Child Nutrition Program Integrity
| Citation | 88 FR 57792 |
| Published date | 23 August 2023 |
| Record Number | 2023-17992 |
| Court | Food And Nutrition Service |
| Section | Rules and Regulations |
Federal Register, Volume 88 Issue 162 (Wednesday, August 23, 2023)
[Federal Register Volume 88, Number 162 (Wednesday, August 23, 2023)]
[Rules and Regulations]
[Pages 57792-57859]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-17992]
[[Page 57791]]
Vol. 88
Wednesday,
No. 162
August 23, 2023
Part IVDepartment of Agriculture-----------------------------------------------------------------------Food and Nutrition Service-----------------------------------------------------------------------7 CFR Parts 210, 215, 220, et al.Child Nutrition Program Integrity; Final Rule
Federal Register / Vol. 88, No. 162 / Wednesday, August 23, 2023 /
Rules and Regulations
[[Page 57792]]
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DEPARTMENT OF AGRICULTURE
Food and Nutrition Service
7 CFR Parts 210, 215, 220, 225, 226, and 235
[FNS-2016-0040]
RIN 0584-AE08
Child Nutrition Program Integrity
AGENCY: Food and Nutrition Service (FNS), U.S. Department of
Agriculture (USDA).
ACTION: Final rule.
-----------------------------------------------------------------------
SUMMARY: This action implements statutory requirements and policy
improvements to strengthen administrative oversight and operational
performance of the Child Nutrition Programs.
DATES:
Effective date: The provisions of this rulemaking are effective
September 22, 2023.
Compliance dates: This rulemaking consists of multiple provisions.
Compliance for each provision is referenced in the SUPPLEMENTARY
INFORMATION section of this final rule and detailed in the section-by-
section analysis.
FOR FURTHER INFORMATION CONTACT: Megan Geiger, Senior Technical
Advisor, Program Monitoring and Operational Support Division--4th
floor, USDA Food and Nutrition Service, 1320 Braddock Place,
Alexandria, VA 22314 or at [email protected].
SUPPLEMENTARY INFORMATION:
Outline:
I. Child Nutrition Program Integrity Proposed Rule
A. Background
B. Public Comments
C. Section-By-Section Discussion of the Regulatory Provisions
1. Fines for Violating Program Requirements
2. Reciprocal Disqualification in All Child Nutrition Programs
3. Serious Deficiency Process and Disqualification in SFSP and
CACFP
4. State Agency Review Requirements in CACFP
5. State Liability for Payments to Aggrieved Child Care
Institutions
6. CACFP Audit Funding
7. Financial Review of Sponsoring Organizations in CACFP
8. Informal Purchase Methods for CACFP
9. School Food Authority Contracts With Food Service Management
Companies
10. Annual NSLP Procurement Training
II. CACFP Amendments
A. Background
B. Codifying the CACFP Amendments
1. Elimination of the Annual Application for Institutions
2. Timing of Unannounced Reviews
3. Standard Agreements Between Sponsoring Organizations and
Sponsored Child Care Centers
4. Collection and Transmission of Household Income Information
5. Calculation of Administrative Funding for Sponsoring
Organizations of Day Care Homes
6. Carryover of Administrative Funding for Sponsoring
Organizations of Day Care Homes
III. Simplifying Monitoring in NSLP and SBP
A. Background
B. Streamlining the Administrative Review Process
1. Return to a 5-Year Review Cycle
2. Substitution of Local-Level Audits
3. Completion of Review Requirements Outside of the
Administrative Review
4. Framework for Integrity-Focused Process Improvements
5. Assessment of Resource Management Risk
6. Buy American Area of Review
7. Discretion in Taking Fiscal Action for Meal Pattern
Violations
C. Reducing Performance-Based Reimbursement Reporting
IV. Miscellaneous Amendments
A. State Administrative Expense (SAE) Funds
B. FNS Contact Information
C. Program Application Requirements
V. Procedural Matters
I. Child Nutrition Program Integrity Proposed Rule
A. Background
FNS cannot accomplish its mission to provide access to food, a
healthful diet, and nutrition education in ways that inspire public
confidence without a strong and sustained effort to ensure that
integrity is always a priority in the administration of the Child
Nutrition Programs. On March 29, 2016, FNS published a proposed rule,
Child Nutrition Program Integrity, 81 FR 17564, https://www.fns.usda.gov/cn/fr-032916, to address criteria and procedures to
strengthen administrative oversight and operational performance of the
National School Lunch Program (NSLP), School Breakfast Program (SBP),
Special Milk Program (SMP), Summer Food Service Program (SFSP), Child
and Adult Care Food Program (CACFP), and State Administrative Expense
Funds (SAE).
Many of the modifications proposed by FNS were based on amendments
to the Richard B. Russell National School Lunch Act (NSLA), 42 U.S.C.
1751 et seq., https://www.fns.usda.gov/nsla-amended-pl-117-328,
mandated by the Healthy, Hunger-Free Kids Act of 2010, Public Law 111-
296, https://www.fns.usda.gov/pl-111-296, including:
Implementation of fines;
Prohibition of participation of any terminated entity or
terminated individual in any Child Nutrition Program;
Termination and disqualification of SFSP sponsors and
unaffiliated CACFP centers through extension of the serious deficiency
process;
Termination of permanent agreements of SFSP sponsors and
CACFP institutions and facilities;
More frequent reviews of CACFP institutions that are at
risk of having serious management problems;
State agency liability for payments when hearings for
CACFP institutions are delayed; and
Additional State agency funding for audits of CACFP
institutions.
These provisions were added to the NSLA to strengthen the
administration of Child Nutrition Programs, at all levels, through
enhanced oversight and enforcement tools. They were designed to help
FNS and State administering agencies reduce program error of all types,
resulting in more efficient operations and improved compliance with
program requirements.
The proposed rule also incorporated recommendations from the USDA
Office of Inspector General (OIG), including management decisions from
audits--National School Lunch Program--Food Service Management Company
Contracts, published January 2013, https://usdaoig.oversight.gov/reports/audit/national-school-lunch-program-food-service-management-company-contracts, and Review of Management Controls for the Child and
Adult Care Food Program, published November 2011--and FNS management
evaluations of State agency administration of NSLP, SBP, SFSP, and
CACFP. The recommendations address improvements to contract management,
adherence to Federal procurement standards, and financial oversight to
further enhance program integrity.
This final rule adds strong integrity safeguards to a variety of
aspects of the Child Nutrition Programs. The provisions codified in
this rulemaking are designed to increase program operators'
accountability and operational efficiency, while improving the ability
of FNS and State agencies to address severe or repeated violations of
program requirements. This rulemaking also provides States and program
operators with targeted flexibilities which allow oversight efforts to
be tailored to specific program circumstances. These provisions will be
effective on September 22, 2023. However, each provision has a separate
compliance date for implementation, which is explained in the section-
by-section analysis. Although the proposed rule required implementation
for most
[[Page 57793]]
provisions 90 days after publication of the final rule, numerous
respondents requested a 1-year delay in implementation, and FNS agrees
that additional time is needed to implement this rulemaking. The
extended implementation period gives State agencies time to make
necessary systems changes, and gives FNS time to provide technical
assistance and develop resources to support successful implementation.
FNS intends each of the provisions of this rule to be severable.
Were a court to stay or invalidate any provision of this rule, or to
hold a provision unlawful as applied in certain factual circumstances,
FNS would intend that all other provisions set forth in this rule
remain in effect to the maximum possible extent.
B. Public Comments
FNS received 5,659 comments from a cross section of stakeholders
during a 90-day comment period, which was extended to July 7, 2016. Of
these, 3,261 responses were from 11 form letter campaigns, 2,266
responses were unique, and an additional 108 were unique responses that
contained particularly substantive comments on specific aspects of FNS'
proposed implementation of the statutory and discretionary
requirements. The letter campaigns were organized primarily by the
Freedom Works Foundation (2,652), the Food Research and Action Center
(377), and the National CACFP Sponsors Association (147). Many of the
comments expressed general opposition to Federal oversight policies,
citing issues of government overreach. FNS is not responding to those
comments, because they did not provide feedback on provisions that were
specifically proposed for revisions as part of this rulemaking.
Moreover, many of the requirements addressed in the proposed rule are
based on statutory provisions in the NSLA and, therefore, cannot be
removed through the rulemaking process.
Responses were generated from State administering agencies (21) and
a wide variety of child nutrition program stakeholders, including those
who identified as parents and private citizens (5,472), school food
authorities (37), advocates (34), schools and educational institutions
(9), community and faith-based organizations (7), food service
management companies (7), health and child care professional
associations (6), food banks (4), and students (2). Only 15 respondents
unconditionally favored the proposed rule. Respondents expressed wide
support for implementing robust integrity practices and valuable
suggestions for improvement. However, the vast majority of respondents
(4,769) expressed general opposition to the penalties that FNS
proposed. Of the remaining 875 comments, 687 were mixed and 188 were
either out of scope (164) or duplicative (24). The comments (5,599) are
posted at http://www.regulations.gov under docket ID FNS-2016-0040,
Child Nutrition Program Integrity.
C. Section-by-Section Discussion of the Regulatory Provisions
1. Fines for Violating Program Requirements
Section 22(e)(1)(A) of the NSLA, 42 U.S.C. 1769c(e), requires the
Secretary to establish criteria by which a State agency or the
Secretary may impose a fine against any school food authority (SFA) or
school administering a Child Nutrition Program. Section 22(e)(2)(A)
requires the Secretary to establish criteria by which the Secretary may
impose a fine against any State agency administering a Child Nutrition
Program. In both cases, the statute states that a fine may be imposed
if it is determined that the SFA, school, or State agency has:
Failed to correct severe mismanagement of the program;
Disregarded a program requirement of which the SFA,
school, or State has been informed; or
Failed to correct repeated program violations.
Current regulations require State agency and FNS oversight to
ensure program compliance, improve management, and promote integrity.
The regulations at 7 CFR 210.26 provide FNS the authority to penalize
individuals or entities for criminal violations, such as theft or
fraud. However, existing regulations do not include a strong
enforcement mechanism to protect Federal funds and maintain program
integrity when an exceptional, non-criminal circumstance arises.
FNS proposed a process to implement the statutory authority to
establish fines, referred to as ``assessments'' in the proposed rule.
FNS expected assessments to serve as a new accountability measure to
address severe or repeated program violations that seriously threaten
the integrity of Child Nutrition Programs, but do not meet the
threshold for criminal action. The proposed rule:
Identifies violations that warrant assessments, as
specified in statute;
Allows FNS to establish assessments against State agencies
and to direct State agencies to establish assessments against SFAs,
sponsors, or institutions;
Allows State agencies to establish assessments against
SFAs, schools, sponsors, or institutions;
Identifies the calculations used to determine the first,
second, and subsequent assessments;
Requires assessments to be paid from non-Federal funds;
Requires the State agency to notify FNS at least 30 days
prior to establishing an assessment;
Provides the ability to appeal any assessment through
existing processes;
Provides FNS and State agencies the authority to suspend
or terminate for cause the participation of an entity, if the
established assessment is not paid; and
Requires implementation one school year after the
publication of the final rule.
Public Comments
Of the comments that discussed assessments or fines, 6 were
supportive, 3,955 were opposed, and 23 were mixed. Of the 3,955
responses in opposition, 3,132 were form letters. Many were opposed to
the idea of government fines in general, citing issues of government
overreach.
Proponents noted this provision would give State agencies an
additional mechanism to address program violations and strengthen
accountability. One stated that fines would be a useful compliance tool
in exceptional situations and supported extending this provision to all
Child Nutrition Programs.
Opponents argued that fines are unnecessary and punitive, and
voiced concern that the risk of fines would discourage Child Nutrition
Program operators from seeking technical assistance. They cited the
potential for inconsistent application of fines across States, and
expressed concern about bribery, collusion, and abuse. Opponents also
disputed FNS authority to establish fines against non-school operators,
and suggested State agencies have adequate accountability tools in SFSP
and CACFP.
FNS Response
As required by statute, this final rule codifies the criteria and
procedures that FNS has developed for State agencies to use to
establish fines for program violations. Although the proposed rule used
the term ``assessment,'' FNS has opted to use the term ``fine'' in this
final rule for clarity and for consistency with statute. A fine is
commonly known to be a monetary penalty for a prohibited act.
[[Page 57794]]
This change responds to concerns that terms used in the proposed rule
created confusion. Consistent with the statute and the proposed rule,
the criteria that warrant fines include:
Failure to correct severe program mismanagement;
Disregard of a program requirement of which an SFA or
State agency has been informed; or
Failure to correct repeated violations of program
requirements.
FNS stresses that fines will be applied under exceptional, not
routine, circumstances. For example, fines may be warranted to address
a serious violation, such as the intentional destruction of records or
the intentional misappropriation of program funds. Fines would not be
warranted for routine problems, such as a menu planning or meal pattern
violation or a recordkeeping or resource management error, which can be
corrected with State agency oversight and technical assistance.
A fine would never replace established technical assistance,
corrective action, or fiscal action measures to solve commonplace or
unintentional problems. Rather, the assessment of fines provides a new
accountability tool for FNS and State agencies to use when there are
severe or repeated non-criminal violations--the types of programs
abuses that seriously threaten the integrity of Federal funds or
significantly impair the delivery of service to eligible students. Each
situation is different, and FNS and State agencies, in consultation
with their legal counsel, will carefully consider whether a fine is the
appropriate response.
As required by statute, this final rule allows fines to be
established against SFAs and State agencies in the operation of any
Child Nutrition Program, including the issuance of fines against SFA
sponsors in SFSP and SFA institutions in CACFP. This is a change from
the proposed rule, which would have extended fines to all types of SFSP
sponsors and CACFP institutions. FNS has decided to pursue a separate
rulemaking to propose amendments to SFSP and CACFP regulations that
would strengthen the serious deficiency processes to safeguard Federal
funds and program integrity against mismanagement, abuse, and fraud.
This final rule allows State agencies to suspend or terminate the
participation of an SFA, if the established fine is not paid, and
provides the ability to appeal any fine through existing processes at 7
CFR 210.18(p), 225.13, 226.6(k), and 235.11(f). Fines must be paid
using non-Federal funds, as required by statute, which may include
State revenue funds in excess of the 30 percent required match for
NSLP, other State appropriated funds, and local contributions to
support the programs. All fines, and any interest charged, must be
remitted to FNS and then transmitted to the United States Treasury.
These funds cannot be used by FNS.
This final rule clarifies FNS expectations regarding the
calculation and timeframe for the payment of fines. As required by
section 22(e)(1)(A) of the NSLA, 42 U.S.C. 1769c(e), this rulemaking
adds new paragraphs to identify maximum thresholds for first, second,
and subsequent fines at 7 CFR 210.26(b)(3), 215.15(b)(3), 220.18(b)(3),
225.18(k)(3), 226.25(j)(3), and 235.11(c)(2). For State agency fines,
FNS will calculate the maximum thresholds using all SAE allocations
made available to the State agency in the most recent fiscal year for
which full year data is available. For SFA fines, the State agency will
calculate the maximum thresholds using program meal reimbursements from
the most recent fiscal year for which full year data (i.e., closeout
data) is available.
FNS and State agencies may calculate a fine below the maximum
thresholds. For example, a State agency may target a fine only to
certain school sites, or only to meal reimbursements earned by an SFA
during a certain timeframe. Consistent with the proposed rule, State
agencies must notify FNS at least 30 days prior to fining an SFA. FNS
approval of the State agency's action is not required. States agencies
have discretion to determine the due date for a fine, and may consult
with FNS to determine an appropriate due date. FNS strongly recommends
State agencies also consult with their legal counsel prior to fining an
SFA.
FNS is mindful of respondents' concerns about the potential for
fines to be established against State agencies for local program
violations. This final rule clarifies that State agencies may only be
fined for severe or repeated program violations at the State level,
including lack of proper oversight, but not for singular, specific
program violations that occur at the local level. This final rule
maintains FNS authority to direct the State agency to establish a fine
against an SFA.
In most cases, Child Nutrition Program operators work together to
build a culture of compliance. State agencies and SFAs that follow
fundamental program requirements, and those that work to resolve
compliance issues, will not be impacted by this provision, as fines
will only be levied in cases of severe or repeated program violations.
FNS expects fines to be imposed only after State agencies and SFAs have
been informed of program violations--and provided opportunity to
correct them--through existing processes, such as direct technical
assistance, corrective action, or fiscal action.
For less severe violations, for single violations, and for
unintentional violations, technical assistance, corrective action, and,
if necessary, fiscal action will remain appropriate courses of action.
