UNITED STATES DEPARTMENT OF AGRICULTURE

CFDA 10.557 SPECIAL SUPPLEMENTAL NUTRITION PROGRAM FOR WOMEN, INFANTS, AND CHILDREN (WIC)

I. PROGRAM OBJECTIVES

The objective of the Special Supplemental Nutrition Program for Women, Infants and Children (WIC) is to provide supplemental nutritious foods, nutrition education, and referrals to health care for low-income persons during critical periods of growth and development. Such persons include low-income pregnant women, breast-feeding women up to one year postpartum, non-breast-feeding women up to six months postpartum, infants (persons under one year of age), and children under age five determined to be at nutritional risk. Intervention during the prenatal period improves fetal development and reduces the incidence of low birth weight, short gestation, and anemia.

II. PROGRAM PROCEDURES

WIC Program regulations are found in 7 CFR part 246.

Administration

The U.S. Department of Agriculture (USDA) Food and Consumer Service (FCS) administers the WIC program through grants awarded to State health departments or comparable State agencies, Indian tribal governments, bands or intertribal councils, or groups recognized by the Bureau of Indian Affairs, U.S. Department of the Interior, or the Indian Health Service (IHS) of the U.S. Department of Health and Human Services. These WIC State agencies, in turn, award subgrants to local agencies to certify applicants' eligibility for WIC program benefits and deliver such benefits to eligible persons. Organizations eligible to serve as WIC local agencies include public or private non-profit health agencies, human service agencies which provide health services, and IHS health units.

Funding of WIC Program Costs

The WIC program is a grant program that is 100 percent federally-funded (7 CFR sections 246.16(a), (b), and (c)). No State matching requirement exists. Funds are awarded by FCS on the basis of funding formulas prescribed in the WIC program regulations.

FCS allocates federally-appropriated funds to WIC State agencies as grants which are divided into two parts: a grant for food costs and a grant for nutrition services and administrative (NSA) costs. The objectives of the food grant funding formula are to provide program stability by maintaining each State agency's prior year operating level and to encourage program growth by providing a greater share of funds to those State agencies receiving comparatively less than their fair share of funds based on their WIC eligible population. The NSA funding formula strives to preserve a reasonable measure of funding stability, while promoting funding levels that provide equivalent service to participants, and to promote incentives for reducing food costs so that more persons may be served.

Resources available to a State agency for program purposes under the two components of its initial Federal WIC formula grant may be modified by the cumulative effect of the following requirements:

Reallocations and Recoveries

The WIC program's authorizing statute and regulations require FCS to recover unspent funds and reallocate them to State agencies.

Conversion Authority

A State agency that achieves WIC participation increases under a cost containment strategy, as outlined under the "Cost Containment Requirements" section below, in excess of the increases projected by FCS in the NSA funds allocation formula, may shift a portion of its food grant component to its NSA component. This "conversion authority" is a function of the "excess" participation increase and is determined by FCS.

Spending Options

Federal legislation and regulations authorize a State agency to shift a portion of its Federal WIC formula grant between grant periods (Federal fiscal years).

Rebates

A State agency may contract with a food manufacturer to receive a rebate on each unit of the manufacturer's product purchased with food instruments (FI) redeemed by program participants. Such rebates are credits against prior expenditures made during the month in which the rebate was earned for WIC food costs. Rebates held in State accounts are exempt from the interest provisions of the Cash Management Improvement Act (CMIA) and 31 CFR part 205.

Vendor and Participant Collections

A State agency is authorized to retain Federal program funds recovered through claims action against vendors and participants and to use such recoveries for program purposes. Like rebates, post-payment vendor and participant collections are credits against prior expenditures for WIC food costs. Such credits may be applied to expenditures for food in the fiscal year in which the collection is received or in the fiscal year in which the food instrument resulting in the collection was issued. Pre-payment vendor collections are improper payments prevented, not recoveries of food outlays. Therefore, they represent credits to vendor billings, not prior expenditures. The State agency may credit up to 100 percent of its vendor and participant collections for NSA costs. This authority is in addition to the conversion authority related to cost containment initiatives outlined above (Section 17(f)(23) of the Child Nutrition Act of 1966, as amended (42 USC 1786(f)(23).

