claimed. This methodology 
must be submitted to FNS as part of the request for FNS approval of 
funding as required in paragraph (d) of this section. Operational costs 
are to be allocated based on the statewide cost allocation plan rather 
than the APD cost plan. Approved cost allocation plans for ongoing 
operational costs shall not apply to IS system development costs under 
this section unless documentation required under paragraph (c) of this 
section is submitted to and approvals are obtained from FNS. Any APD-
related costs approved by FNS shall be excluded in determining the 
State agency's administrative costs under any other section of this 
part.
    (2) Cost identification for purposes of FFP claims. State agencies 
shall assign and claim the costs incurred under an approved APD in 
accordance with the following criteria:
    (i) Development costs. Using its normal departmental accounting 
system, in accordance with the cost principles set forth in OMB 
Circular A-87 (available on OMB's Web site at https://www.whitehouse.gov/omb/circulars_default/), the State agency shall 
specifically identify what items of costs constitute development costs, 
assign these costs to specific project cost centers, and distribute 
these costs to funding sources based on the specific identification, 
assignment and distribution outlined in the approved APD. The methods 
for distributing costs set forth in the APD should provide for 
assigning identifiable costs, to the extent practicable, directly to 
program/functions. The State agency shall amend the cost allocation 
plan required by Sec.  277.9 (administrative cost principles) to 
include the approved APD methodology for the identification, assignment 
and distribution of the development costs.
    (ii) Operational costs. Costs incurred for the operation of an IS 
shall be identified and assigned by the State agency to funding sources 
in accordance with the approved cost allocation plan required by Sec.  
277.9 (administrative cost principles).
    (iii) Service agreement costs. States that operate a central data 
processing facility shall use their approved central service cost 
allocation plan required by OMB Circular A-87 (available on OMB's Web 
site at https://www.whitehouse.gov/omb/circulars_default/) to identify 
and assign costs incurred under service agreements with the State 
agency. The State agency shall then distribute these costs to funding 
sources in accordance with paragraphs (j)(2)(i) and (ii) of this 
section.
    (3) Capital expenditures. The State agency shall charge the costs 
of IT equipment having unit acquisition costs or total aggregate costs, 
at the time of acquisition, of more than $25,000 by means of 
depreciation or use allowance, unless a waiver is specifically granted 
by FNS. If the equipment acquisition is part of an APD that is subject 
to the prior approval requirements of paragraph (c)(2) of this section, 
the State agency may submit the waiver request as part of the APD.
    (4) Claiming costs. Prior to claiming funding under this section 
the State agency shall have complied with the requirements for 
obtaining approval and prior approval of paragraph (c) of this section.
    (5) Budget authority. FNS approval of requests for funding shall 
provide notification to the State agency of the budget authority and 
dollar limitations under which such funding may be claimed. FNS shall 
provide this amount as a total authorization for such funding which may 
not be exceeded unless amended by FNS. FNS's determination of the 
amount of this authorization shall be based on the budget submitted by 
the State agency. Activities not included in the approved budget, as 
well as continuation of approved activities beyond scheduled deadlines 
in the approved plan, shall require FNS approval of an As Needed APD 
Update as prescribed in paragraphs (c)(3)(i)(D) and (d)(4) of this 
section, including an amended State budget. Requests to amend the 
budget authorization approved by FNS shall be submitted to FNS prior to 
claiming such expenses.
    (k) Access to the system and records. Access to the system in all 
aspects, including but not limited to design, development, and 
operation, including work performed by any source, and

[[Page 16]]

including cost records of contractors and subcontractors, shall be made 
available by the State agency to FNS or its authorized representatives 
at intervals as are deemed necessary by FNS, in order to determine 
whether the conditions for approval are being met and to determine the 
efficiency, economy and effectiveness of the system. Failure to provide 
full access to all parts of the system may result in suspension and/or 
termination of SNAP funds for the costs of the system and its 
operation.
    (l) Ownership rights--(1) Software.--(i) The State or local 
government shall include a clause in all procurement instruments which 
provides that the State or local government shall have all ownership 
rights in any software or modifications thereof and associated 
documentation designed, developed or installed with FFP under this 
section.
    (ii) FNS reserves a royalty-free, nonexclusive, and irrevocable 
license to reproduce, publish or otherwise use and to authorize others 
to use for Federal Government purposes, such software, modifications 
and documentation.
    (iii) Proprietary operating/vendor software packages which meet the 
definition of COTS at paragraph (b) of this section shall not be 
subject to the ownership provisions in paragraphs (l)(1)(i) and 
(l)(1)(ii) of this section. FFP is not available for development costs 
for proprietary application software developed specifically for SNAP.
    (2) Information Systems equipment. The policies and procedures 
governing title, use and disposition of property purchased with FFP, 
which appear at Sec.  277.13 (Property) are applicable to IS equipment.
    (m) Information system security requirements and review process--
(1) Information system security requirements. State and local agencies 
are responsible for the security of all IS projects under development, 
and operational systems involved in the administration of SNAP. State 
and local agencies shall determine appropriate IS security requirements 
based on recognized industry standards or compliance with standards 
governing security of Federal information systems and information 
processing.
    (2) Information security program. State agencies shall implement 
and maintain a comprehensive Security Program for IS and installations 
involved in the administration of the SNAP. Security Programs shall 
include the following components:
    (i) Determination and implementation of appropriate security 
requirements as prescribed in paragraph (m)(1) of this section.
    (ii) Establishment of a security plan and, as appropriate, policies 
and procedures to address the following areas of IS security:
    (A) Physical security of IS resources;
    (B) Equipment security to protect equipment from theft and 
unauthorized use;
    (C) Software and data security;
    (D) Telecommunications security;
    (E) Personnel security;
    (F) Contingency plans to meet critical processing needs in the 
event of short- or long-term interruption of service;
    (G) Emergency preparedness; and
    (H) Designation of an Agency IS Security Manager.
    (iii) Periodic risk analyses. State agencies shall establish and 
maintain a program for conducting periodic risk analyses to ensure that 
appropriate, cost-effective safeguards are incorporated into new and 
existing systems. In addition, risk analyses shall be performed 
whenever significant system changes occur.
    (3) IS security reviews. State agencies shall review the security 
of IS involved in the administration of SNAP on a biennial basis. At a 
minimum, the reviews shall include an evaluation of physical and data 
security, operating procedures and personnel practices. State agencies 
shall maintain reports of their biennial IS security reviews, together 
with pertinent supporting documentation, for Federal review upon 
request.
    (4) Applicability. The security requirements of this section apply 
to all IS systems used by State and local governments to administer 
SNAP.

    Dated: December 24, 2013.
Yvette S. Jackson,
Acting Administrator, Food and Nutrition Service.
[FR Doc. 2013-31347 Filed 12-31-13; 8:45 am]
BILLING CODE 3410-30-P