However, when existing processes do not adequately address program
violations, the assessment of a fine will support efforts to ensure
State agencies and SFAs comply with program regulations and use Federal
funds for their intended purposes. FNS recognizes the importance of
preserving public trust in the Child Nutrition Programs by holding
State agencies and SFAs accountable for severe or repeated violations.
In those exceptional circumstances, fines will be an important tool to
bring State agencies and SFAs into compliance with Federal regulations
and protect the integrity of the Child Nutrition Programs.
Accordingly, this final rule amends 7 CFR 210.18(p) and 235.11(c)
and adds new paragraphs to 210.26(b), 215.15(b), 220.18(b), 225.18(k),
and 226.25(j) to provide authority to FNS and to State agencies to
establish fines in cases of severe or repeated program violations. The
compliance date is August 23, 2024.
2. Reciprocal Disqualification in All Child Nutrition Programs
Section 12(r) of the NSLA, 42 U.S.C. 1760(r), states that any
school, institution, service institution, facility, or individual that
is terminated from any Child Nutrition Program and that is on a list of
institutions and individuals disqualified from participation in SFSP or
CACFP may not be approved to participate in or administer any Child
Nutrition Program. Current CACFP regulations include procedures for
disqualification of institutions and day care homes. An institution or
individual remains on the National disqualified list (NDL) until each
serious deficiency is corrected, or until 7 years have passed.
In all cases, all debts owed must be repaid prior to removal from
the NDL. State agencies are required to consult the NDL when reviewing
any program application, and must deny the application if the
institution, or any of its responsible principals, is on the NDL.
Although the statute authorizes an NDL for SFSP, currently, CACFP is
the only Child Nutrition Program with an NDL.
[[Page 57795]]
FNS proposed requiring State agencies to deny the application for
any Child Nutrition Program if the applicant has been terminated for
cause from any Child Nutrition Program or the applicant is on the NDL
for CACFP or SFSP. This process is called ``reciprocal
disqualification.'' The proposed rule:
Applies reciprocal disqualification to all applicants in
any Child Nutrition Program;
Specifies that either termination for cause or placement
on an NDL would be the basis for reciprocal disqualification;
Identifies an entity as any school, SFA, institution,
service institution, facility, sponsoring organization, site, child
care institution, day care center, day care home, responsible
principal, or responsible individual;
Applies suspension or termination procedures when it is
determined that an entity currently participating in a Child Nutrition
Program is terminated for cause from another Child Nutrition Program;
Requires each State agency to develop a process to share
information about disqualified entities within the State with other
agencies administering Child Nutrition Programs or the Special
Supplemental Nutrition Program for Women, Infants, and Children (WIC),
which must be approved by FNS;
Maintains disqualification until deficiencies are
corrected, or until 7 years have passed, so that an entity will remain
ineligible until all debts owed under the program are repaid;
Establishes that the decision to deny an application is
final and not subject to further administrative or judicial review; and
Requires implementation 90 days after the publication of
the final rule.
Public Comments
FNS received 127 comments about reciprocal disqualification. Of
these, 7 were supportive, 105 were opposed, and 15 were mixed.
Proponents stated that this provision promotes integrity across all
Child Nutrition Programs. They agreed that if an entity is disqualified
from one Child Nutrition Program, it should not be permitted to
participate in another. Some responses supported the proposal but
requested more guidance for successful implementation. Opponents were
primarily concerned about the impact this provision could have on SFSP
and CACFP participation. They asserted that SFAs may be reluctant to
sponsor SFSP or CACFP if it puts their NSLP participation at risk and
suggested limiting this provision to entities that are terminated for
cause and placed on an NDL.
FNS Response
This provision supports integrity when it is determined that an
entity currently participating in a Child Nutrition Program is
terminated for cause from another Child Nutrition Program and placed on
an NDL, as required by statute. It aligns with FNS' efforts to preserve
public trust in the programs by preventing further abuse and severe
mismanagement. However, before the reciprocal disqualification process
may be applied to program regulations, FNS recognizes that additional
attention needs to be given to the NDL before it is expanded to SFSP.
FNS intends to publish a separate rulemaking to propose
improvements to the serious deficiency process that will also address
the legal requirements for records maintained on individuals in the
NDL, including independent verification and the opportunity to contest
matches on the list. This separate rulemaking will allow FNS to address
additional requirements, further consider respondents' concerns about
termination for cause and disqualification and provide an opportunity
for the public to comment on the changes. FNS is committed to
publishing new regulations. Accordingly, this final rule will not
codify any regulatory amendments related to the reciprocal
disqualification process at this time.
3. Serious Deficiency Process and Disqualification in SFSP and CACFP
Section 13(q) of the NSLA, 42 U.S.C. 1761(q), requires the
Secretary to establish procedures for the termination of SFSP sponsors
for each State agency to follow. The procedures must include a fair
hearing and prompt determination for any sponsor aggrieved by any
action of the State agency that affects its participation or claim for
reimbursement. The Secretary is also required to maintain a list of
disqualified sponsors and individuals that will be available to State
agencies to use in approving or renewing sponsor applications.
In order to implement section 13(q), along with the reciprocal
disqualification requirement under section 12(r) of the NSLA, 42 U.S.C.
1760(r), the proposed rule included amendments expanding the serious
deficiency process in CACFP and extending it to SFSP. This integrity-
focused process has provided a systematic way for CACFP State agencies
and sponsoring organizations to correct serious management problems,
and when that effort fails, protect the program through due process.
Current SFSP regulations include provisions addressing corrective
action, termination, and appeals. The regulations under 7 CFR part 225:
Specify criteria State agencies must consider when
approving sites for participation;
Provide authority for the State agency to terminate
sponsor participation;
List the types of program violations that would be grounds
for application denial or termination;
Require State agencies to terminate participation of sites
or sponsors for failure to correct program violations within timeframes
specified in a corrective action plan; and
Establish procedures for sponsors to appeal adverse
actions, including termination of a sponsor or site and denial of an
application for participation.
However, SFSP current regulations do not provide authority to FNS
or State agencies to disqualify sponsors.
Serious deficiency, termination, and disqualification procedures
already exist for institutions, day care homes, responsible principals,
and responsible individuals in CACFP under section 17(d)(5) of the
NSLA, 42 U.S.C. 1766(d)(5), and codified in regulations at 7 CFR
226.6(c) and 226.16(l). These procedures provide seriously deficient
institutions and facilities with the opportunity to correct the serious
deficiency. They are intended to ensure that institutions and day care
homes that had failed to take satisfactory corrective action, within
the allotted period of time, have had their program agreement
terminated, been disqualified, and placed on the NDL. FNS proposed
applying these existing requirements to establish a serious deficiency
process for sponsors and sites in SFSP and unaffiliated centers in
CACFP, which is essential to fulfilling the intent of section 12(r) of
the NSLA. The proposed rule includes amendments to:
Establish a serious deficiency process for unaffiliated
child care centers and unaffiliated adult day care centers in CACFP;
Modify termination procedures and establish a serious
deficiency process in SFSP;
Establish an NDL for SFSP that FNS would maintain and make
available to all State agencies;
Require each SFSP State agency to establish a list of
sponsors, responsible principals, and responsible individuals declared
seriously deficient;
[[Page 57796]]
Require each SFSP State agency to provide appeal
procedures to sponsors, annually and upon request; and
Specify the types of adverse actions that cannot be
appealed in SFSP.
Public Comments
FNS received 236 comments addressing application of the serious
deficiency process in SFSP--104 (including a form letter campaign) were
supportive, 8 were opposed, and 124 were mixed. Several respondents
requested additional definitions and clarification of the terms that
are used to describe the serious deficiency process. Multiple
respondents suggested alternatives that would extend the timeframe for
corrective action, adapt the amount of time for corrective action to
specific types of serious deficiencies, and allow State agencies to
approve long-term corrective action plans. They also asked FNS to
consider delaying implementation to allow time for updating automated
systems.
Out of 532 comments regarding amendments to the serious deficiency
process in CACFP, 11 were supportive, 47 (including 38 form letters)
were in opposition, and 474 (including 462 form letters) were mixed.
Many of the respondents voiced general concern about using the current
CACFP serious deficiency process as a model for establishing procedures
in other Child Nutrition Programs. They suggested that FNS further
investigate and attempt to address potential inconsistencies in
implementation among States.
FNS Response
FNS agrees that modifications are needed to improve the serious
deficiency process to ensure its application is fair and fully
implemented. Consequently, FNS published a notice, Request for
Information: The Serious Deficiency Process in the Child and Adult Care
Food Program, in the Federal Register, at 84 FR 22431, on May 17, 2019,
https://www.fns.usda.gov/cacfp/fr-051719, to gather information to help
FNS understand the firsthand experiences of State agencies and program
operators. FNS received 580 comments in response to this request for
information. An analysis of the responses has convinced FNS to delay
the expansion of the serious deficiency process and related changes. To
better serve State agencies and program operators, important
modifications are needed to make the application of the serious
deficiency process consistent and effective, in line with current
statutory requirements.
To allow FNS to respond to the concerns and challenges that
resonated in the public comments, FNS intends to publish a separate
rulemaking to propose improvements to the serious deficiency process
and provide an opportunity for the public to comment on the changes.
FNS is committed to publishing new regulations to address a serious
deficiency determination, corrective action, termination for cause, and
disqualification, prior to extending these requirements to unaffiliated
centers in CACFP and SFSP sponsors. This separate rulemaking will
establish a serious deficiency process for SFSP, with provisions for
disqualification and placement on the NDL. It will also address the
legal requirements for records maintained on individuals on the NDL.
State agencies will continue to have discretion to apply their own
processes for addressing seriously deficient performance by
unaffiliated centers in CACFP and sponsors in SFSP, during this period
of rulemaking development. Implementation of State agency processes
does not require a State agency request for FNS approval of additional
requirements. FNS will continue to provide technical assistance as
needed to support such implementation.
To eliminate ambiguity, this rulemaking also includes a definition
of ``Termination for convenience'' to clarify that an agreement may be
terminated for convenience when a sponsor, institution, facility, or
State agency chooses to permanently end program participation, due to
considerations unrelated to its performance of program
responsibilities. If an entity decides to apply to participate in SFSP
or CACFP, at a future date, a new agreement is required. However, if
the service of meals is temporarily interrupted, due to considerations
unrelated to program performance, the State agency or sponsoring
organization, as applicable, must be notified in writing that meals
will not be claimed for that period of time. The agreement remains in
effect.
Termination for convenience, particularly by the State agency, may
be an infrequent occurrence. The regulations maintain that the State
agency, sponsor, institution, or facility cannot terminate for
convenience to avoid implementing the serious deficiency process. Any
entity that voluntarily terminates its agreement after receiving a
notice of intent to terminate will be terminated for cause and
disqualified.
Accordingly, this final rule amends 7 CFR 225.2, 225.6(i), 226.2,
and 226.6(b)(4) to define ``Termination for convenience'' and address
the cessation of program activities in SFSP and CACFP for reasons that
are unrelated to performance. The compliance date is August 23, 2024.
FNS will propose additional State agency provisions for establishing a
serious deficiency process to address termination for cause,
disqualification, and other administrative actions for program
violations in a separate rulemaking.
4. State Agency Review Requirements in CACFP
Monitoring is an essential tool for ensuring integrity and reducing
program abuse. Section 17(d)(2)(C) of the NSLA, 42 U.S.C.
1766(d)(2)(C), directs the Secretary to develop policies under which
each State agency must conduct at least one scheduled site visit, at
not less than 3-year intervals, to identify and prevent management
deficiencies, fraud, and abuse, and to improve CACFP operations. The
statute mandates more frequent reviews of any institution that:
Sponsors a significant share of the facilities
participating in CACFP;
Conducts activities other than those expressly related to
the administration and delivery of CACFP;
Has had prior reviews that detected serious management
problems;
Is at risk of serious management problems; or
Meets other criteria as defined by the Secretary.
Current regulations require State agencies to annually review at
least a third (33.3 percent) of all institutions participating in the
CACFP in each State. Independent centers must be reviewed at least once
every 3 years. Sponsoring organizations with up to 100 facilities must
also be reviewed at least once every 3 years. Sponsoring organizations
with more than 100 facilities must be reviewed at least once every 2
years. New sponsoring organizations with five or more facilities must
be reviewed within the first 90 days of operation.
As part of each required review of a sponsoring organization, the
State agency must select a sample of facilities. For sponsoring
organizations of less than 100 facilities, the State agency must review
10 percent of the facilities. For sponsoring organizations of more than
100 facilities, the State agency must review 5 percent of the first
1,000 facilities, and 2.5 percent of the facilities in excess of 1,000.
Consistent with the statutory mandate under section 17(d)(2)(C) of
the NSLA, FNS proposed criteria for State agencies to use in selecting
institutions for more
[[Page 57797]]
frequent reviews. Under the proposed rule, selected institutions must
be reviewed at least once every 2 years. FNS did not propose any
changes to the requirements for reviews of sponsored facilities.
Public Comments
FNS received 137 comments, of which 4 responses were supportive, 10
were opposed, and 123 were mixed. A large form letter campaign
requested FNS to provide additional criteria to describe institutions
that are at risk of having serious management problems. Multiple State
agencies did not agree that conducting activities other than those
related to CACFP would increase the risk of abuse, citing the
participation of numerous types of child care, social service, tribal,
and other multi-purpose organizations that engage in activities outside
of CACFP. They observed that virtually all sponsoring organizations
conduct activities other than those related to CACFP and that there is
greater risk for abuse by institutions that have little outside funding
and rely almost exclusively on CACFP funds. They also asked FNS to
clarify how State agencies should incorporate additional reviews into
the current 3-year review cycle.
Respondents expressed concern that compliance with the proposed
rule would require additional State agency funding and staffing to
address the substantial increase in burden. They recommended
alternatives, such as requiring in depth financial reviews of all
institutions; applying this requirement only to sponsoring
organizations that do not provide child or adult care services, beyond
CACFP; or excluding institutions that receive monitoring through their
participation in other Federal programs, such as SFAs in NSLP.
FNS requested specific comments addressing the frequency and number
of reviews State agencies would be required to perform under the
provisions of the proposed rule. Four State agencies responded. They
projected that 26 to 64 percent of sponsoring organizations would
require additional reviews. They voiced concern that the additional
audit funds now available to State agencies would not sufficiently
cover the increased costs of monitoring.
FNS Response
This final rule establishes additional priorities and criteria for
State agencies to use in selecting institutions for review. As required
by statute, it requires State agencies to conduct at least one review
every 2 years of institutions that:
Sponsor more than 100 facilities, as currently required;
Engage in any activities other than those related to
CACFP;
Have received findings from a recent review that detected
serious management problems; or
Are at risk of having serious management problems.
In developing this rulemaking, FNS recognizes that a more frequent
schedule of reviews will require State agencies to also prioritize
funding and staffing resources. Comments from State agencies and other
respondents stress this point. However, FNS has found that some States
are not making full use of SAE and CACFP audit funds that are available
to support the performance of reviews, audits, and other oversight
activities. That is why FNS continues to encourage all State agencies
to make wider use of these funds. Full use of these funds will help
ease any potential burden.
SAE and CACFP audit funds are available to State agencies for
specific purposes. SAE supports allowable expenses associated with the
administration of the Child Nutrition Programs and related Food
Distribution Programs; the employment of additional personnel to
supervise, improve management, and give technical assistance to
institutions; and other allowable uses described under 7 CFR 235.6.
When some State agencies cannot fully use their allotment of SAE funds,
FNS reallocates them to other States that can ensure they are used.
CACFP audit funds may be used to pay for the CACFP portion of
institution audits and for conducting program-specific audits of
institutions. The State agency may use these funds to support CACFP-
related audits and subsequent audit resolution activities. The funds
may also be used for reviews of CACFP institutions, provided that all
required program-specific audits have been performed. The State agency
may choose to retain all of its allocation, provide some of its audit
funds to institutions, or use any remaining audit funds for other
monitoring activities purposes. Section I-C-6 of this preamble provides
additional information about the allocation and usage of audit funds
for State agencies.
The comments also point out concerns about the criteria State
agencies must use in selecting institutions for review. As required by
statute, institutions must receive more frequent monitoring if they
sponsor more than 100 facilities, engage in any activities other than
those related to CACFP, have had serious management problems, or are at
risk of having serious management problems. These criteria are
specified under section 17(d)(2)(C) of the NSLA. They underscore the
importance of prioritizing State monitoring resources to achieve the
most effective program oversight.