Program Income

Certain miscellaneous receipts a State agency collects as the result of WIC program operations are classified as program income (7 CFR 246.15).

State Funding

Although the Federal financial participation (FFP) for WIC is 100 percent, some States voluntarily appropriate funds from their own revenues to extend WIC services beyond the level that could be supported by Federal funding alone.

Certification

Applicants for WIC program benefits are screened at WIC clinic sites to determine whether they meet the eligibility criteria in the following categories: categorical, residency, income, and nutritional risk (7 CFR sections 246.7(c), (d), (e), and (g)).

Benefits

The WIC program provides participants with specific nutritious supplemental foods, nutrition education, and health services referrals at no cost. The authorized supplemental foods are prescribed from standard food packages according to the category and nutritional need of the participant. The seven food packages available are described in detail in WIC program regulations (7 CFR section 246.10). In general, infants receive iron-fortified formula, iron-fortified infant cereal, and fruit juices high in vitamin C. Participating women and children receive fortified milk and/or cheese, eggs, hot or cold cereals high in iron, fruit and vegetable juices high in vitamin C, and either peanut butter or dry beans/peas. In addition to these foods, certain breast-feeding women also receive tuna, carrots, and both peanut butter and dry beans/peas.

About 75 percent of the WIC program's annual appropriation is used to provide WIC participants with monthly food package benefits. The remainder is used to provide additional benefits and to manage the program. Additional benefits provided to WIC participants include nutrition education, breast-feeding promotion and support activities, and client services, such as diet and health assessments, referral services for other health care and social services, and coordination activities.

Food Benefit Delivery

Supplemental foods are provided to participants in any one of the following three ways (7 CFR section 246.12(b)):

Direct Distribution (used only in Mississippi and parts of Illinois)

The State agency and/or its agent purchases supplemental foods in bulk and issues them to participants at designated distribution points.

Home Delivery (used in Vermont and parts of Ohio)

Contractual arrangements with dairies provide for the delivery of supplemental foods directly to participants' homes.

Retail Purchase System (used by most States)

Negotiable food instruments (FIs) are issued directly to individual participants and the participants exchange them for authorized supplemental foods at retail stores. Two types of retail systems are used: voucher systems and check systems. In a voucher system, the vendor submits the voucher directly to the State agency for payment; in a check system, vendors deposit checks to their bank accounts and the State reimburses the banks. A participant must use an FI within 30 days of its issuance date, and the vendor must submit the FI for payment within 90 days of the issuance.

Each FI issued to a participant must have a unique serial number. The State agency is required to reconcile all redeemed FIs to issuance records (generally created at the local agency level) by serial number within 150 days of the first valid date for participant use.

A State agency must adjust previously reported obligations for WIC food costs in order to account for actual FI redemptions and other changes in the status of FIs. A State agency is also subject to claims action for the value of redeemed, unreconciled FIs. While the State agency is required to reconcile all redeemed FIs to issuance records, FCS may determine that the reconciliation process has been satisfactorily completed if certain conditions have been met. These conditions are: (1) the State can demonstrate that all reasonable management efforts were devoted to achieving 100 percent reconciliation; and (2) 99 percent or more of redeemed FIs were reconciled (7 CFR section 246.23(a)(4)).

Cost Containment Requirements

In an effort to use their food funding more efficiently, all WIC State agencies in the 50 States, the District of Columbia, Puerto Rico, Guam, the Virgin Islands, American Samoa, and most Indian Tribal State agencies have implemented cost containment activities (7 CFR sections 246.16(j) through (o)).

