[Code of Federal Regulations]
[Title 7, Volume 4]
[Revised as of January 1, 2004]
From the U.S. Government Printing Office via GPO Access
[CITE: 7CFR235.5]

[Page 263-265]
 
                          TITLE 7--AGRICULTURE
 
    CHAPTER II--FOOD AND NUTRITION SERVICE, DEPARTMENT OF AGRICULTURE
 
PART 235_STATE ADMINISTRATIVE EXPENSE FUNDS--Table of Contents
 
Sec.  235.5  Payments to States.

    (a) Method of payment. FNS will specify the terms and conditions of 
the State agency's annual grant of SAE funds in conjunction with the 
grant award document and will make funds available for payment by means 
of a Letter of Credit issued in favor of the State agency. The total 
amount of a State agency's grant shall be equal to the sum of the 
amounts allocated to such agency under Sec.  235.4 plus or minus

[[Page 264]]

any adjustments resulting from the reallocation provisions under 
paragraph (d) of this section plus any transfers under Sec.  235.6(a) 
and/or Sec.  235.6(c) of this part. The amount of SAE funds made 
available for payment to a State agency in any fiscal year shall be 
determined by FNS upon approval of the State agency's administrative 
plan under paragraph (b) of this section and any amendments to such plan 
under paragraph (c) of this section. Funds shall not be made available 
before the State agency's plan or amendment to such plan, as applicable, 
has been approved by FNS. However, if the plan has not been approved by 
October 1 of the base year, FNS may advance SAE funds to the State 
agency, in amounts determined appropriate by FNS, pending approval of 
the plan.
    (b) Administrative plan. (1) Each State agency shall submit, subject 
to FNS approval, an initial State Administrative Expense plan based upon 
guidance provided by FNS. This base year plan shall include:
    (i) The staffing pattern for State level personnel;
    (ii) A budget for the forthcoming fiscal year showing projected 
amounts (combined SAE and State funds) by cost category;
    (iii) The total amount of budgeted funds to be provided from State 
sources;
    (iv) The total amount of budgeted funds to be provided under this 
part;
    (v) The State agency's estimate of the total amount of budgeted 
funds (combined SAE and State funds) attributable to administration of 
the School Nutrition Programs (National School Lunch, School Breakfast 
and Special Milk Programs), Child and Adult Care Food Program, and/or 
Food Distribution Program in schools and child and adult care 
institutions and to each of the major activity areas of the State 
agency; and
    (vi) The State agency's estimate of the total Child and Adult Care 
Food Program audit funds to be used for the forthcoming fiscal year.
    (2) These activity areas shall be defined and described by the State 
agency in accordance with guidance issued by FNS and may include such 
activities as program monitoring, technical assistance, Federal 
reporting/claims processing, policy implementation, and allocation of 
foods to recipient agencies.
    (3) Except in specific instances where determined necessary by FNS, 
State agencies shall not be required to maintain expenditure records by 
activity area or program. State agencies shall refer to Office of 
Management and Budget Circular A-87, Attachment B, to establish cost 
categories.
    (4) FNS shall approve a State agency's plan, or any amendment to 
such plan under paragraph (c) of this section, if it determines that the 
plan or amendment is consistent with program administrative needs and 
SAE requirements under this part.
    (5) To the extent practicable, State agencies shall implement their 
approved plans (as amended). FNS shall monitor State agency 
implementation of the plans through management evaluations, State agency 
reports submitted under this part, audits, and through other available 
means.
    (6) FNS may expand plan requirements for individual State agencies 
in order to address specific administrative deficiencies which affect 
compliance with program requirements and which have been identified by 
FNS through its monitoring activities.
    (c) Amendments to the administrative plan. A State agency may amend 
its plan at any time to reflect changes in funding or activities, except 
that, if such changes are substantive as defined in the June 5, 1997 
guidance, and any amendments or updates to this guidance, the State 
agency shall amend its plan in accordance with guidance provided by FNS. 
Plan amendments shall provide information in a format consistent with 
that provided in the State agency's plan, but shall only require FNS 
approval if it results in a substantive change as defined by FNS.
    (d) Reallocation of funds. Annually, between March 1 and May 1 on a 
date specified by FNS, of each year, each State agency shall submit to 
FNS a State Administrative Expense Funds Reallocation Report (FNS-525) 
on the use of SAE funds. At such time, a State agency may release to FNS 
any funds that have been allocated, reallocated or transferred to it 
under this part or

[[Page 265]]

may request additional funds in excess of its current grant level. Based 
on this information or on other available information, FNS shall 
reallocate, as it determines appropriate, any funds allocated to State 
agencies in the current fiscal year which will not be expended in the 
following fiscal year and any funds carried over from the prior fiscal 
year which will not be expended in the current fiscal year. Reallocated 
funds shall be made available for payment to a State agency upon 
approval by FNS of the State agency's amendment to the base year plan 
which covers the reallocated funds, if applicable. Notwithstanding any 
other provision of this part, a State agency may, at any time, release 
to FNS for reallocation any funds that have been allocated, reallocated 
or transferred to it under this part and are not needed to implement its 
approved plan under this section.
    (e) Return of funds. (1) In Fiscal Year 1991, up to 25 per cent of 
the SAE funds allocated to each State agency under Sec.  235.4 may 
remain available for obligation and expenditure in the second fiscal 
year of the grant. In subsequent fiscal years, up to 20 percent may 
remain available for obligation and expenditure in the second fiscal 
year. The maximum amount to remain available will be calculated at the 
time of the formula allocation by multiplying the appropriate percentage 
by each State agency's formula allocation as provided under Sec.  
235.4(a) through (c). At the end of the first fiscal year, the amount 
subject to the retention limit is determined by subtracting the amount 
reported by the State agency as Total Federal share of outlays and 
unliquidated obligations on the fourth quarter Standard Form (SF) 269, 
Financial Status Report, from the total amount of SAE funds made 
available for that fiscal year (i.e., the formula allocation adjusted 
for any transfers or reallocations). However, funds provided under Sec.  
235.4(d) are not subject to the retention limit. Any funds in excess of 
the amount that remains available to each State agency shall be returned 
to FNS.
    (2) At the end of the fiscal year following the fiscal year for 
which funds were allocated, each State agency shall return any funds 
made available which are unexpended.
    (3) Return of funds by the State agency shall be made as soon as 
practicable, but in any event, not later than 30 days following demand 
by FNS.

[Amdt. 14, 51 FR 27151, July 30, 1986, as amended by Amdt. 17, 55 FR 
1378, Jan. 16, 1990; 60 FR 15462, Mar. 24, 1995]

[41 FR 32405, Aug. 3, 1976, as amended at 64 FR 50743, Sept. 20, 1999]