FNS characterizes serious management problems as the types of
administrative weaknesses that affect an institution's ability to meet
CACFP performance standards--financial viability, administrative
capability, and accountability. A sponsoring organization that operates
a variety of community programs may be prone to serious management
problems if it has inadequate staffing to support CACFP operations or
may be devoting too small of a share of administrative resources to
CACFP. Routine allocation of a disproportional amount of a sponsoring
organization's budget to its other activities should raise a red flag
about its ability to properly manage CACFP. More frequent monitoring by
the State agency would help improve CACFP operations by identifying and
addressing these weaknesses. Excluding Head Start centers, SFAs, and
other types of institutions that receive monitoring through their
participation in other Federal programs from this requirement would be
inconsistent with the statutory requirement and would not support
efforts to identify and correct serious management problems in CACFP.
FNS expects State agencies to prioritize reviews to ensure that
institutions do not divert CACFP resources to other activities.
However, FNS is open to considering alternative approaches for
determining review priorities, identifying institutions with a high
number of risk factors, and ensuring effective monitoring on a case-by-
case basis. State agencies should work with FNS to determine how they
can design their monitoring policies to comply with statutory
requirements. A State agency with a proposed alternative approach
should consult with FNS.
The proposed rule cites examples of factors that may expose an
institution's risk, including changes in ownership, significant staff
turnover, new licensing status, complaints about a sponsoring
organization, sizable differences in the number of claims or the amount
of claims submitted by an institution, or large increases in the number
of sponsored centers or day care homes. The State agency should also
consider its ongoing evaluation of the performance standards that
demonstrate the institution's ability to effectively operate the
program. For example,
[[Page 57798]]
institutions that have lost other sources of funding are at risk, as
they may be incapable of meeting their financial obligations if there
were an interruption in CACFP payments.
Accordingly, as required by statute, this final rule amends 7 CFR
226.6(m)(6) to require the State agency to schedule reviews at least
once every 2 years of institutions that sponsor more than 100
facilities, engage in activities other than CACFP, have had serious
management problems in previous reviews, or are at risk of having
serious management problems. The compliance date is August 23, 2024.
5. State Liability for Payments to Aggrieved Child Care Institutions
Section 17(e) of the NSLA, 42 U.S.C. 1766(e), directs the Secretary
to promulgate CACFP regulations to ensure that State agencies use a
fair and timely hearing process to reduce the amount of time between a
State agency's action and the child care institution's hearing. This
provision only applies to payments to child care institutions. It
shifts the responsibility for payments from aggrieved child care
institutions to State agencies and works as a deterrent to prevent
State agencies from failing to issue administrative review decisions
within the required timeframe. It requires State agencies to pay, from
non-Federal sources, all valid claims for reimbursement, from the end
of the regulatory deadline for providing the hearing to the date a
decision is made.
Under current regulations at 7 CFR 226.6(k), the State agency must
acknowledge an institution's request for an administrative review
within 10 days of its receipt of the request. Within 60 days of the
State agency's receipt of the request, the administrative review
official must inform the State agency, the institution's executive
director, chair of the board of directors, responsible principals, and
responsible individuals of the administrative review's outcome. During
this period, all valid claims for reimbursement must be paid to the
institution and the facilities of the institution, unless there is an
allegation of fraud or a serious health or safety violation against the
institution. The claims are paid from Federal funds.
FNS proposed amending the regulations to establish the State
agency's liability to pay all valid claims if the State agency fails to
meet the required timeframe for providing a fair hearing and a prompt
decision. A State agency that fails to issue administrative review
decisions within 60 days must pay, from non-Federal sources, all valid
claims for reimbursement to the aggrieved institution, beginning on the
61st day and ending on the date on which the decision is made.
Public Comments
FNS asked respondents to the proposed rule to address the financial
implications of this provision, and suggest appropriate milestones that
FNS could require of State agencies during implementation. FNS
specifically requested comments to consider alternatives to the 60-day
timeframe and any modifications which would meet State needs, without
compromising integrity or the demand for a timely decision for the
aggrieved institution. Out of 132 comments, 10 responses were
supportive, 10 responses (including 2 form letters) were opposed, and
112 responses (including 99 form letters) were mixed.
Although the comments did not highlight any financial impacts,
multiple respondents offered alternatives or improvements to the 60-day
timeframe. They cited numerous factors outside of the State agency's
control that may delay the State agency's ability to issue
administrative review decisions within a 60-day deadline, including:
Delays caused by the hearing official's schedule;
Voluminous stacks of paperwork requiring the hearing
official to take additional time for review;
Additional time needed by the hearing official to render
and fully document the legal basis for the decision;
Continuances requested by the State agency to gather
evidence; and
The aggrieved institutions' needs for additional time to
secure counsel, build their cases, or schedule hearings.
Thirteen of the comments were from State agencies administering
CACFP that are directly responsible for adhering to the timeframe for
issuing an administrative review decision under 7 CFR 226.6(k)(5)(ix).
One State agency proposed changing the deadline for completion of the
administrative review to 90 days, citing the results of Targeted
Management Evaluations. During Fiscal Years 2010 and 2011, FNS
conducted in-depth reviews of compliance with serious deficiency
requirements and found that more than half of State agencies in the
Targeted Management Evaluation sample needed up to 90 days to complete
the administrative review process. Another State agency proposed
changing the deadline to 120 days, which would conform with NSLP appeal
procedures for SFAs under 7 CFR 210.18(p).
A form letter campaign proposed extending the appeals timeline from
60 to 90 days and extending the timeframe from 60 to 120 days before
the State agency is responsible for paying valid claims from non-
Federal sources. The respondents asked FNS not to hold the State agency
accountable for delays due to an institution's actions or,
alternatively, they asked FNS to allow an exemption from liability when
the delays are outside the State agency's control. They also requested
that FNS include a step in the process that would elevate appeals of
State agency review findings for FNS mediation, as recommended in the
August 2015 Report to Congress, Reducing Paperwork in the Child and
Adult Care Food Program, https://fns.usda.gov/sites/default/files/cacfp/CACFP_Paperwork_Report.pdf.
FNS Response
Consistent with statute, this final rule requires State agencies to
provide fair and timely hearings through the serious deficiency
process. It also requires a State agency to pay all valid claims for
reimbursement, from non-Federal sources, if the 60-day timeframe for
the fair hearing is not met. Historically, some CACFP operators have
come under scrutiny for a lack of program integrity in affording due
process and ensuring payment accuracy, resulting in the need for the
current regulatory framework featuring tighter regulations and
deadlines. In order to minimize the exposure of program funds to waste
or abuse, State agencies must be able to resolve problems quickly and
train hearing officials to meet the FNS deadline to promptly complete
the appeals process.
In developing this rulemaking, FNS recognizes the concerns of State
agencies and other respondents about exceptional circumstances that may
require additional time and flexibility. They argued that, despite all
reasonable efforts to keep administrative processes moving quickly and
to overcome administrative law procedures that challenge the CACFP
timelines, delays may arise from any number of exceptional
circumstances. In response to these comments, this final rule allows
FNS to approve, on a case-by case basis, a written request for an
exception to the 60-day deadline.
FNS is committed to working with individual State agencies to
establish milestones to implement this provision and minimize potential
financial burdens. Suppose a State agency is unable to meet the
deadline due to an isolated administrative issue at the State level.
The State agency may seek a
[[Page 57799]]
reduction in its liability, a reconsideration of its liability, or an
exception to the 60-day deadline in this specific case by submitting a
request to FNS that includes information regarding any mitigating
circumstances. In this example, the State agency would explain the
specific administrative issue it is facing, why the issue prevents the
State agency from meeting the deadline, and how the issue will be
remedied to ensure that it does not continue in the future. To
determine if the request should be approved, FNS would review the State
agency's information and consider the mitigating circumstances. For
approval, FNS would also have to weigh factors, such as how many times
the State agency has failed to meet the deadline, or how much of a risk
to the integrity of Federal funds would the delay or inaction by the
State agency cause.
Accordingly, as required by statute, this final rule amends 7 CFR
226.6(k) to establish State liability for payments to aggrieved child
care institutions. It requires the State agency to pay all valid claims
with non-Federal funds if the State agency fails to meet the required
timeframe for providing a fair hearing and a prompt determination,
unless FNS grants an exception. To further support the State agency's
ability to ensure timely resolution of administrative reviews, FNS
intends to provide technical assistance materials on developing
processes for tracking and notifying State agencies when they would
become liable for payments and best practices for working with hearing
officials to emphasize the importance of adhering to a timeline in
rendering their decisions. The compliance date is August 23, 2024.
6. CACFP Audit Funding
Program audits are an integral component of CACFP, allowing State
agencies to monitor funding and operations to ensure that sponsoring
organizations and centers operate CACFP as required by law. Section
17(i)(2)(B) of the NSLA, 42 U.S.C. 1766(i)(2)(B), allows additional
funding to State agencies to conduct audits. The Secretary may increase
the amount of funds to any State agency that demonstrates that it can
effectively use the funds to improve program management, under criteria
established by the Secretary.
In previous fiscal years, each State agency has received up to 1.5
percent of the program funds used by the State during the second
preceding fiscal year for the purpose of conducting CACFP audits.
Beginning in Fiscal Year 2016, and each fiscal year thereafter, FNS
began accepting requests from State agencies to increase their audit
funding from 1.5 percent to a maximum of 2 percent of the CACFP funds
used by each State.
Public Comments
Out of 381 comments, 10 were supportive and 371 (including 354 from
2 form letter campaigns) were mixed. The majority of responses
supported increasing the amounts of audit funds available to State
agencies, just not the need to have to apply for them. Multiple
respondents requested greater flexibility to use audit funds to support
integrity-related expenses, such as purchases of improved technology or
travel for training purposes. They also recommended that FNS:
Make it easier for State agencies to use additional audit
funds to support the permanent or ongoing costs that are necessary for
completing audits and maintaining program integrity;
Ensure that State agencies can still pass through audit
funds to institutions if they have audit funds available to do so; and
Allow unspent audits funds to be used to improve CACFP,
instead of returning them to the United States Treasury.
FNS Response
This final rule allows FNS to increase the amount of State audit
funds if a State agency demonstrates that it can effectively use the
funds to improve program management. This rulemaking codifies into
CACFP regulations the procedures FNS has established for State agencies
to apply for a higher allocation of audit funds. It also provides
criteria for FNS to approve these requests.
Additional CACFP audit funds are available to State agencies that
demonstrate the need for an increase in resources to meet audit
requirements under 7 CFR 226.8, fulfill monitoring requirements under 7
CFR 226.6(m), or effectively improve program management, under criteria
established by the Secretary. FNS recognizes that the additional funds
will be an incentive for State agencies to improve the effectiveness of
their oversight activities and strengthen program integrity. FNS has
established an equitable process, outlined below, to authorize these
funds to those State agencies that submit a written request justifying
the need for an increase in CACFP audit funds.
Prior to the beginning of each new fiscal year, FNS announces the
opportunity to increase CACFP audit funding levels from 1.5 to 2
percent. The announcement includes a spreadsheet calculating the State
agency-by-State agency funding levels at the 1.5 and 2 percent levels
to illustrate the maximum amounts available. Each State agency may
request any amount within the 1.5 to 2 percent range of funds. Funding
above 1.5 percent will be available only if the State agency can
demonstrate it will effectively use the funds to improve program
management.
This action does not change the formula used to calculate CACFP
audit funds. It only changes the maximum amount of assistance available
for some State agencies. The amount of assistance provided to a State
agency for this purpose, in any fiscal year, may not exceed the State's
expenditures for conducting audits as permitted under 7 CFR 226.4 and
226.8. CACFP audit funds are not reallocated and may not be carried
over into another fiscal year. The funds must be used for:
Funding of the CACFP portion of organization-wide audits
and the resulting audit resolution activities;
Conducting, handling, and processing CACFP-related audits
and performing the resulting audit resolution activities; and
Conducting monitoring of CACFP institutions, provided that
all required program-specific audits have been performed.
FNS approval of requests for additional CACFP audit funds is based
on the State agency's demonstrated need for additional funds to meet
audit or monitoring requirements or effectively improve program
management. To be funded, costs must be incurred strictly to meet the
audit requirements under 7 CFR 226.8 and the monitoring requirements
under 7 CFR 226.6(m). Allowable costs include, but are not limited to,
salaries of auditors and monitors and travel expenses incurred to
conduct audits and monitoring.
State agencies may use their allocation of CACFP audit funds to pay
for the CACFP portion of institution audits or conduct program-specific
audits of institutions, as specified under 7 CFR 226.8(b) and (c),
respectively. The State agency may choose to retain all of its
allocation, provide some of its audit funds to institutions, or use any
remaining audit funds for other monitoring activities. For example,
after the completion of program-specific audits, the State agency may
use the remaining funds to cover costs incurred in evaluating financial
viability, administrative capability, and accountability at the time of
application. The review of budgets to ensure that costs are allowable
and the purchase of mapping software for determining the
[[Page 57800]]
accuracy of area eligibility determinations for day care homes are also
examples of allowable uses of remaining funds.
Accordingly, this final rule amends 7 CFR 226.4(j) to allow
additional CACFP audit funds for State agencies. FNS now considers
requests to increase audit funding from 1.5 percent to a cumulative
maximum of 2 percent of CACFP funds used by the State agency during the
second preceding fiscal year for the purpose of conducting program
audits. The additional funds must be used to meet program oversight and
audit requirements under 7 CFR 226.6(m) and 226.8, respectively, or to
improve program management under criteria established by the Secretary.
The compliance date is September 22, 2023.
7. Financial Review of Sponsoring Organizations in CACFP
The proposed rule includes modifications in program policy
resulting from the reports of findings from OIG's audit, Review of
Management Controls for the Child and Adult Care Food Program, issued
in November 2011, and FNS management evaluations of State agency
administration of CACFP. These inquiries found that the misuse of funds
was often an indicator of a sponsoring organization's systemic program
abuse that State agency financial reviews were unable to detect. The
reports recommended improvements that would be effective at uncovering
and preventing the misuse of funds, including the following
requirements for State agencies to review:
CACFP bank account activity to verify that sponsoring
organization transactions meet program requirements; and
Program expenditures and the amount of meal reimbursement
funds sponsoring organizations retain from unaffiliated centers for
administrative costs.
Current regulations require State agencies to review and approve
budgets for sponsoring organizations of centers to ensure that CACFP
funds are used only for allowable expenses. The portion of the
administrative costs to be charged to CACFP must not exceed 15 percent
of the meal reimbursements estimated to be earned during the budget
year unless a waiver is granted. All administrative costs, whether
incurred by the sponsoring organization or by its sponsored centers,
must be taken into account.
If a sponsoring organization intends to use any non-program
resources to meet CACFP requirements, its budget must identify a source
of non-program funds that could be used to pay overclaims or other
unallowable costs. To determine if CACFP funds are solely used for the
operation or improvement of the nonprofit food service, an evaluation
of the financial trail of source documents, ledgers, bank account
statements, canceled checks, electronic deductions and transfers, and
other financial records is required.
A thorough review of the sponsoring organization's financial
records is vital in ensuring program integrity. The sponsoring
organization must produce accurate, current, and complete disclosure of
the financial results of each Federal award or program. Additionally,
the records must identify the source and application of funds for
federally-funded activities. However, the State agency's ability to
monitor a sponsoring organization's use of CACFP funds is limited.
While sponsoring organizations must submit annual budgets, which detail
expenditures by cost category, they are not currently required to
report actual expenses or fully account for their disbursement of CACFP
funds.
To rectify these weaknesses, FNS proposed requiring State agencies
to establish processes to verify that sponsoring organizations'
financial transactions comply with CACFP regulations by requiring
sponsoring organizations to report program expenditures. The proposed
rule would require the State agency to annually review and compare at
least 1 month of a sponsoring organization's bank account activity with
documents to demonstrate that the transactions meet program
requirements. The State agency must reconcile reported expenditures
with CACFP payments to ensure that funds are accounted for fully.
The proposed rule would also require the State agency to annually
review sponsoring organization reports of actual expenditures of
program funds and the amount of meal reimbursement funds retained from
their unaffiliated centers for administrative costs. If the State
agency identifies any expenditures that have the appearance of
violating program requirements, the State agency must refer the
sponsoring organization's bank account activity to an auditor or other
appropriate State authority for verification.
Public Comments
Out of 589 comments, 4 were supportive, 67 (including 53 form
letters) were opposed, and 518 (including 486 from 3 form letter
campaigns) were mixed. Many respondents argued that completing annual
financial reviews, particularly annual bank account reviews, would
create an administrative burden for State agencies. Respondents were
concerned that a review of a single month of bank account activity
would not be an effective use of program resources. They asserted that
bank account statements would not provide useful information because
there is no requirement for sponsoring organizations to have separate
bank accounts for Federal funds.