The Child Nutrition and WIC Reauthorization Act of 1989 (Public Law 101-147), enacted November 10, 1989, requires WIC State agencies to explore the feasibility of implementing one of four acceptable cost containment initiatives: competitive bidding, rebates, home delivery, or direct distribution. A substantial portion of WIC's participation increases is attributable to the success of cost containment measures. Reducing the average food cost per person enables WIC to reach more participants with a given amount of funds. The most successful strategy has been the negotiation of competitive rebate contracts between State agencies and infant formula companies. Such contracts provide for the State agency to receive rebates on infant formula used in the program.

State Responsibilities

A State administering the WIC program must sign a Federal/State Agreement that commits it to observe applicable laws and regulations in carrying out the program (7 CFR section 246.3(c)). Section 17 of the Child Nutrition Act of 1966 (42 USC 1786), the authorizing legislation for the WIC Program, prescribes the basic goals of the WIC program. States are required to establish an ongoing management evaluation system; to conduct monitoring reviews of each local agency at least biennially, including on-site reviews of 20 percent of the clinics in each local agency; and to monitor 10 percent of their authorized vendors annually (7 CFR section 246.12(i)). The State must also ensure corrective action is taken in response to the detection of program deficiencies and fully document the results of reviews and corrective action plans. Monitoring of local agencies encompasses evaluation of management, certification, nutrition education, civil rights compliance, accountability, financial management systems, and food delivery systems (7 CFR section 246.19(b)).

State and local agencies prepare a WIC Local Agency Directory Report (FCS-648), updated as needed, to inform FCS of additions, deletions, or address changes for the local agencies administering the WIC Program. FCS uses the data to maintain and issue a current WIC Local Agency Directory. This directory is used by FCS and State and local agencies to provide potential Program participants with the correct name, address and phone number of the nearest WIC local agency. FCS also uses this information for mailings of publications and other important information.

Federal Oversight and Compliance Mechanisms

FCS oversees State operations through an organization consisting of headquarters and seven regional offices. Federal program oversight encompasses review of 11 functional areas of the program, including vendor management, management information systems, funds management, certification and eligibility, nutrition services, and food delivery/food instrument accountability. Each year FCS Regional Offices evaluate one or more of these areas or other related areas in those States that they determine are in most need of review.

Although FCS uses technical assistance extensively to promote improvements in State operation of the WIC Program, enforcement mechanisms are also present. The misuse of funds through State or local agency negligence or fraud may result in the assessment of a claim (7 CFR section 246.23(a)). Claims may be established for funds lost due to food instrument theft or embezzlements or for unreconciled food instruments (7 CFR sections 246.23(a)(2) and (4)). FCS has other mechanisms to recover other losses and the cost of negligence. For other forms of noncompliance, FCS has the authority to give notice and, if improvements do not occur, withhold administrative funds for failure to implement program requirements (7 CFR section 246.19(a)(2)).

FCS has identified the following circumstances that may be indicators of noncompliance with WIC program requirements: (1) redeemed FIs which the issuing local agencies had reported as voided or unclaimed; (2) a large number of consecutively numbered, unreconciled FIs issued by the same local agency; (3) FIs that appear to have been validly issued and used but, nevertheless, fail to match existing issuance records; and, (4) participants that redeemed all of their FIs on the same day as they were issued.

III. COMPLIANCE REQUIREMENTS

In developing the audit procedures to test compliance with the requirements for a Federal program, the auditor should first look to Part 2, Matrix of Compliance Requirements, to identify which of the 14 types of compliance requirements described in Part 3 are applicable and then look to Parts 3 and 4 for the details of the requirements.

A. Activities Allowed or Unallowed

Funds allocated to a State agency for food must be expended to purchase supplemental foods for participants or to redeem food instruments issued for that purpose. Funds allocated for NSA must be used for the costs incurred by the State or local agency to provide participants with nutrition education, breast-feeding promotion and support, and referrals to other social and medical service providers and to conduct participant certification, caseload management, food benefit delivery, vendor management, voter registration and program management (7 CFR sections 246.14(a) through (d)).

There are two exceptions to the preceding rules. Funds allocated for NSA costs but not needed for such costs may be applied to food costs (7 CFR section 246.14(a)(2)). Funds allocated for food costs may be applied to NSA costs as a result of exceeding participation levels projected by the Federal funding formula and/or vendor/participant collections (7 CFR sections 246.14(e) and 246.16(f)).

Under no circumstances may the WIC grant be charged for costs which are demonstrably outside the scope of the WIC program. The cost for some screening (exclusive of laboratory tests), referrals for other medical/social services, such as immunizations, prenatal (before birth)/perinatal (near the time of birth from the 28th week of pregnancy through 28 days following birth) care, well child care and/or family planning, and follow-up on participants referred for such services, may be charged to the Federal WIC grant. However, the cost of the services performed by other health care/social service providers to which the participant has been referred shall not be charged to the WIC grant. For example, the cost to screen, refer, and follow-up on immunizations for WIC participants may be charged to the WIC grant; but, the cost to administer the shot, the vaccine, and vaccine-related equipment may not be charged to the WIC grant.

B. Allowable Costs/Cost Principles

Rebates, vendor collections (post-payment vendor collections are funds collected by the recovery of claims assessed against food vendors for errors and overcharges; pre-payment vendor collections are improper payments prevented as a result of reviews of food instruments prior to payment) and participant collections (collections for improperly issued food benefits as the result of a participant, guardian or caretaker intentionally making a false or misleading statement or withholding information) are credits against vendor billings or prior expenditures. A State agency must recognize, use, and account for these items in accordance with program regulations. A State agency's failure to do so could result in overclaims against its Federal WIC grant and in cash management problems.

C. Cash Management

The WIC program is subject to the provisions of the Cash Management Improvement Act (CMIA); however, rebates are exempt from the interest provisions of the CMIA and its implementing regulations (Section 17(h)(8)(iii)(L) of the Child Nutrition Act) (42 USC 1786(h)(8)(iii)(L)).

E. Eligibility

1. Eligibility for Individuals

Applicants for WIC Program benefits are screened at WIC clinic sites to determine whether they meet the following eligibility criteria (7 CFR sections 246.7(c), (d), (e) and (g)).

a. Categorical ­ Eligibility is restricted to pregnant, postpartum, and breast-feeding women, infants, and children up to their fifth birthday (7 CFR sections 246.2 (definition of each category) and 246.7(c)).

b. Residency ­ An applicant must meet the State agency's residency requirement. Except in the case of Indian State agencies, the applicant must reside in the jurisdiction of the State. Indian State agencies may require applicants to reside within their jurisdiction. All State agencies may designate service areas for any local agency, and may require that applicants reside within the service area (7 CFR section 246.7(c)(1)).

c. Income ­ An applicant must meet an income standard established by the State agency or be determined to be automatically income-eligible based on documentation of his/her eligibility, or certain family members' eligibility, for the following Federal programs: (1) Temporary Assistance for Needy Families (formerly Aid To Families With Dependent Children); (2) Medicaid; or (3) Food Stamps, i.e., adjunctive income-eligible. State agencies may also determine an individual automatically income-eligible based on his/her eligibility for certain State-administered programs (7 CFR sections 246.2 (definition of "family"), 246.7(c), and 246.7(d)).

Income Guidelines: The income standard established by the State agency may be up to 185 percent of the income poverty guidelines issued annually by the Department of Health and Human Services or State or local income guidelines used for free and reduced-price health care. However, in using health care guidelines, the income guidelines for WIC must be between 100 and 185 percent of poverty guidelines. Local agency income guidelines may vary as long as they are based on the guidelines used for free and reduced-price health care (7 CFR section 246.7(d)(1)).

Income Determination: Except for applicants determined automatically income-eligible, income is based on gross income and other cash readily available to the family or economic unit. Certain Federal payments and benefits are excluded from the computation of income. In addition, the State agency may exclude the value of military families' off-base housing allowances but must implement such exclusion uniformly for all military families (7 CFR section 246.7(d)(2)(iv)).