Multiple responses suggested that State agencies change review
priorities to tie invoices to bank account statements in a targeted
edit check of bank, invoice, and accounting records during the review
process. The responses also included recommendations for adopting a
risk-based approach to ensure that organizations at risk of misusing
Federal funds are reviewed annually; coordinating the financial review
with the review cycle; or adding a requirement that sponsoring
organizations maintain timely financial reports onsite so that these
reports would be available for review at any time.
FNS Response
This final rule requires State agencies to annually verify bank
account activity and actual expenditures by sponsoring organizations in
CACFP. The State agency must select and compare 1 month of a sponsoring
organization's CACFP bank account activity with other documents that
are adequate to support that the financial transactions meet program
requirements. This rulemaking also requires State agencies to annually
review CACFP expenditures reported by sponsoring organizations of
unaffiliated centers. Sponsoring organizations must annually report the
amount of program expenditures of program funds and the amount of meal
reimbursement funds retained from their unaffiliated centers for
administrative costs.
While comments to the proposed rule included a number of
alternatives that may offer a small reduction in burden, FNS believes
that an annual review of bank account activity will more effectively
uncover and prevent the misuse of funds than a less frequent review
cycle. The review of bank account activity provides the most reliable
and effective means to verify and document costs. Unlike receipts that
show the reviewer who is owed the payments, statements of bank account
activity inform the reviewer of who actually received the payments.
Bank account statements and supporting documents are utilized as
[[Page 57801]]
tools to conduct edit checks on compliance requirements associated with
the receipt and use of CACFP reimbursement. Edit checks can be
conducted electronically and remotely, once the necessary supporting
financial documentation is received by the State agency reviewer.
For example, to confirm that a sponsoring organization's invoices
for CACFP expenses are legitimate and correctly paid, the State agency
reviewer would compare the invoices to the actual bank statement. If
discrepancies were found, the sponsoring organization would have the
opportunity to present documentation to resolve them. The State agency
reviewer would expand the review to examine additional months of bank
statements, as warranted, to determine if the discrepancies are part of
a systemic problem. If any expenditures have the appearance of
violating program requirements, the State agency reviewer must attempt
to verify the bank account activity. If the discrepancies cannot be
verified, or if they are significant, the State agency reviewer must
refer the sponsoring organization's bank account activity to
appropriate State authorities, such as the State auditing division or
the State Bureau of Investigation.
The State agency has discretion to obtain statements of bank
account activity with the annual budget submission, as part of the
application renewal, or through a monitoring review. No changes were
made to the review content, application procedures, or budget approval
requirements at 7 CFR 226.6. The review of bank account activity is
easier if funds are not comingled. Although FNS does not require it in
CACFP, maintaining a separate bank account for Child Nutrition Program
funds is a recommended practice. Personal or non-Child Nutrition
Program funds should be held in a separate bank account.
Accordingly, this final rule amends 7 CFR 226.7(b) to require the
State agency to have procedures in place for annually reviewing at
least 1 month of the sponsoring organization's bank account activity
against other associated records to verify that the financial
transactions meet program requirements. The State agency must also have
procedures for annually reviewing a sponsoring organization's actual
expenditures of CACFP funds and the amount of meal reimbursement funds
retained from unaffiliated centers to support the sponsoring
organization's administrative costs. The State agency must reconcile
reported expenditures with program payments to ensure that funds are
accounted for fully. This final rule makes a corresponding change to 7
CFR 226.10(c) to require sponsoring organizations of unaffiliated
centers to annually make available to the State agency the amount of
program expenditures of program funds and the amount of meal
reimbursement funds retained from their centers for administrative
costs. FNS will work closely with State agencies to develop resources
and provide technical assistance to sponsoring organizations to ensure
successful implementation of these requirements. The compliance date is
August 23, 2024.
8. Informal Purchase Methods for CACFP
Informal purchase methods (i.e., micro-purchases and small
purchases) for procurements under Federal awards are covered in the
Uniform Administrative Requirements, Cost Principles, and Audit
Requirements for Federal Awards, published by the Office of Management
and Budget at 2 CFR part 200 and adopted by USDA at 2 CFR part 400.
This guidance sets the dollar threshold and degree of informality that
characterizes micro-purchases and small purchases.
Current practices allow CACFP institutions to use the micro-
purchase method for transactions in which the aggregate cost of the
items purchased does not exceed $10,000, the current Federal threshold.
Institutions may use the small purchase method for purchases below the
Federal simplified acquisition threshold, currently set at $250,000.
States and local agencies may specify lower micro-purchase and
simplified acquisition thresholds, and local agencies may set a higher
micro-purchase thresholds in line with 2 CFR part 200.320(a)(1)(iv-v).
FNS would like to note that when the Child Nutrition Program Integrity
rule was initially proposed and open to public comment, the dollar
amounts quoted for the micro-purchase threshold and the small purchase
threshold aligned with the 2016-time frame. Due to the passage of time
and inflationary adjustments the above-mentioned micro-purchase and
small purchase thresholds align with the current federal thresholds.
CACFP regulations set out procedures that are intended to prevent
fraud, waste, and program abuse in contracts and purchasing. However,
operational provisions addressing food service management companies
(FSMC) and procurement standards under 7 CFR 226.21 and 226.22,
respectively, do not align with existing practices. Current regulations
set the Federal threshold for small purchases at $10,000. There is no
mention of micro-purchases. FNS proposed amending the regulations to
expand the availability of informal purchase methods and align the
applicable Federal dollar thresholds with future adjustments that may
be made for inflation.
Public Comments and FNS Response
Of the comments addressing changes to informal purchase methods,
three were supportive and one was mixed. One respondent requested that
FNS define a range for informal purchases.
This final rule updates procurement standards and guidelines and
makes the values of the Federal micro-purchase threshold and Federal
simplified acquisition threshold consistent with current guidance on
informal purchase methods under 2 CFR part 200. This modification
eliminates the need to revise CACFP regulations each time the
thresholds are adjusted for inflation.
This rulemaking also streamlines CACFP procurement standards and
provides clarity by removing outdated or duplicative provisions of the
regulations that have been replaced by 2 CFR part 200. For example,
institutions must comply with procurement procedures for micro-
purchases, small purchases, sealed bids, competitive proposals, and
non-competitive proposals. The text at 7 CFR 226.22(i) is replaced with
cross-references to the procedures at 2 CFR part 200 and USDA
regulations under 2 CFR parts 400 and 415. This modification ensures
that CACFP requirements are consistent with the streamlined
regulations, Uniform Administrative Requirements, Cost Principles, and
Audit Requirements for Federal Awards, that the Office of Management
and Budget first published at 78 FR 78589, on December 26, 2013,
https://www.federalregister.gov/documents/2013/12/26/2013-30465/uniform-administrative-requirements-cost-principles-and-audit-requirements-for-federal-awards, and USDA-specific requirements
published at 79 FR 75871, on December 19, 2014, https://www.federalregister.gov/documents/2014/12/19/2014-28697/federal-awarding-agency-regulatory-implementation-of-office-of-management-and-budgets-uniform.
Micro-purchase and small purchase procedures are relatively simple
and informal methods that are appropriate for the procurement of goods
and services for which the cost is below Federal, State, and local
thresholds. Micro-purchase procedures are used when the transaction is
below the current Federal threshold of $10,000 and prices are
reasonable. Similarly, although State and local agencies may
[[Page 57802]]
impose more restrictive procurement procedures, adopting the Federal
simplified acquisition threshold for small purchases--up to the
threshold set by 2 CFR 200.88, Simplified acquisition threshold--would
streamline the procurement process for CACFP institutions. The Federal
simplified acquisition threshold is currently set at $250,000. All
procurement transactions, regardless of the amount, must be conducted
in a manner that ensures free and open competition.
To the extent practicable, CACFP institutions must distribute
micro-purchases equitably among qualified suppliers. When purchases are
below the current Federal simplified acquisition threshold, an
institution may use small purchase procedures, sealed bids, or
competitive proposals, which require prices to be solicited and
documented from an adequate number of qualified sources. Depending on
the value of the purchase, many of the required contract provisions in
Appendix II to 2 CFR part 200, Contract Provisions for Non-Federal
Entity Contracts Under Federal Awards, may apply.
Accordingly, this final rule amends 7 CFR 226.21(a) to remove
outdated language so that the values of the Federal micro-purchase
threshold and Federal simplified acquisition threshold are linked to 2
CFR part 200. This final rule also makes technical changes to remove
outdated or duplicative provisions of 7 CFR 226.22 and affirm that
procurements by public or private non-profit institutions comply with
the appropriate requirements under 2 CFR part 200. The compliance date
is August 23, 2024.
9. School Food Authority Contracts With Food Service Management
Companies
Any school food authority (SFA) may contract with an FSMC to manage
the food service operation at one or more of its schools. SFAs are
required to monitor contractor performance to ensure that FSMCs comply
with the terms, conditions, and specifications of their contracts. As
required by 2 CFR 200.403, all costs must be reasonable, necessary, and
allocable. SFAs are currently permitted to use ``fixed-price'' and
``cost-reimbursable'' FSMC contracts:
Under a fixed-price contract, the FSMC charges the SFA a
fixed cost per meal or a fixed cost for a certain time period; and
Under a cost-reimbursable contract, the FSMC charges the
SFA for food service operating costs, and also charges fixed fees for
other services, such as labor.
The proposed rule included a provision to eliminate the use of
cost-reimbursable contracts for SFAs that contract with a FSMC. FNS
proposed limiting FSMC contracts in NSLP and SBP to fixed-price
contracts, either with or without economic price adjustments tied to a
standard index and eliminating cost-reimbursable FSMC contracts in NSLP
and SBP. The proposed rule also included two technical changes to align
FSMC requirements under 7 CFR 210.16 with existing regulations under 7
CFR parts 210 and 250. These changes would have required State agencies
to annually review and approve all contracts and contract amendments
between any SFA and FSMC and require an FSMC to credit the value of
USDA Foods to the respective SFA.
Public Comments
FNS received 107 comments about the proposed elimination of cost-
reimbursable contracts. Of these, 15 were supportive, 80 were opposed
(including 52 form letters), and 12 were mixed. Proponents agreed that
the complexity of rebates, discounts, and credits in cost-reimbursable
contracts make the contracts challenging to manage and to monitor. They
suggested the elimination of cost-reimbursable contracts would reduce
fraud, while creating more straightforward business dealings for SFAs.
One food industry representative noted that in order to manage cost-
reimbursable contracts effectively, SFAs must devote significant
resources to review, monitor, and audit costs and billings. By
contrast, another respondent suggested fixed-price contracts allow SFAs
to focus on manageable program areas, such as contract compliance. The
return of rebates, discounts, and credits is not required under a
fixed-price contract, as these factors are considered when submitting
the bid. One State agency noted that consistent with its authority in
current regulations, all FSMC contracts in that State are already
required to be fixed-price.
Opponents were concerned that fixed-price contracts may cause FSMCs
to focus on the lowest cost per meal, rather than food quality. They
argued that cost-reimbursable contracts offer greater transparency that
provides SFAs better management control over the program. For example,
a joint comment from four food industry representatives noted that
cost-reimbursable contracts allow flexibility for SFAs to incorporate
local produce, switch to sustainable paper products, and adjust other
associated costs during the contract term.
FNS Response
In this final rule, FNS is not eliminating the availability of cost
reimbursable contracts as a type of FSMC contract SFAs may use in the
NSLP and SBP. As noted in the proposed rule, audit findings, FNS
management evaluations, and stakeholder feedback suggested that some
SFAs have not been fully successful in conducting procurements or
monitoring of cost-reimbursable contracts in the past. The ability of
those SFAs to receive the full benefit of the contract terms and
achieve administrative and nutritional compliance in the programs was
negatively impacted, however given the mixed comments received on the
proposed rule FNS has chosen not to finalize this provision as
proposed.
In response to the COVID-19 public health emergency and consistent
with legislative directives, FNS, State partners, and SFAs developed
new approaches that offered unprecedented flexibilities to school meal
service and program management, through nationwide waivers. The
fundamental goal for each of the waivers was to provide substantive
support promoting access to nutritious meals to all children during the
COVID-19 pandemic. In 2020, FNS issued guidance, Nationwide Waiver of
Food Service Management Contract Duration in the National School Lunch
Program and Summer Food Service Program, https://www.fns.usda.gov/cn/covid-19-child-nutrition-response-19, which waived contract duration
requirements for all State agencies, SFAs, and SFSP sponsors. SFAs in
States opting to use this waiver could extend contracts with FSMCs
beyond the fourth extension year, without undertaking new competitive
procurements. The waiver relieved SFAs and FSMCs of the burden of
competitive procurements and enabled full focus on preparing and
providing nutritious school meals.
In 2021, when FSMCs and schools experienced supply chain
disruptions that impacted food, packaging components, and
transportation demands, FNS offered States and SFAs flexibilities,
resources, and support to compensate for the unpredictability of the
supply chain and the new uncertainties in accessing foods and supplies
essential for school food service. Despite that, stakeholders provided
compelling information indicating that even those contracts which
included a price adjustment tied to a standard index--such as the
Consumer Price Index--were not flexible enough to fully offset the
[[Page 57803]]
contract price to adjust during the COVID-19 pandemic supply chain-
related market volatility. In a few instances, FSMCs concluded that
withdrawal from the SFA market was in their best interest, leaving
affected SFAs with few options in providing school meal service.
As a result of the lessons learned during COVID-19 and in response
to the negative and mixed comments received during the comment period
when this provision was proposed this final rule does not eliminate
cost-reimbursable contracts in NSLP and SBP regulations. In responding
to the demands of the COVID-19 pandemic, FNS gained deeper insight into
the contractual relationships between SFAs and FSMCs, the financial
aspects of those contracts, the impact on school food service workers,
and the opportunities FNS may have to support and improve school food
service. FNS has concluded that the proposed rule's elimination of cost
reimbursable contracting would not be in the best interest of the
programs at this time. FNS intends to assess the options and resources
which may improve administrative and nutritional compliance, through
stakeholder outreach, consultation, and analysis of the data reported
as part of the COVID-19 waiver process.
As with the proposed rule, this final rule amends NSLP regulations
to require each State agency to annually review and approve each
contract and contract amendment between any SFA and FSMC. This final
rule also amends NSLP and SBP regulations to require the value of USDA
Foods to accrue only to the benefit of the SFA's nonprofit school food
service. The proposed rule did not extend these provisions to SBP.
However, FNS is correcting this oversight in this final rule. FNS
recognizes the importance of consistency and administrative
streamlining of Child Nutrition Program and USDA Food regulations.
Current NSLP and SBP regulations define cost-reimbursable contract.
Finally, for clarity, this final rule adds a definition for fixed-price
contract to NSLP and SBP regulations. Fixed-price contract means a
contract that charges a fixed cost per meal, or a fixed cost for a
certain time period. Fixed-price contracts may include an economic
price adjustment tied to a standard index. Current NSLP and SBP
regulations define cost-reimbursable contract as a contract that
provides for payment of incurred costs to the extent prescribed in the
contract, with or without a fixed fee.
FNS recognizes that SFAs value flexibility in their contracts. For
example, a contract that includes an economic price adjustment tied to
a standard index--such as the Consumer Price Index--allows the contract
price to adjust during market volatility. The SFA may also include a
clause to account for changes in labor cost, such as a minimum wage
increase. Additionally, qualitative factors--such as specifications
relating to product appeal to students--are allowable evaluation
factors that may be published in solicitations, as long as cost is the
primary factor. SFAs may also include provisions that penalize an FSMC
if meal quality is an issue. FNS recommends that SFAs consult with
counsel during the procurement process to ensure that the contract
terms are consistent with Federal law and any pertinent State and local
laws.
Accordingly, this final rule amends 7 CFR 210.2 and 220.2 to define
fixed-price contract in NSLP and SBP. The rulemaking also amends 7 CFR
210.19(a)(5) to require each State agency to annually review--and
approve--each contract and contract amendment between any SFA and FSMC,
for consistency with 7 CFR 210.16(a)(10). Finally, this rulemaking adds
7 CFR 210.16(c)(4) and 220.7(d)(3)(iv) to require the value of USDA
Foods to accrue only to the benefit of the SFA's nonprofit school food
service, to align with 7 CFR 210.16(a)(6). The compliance date is
August 23, 2024.
10. Annual NSLP Procurement Training
Section 7(g)(2) of the Child Nutrition Act of 1966, 42 U.S.C.
1776(g)(2), requires training for school food service personnel on
certain administrative practices and gives USDA discretion to require
other appropriate training topics to address critical issues, such as
integrity concerns. Current regulations at 7 CFR 210.30(b), (c), and
(d) outline the professional standards training requirements for school
nutrition program directors, management, and staff, respectively.
Current regulations at 7 CFR 235.11(g)(3) outline the training
requirements for State directors of school nutrition programs and
distributing agencies. The specific annual training requirements vary,
but for each position, FNS may identify other training topics, as
needed. There are no specific regulatory requirements related to NSLP
procurement training.
As discussed in the proposed rule, FNS released a guidance memo
strongly encouraging periodic training for State Agency and SFA staff
tasked with procurement responsibilities and has taken a number of
steps to share information about proper procurement methods. However,
State agencies and SFAs continue to face challenges implementing
Federal procurement requirements. Helping State agencies and SFAs
better understand procurement responsibilities through adequate
training is one way to ensure Federal funds are used appropriately in
NSLP. To improve compliance of these important requirements, the
proposed rule requires annual procurement training for State agency and
SFA staff tasked with procurement responsibilities, with an effective
date 90 days after publication of the final rule. The proposed rule
also requires State agencies and SFAs to retain records to document
compliance with this provision.
Public Comments
FNS received 15 comments about NSLP procurement training. Of these,
2 were supportive, 4 were opposed, and 9 were mixed. Proponents
described this provision as important and necessary, and stated that
annual procurement training would ensure the school nutrition programs
use Federal funds efficiently. Some respondents asked for clarification
about the implementation of this requirement, including the number of
annual training hours required. Regarding the proposal to document
training, one respondent noted this would be an important step in
assuring accountability. Opponents were concerned that this provision
would increase program costs and create burden. They argued that annual
procurement training is duplicative or excessive, unless it is
necessary to resolve a review finding. One respondent argued that
annual trainings in general lose value and become tedious.
FNS Response
This final rule requires State directors of school nutrition
programs, State directors of distributing agencies, and school
nutrition program directors, management, and staff who work on NSLP
procurement activities to complete procurement training annually. FNS
modified the language in this final rule to align with the school
nutrition professional standards. This final rule also amends 7 CFR
210.30 and 235.11 to clarify that NSLP procurement training is subject
to professional standards monitoring and recordkeeping requirements and
may count towards the professional standards training requirements.
This change from the proposed rule streamlines monitoring,
recordkeeping, and training requirements.
FNS is mindful of respondents' concerns that NSLP procurement
[[Page 57804]]
training will not be relevant to all program staff. FNS recognizes that
school nutrition program personnel have a variety of job
responsibilities, which may or may not include procurement. FNS does
not intend to require all personnel to complete annual procurement
training, nor to take time away from other relevant training topics.
This requirement only applies to State directors and school nutrition
program directors, management, and staff who work on NSLP procurement
activities.
FNS will not require a specific number of annual training hours.
For personnel with minimal involvement, a brief refresher course may be
sufficient. Personnel who are new to NSLP procurement, who are assigned
new procurement tasks, or who use more complex procurement methods,
such as sealed bids and competitive proposals, may require a full day
of training. FNS encourages the training plan that best supports each
staff member's job-specific training needs and experience.
Consistent with the professional standards training requirements, a
variety of training formats may be used, such as webinars, classroom
training, and seminars. State agencies may use SAE funds to pay for the
costs of receiving or delivering annual NSLP procurement training.
Generally, training is an allowable use of school food service funds.
State agencies and SFAs are encouraged to access the free or low-cost
training resources listed online at https://professionalstandards.fns.usda.gov/.
Annual training is an important step to ensure personnel who work
on NSLP procurement activities have the knowledge they need to
successfully implement Federal procurement requirements. Ensuring that
responsible personnel annually gain knowledge of Federal procurement
standards and contract performance monitoring through this regulatory
change is an important step towards improving program integrity.
Accordingly, this final rule adds new paragraphs at 7 CFR
210.21(h), 210.30(g)(3), and 235.11(h)(3) to require State directors of
school nutrition programs, State directors of distributing agencies,
and school nutrition program directors, management, and staff who work
on NSLP procurement activities to complete annual procurement training.
The compliance date is August 23, 2024.
II. CACFP Amendments
A. Background
FNS is also using this opportunity to codify statutory requirements
that are designed to improve the administration and operational
efficiency of CACFP, with less paperwork. FNS published a proposed
rule, Child and Adult Care Food Program: Amendments Related to the
Healthy, Hunger-Free Kids Act of 2010, 77 FR 21018, on April 9, 2012,
https://www.fns.usda.gov/cacfp/fr-040912, that included amendments that
would replace the renewal application with an annual certification
process, vary the timing of reviews of day care homes and centers,
require permanent operating agreements for sponsored centers, broaden
procedures for the collection of meal benefit forms for children
enrolled in day care homes, and allow carry over and simplified
calculation of administrative payments.
Since these changes in CACFP policy were required by the Healthy,
Hunger-Free Kids Act of 2010 (HHFKA), and FNS released the changes in
policy memos, they have become standard operating practices for State
agencies and sponsoring organizations. In the intervening years since
publication of the proposed rule, due to shifting priorities and the
COVID-19 pandemic, FNS was unable to publish subsequent rulemaking to
incorporate these statutory amendments into CACFP regulations under 7
CFR part 226. Through this final rule, FNS is incorporating only the
statutory amendments proposed in the Child and Adult Care Food Program:
Amendments Related to the Healthy, Hunger-Free Kids Act of 2010, 77 FR
21018, on April 9, 2012, https://www.fns.usda.gov/cacfp/fr-040912, into
CACFP regulations.
FNS received 27 comments in response to the proposed rule. Many of
them pointed out technical errors, questioned potential gaps in
implementation, and offered valuable suggestions for improvement, but
none of the comments objected to any of the six amendments, which are
required by statute. There were no adverse comments challenging the
rule's underlying premise or approach or suggesting that the content of
the rule would be inappropriate, ineffective, or unacceptable without a
change. The comments are posted at http://www.regulations.gov under
docket ID FNS-2012-0022, Child and Adult Care Food Program: Amendments
Related to the Healthy, Hunger-Free Kids Act of 2010.
The amendments included in this final rule:
Require institutions to submit an initial application to
the State agency and, in subsequent years, periodically update the
information, in lieu of submitting a new application;
Require sponsoring organizations to vary the timing of
reviews of sponsored facilities;
Require State agencies to develop and provide for the use
of a standard permanent agreement between sponsoring organizations and
day care centers;
Allow tier II day care homes to collect household income
information and transmit it to the sponsoring organization;
Modify the method of calculating administrative payments
to sponsoring organizations of day care homes; and
Allow sponsoring organizations of day care homes to carry
over up to 10 percent of their administrative funding from the previous
Federal fiscal year into the next fiscal year.
B. Codifying the CACFP Amendments
1. Elimination of the Annual Application for Renewing Institutions
Annual certification of an institution's eligibility to continue
participating in CACFP has replaced the renewal application process.
Section 17(d)(2) of the NSLA, as amended by HHFKA, directs the
Secretary to develop a policy to address the initial application
requirements for institutions and annual confirmation of compliance
with licensing and all other requirements for institutions and
facilities to continue to participate in CACFP. These amendments
required changes to current regulations, which require institutions to
submit an annual application to participate in the program. Renewing
institutions must re-apply at intervals of between 12 and 36 months
after their initial application was approved by the State agency.
FNS issued CACFP 19-2011, Child Nutrition Reauthorization 2010:
Child and Adult Care Food Program Applications, on April 8, 2011,
https://www.fns.usda.gov/cacfp/applications, to provide guidance
regarding the HHFKA requirements that renewing institutions must submit
an annual certification of information, updated licensing information,
and a budget. FNS included the requirements for annual certification in
the April 9, 2012, proposed rule for the public to review and comment
on. FNS did not receive any substantive comments on this provision.
This final rule adopts these changes, as proposed, by amending 7
CFR 226.6(b) to require an initial application for new institutions and
annual confirmation for renewing institutions that they are compliant
with program requirements. Renewing sponsoring organizations must
submit updated
[[Page 57805]]
licensing information for its sponsored facilities, an annual budget,
and an annual certification of compliance with all of the requirements
under 7 CFR 226.6(b)(2) and 226.6(f)(1). The renewing sponsoring
organization must certify that:
The management plan on file with the State agency is
complete and up to date, per 7 CFR 226.6(b)(1)(iv);
The sponsoring organization and its principals are not
currently on the National Disqualified List, per 7 CFR
226.6(b)(1)(xii);
No sponsored facility or principal of a sponsored facility
is currently on the CACFP National Disqualified List, per 7 CFR
226.6(b)(1)(xii);
A list of any publicly funded programs that the sponsoring
organization and its principals have participated in, in the past 7
years, is current, per 7 CFR 226.6(b)(1)(xiii)(B);
The sponsoring organization and its principals have not
been determined ineligible for any other publicly funded programs due
to violation of that program's requirements, in the past 7 years, per 7
CFR 226.6(b)(1)(xiii)(B);
No principals have been convicted of any activity that
occurred during the past 7 years and that indicated a lack of business
integrity, per 7 CFR 226.6(b)(1)(xiv)(B);
The names, mailing addresses, and dates of birth of all
current principals have been submitted to the State agency per 7 CFR
226.6(b)(1)(xv);
The outside employment policy most recently submitted to
the State agency remains current and in effect, per 7 CFR
226.6(b)(1)(xvi);
The sponsoring organization is currently compliant with
the required performance standards of financial viability and
management, administrative capability, and program accountability, per
7 CFR 226.6(b)(1)(xviii);
Licensing or approval status of each sponsored child care
center, adult day care center, or day care home is up-to-date;
The list of the sponsoring organization's facilities on
file with the State agency is up-to-date; and
All facilities under the sponsoring organization's
oversight have adhered to Program training requirements.
Renewing independent centers must submit updated licensing
information and an annual certification of compliance with all of the
requirements under 7 CFR 226.6(b)(2) and 226.6(f)(1). The renewing
independent center must certify that:
The center and its principals are not currently on the
National Disqualified List, per 7 CFR 226.6(b)(1)(xii);
A list of any publicly funded programs that the center and
its principals have participated in the past 7 years is current, per 7
CFR 226.6(b)(1)(xiii)(B);
The center and its principals have not been determined
ineligible for any other publicly funded programs due to violation of
that program's requirements in the past 7 years, per 7 CFR
226.6(b)(1)(xiii)(B);
No principals have been convicted of any activity that
occurred during the past 7 years and that indicated a lack of business
integrity, per 7 CFR 226.6(b)(1)(xiv)(B);
The names, mailing addresses, and dates of birth of all
current principals have been submitted to the State agency per 7 CFR
226.6(b)(1)(xv);
The center is currently compliant with the required
performance standards of financial viability and management,
administrative capability, and program accountability, per 7 CFR
226.6(b)(1)(xviii); and
Licensing or approval status of each child care center or
adult day care center.
State agencies may add to this list other types of information that
they require annually for proper administration of the program, such as
submission of budgets by independent centers, which is not a Federal
requirement. The miscellaneous responsibilities currently listed under
7 CFR 226.6(f)(3)(iv) include additional reporting requirements for
CACFP institutions. This final rule makes a corresponding change to
remove the reapplication requirements under 7 CFR 226.6(f)(2) and move
the responsibilities at other time intervals, listed under paragraph
(f)(3), to paragraph (f)(2).
Accordingly, as required by statute, this action amends 7 CFR
226.2, and 226.6(b) to require an initial application for new
institutions and annual updates, as needed, for renewing institutions.
A corresponding change is made at 7 CFR 226.6(f). This provision has
been a standard operating practice for State agencies since 2011. The
compliance date is September 22, 2023.
2. Timing of Unannounced Reviews
Reviews are more effective at ensuring program integrity when they
are unannounced and unpredictable. Section 17(d)(2)(B)(ii) of the NSLA
requires sponsoring organizations to vary the timing of unannounced
reviews in a manner that makes the reviews unpredictable to sponsored
facilities. Current regulations require sponsoring organizations to
conduct three reviews per year at each facility, two of which must be
unannounced. One of the unannounced reviews must include observation of
a meal service. No more than 6 months may elapse between reviews.
However, there is no current regulatory requirement that the timing of
those reviews must be varied.
FNS issued CACFP 16-2011, Child Nutrition Reauthorization 2010:
Varied Timing of Unannounced Reviews in the Child and Adult Care Food
Program, on April 7, 2011, https://www.fns.usda.gov/cacfp/varied-timing-unannounced-reviews-child-and-adult, to advise State agencies of
the new statutory requirement under HHFKA to ensure that the timing of
unannounced reviews is varied in a way that would ensure they are
unpredictable to the day care home or sponsored center. FNS included
the requirements for the timing of unannounced reviews in the CACFP
proposed rule for the public to review and comment on. FNS did not
receive any substantive comments on this provision.
This final rule adopts these changes by amending 7 CFR
226.16(d)(4)(iii) to require sponsoring organizations to vary both the
timing of unannounced reviews and the types of meal service that are
subject to review. This rulemaking also amends the review content at 7
CFR 226.6(m)(3) to add a requirement that the State agency assess the
frequency, predictability, and type of each sponsoring organization's
facility reviews. Effective monitoring of day care homes and sponsored
centers will require sponsoring organizations to ensure that:
At least two of the three annual reviews are unannounced;
At least one unannounced review includes observation of a
meal service;
At least one review is made during each new facility's
first 4 weeks of program operations;
No more than 6 months elapse between reviews;
The timing of unannounced reviews is varied so that they
are unpredictable to the facility;
All types of meal service are reviewed; and
The types of meal service reviewed are varied.
Accordingly, this final rule amends 226.16(d)(4)(iii) to require
sponsoring organizations to vary the timing of unannounced reviews and
vary the type of meal service subject to review. A corresponding change
is made at 7 CFR 226.6(m)(3)(ix) to require the State agency to assess
the timing of each sponsoring organization's reviews of day care homes
and sponsored centers. This provision has been a standard operating
practice for sponsoring organizations and State agencies since
[[Page 57806]]
2011. The compliance date is September 22, 2023.
3. Standard Agreements Between Sponsoring Organizations and Sponsored
Centers
Section 17(j) of the NSLA requires State agencies to develop and
provide for the use of a standard form of agreement between each
sponsoring organization and day care home or sponsored center. Current
regulations require the sponsoring organization to enter into a written
permanent agreement with each sponsored day care home, which specifies
the rights and responsibilities of both parties. However, there is no
standard form of agreement and no requirement that sponsoring
organizations establish agreements with sponsored centers.
FNS included the requirements for standard operating agreements in
the CACFP proposed rule for the public to review and comment on. FNS
did not receive any substantive comments on this provision. FNS
proposed establishing a standard form of agreement between sponsoring
organizations and their sponsored centers at 7 CFR 226.16(h) that would
specify the rights and responsibilities of each party.
This final rule adopts the proposed terms of a standard agreement
between a sponsoring organization and a child care center at 7 CFR
226.17, an at-risk afterschool care center at 7 CFR 226.17a, an
outside-school-hours care center at 226.19, and an adult day care
center at 226.19a. The standard agreement, described at 7 CFR 226.6(p),
requires the center to:
Allow visits by sponsoring organizations or State agencies
to review meal service and records;
Promptly inform the sponsoring organization about any
change in its licensing or approval status;
Meet any State agency approved time limit for submission
of meal records; and
Distribute to parents a copy of the sponsoring
organization's notice to parents if directed to do so by the sponsoring
organization.
The standard agreement also establishes the right of centers to
receive timely reimbursement from the sponsoring organizations for
meals served. Consistent with the requirement under 7 CFR 226.16(h)(2),
sponsoring organizations must pay program funds to child care centers,
adult day care centers, emergency shelters, at-risk afterschool care
centers, or outside-school-hours care centers within 5 working days of
receipt from the State agency.
FNS also proposed a corresponding amendment to define ``Facility''
under 7 CFR 226.2. In this final rule, facility means a sponsored
center or day care home. FNS is finalizing a new definition of
``Sponsored center'', as proposed, to mean a child care center, an at-
risk afterschool care center, an adult day care center, an emergency
shelter, or an outside-school-hours care center that operates CACFP
under the auspices of a sponsoring organization. A sponsored center may
be either affiliated--as part of the same legal entity as the CACFP
sponsoring organization--or unaffiliated, which is legally distinct
from the sponsoring organization.
Accordingly, this final rule amends 7 CFR 226.6(p) and 226.17a(f)
and adds new paragraphs at 226.17(e) and (f), 226.19(d) and (e), and
226.19a(d) and (e) to require sponsoring organizations to enter into
permanent agreements with their unaffiliated centers. New definitions
of ``Facility'' and ``Sponsored center'' are added under 7 CFR 226.2.
This provision is a standard operating practice for sponsoring
organizations. The compliance date is September 22, 2023.
4. Collection and Transmission of Household Income Information
Section 17(f)(3)(A)(iii)(III)(dd) of the NSLA allows day care homes
to assist in the transmission of necessary household income information
to the sponsoring organization. Section 17(f)(3)(A)(iii)(III)(ee)
directs the Secretary to develop policy specifying the written consent
of parents and other conditions, which would allow day care home
providers to assist in transmitting meal benefit forms from parents to
the sponsoring organizations.