At a minimum, in-stream (away from home base) migrant farm workers and their families with expired Verification of Certification cards shall meet the State agency's income standard provided that the income of the family is determined at least once every 12 months (7 CFR section 246.7(d)(2)(viii)).

An Indian State agency, or a State agency acting on behalf of an Indian local agency, may submit reliable data that proves to FCS that the majority of Indian households in a local agency service area have incomes at or below the State agency's income guidelines. In such cases, FCS may authorize the State agency to permit the use of an abbreviated income screening process whereby an applicant affirms, in writing, that its family income is within the State agency's prescribed guidelines.

State agencies may instruct local agencies to consider family income over the preceding 12 months or the family's current rate of income, whichever indicator more accurately reflects the family's income status. However, applicants in which an adult member is unemployed shall have income determined based on the period of unemployment. A State or local agency may require verification of information which it determines necessary to confirm income eligibility.

d. Nutritional Risk ­ A competent professional authority (e.g., physician, nutritionist, registered nurse, or other health professional) must determine that the applicant is at nutritional risk. Nutritional risk is defined by each State agency within broad guidelines set forth in WIC legislation and regulations. At a minimum, this determination must be based on measurement of height or length and weight, and on a hematological test for anemia. Such anemia testing is required of all applicants except infants under six months of age and, at the State or local agency's discretion, children who are determined to be within the normal range at their last certification. The determination of nutritional risk may be based on referral data provided by a competent professional authority who is not on the WIC staff (7 CFR sections 246.2 (definitions of competent professional authority and nutritional risk) and 246.7(e)).

When an applicant meets all eligibility criteria, he/she is determined by WIC clinic staff to be eligible for program benefits. Certification periods are assigned to each participant based on categorical status for women, infants, and children (7 CFR section 246.7(g)).

A WIC local agency assigns each eligible person a priority classification according to the classification system described in 7 CFR section 246.7(e)(4). A person's priority assignment reflects the severity of his/her nutritional risk. If the local agency cannot immediately place the person on the program for lack of an available caseload slot, the person is placed on a waiting list. Caseload vacancies are filled from the waiting list in priority classification order. State agencies are expected to target program outreach and caseload management efforts toward persons at greatest nutritional risk (i.e., those in the highest priority classifications).

Pregnant women are certified for the duration of their pregnancy and for up to six weeks postpartum. Breast-feeding women may be certified for six-month intervals ending with the breast-fed infant's first birthday. Infants are certified at intervals of approximately six months, except that infants under six months of age may be certified for a period extending up to the child's first birthday, provided the quality and accessibility of health care services are not diminished. Children are certified for six-month intervals ending with the month in which the child reaches the fifth birthday. Non-breast-feeding women are certified for up to six months postpartum.

2. Eligibility for Group of Individuals or Area of Service Delivery - Not Applicable

3. Eligibility of Subrecipients

A State agency may award WIC subgrants only to organizations meeting the definition of "local agency" in 7 CFR section 246.2. Such organizations are identified under "Program Procedures" above.

H. Period of Availability of Federal Funds

A State agency may spend up to 1 percent of its total WIC formula grant for food costs of the fiscal year preceding and/or food or NSA costs of the fiscal year following the fiscal year for which the grant was awarded. This feature, known as "backspend" and "spendforward," is unique to the WIC Program. Under certain conditions related to cost containment strategies, a State agency may spend forward a maximum of 3 or 5 percent and/or backspend a maximum of 3 percent of its formula food grant award. The 3 percent backspend and the 3 and 5 percent spendforward provisions incorporate, and are not in addition to the 1 percent backspend/spendforward provisions. A State agency's total spending options may never exceed 3 or 5 percent, as applicable, of its food grant (7 CFR section 246.16(b)(3)) (Section 17(I)(3) of the Child Nutrition Act) (42 USC 1786(I)(3)).

I. Procurement and Suspension and Debarment

1. Procurement

FCS authorizes WIC State and local agencies to purchase equipment having a cost of less than the threshold established by FCS without prior approval from FCS. This policy does not apply to purchases of automated data processing (ADP) equipment with a unit cost less than $25,000, if the equipment is related to a multi-unit procurement with a total project cost (including equipment, software and/or contracted services costs) of $25,000 or more, such as a statewide automation system or a large replacement plan. Such purchases continue to require prior approval from FCS (see ADP Projects).

This policy relieves WIC State agencies of submitting requests for prior approval of relatively small equipment purchases which have traditionally been accepted to be reasonable and necessary to conduct WIC program operations, such as copiers, vehicles, and personal computers and monitors required for individual work stations.

ADP Projects

FCS authorizes WIC State agencies to make ADP acquisitions with a total project cost of up to $24,999 without prior FCS approval. Instead, WIC State agencies must notify the FCS Regional Office in writing of such purchases within 60 days of the expenditure or contract execution. ADP acquisitions with a total project cost of $25,000 to $499,999 require a written request for prior approval from the FCS Regional Office, including an explanation of the purchase(s), description of needs, and other information appropriate to the proposed acquisition (cost allocation, procurement documents, etc, as appropriate).

WIC State agencies are required to submit an Advanced Planning Document (APD) to request prior approval of automation acquisitions with a total project cost of $500,000 or more. Prior approval from FCS is required for such costs to be allowable charges to the WIC grant (7 CFR section 3016.22).

Purchases of other capital assets, such as buildings, land and improvements to buildings or land that materially increase their value or useful life, costing more than $5000, continue to require prior approval from FCS.

2. Suspension and Debarment

There are no provisions unique to this program. Refer to Part 3 of the Compliance Supplement for these requirements.

J. Program Income

Program income is to be treated as a credit against prior expenditures. Currently, the following are the only funds FCS is aware of that WIC State agencies receive that are classified as program income: (1) royalties from printed publications; (2) nominal fees, not to exceed costs, for reproducing or mailing publications, videotapes, posters, etc.; (3) interest earned on rebate funds for infant formula and other foods; and, (4) general grants not tied directly to foods redeemed, but made for inclusion of food items in a State's food package (such as Welch's grants). A State agency may use program income for any combination of food and NSA costs (7 CFR section 246.15(b)).

L. Reporting

1. Financial Reporting

The WIC program does not use the standard financial reports.

a. SF-269, Financial Status Report - Not Applicable

b SF-270, Request for Advance or Reimbursement - Not Applicable

c. SF-271, Outlay Report and Request for Reimbursement for Construction Program - Not Applicable

d. SF-272, Federal Cash Transaction Report - Not Applicable

e. FCS-227, WIC Program Annual Closeout Report (OMB No. 0584-0427) - This report replaces the annual SF-269, Financial Status Report, as the official document used by WIC State agencies to provide the data needed by FCS to conduct the annual reconciliation and closeout of grants which is required by 7 CFR section 3016. The FCS-227 discloses WIC program funds and costs according to WIC's two grant components, food and NSA. The FCS-227 presents the status of the report year grant and costs adjusted by the spending options unique to WIC which allow a small portion of WIC grant funds to be shifted between Federal fiscal years. The FCS-227 is the State's official validation of the final status of its grant and costs for the report year.

Key Line Items - The following line items contain critical information:

1. Line 9 Gross Outlays and Unliquidated Obligations For Report Year Program Costs - reflects the total of the State agency's outlays and unliquidated obligations for report year WIC program costs.

2. Line 10a Rebates - reflects the total annual credit to the Federal grant as a result of rebates collected.

3. Line 10b Program Income - reflects the total amount of gross income received by the State directly generated by a grant-supported activity, or earned only as a result of the grant agreement during the grant period.