Current regulations include procedures for families whose children
are enrolled in family day care to provide household income information
on meal benefit forms that are transmitted directly to the sponsoring
organization. The sponsoring organization is responsible for informing
tier II day care homes of all of their options for receiving
reimbursement for meals served to enrolled children, including electing
to have the sponsoring organization attempt to identify all income-
eligible children enrolled in the day care home, through collection of
meal benefit forms. The sponsoring organization must also ensure that
free and reduced-price eligibility information of individual households
is not available to day care homes.
FNS issued CACFP 17-2011, Child Nutrition Reauthorization 2010:
Transmission of Household Income Information by Tier II Family Day Care
Homes in the Child and Adult Care Food Program, on April 7, 2011,
https://www.fns.usda.gov/cacfp/transmission-household-income-information-tier-ii. This guidance describes how tier II family day
care home providers may participate in the collection and transmission
of household information. The guidance also outlines the options and
privacy protections available to households. FNS included these options
in the CACFP proposed rule for the public to review and comment on. FNS
did not receive any substantive comments on this provision.
This final rule adopts these options by amending the sponsoring
organization's responsibility under 7 CFR 226.18(b)(13) to allow tier
II day care homes to assist in collecting meal benefit forms from
households and transmitting the forms to the sponsoring organization on
the household's behalf. It is important to emphasize that this is an
option available to day care home providers and households. The State
agency or sponsoring organization cannot require day care homes to
collect and transmit this information. Households cannot be required to
return their meal benefit forms directly to the provider.
The sponsoring organization is also responsible for establishing
procedures that prohibit a day care home provider who chooses this
option from reviewing or altering the information on the meal benefit
form. This rule finalizes a new paragraph at 7 CFR 226.23(e)(2)(vii) as
proposed with minor clerical adjustments to further require the
sponsoring organizations to protect the privacy of a household's income
information. Households of children enrolled in tier II day care homes
that elect this option must give their consent for the collection and
transmission of their information. The household must be advised that:
The household is not required to complete the meal benefit
form in order for a child to participate in CACFP;
The household may return the meal benefit form to either
the sponsoring organization or the day care home provider;
By signing the letter and giving it to the day care home
provider, the household has given the day care home provider written
consent to collect and transmit the household's application to the
sponsoring organization; and
The meal benefit form will not be reviewed by the day care
home provider.
Accordingly, this final rule adds a new paragraph at 7 CFR
226.18(b)(13) to add the right of the tier II day care home
[[Page 57807]]
to assist in collecting and transmitting applications to the sponsoring
organizations and prohibit the provider from reviewing applications
from households. This final rule also adds a new paragraph at 7 CFR
226.23(e)(1)(vii) to address household consent and actions to protect
the privacy of a household's income information. This provision has
been a standard operating practice for sponsoring organizations of day
care homes since 2011. The compliance date is September 22, 2023.
5. Calculation of Administrative Funding for Sponsoring Organizations
of Day Care Homes
Section 17(f)(3)(B)(i) of the NSLA authorizes reimbursement for
administrative expenses of sponsoring organizations of day care homes
and applies a formula for calculating the amount of administrative
reimbursement a sponsoring organization may receive. As amended by
HHFKA, section 17(f)(3) of the NSLA by eliminating the ``lesser of''
cost and budget comparison for calculating administrative payments to
sponsoring organizations of day care homes, as defined under current
regulations at 7 CFR 226.12(a). Under current regulations, the State
agency determines administrative reimbursement by calculating and
paying the ``lesser of'' actual administrative costs, budgeted
administrative costs, or an amount established by a formula.
FNS issued CACFP 06-2011, Child Nutrition Reauthorization 2010:
Administrative Payments to Family Day Care Home Sponsoring
Organizations, on December 22, 2010, https://www.fns.usda.gov/cacfp/2010-administrative-payments-family-day-care-home, to advise State
agencies that a simpler method for determining monthly administrative
payments had been established by HHFKA. Effective October 1, 2010, the
sponsoring organization's monthly payment would be based on the
statutory formula that would no longer require a comparison with actual
expenditures or budgeted administrative costs. FNS included the
requirements for calculating administrative payments in the CACFP
proposed rule for the public to review and comment on. FNS did not
receive any substantive comments on this provision.
This final rule adopts this change by amending 7 CFR 226.12(a) to
establish that administrative costs payments are determined only by
multiplying the appropriate administrative reimbursement rate by the
number of day care homes submitting claims for reimbursement during the
month. Administrative reimbursement rates are announced annually in the
Federal Register.
Sponsoring organizations are still required to submit annual
budgets and remain responsible for correctly accounting for costs and
maintaining records and sufficient supporting documentation to
demonstrate that the claimed costs were incurred, are allocable to the
program, and comply with Federal regulations and policies. State
agencies must continue to recover reimbursements that are unallowable
or that lack adequate documentation. However, the expenditures for
administrative costs, the amount of costs approved in the
administrative budget, and the 30 percent restriction on the total
amount of administrative payments and food service payments for day
care home operations no longer apply in determining the sponsoring
organization's monthly payment.
Accordingly, this final rule amends 7 CFR 226.12(a) to simplify the
calculation of monthly administrative reimbursement that sponsoring
organizations of day care homes are eligible to receive. To determine
the amount of payment, the State agency must multiply the appropriate
administrative reimbursement rate, which is announced annually in the
Federal Register, by the number of day care homes submitting claims for
reimbursement during the month. This provision has been a standard
operating practice for State agencies since 2010. The compliance date
is September 22, 2023.
6. Carryover of Administrative Funding for Sponsoring Organizations of
Day Care Homes
Section 17(f)(3)(B)(iii) of the NSLA, as amended by HHFKA, directs
the Secretary to develop procedures under which up to 10 percent of a
sponsoring organization's administrative funds may remain available for
obligation or expenditure in the succeeding fiscal year. It allows
sponsoring organizations to carry over up to 10 percent of their
administrative payments from the previous fiscal year into the next
fiscal year. There is no provision for carryover of administrative
payments in current regulations.
FNS issued a memorandum, CACFP 18-2011 Child Nutrition
Reauthorization 2010: Carry Over of Unused Child and Adult Care Food
Program Administrative Payments, on April 8, 2011, https://www.fns.usda.gov/cacfp/carry-over-unused. FNS advised State agencies of
the option available to sponsoring organizations of day care homes to
carry over up to 10 percent of unspent administrative reimbursement
from the current Federal fiscal year to the next fiscal year.
FNS issued additional guidance, CACFP 11-2012, Family Day Care Home
Administrative Reimbursements: Options and Carryover Reporting
Requirements, on March 19, 2012, https://www.fns.usda.gov/cacfp/family-day-care-home-administrative-reimbursements-options-and-carryover-reporting, and CACFP 24-2012: REVISED, Family Day Care Home
Administrative Reimbursements: Carryover Reporting Requirements for
Fiscal Year 2012 and All Subsequent Years, on September 5, 2012,
https://www.fns.usda.gov/cacfp/family-day-care-home-administrative-reimbursements-carryover-reporting-requirements-fy-2012. These
memoranda provided clarification of options regarding administrative
reimbursements and the management of unspent funds that may be carried
over from the current Federal fiscal year to the next fiscal year. They
also described procedures for reporting administrative funds under a 2-
year period of performance.
FNS included the requirements allowing sponsoring organizations of
day care homes to carry over administrative funding in the CACFP
proposed rule for the public to review and comment on. FNS did not
receive any substantive comments on this provision. This final rule
amends 7 CFR 226.12(a) to allow a sponsoring organization to carry over
and obligate a maximum of 10 percent of administrative funds into the
succeeding fiscal year, with State agency approval. Corresponding
amendments at 7 CFR 226.6(f)(1)(iv), 226.7(g) and 226.7(j), require
State agencies to ensure that:
The annual budget that is submitted for the State agency's
review and approval includes an estimate of the sponsoring
organization's requested administrative fund carryover amounts and a
description of the proposed purpose for obligating or expending those
funds;
An amended budget, which identifies the amount of
administrative funds that the sponsoring organization actually carried
over and describes the purpose, is submitted for the State agency's
review and approval as soon as possible after fiscal year close-out;
The review of the sponsoring organization's administrative
costs includes a review of the documentation supporting carryover
requests, obligations, and expenditures; and
[[Page 57808]]
Procedures are established to recover any administrative
funds that exceed 10 percent of that fiscal year's administrative
payments, and any carryover amount that is not expended or obligated by
the end of the fiscal year following the fiscal year in which the funds
were earned.
Administrative funds remaining at the end of the fiscal year must
be returned to the State agency. If any remaining carryover funds are
not obligated or expended by the sponsoring organization in the
succeeding fiscal year, the sponsoring organization is required to
return the remaining funds to the State agency. A sponsoring
organization can avoid that situation by using its payments for
administrative costs on a first-in-first-out basis.
Sponsoring organizations are not required to carry over any unspent
funds. They may, at their option, return them to the State agency. The
sponsoring organization also has the option to request that the State
agency base administrative payments on the sponsoring organization's
actual expenses. However, sponsoring organizations receiving
administrative payments based upon actual expenses are not permitted to
carry over funds into the next fiscal year.
Accordingly, this final rule amends 7 CFR 226.6(f)(1)(iv) and adds
new paragraphs at 226.7(g)(2) and 226.12(a)(3) to allow carryover of
administrative funds with State agency approval. This rulemaking also
amends 7 CFR 226.7(j) and adds a new paragraph 226.12(a)(4) to require
the State agency to establish procedures to recover administrative
funds from sponsoring organizations of day care homes that are not
properly payable, are in excess of the 10 percent maximum carryover
amount, or any carryover amounts not expended or obligated by the end
of the fiscal year following the fiscal year in which they were earned.
This provision has been a standard operating practice for sponsoring
organizations and State agencies since 2011. The compliance date is
September 22, 2023.
III. Simplifying Monitoring in NSLP and SBP
A. Background
State agencies are responsible for regularly monitoring SFA
operations in NSLP and SBP, in addition to providing training and
technical assistance. Since School Year 2013-2014, the unified
administrative review process has provided State agencies with a
comprehensive process for evaluating compliance with program
requirements. It includes a review of an SFA's financial practices,
compliance with nutrition standards, and a review of program operations
to ensure compliance with Federal regulations.
This final rule provides a means for FNS to amend the
administrative review process. State agencies and SFAs have called on
FNS to streamline requirements so that they could more effectively
direct their resources to their core mission of serving nutritious
meals to children. FNS looked for opportunities to reduce
administrative burden addressing findings from USDA's Child Nutrition
Reporting Burden Analysis Study, released in 2019, https://www.fns.usda.gov/child-nutrition-reporting-burden-analysis-study, in a
responsible way, while giving consideration to local resource
constraints. In a proposed rule, Simplifying Meal Service and
Monitoring Requirements in the National School Lunch and School
Breakfast Programs, 85 FR 4094, on January 23, 2020, https://www.fns.usda.gov/nslp/fr-012120, FNS suggested a number of
discretionary changes to streamline the administrative review, without
compromising State agency and SFA efforts to maintain accountability
and integrity.
Through this final rule, FNS is taking action to codify the
proposed changes to monitoring. These amendments will give State
agencies greater flexibility, eliminate redundancy, and target limited
State resources to higher risk SFAs. This rulemaking includes
amendments to:
Allow State agencies to return to a 5-year administrative
review cycle and require State agencies that conduct reviews on a
longer than 3-year cycle to identify high-risk SFAs for additional
oversight at 7 CFR 210.18(c);
Give State agencies flexibility to substitute information
from local-level audits for related parts of the administrative review,
at 7 CFR 210.18(f)(3);
Reduce the performance-based reimbursement reporting
requirement, from quarterly to annually, by removing 7 CFR
210.5(d)(2)(ii) and 210.7(d)(1)(vii) and (d)(2), which are obsolete;
Allow State agencies to omit specific elements of the
administrative review, when equivalent oversight activities are
conducted outside of the administrative review process, at 7 CFR
210.18(f), (g), and (h);
Adopt a framework that State agencies may elect to modify
the administrative review if the State agency or SFA adopts the
specified integrity-focused improvements, at 7 CFR 210.18(f), (g), and
(h);
Give State agencies flexibility to conduct the assessment
of an SFA's nonprofit school food service account at any point in the
review process, at 7 CFR 210.18(h)(1);
Include compliance with the Buy American requirement as
part of the general areas of the administrative review, at 7 CFR
210.18(b) and (h)(2);
Removes requirement for required fiscal action against
SFAs for repeated violations of meal pattern noncompliance, at 7 CFR
210.18(l)(2); and
Allow State agencies to conduct the FSMC review on a 5-
year cycle, at 7 CFR 210.19(a)(5).
FNS received 57,248 public comments on the proposed rule. Nearly
all of the comments were submitted in response to proposed amendments
related to school meal nutrition standards, which are not addressed in
this final rule but are instead addressed in a separate rulemaking. The
comments are posted at http://www.regulations.gov under docket ID FNS-
2019-0007, Simplifying Meal Service and Monitoring Requirements in the
National School Lunch and School Breakfast Programs.
Although less than 150 respondents addressed any of the proposed
changes to monitoring under the administrative review process, the
comments were overall supportive of proposed changes. Respondents
agreed that the proposed monitoring amendments would free up time and
resources for State agencies to more effectively perform reviews,
provide technical assistance, and focus on program improvement. They
championed the increased flexibility, reduced redundancy, and paperwork
savings that would be achieved. Their comments expressed support for
changes that would allow opportunities for State agencies to provide
technical assistance, instead of what respondents perceived as
penalizing schools. Respondents also asserted that the proposed rule
would provide State agencies the autonomy to determine the review
processes that make the most operational sense for their situation.
In addition to providing training and technical assistance, State
agencies are responsible for regularly monitoring SFA operations. Since
School Year 2013-2014, the unified administrative review process has
provided a more robust review of the school meal programs. It also
includes a review of an SFA's financial practices through the Resource
Management Module to better ensure compliance with Federal regulations.
As was discussed in the proposed rule, program regulations under 7
CFR
[[Page 57809]]
210.18 address various aspects of the administrative review, including
the timing of review, use of audit findings as part of the scope of
review, areas of critical and general review, corrective action,
withholding of payments, fiscal action, and appeal rights. FNS examined
the review process to identify a number of elements that could
favorably reduce administrative burden in a responsible way.
B. Streamlining the Administrative Review Process
1. Return to a 5-Year Review Cycle
The unified administrative review process provides a robust review
of the school meal programs, supporting integrity and administrative
responsibility. Current regulations at 7 CFR 210.18(c) require State
agencies to conduct a comprehensive administrative review of each SFA
participating in NSLP and SBP at least once during a 3-year cycle.
FNS proposed modifying the review cycle to ease the burden for
State agencies and SFAs, by allowing State agencies to return to a 5-
year administrative review cycle. An SFA that has any findings on the
previous administrative review or noncompliance with Federal
procurement regulations would be designated high risk. The proposed
rule would require State agencies to designate and, within 2 years,
perform follow-up reviews of high-risk SFAs. The proposed rule would
also allow State agencies to conduct more frequent reviews.
FNS received 147 comments on the proposed 5-year review cycle--97
were supportive, 38 were opposed, and 12 were mixed. Proponents
recognized that the high number of waivers granted to State agencies
under the current waiver process--which allows State agencies to
request to extend the 3-year review cycle--underscores the need for
relief. State agencies currently using waivers to extend their review
cycles have reported that it allows them to better balance resources
between technical assistance and formal reviews, and better support
schools in their operations. Many respondents supported requiring
targeted follow-up reviews for high-risk SFAs, maintaining that
additional oversight could improve their performance. Many also agreed
that a risk-based approach would target limited State agency oversight
resources where they are most needed.
Opponents suggested that a 5-year gap between reviews would be too
long and could weaken program integrity. Instead of making this change,
they suggested that FNS retain the 3-year cycle and work to streamline
the administrative review process or ensure that SFAs selected for
follow-up reviews receive technical assistance. FNS is committed to
robust oversight, integrity, and quality in the school meal programs.
However, FNS recognizes that the 3-year review cycle is taxing for
State agencies and SFAs and diverts resources from technical assistance
and program improvement.
This final rule amends 7 CFR 210.18(c), to allow State agencies to
implement a 5-year administrative review cycle, while targeting
additional oversight to those SFAs most in need of assistance. State
agencies may continue with a shorter review cycle if they wish to do
so. This rule also requires State agencies that review SFAs on a longer
than 3-year cycle to identify high-risk SFAs for additional oversight.