4. Line 10c Vendor/Participant Collections - reflects the amount of post-payment vendor collections (i.e., funds collected by the recovery of claims assessed against food vendors for errors and overcharges) and participant collections. Pre-payment vendor collections are not reported in this line as they represent credits to vendor billings, not credits to gross expenditures. Participant collections are funds collected for improperly issued food benefits as the result of a participant, guardian or caretaker making a false or misleading statement or withholding information.

f. FCS-227A, Addendum to WIC Program Annual Closeout Report - NSA Expenditures (OMB No. 0584-0427) - The FCS-227A is prepared annually by State agencies to report (1) NSA expenditures by function for the fiscal year being closed out (2) the method by which NSA expenditures were charged as indirect costs, and (3) the method by which the indirect cost amount was determined. FCS uses the amounts reported in nutrition education and breast-feeding promotion and support, two of the four functional categories on the FCS-227A, to determine whether the State agencies met the statutory minimum spending level for those functions.

Key Line Items - The following line items and columns contain critical information for State-level activities.

1. Line 5a Federal Outlays - Column (03) - State-Level Nutrition Education -represents total outlays and unliquidated obligations made for State-level nutrition education costs supported by Federal grant funds and program income.

2. Line 5a Federal Outlays - Column (04) - State-Level Breast-feeding Promotion and Support - represents total outlays and unliquidated obligations made for State-level breast-feeding promotion and support costs supported by Federal grant funds and program income.

3. Line 5b State Outlays - Column (03) - State-Level Nutrition Education -represents total outlays and unliquidated obligations made for State-level nutrition education costs supported by State-appropriated funds plus the dollar value of any in-kind contributions received from any Federal, State or local funding source.

4. Line 5b State Outlays - Column (04) - State-Level Breast-feeding Promotion and Support - represents total outlays and unliquidated obligations made for State-level breast-feeding promotion and support costs supported by State-appropriated funds plus the dollar value of any in-kind contributions received from any Federal, State or local funding source.

Key Line Items - The following line items and columns contain critical information for local-level activities - Outlays and unliquidated obligations made by local agencies or made by the State agency for local clinics or other units in local communities which directly provide benefits to participants.

1. Line 5a Federal Outlays - Column (07) - Local-Level Nutrition Education - represents total outlays and unliquidated obligations made for local-level nutrition education costs supported by Federal grant funds and program income.

2. Line 5a Federal Outlays - Column (08) - Local-Level Breast-feeding Promotion and Support - represents total outlays and unliquidated obligations made for local-level breast-feeding promotion and support costs supported by Federal grant funds and program income.

3. Line 5b State outlays - Column (07) - Local-Level Nutrition Education -represents total outlays and unliquidated obligations made for local-level nutrition education costs supported by State-appropriated funds plus the dollar value of any in-kind contributions received from any Federal, State or local funding source.

4. Line 5b State outlays - Column (08) - Local-Level Breast-feeding Promotion and Support - represents total outlays and unliquidated obligations made for local-level breast-feeding promotion and support costs supported by State-appropriated funds plus the dollar value of any in-kind contributions received from any Federal, State or local funding source.

(Refer to 7 CFR section 246.14(c))

g. FSC-498, WIC Monthly Financial Management and Participation Report (OMB No. 0584-0045) - A State agency is required to submit monthly financial and program performance (participation) data (7 CFR section 246.25(b)).

Each WIC State agency uses the FCS-498 to report projected and actual Federal food expenditures and participation for each month of the fiscal year. Participation for any given month equals the number of individuals who received supplemental foods or food instruments during that month plus the number of infants who received no supplemental foods or food instruments, but were breast-fed by participating women during that month.

The FCS-498 also reports actual NSA expenditures and unliquidated obligations and the source of funds available to support both food and NSA expenditures. The reporting of State-supported food expenditures and participation is optional. The States and FCS use this information for program monitoring, funds management, budget projections, monitoring caseload, policy development, and responding to requests from Congress and the interested public.

Key Line Items - The following line items contain critical information:

1. Line 1 Gross Obligation - reflects the amount of money, net of vendor and participant collections and program income, used to fund food outlays that a State agency estimates it will spend for each month's food orders or FI issuances.

2. Line 2 Estimated Rebate - reflects the amount of money that a State agency estimates it will receive for rebates.

3. Line 4 Actual Outlays - reflects the amount of payments for redeemed food instruments or the total amount of redeemed documents approved by the WIC program for payment, minus vendor and participant collections and program income used to fund food outlays for the report month. The State's WIC program food cost ledger account should support this amount.

4. Line 5 Rebates Billed - reflects the dollar value of bills or invoices submitted by the State to food manufacturers, such as infant formula companies, for rebate payments.

5. Line 11 Total Federal Participation - reflects the actual number of federally-supported participants for elapsed months. The participation counts should be supported by FI issuance records and participant files.

6. Line 16c Total Year-to-Date Administrative Costs - reflects cumulative year-to-date payments made for WIC program NSA costs incurred up to the report month minus those payments funded with program income.

2. Performance Reporting - Not Applicable

3. Special Reporting - Not Applicable

N. SPECIAL TESTS AND PROVISIONS

1. One-to-One Reconciliation

Compliance Requirement - A State agency must reconcile all redeemed FIs to issuance records within 150 days of the FI's first valid date for participant use. The State agency must determine whether each redeemed FI was: (1) validly issued and validly used; (2) used after being lost, stolen, or voided; (3) validly issued but used outside its valid use dates; (4) used pursuant to a duplicate issuance (either two FIs bearing the same serial number or a participant receiving duplicate benefits); or, (5) otherwise not matching issuance records. State agencies generally do this by analyzing computer reports that provide detailed issuance and redemption information on each FI redeemed (7 CFR section 246.12(n)(1)).

Audit Objective - Determine whether the State agency's FI reconciliation process complies with the one-to-one reconciliation requirement.

Suggested Audit Procedures

a. Obtain an understanding of the State agency's process for reconciling redeemed FIs. At a minimum, this includes determining how the State agency:

(1) Identifies the ultimate disposition of every redeemed FI; and

(2) Follows up on redeemed FIs that cannot be matched with valid issuances (State agencies do this by contacting the issuing local agencies and by other means).

b. Determine whether written guidance on how to follow up on unreconciled FIs exists for local agencies.

c. Determine through inspection of reconciliation reports that the State agency:

(1) Reconciled its records to issued FIs on a one-to-one basis within the 150 day time frame set by regulation;

(2) Followed-up on FIs that were not validly issued and validly used, in order to determine their ultimate disposition;

(3) Obtained explanations for identified discrepancies; and

(4) Adjusted its accounting records and external reports in order to reflect the results of the reconciliation process.

d. Using State agency reconciliation reports for the last month of the audit period, verify the State agency's non-reconciliation rate. The non-reconciliation rate should not exceed one percent. The State agency should use the following steps in performing the non-reconciliation rate calculation:

(1) Determine total FIs redeemed

(2) Determine total redeemed FIs initially identified as unreconciled (listed as redeemed with no record of issuance on exception report)

(3) Determine total redeemed FIs finally identified as unreconciled (after follow-up with local agencies/clinics)

(4) Calculate the unreconciled rate (#3 divided by #1)

(5) Calculate total value of FIs redeemed

(6) Calculate total value of FIs finally identified as unreconciled

2. Management Evaluations

Compliance Requirement - State agencies must establish an ongoing management evaluation system which includes at least the monitoring of local agency operations, the review of local agency financial and participation reports, the development of corrective action plans, the monitoring of the implementation of corrective action plans, and on-site visits. Monitoring of the local agencies shall include evaluation of management, certification, nutrition education, civil rights compliance, accountability, financial management systems, and food delivery systems. These reviews must be conducted on each local agency at least once every two years, including on-site reviews of a minimum of 20 percent of the clinics in each local agency or one clinic, whichever is greater (7 CFR section 246.19(b)).

Audit Objective - Determine whether the State agency has conducted the required local agency management reviews and that the local agency management reviews cover the required areas.

Suggested Audit Procedures

a. Ascertain that the State agency conducts the required local agency management reviews, including on-site visits of a minimum of 20 percent of the clinics in each local agency or one clinic, whichever is greater.

b. Ascertain that the local agency management reviews include required areas.