SFAs in need of more frequent monitoring--those that present program
integrity concerns--will receive it through the required targeted
follow-up review. Each State agency that reviews SFAs on a longer than
3-year cycle must develop a plan for FNS approval describing the
criteria that will be used to identify high-risk SFAs for targeted
follow-up reviews.
In this final rule, minimum high-risk criteria that must be
included in State plans will be outlined at 7 CFR 210.18(c)(2). These
core elements are consistent with recommendations from State agencies
to focus on compliance with the performance standards and the
appropriate use of Federal funds. State agencies may add other criteria
and use other information to designate an SFA as high-risk on a case-
by-case basis.
State agencies must also conduct a targeted follow-up review of any
SFA designated as high-risk within 2 years of the initial review. The
targeted follow-up review must, at a minimum, include the areas
identified in the most recent review that caused the SFA to be
designated high-risk.
FNS also proposed a corresponding change at 7 CFR 210.19(a)(5) to
align the food service management company (FSMC) review with the 5-year
administrative review cycle. FNS received 19 comments on this
proposal--13 were supportive, 3 were opposed, and 3 were mixed. Most
respondents cited the same reasons for supporting or opposing a return
to a 5-year administrative review cycle. One respondent argued that
there should be no change in cycle because the review of FSMCs is
primarily a procurement review, which would be completed annually off-
site. Another suggested that more frequent reviews of invoices should
be conducted instead.
Accordingly, this final rule amends 7 CFR 210.18(c), and allow
State agencies to implement a 5-year administrative review cycle, while
targeting additional oversight to those SFAs most high risk. This final
rule also amends 7 CFR 210.19(a)(5) to allow State agencies to conduct
the FSMC review on a 5-year cycle to align with the administrative
review cycle. This final rule does not make any changes to the
oversight of FSMCs, including the requirement for State agencies to
review each contract between an SFA and FSMC annually. State agencies
may continue with a shorter FSMC review cycle if they wish to do so.
The compliance date is July 1, 2024.
2. Substitution of Local-Level Audits
Current regulations at 7 CFR 210.18(f)(3) allow State agencies to
use applicable findings from federally-required audit activity or
State-imposed audit requirements in lieu of reviewing the same
information on an administrative review, provided the audit activity
complies with the same standards and principles that govern the Federal
single audit. FNS proposed building on this flexibility by expanding
the allowable use of local-level audits. The proposed rule would allow
State agencies to use recent and applicable findings from local-level
audits initiated by SFAs or other entities including tribes,
supplementary audit activities, or requirements added to Federal or
State audits by local operators, as long as the audit activity complies
with the same standards.
FNS received 47 comments that addressed this proposed amendment--38
were supportive, 3 were opposed, and 6 were mixed. One respondent
argued that external audits would only add confusion because they do
not necessarily align with the same standards used in the
administrative review process. However, FNS agrees with most
respondents that the use of local-level audits will simplify
monitoring--limiting unnecessary duplication of efforts and minimizing
burden on State agency staff--without compromising program integrity.
Accordingly, this final rule amends 7 CFR 210.18(f)(3) to allow
State agencies, with FNS approval, to use information from local-level
audits to substitute for related parts of the administrative review.
Requiring FNS approval will ensure that the local-level audit aligns
with Federal audit standards. The compliance date is July 1, 2024.
[[Page 57810]]
3. Completion of Review Requirements Outside of the Administrative
Review
State agencies conduct a variety of oversight activities outside of
the formal administrative review process. FNS proposed adding a new
amendment under 7 CFR 210.18(f), (g), and (h), to allow State agencies
to satisfy sections of the administrative review through equivalent
State oversight activities that take place outside of the formal
administrative review process, if the State agency or SFA has
implemented FNS-specified error reduction strategies or monitoring
efficiencies. In other words, State agencies would be able to omit
specific, redundant areas of the administrative review, when sufficient
oversight is conducted elsewhere.
FNS received 22 comments on this proposal--21 were supportive and 1
was opposed. Respondents described a number of equivalent State
oversight activities that would satisfy sections of the administrative
review, including health inspections, validation of Community
Eligibility Provision source data at the time of election, school
reports of financial revenues and expenses, information collected
during annual agreement renewals, on-site and comprehensive technical
assistance visits, and review of financial and other types of reports.
FNS agrees with respondents that this proposed amendment will increase
flexibility and reduce redundancy by allowing State agencies to satisfy
parts of the administrative review through activities they have already
performed.
Accordingly, this final rule amends 7 CFR 210.18(f), (g), and (h)
to allow State agencies, with FNS approval, to omit specific, redundant
areas of the administrative review, when sufficient oversight is
conducted outside of the administrative review. Each of these State
agencies must submit a plan, for FNS approval, that describes the State
agency's specific oversight activities and the critical or general
areas of review that would be replaced. State agencies must submit
updates or additions to their plan for FNS approval. The compliance
date is July 1, 2024.
4. Framework for Integrity-Focused Process Improvements
To address the improper payment challenges facing the NSLP and SBP,
where much of the underlying program error cannot be identified or
addressed through monitoring alone, additional efforts must be directed
to process reform. FNS proposed further amending 7 CFR 210.18(f), (g),
and (h) to allow State agencies to elect to modify, reduce, or
eliminate a specified administrative review requirement, if the State
agency or the SFA has adopted a given set of process improvements. The
goal would be to redirect some of the costs of the administrative
review into State agency or SFA investment in designated systems or
process improvements to reduce or eliminate program errors. The
streamlined review would be the incentive to make the necessary
investments in systems or process improvements that can reduce or
eliminate program errors.
FNS received 26 comments on this proposal--12 were supportive, 3
were opposed, and 11 were mixed. Many of the comments identified
potential challenges or asked for clarification. For example,
respondents requested more specific information on what the integrity-
focused processes entail, expressed concerns about potential impacts of
the proposal on State agencies or SFAs, and posed questions about the
effect of proposed integrity features. FNS believes that providing
States and SFAs the option of adopting integrity focused process
reforms could increase outcomes and decrease errors.
FNS intends to develop guidance and a series of FNS-approved
optional process reforms that respond to the latest findings from USDA
research, independent audits, and FNS analysis of administrative data
that State agencies and SFAs may adopt. FNS understands there will be
costs associated with some of these process reforms, but that these
will be offset, in whole or in part, through savings from the
streamlined administrative review.
FNS will test potential reforms, in cooperation with State and
local program administrators, to assess their feasibility and
effectiveness. States or SFAs may then adopt these FNS-approved process
reforms, at their option, in exchange for elimination, modification, or
reduction of existing administrative review requirements. FNS
anticipates that this package of optional reforms will grow over time
in response to new research and changes in the nature of the integrity
challenges facing the programs.
Accordingly, this final rule amends 7 CFR 210.18(f), (g), and (h)
to allow State agencies to omit designated areas of review, in part or
entirely, where a State agency or SFA has implemented FNS-specified
error reduction strategies or utilized FNS-specified monitoring
efficiencies. The effective date is September 22, 2023.
5. Assessment of Resource Management Risk
Current regulations at 7 CFR 210.18(h)(1) direct State agencies to
perform an off-site assessment of an SFA's nonprofit school food
service account to evaluate the risk of noncompliance with resource
management requirements. If risk indicators show that the SFA is at
high risk for noncompliance with resource management requirements, the
State agency must conduct a comprehensive review. FNS proposed giving
State agencies discretion to conduct this assessment at any point in
the review process rather than requiring it to take place off-site.
FNS received 19 comments on this proposal--16 were supportive and 3
were opposed. While proponents supported greater flexibility for State
agencies to determine when and how they conduct the resource management
module, opponents were concerned that reviews would become less
efficient and more disruptive to SFAs under this proposal. For example,
one respondent argued that SFAs need a firm timeline to prepare for the
administrative review. FNS recognizes that allowing State agencies to
set up the review process to meet their needs will increase the
usefulness of the resource management assessment, while reducing
unnecessary burden.
Accordingly, this final rule amends 7 CFR 210.18(h)(1) to allow
State agencies to conduct the assessment of an SFA's nonprofit school
food service account at any point in the review process. Similar to the
on-site portion of the review, FNS will no longer require that this
assessment take place off-site before the administrative review.
Although the State agency should make this assessment in the school
year that the review began, completion of the resource management
module may occur before, during, or after the on-site portion of the
administrative review. The compliance date is September 22, 2023.
6. Buy American Area of Review
Program regulations under 7 CFR 210.21(d) and 7 CFR 220.16(d)
describe requirements SFAs must follow to purchase, to the maximum
extent practicable, domestic commodities or products and State agencies
already review this provision as a part of the administrative review.
However, Buy American is not currently included in regulation as part
of the general areas of the administrative review. FNS proposed
including compliance with the Buy American requirements as a general
area of review, under 7 CFR 210.18(h)(2), that State agencies must
monitor when they conduct administrative reviews.
[[Page 57811]]
FNS received 20 comments--9 were supportive, 4 were opposed, and 7
were mixed. While many of the comments went beyond the scope of the
proposed rule, one respondent argued that a Buy American review should
be included in either the oversight of procurement practices required
under governmentwide regulations at 2 CFR 200 or the administrative
review, but not both. State agencies review Buy American on-site
through the administrative review, which then allows the State agency
to conduct the oversight of procurement practices entirely off-site. To
the extent practicable, these review teams should coordinate reviews
and communicate findings in order to provide comprehensive monitoring
of the Buy American requirements.
Accordingly, this final rule amends 7 CFR 210.18(h)(2) to add a new
paragraph (xi) to require State agencies to ensure compliance with the
Buy American requirements to purchase domestic commodities or products.
This final rule also makes a corresponding technical change to the
definition of ``General areas'' under 7 CFR 210.18(b). This small
change provides consistency by aligning the lists of general areas of
review that appear in paragraphs (b) and (h)(2). The compliance date is
September 22, 2023.
7. Discretion in Taking Fiscal Action for Meal Pattern Violations
Current regulations at 7 CFR 210.18(l)(2) require State agencies to
take fiscal action to recover Federal funds from SFAs for repeated
violations of milk type and vegetable subgroup requirements. FNS
proposed to instead give the State agency discretion to take fiscal
action against SFAs for repeated violations of milk type and vegetable
subgroup requirements. This would align with current State discretion
to take fiscal action to address repeated violations of food quantity,
whole grain-rich, and dietary specifications requirements.
FNS received 54 comments on this proposal--23 were supportive, 28
were opposed, and 3 were mixed. Proponents suggested that this
amendment would allow State agencies to provide technical assistance,
instead of penalizing schools for unintentional errors. Opponents
argued that continued violations of program requirements should be
addressed uniformly, with consequences that will prevent integrity
concerns. FNS continues to believe that implementing this amendment
will increase efficiency and reduce burden, without compromising
integrity.
While most SFAs strive to make a good faith effort to comply with
meal pattern requirements, FNS recognizes that some SFAs may need
additional support from the State agency to fully and correctly
implement the meal pattern. Rather than require State agencies to
fiscally penalize SFAs, this rule allows States to consider each unique
situation and determine whether technical assistance, fiscal action, or
a combination of both, is the appropriate response. FNS encourages
State agencies to communicate with their SFAs about situations that
would warrant fiscal action, to ensure a uniform and fair approach.
Accordingly, this final rule amends 7 CFR 210.18(l)(2) to give
State agencies the discretion to take fiscal action against SFAs for
repeated violations of milk type and vegetable subgroup requirements.
This amendment aligns with State's existing discretion to take fiscal
action for repeated violations concerning food quantities, whole grain-
rich foods, and the dietary specifications. This final rule retains the
requirement that State agencies must take fiscal action for missing
food components. The compliance date is September 22, 2023.
C. Reducing Performance-Based Reimbursement Reporting
Program regulations at 7 CFR 210.5(d)(2)(ii) require State agencies
to submit to FNS a quarterly report detailing the total number of SFAs
in the State and the names of SFAs that are certified to receive the
statutorily-established 8-cents performance-based reimbursement. The
regulations further affirm that State agencies will no longer be
required to submit the quarterly report once all SFAs in the State have
been certified. In the Simplifying Meal Service and Monitoring
Requirements in the National School Lunch and School Breakfast
Programs, 85 FR 4094, https://www.fns.usda.gov/nslp/fr-012120, FNS
proposed reducing the frequency of this reporting requirement from
quarterly to annually, as almost all SFAs are already certified to
receive the performance-based reimbursement.
FNS received 21 comments on this proposal--20 were supportive and 1
was mixed. The mixed comment generally supported the provision but
suggested a change to the rate structure which is statutorily driven.
FNS agrees with respondents that eliminating or reducing non-essential
administrative requirements and simplifying program regulations will
allow more time for State agencies to focus on improving program
operations.
Accordingly, this final rule amends 7 CFR 210.5(d) to reduce the
performance-based reimbursement reporting requirement from quarterly to
annually. This rulemaking moves the performance-based reimbursement
report from the quarterly report under paragraph (d)(2) to the end-of-
the-year report under paragraph (d)(3). Corresponding changes remove
references to the performance-based reimbursement report at 7 CFR
210.7(d)(1)(vii) and (d)(2) that are now obsolete. This rulemaking
amends 7 CFR 210.5(d)(2) and (d)(3) and 210.7(d). The compliance date
is September 22, 2023.
IV. Miscellaneous Amendments
A. State Administrative Expense (SAE) Funds
SAE regulations require State agencies to return to FNS any
unexpended SAE funds at the end of the fiscal year following the fiscal
year for which the funds are awarded. FNS proposed an amendment that
would require State agencies to return any unobligated SAE funds--
instead of unexpended--to give State agencies more flexibility to spend
their funds. FNS received 40 comments on this proposal--38 were
supportive, 1 was opposed, and 1 was mixed. FNS agrees with respondents
that making this change will help ensure that State agencies are not
missing opportunities to use their funds. This change also gives State
agencies a longer period of time to expend SAE funds to complete
critical work. Accordingly, this final rule amends 7 CFR 235.5(d) and
(e)(2) to require State agencies to return any unobligated SAE funds to
FNS. The compliance date is September 22, 2023.
B. FNS Contact Information
A realignment of FNS Regional Offices took effect on September 29,
2019. These organizational changes achieve operational efficiencies,
increased accountability, and improved communications to support
program integrity, and ensure continued executive supervisory oversight
for mission critical functions such as human resources, contracting,
and logistics. This final rule makes a technical change to advise the
public to contact the appropriate State agency or FNS Regional Office
to obtain program information. Accordingly, this final rule amends 7
CFR 210.32, 215.17, 220.21, 225.19, and 226.26 to direct the public to
the FNS website to obtain contact information. The effective date is
September 22, 2023.
[[Page 57812]]
C. Program Application Requirements
CACFP institutions must submit a certification, under 7 CFR
226.6(b)(1)(xv), that all information on the application is true and
correct, along with the name, mailing address, and date of birth of the
institution's executive director and board of directors chair or, in
the case of a for-profit center, the owner of the for-profit center.
Similar information about the executive director, board of directors
chair, and other responsible principals must be included in each SFSP
application. SFSP sponsors and CACFP institutions must also provide
Federal Employer Identification Numbers (FEIN) or the Unique Entity
Identifier (UEI). This final rule codifies these amendments under 7 CFR
225.6(c)(1), 226.6(b)(1)(xv), and 226.6(b)(2)(iii)(F). The effective
date is September 22, 2023.
V. Procedural Matters
Executive Orders 12866 and 13563
Executive Orders 12866, 13563, and 14094 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, reducing costs, harmonizing rules, and promoting flexibility.
This final rule was reviewed by the Office of Management and Budget
(OMB) and determined to be significant. As required, an economic
summary was developed for this final rule.
Economic Summary
Need for Action: This action implements statutory requirements and
policy improvements to strengthen administrative oversight and
operational performance of the Child Nutrition Programs. Strong
integrity safeguards for taxpayer investments in nutrition are
fundamental to earning and keeping the public confidence that make
these programs possible. As FNS continues to work towards improving
integrity in these programs, this final rule establishes criteria and
procedures through a number of provisions that are designed to increase
accountability, maximize operational efficiency, and ensure that the
National School Lunch Program, School Breakfast Program, Special Milk
Program, Summer Food Service Program, and Child and Adult Care Food
Program deliver important nutritional benefits and protect scarce
Federal resources with the highest level of integrity.
Affected Parties: The programs affected by this rule are the
National School Lunch Program (NSLP), School Breakfast Program (SBP),
Special Milk Program (SMP), Child and Adult Care Food Program (CACFP),
and the Summer Food Service Program (SFSP). The parties affected by
this regulation are the USDA's Food and Nutrition Service, State
agencies administering Child Nutrition programs, local school food
authorities, schools, institutions, sponsoring organizations, sponsor
sites, and day care centers.
Summary: A regulatory impact analysis (RIA) must be prepared for
major rules with effects of $200 million or more in any one year. USDA
does not anticipate that this final rule is likely to have an economic
impact of $200 million or more in any one year, and therefore, does not
meet the definition of ``significant effects'' under 3(f)(1) under
Executive Order 12866, as amended.
USDA estimates the cost of this rule to State and local government
agencies to be approximately $0.7 million over 5 years, and for the
cost to businesses (i.e., CN program sponsors) to be $6 million over 5
years, for a total 5-year nominal cost of $6.7 million. At least some
of those costs will be offset by new federal CACFP audit funding made
available under this rule; USDA estimates the lower bound of these
transfers from the federal government to the States to be $27.2 million
over 5 years and the upper bound to be $108.9 million over 5 years. Due
to these transfers, USDA anticipates that the net costs to the State
and local parties will be lower than $6.7 million over 5 years. All
estimates in this economic summary are given in 2023 dollars.
Baseline for analysis: The baseline for this particular analysis is
the administrative costs prior to the provisions' implementation on
State agencies, SFAs, and CACFP sponsors for administering programs in
compliance with Federal CN rules and statute, including reporting and
recordkeeping costs. The cost estimates presented are the additional
costs and transfer impacts above this baseline attributable to the
provisions of this rule. Some of the rule's provisions have already
been implemented and are simply codified through this rule. The cost
impacts of provisions being codified are included with the total cost
impacts of all provisions in this economic summary for transparency;
those provisions are explicitly identified in the discussion below. The
estimates and tables in this analysis assume that all provisions will
be in effect by 2025, so 2025 is used as the starting year for
simplification and consistency in this economic summary.
Summary of provisions from Child Nutrition Program Integrity
Proposed rule factored into economic analysis: This section states and
summarizes the provisions considered in the Final Integrity rule
carried over from the Child Nutrition Program Integrity Proposed rule,
with a particular focus on the components with administrative cost
implications.
Fines for Violating Program Requirements: The
CNI final rule authorizes the imposition of fines by the USDA and State
agencies against school food authorities (SFAs) that have an agreement
with a State agency to administer any of USDA's child nutrition
programs. USDA and State agencies may impose fines against these
institutions for failure to correct severe mismanagement of one of the
CN programs, disregard of program requirements, and failure to correct
repeated violations of program requirements. It also provides for the
imposition of fines by the USDA against State agencies for failure to
correct State or local mismanagement of a CN program, disregard of
program requirements, or failure to correct repeated violations of
program requirements. The rule sets limits on these fines and provides
for the right to appeal fines imposed under this section.
State Agency Review Requirements in CACFP: The
final rule increases the minimum frequency of review, from once every
three years to once every two, for certain CACFP institutions--
independent centers or sponsoring organizations that have been
identified as having or are at risk of having serious management
problems, and sponsors of up to 100 facilities that conduct activities
in addition to the CACFP (known as multi-purpose sponsors).
State Liability for Payments to Aggrieved Child
Care Institutions: The final rule sets reporting requirements for the
administrative review process for CACFP sponsors or providers that face
State agency administrative or fiscal actions and requires that State
agencies issue administrative review decisions within 60 days, and
permits USDA to make the State agency liable to pay all valid claims
for reimbursement (meals and administrative) to the institution from
non-Federal sources starting on the 61st day. This provision amends
current regulations at 7 CFR 226.6(k).
CACFP Audit Funding: Beginning in FY 2016, if a
State agency demonstrated that it can effectively use additional funds
to improve program
[[Page 57813]]
management in accordance with USDA criteria, USDA increased the funds
made available to the State from 1.5 percent to 2 percent of the CACFP
funds used by that State in the second preceding fiscal year. This
provision is already in effect, and the final rule codifies this change
in regulation.
Financial Review of Sponsoring Organizations in
CACFP: The final rule requires sponsoring organizations to report
actual program expenditures, and it requires State agencies to annually
review at least one month of all sponsoring organization's CACFP bank
account activity against supporting documents to validate that all
transactions meet program requirements. This provision amends current
regulations at 7 CFR 226.7(b) and 7 CFR 226.10(c).
Informal Purchase Methods for CACFP: This final
rule amends 7 CFR 226.21(a) and 226.22(i)(1) to link the values of the
Federal micro-purchase threshold and Federal simplified acquisition
threshold to 2 CFR 200 (currently $10,000 for micro-purchases and
$250,000 for the simplified acquisition threshold).
SFA Contracts with Food Service Management
Companies: This final rule amends NSLP regulations to require each
State agency to annually review and approve each contract and contract
amendment between any SFA and FSMC. (Currently, State agencies are
required to review procurement contracts, but not to approve them
formally.) It also amends NSLP and SBP regulations to require the value
of USDA Foods to accrue only to the benefit of the SFA's nonprofit
school food service. The proposed rule did not extend this second
provision to SBP. However, FNS is correcting this oversight in this
final rule by adding the USDA Foods provision to both NSLP and SBP
regulations. Finally, the final rule adds a definition for fixed-price
contract to NSLP and SBP regulations for clarity. Current NSLP and SBP
regulations define cost-reimbursable contract. This provision amends
current regulations at 7 CFR 210.19(a)(5).
Annual NSLP Procurement Training: This provision
requires that State directors of school nutrition programs, State
directors of distributing agencies, and school nutrition program
directors, management, and staff who work on NSLP procurement
activities successfully complete annual training in procurement
standards. It also requires State agencies and SFAs to retain records
to document compliance with professional standards training
requirements.
FNS Contact Information: A realignment of FNS
Regional Offices took effect on September 29, 2019. These
organizational changes achieve operational efficiencies, increased
accountability, and improved communications to support program
integrity, and ensure continued executive supervisory oversight for
mission critical functions such as human resources, contracting, and
logistics. This final rule makes a technical change to advise the
public to contact the appropriate State agency or FNS Regional Office
to obtain program information.
Program Applications: CACFP institutions must
submit a certification, under 7 CFR 226.6(b)(1)(xv), that all
information on the application is true and correct, along with the
name, mailing address, and date of birth of the institution's executive
director and board of directors chair or, in the case of a for-profit
center, the owner of the for-profit center. Similar information about
the executive director, board of directors chair, and other responsible
principals must be included in each SFSP application. SFSP sponsors and
CACFP institutions must also provide Federal Employer Identification
Numbers (FEIN) or the Unique Entity Identifier (UEI).
Summary of provisions from CACFP amendments factored into economic
analysis: This section states and summarizes the provisions in the
Final Integrity rule carried over from the CACFP amendments Proposed
rule.
Elimination of the Annual Application for
Institutions: This provision eliminates renewal applications and
modifies the frequency with which initial and follow-up applications
must be submitted by sponsoring organizations to state agencies. It
also adds new definitions of New Institution, Participating
Institution, Renewing Institution, and Lapse in Participation. Finally,
the rule reorganizes applications submission and renewal requirements.
This provision is already in effect.
Timing of Unannounced Reviews: The timing of
reviews conducted by sponsoring organizations will be required to vary
and be unannounced, so they are unpredictable to sponsored facilities.
The unannounced reviews from this provision are intended to uncover
program integrity issues more effectively. This provision is already in
effect.
Standard Agreements Between Sponsoring
Organizations and Sponsored Child Care Centers: This final rule
requires State agencies to develop and provide for the use of permanent
operating agreements between sponsoring organizations of sponsored
centers and day care homes. A standard agreement can be developed by
State agencies to be used between sponsoring organizations and
unaffiliated childcare centers. State agencies are also allowed to
approve an agreement developed by the sponsoring organization. This
provision is already in effect.
Collection and Transmission of Household Income
Information: The provision requires sponsoring organizations to allow
providers of tier II day care homes to assist in the collection and
transmission of household income information with the written consent
of the parents or guardians of children in their care. It provides
specific steps a day care home must take when assisting with this
process. It also strongly encourages sponsoring organizations to
establish procedures to protect the confidentiality of a household's
income information and prohibits the provider from reviewing
applications from households. This provision is already in effect.
Calculation of Administrative Funding for
Sponsoring Organizations of Day Care Homes: A modification was made to
the method of calculating administrative payments to sponsoring
organizations of day care homes by eliminating the ``lesser of'' cost
and budget comparisons. FNS proposed calculating administrative
reimbursement by multiplying the number of day care homes under the
sponsoring organization's oversight by the appropriate annually
adjusted administrative payment rate. This provision is already in
effect.
Carryover of Administrative Funding for
Sponsoring Organizations of Day Care Homes: Under this provision,
sponsoring organizations of day care homes can carry over and obligate
up to 10 percent of administrative payments into the following year
with State agency approval. The State agency is required to establish
procedures to recover the funds from sponsoring organizations that are
not properly payable, are in excess of the 10 percent maximum carryover
amount, or any carryover amounts not expended or obligated by the end
of the fiscal year following the year they were earned. This provision
is already in effect.
Summary of provisions from the Simplifying Monitoring in NSLP and
SBP proposed rule: The provisions listed below were carried over from
the Simplifying Monitoring in NSLP and
[[Page 57814]]
SBP proposed rule into the Final Integrity Rule.
Discretion in Taking Fiscal Action for Meal
Pattern Violations: The final rule provision removes the requirement
that State agencies must take fiscal action against SFAs for repeated
violations of milk type and vegetable subgroup requirements. State
agencies will instead have the discretion to take fiscal action,
consistent with the guidance for food quantities, whole grain-rich
foods, and dietary specifications. Waivers have been in place during
the COVID-19 public health emergency to allow for State agency
discretion for meal pattern violations.
Return to a 5-Year Review Cycle: The final rule
allows State agencies to return to a 5-year administrative review cycle
and allows review of SFAs more frequently. The State agencies that
review on a 3-year cycle are not required to designate high-risk or
targeted reviews; however, high-risk designations and targeted reviews
are required for State agencies that review SFAs on a longer than 3-
year cycle. Each State agency that reviews SFAs on a longer than 3-year
cycle must develop a plan for FNS approval describing the criteria that
will be used to identify high-risk SFAs for targeted follow-up reviews.
State Agencies must conduct targeted follow-up reviews of high-risk
SFAs within two years of the review findings. This provision also
changes the food service management company review from a 3-year to 5-
year cycle, to align with the amendments to the administrative review
cycle. This allows State agencies to review SFAs contracting with food
service management companies more frequently, if they choose. Thirty-
six State agencies had a waiver in place allowing reviews to be
conducted on a 5-year review cycle prior to publication of the rule
proposing this provision.
Framework for Integrity-focused Process
Improvements: The final rule proposes a framework for waiving or
bypassing certain review requirements for State agencies or SFAs as an
incentive to invest in one or more USDA-designated systems or process
improvements that can reduce or eliminate Program errors. The series of
optional process reforms will be published separately from the final
rule.
Substitution of Third-Party Audits: The final
rule allows State agencies to use recent and applicable findings from
the following audits in lieu of reviewing the same information on an
administrative review, provided the audit activity complies with the
same standard and principals that govern the Federal single audit:
[cir] Supplementary audit activities,
[cir] Requirements added to federal or State audits by local
operators,
[cir] Other third-party audits initiated by SFAs, or
[cir] Other third-party audits initiated by other local entities.
Completion of Review Requirements Outside of the
Administrative Review: State agencies may satisfy sections of the
administrative review through equivalent State oversight activities
that take place outside of the formal administrative review process,
with required regional office approval.
Assessment of Resource Management Risk: Under
this provision, State agencies may conduct the assessment of an SFA's
nonprofit school food service account at whichever point in the review
process makes the most operational sense to the State agency. State
agencies may also set up a review process and staff work units in the
manner that they see fit.
Buy American Area of Review: The requirement to
review Buy American as part of the general areas of the administrative
review are codified in the final rule and added to the regulatory
definition of ``general areas.'' Guidance on Buy American is provided
currently.
Performance-based Reimbursement Quarterly
Report: The final rule changes the frequency of the reporting from
quarterly to annual as most SFAs are already certified to receive the
6-cents performance-based reimbursement.
State Administrative Expense Funds: This
provision updates regulatory language to state that State agencies must
return any State Administrative Expense funds which are unobligated.
This is a change from the current requirement that unexpended funds
must be returned.
Addressing Public Comments on the Proposed 2016 CN Integrity
Program Rule RIA: The following list summarizes the comments on the
proposed rule's Regulatory Impact Analysis:
Five commenters discussed costs related to the Regulatory
Impact Analysis (RIA) for the proposed CN Integrity Proposed Rule. A
general advocacy group opposed many of the provisions in the proposed
rule and expressed dissatisfaction that the original Congressional
Budget Office analysis of Public Law 111-296 did not provide an
estimate of the imposition of fines against entities other than State
Agencies and SFAs. Although the dissatisfaction was not directed at the
regulatory impact analysis of the proposed rule, USDA notes that the
final rule removes the provision authorizing fines against entities
other than State Agencies and SFAs, so there will be no fines against
entities other than State Agencies and SFAs. This is a change from the
proposed rule, which would have extended fines to SFSP sponsors and
CACFP institutions.
An individual commenter also expressed concern about the
additional administrative costs to the States of monitoring CACFP
providers, which USDA estimated at $4.3 million in FY2017 and $22.7
million from FY2017-FY2021 in the RIA for the proposed rule. USDA
presents updated estimates for FY2025-FY2029 for the final rule below,
which results in a net decrease in cost and burden on State and local
government agencies. Similarly, a State agency argued that State
agencies would need more State funds (i.e., non-federal funds) in order
to comply with the ``more frequent investigations and reporting'' in
the proposed rule. The State agency also recommended the creation of a
national list of seriously deficient sponsors, rather than requiring
each State to devise their own database reporting methodology and
requiring each State to maintain the database itself. USDA also notes
that the final rule makes available additional audit funding to State
agencies that can justify a need for that funding.
Finally, a State agency expressed concern about the
ability of a State agency to pay any potential fines, as they do not
have general funds available for this kind of liability, and any final
ability to pay ``will be severely hampered by the State's budgeting
process.''
FNS was required by statute to codify the criteria and
procedures under which FNS may establish fines against State agencies.
In general, FNS expects fines to be established in exceptional
circumstances, when existing processes (technical assistance,
corrective action, and routine fiscal action) do not bring State
agencies into compliance. FNS is not required to establish fines
against State agencies, and fines would be limited to severe or
repeated program violations that FNS, in consultation with its legal
counsel, determines warrant a fine. Additionally, if an exceptional
circumstance does warrant a fine, FNS may establish a fine below the
maximum threshold established in regulation.
There were no comments received on the RIA for the CACFP
Amendments or the Simplifying Monitoring in NSLP and SBP proposed
rules.
Cost/Benefit Assessment Summary: The analysis that follows
quantifies the
[[Page 57815]]
impact of the four provisions of the above-listed provisions that we
estimate have non-negligible cost implications for the Federal
government, State agencies, SFAs, and/or businesses (including CACFP
sponsors and centers), as well as the new reporting and recordkeeping
requirements of the final rule.
The analysis does not quantitatively estimate the value of the CNI
final rule's benefits or the magnitude of most of its potential
transfer impacts (such as the recovery of improper program payments)
due to a lack of data, but we expect the overall economic effect to be
relatively small. The provisions codified in this final rule are
designed to increase program operators' accountability and operational
efficiency, while improving the ability of FNS and State agencies to
address severe or repeated violations of program requirements.
Table 1--Summary of Estimable Administrative Cost Differences and Resources
----------------------------------------------------------------------------------------------------------------
Fiscal year (millions)
-----------------------------------------------------------------------------
2025 2026 2027 2028 2029 Total
----------------------------------------------------------------------------------------------------------------
State agency programmatic administrative costs
----------------------------------------------------------------------------------------------------------------
State Agency MIS Upgrade and $2.9 $0.1 $0.1 $0.1 $0.1 $3.1
Maintenance Costs................
----------------------------------------------------------------------------------------------------------------
State and Local Government Reporting and Recordkeeping Costs
----------------------------------------------------------------------------------------------------------------
State and Local Government -0.4 -0.5 -0.5 -0.5 -0.5 -2.3
Information collection burden
(reporting and recordkeeping)....
----------------------------------------------------------------------------------------------------------------
Institutions (Business) administrative costs
----------------------------------------------------------------------------------------------------------------
Businesses--Reporting Requirements 1.1 1.2 1.2 1.2 1.3 6.0
----------------------------------------------------------------------------------------------------------------
Increase in Federal audit funding for State agencies (CACFP)
----------------------------------------------------------------------------------------------------------------
low estimate...................... 5.1 5.2 5.4 5.6 5.9 27.2
upper bound estimate.............. 20.3 20.9 21.7 22.6 23.4 108.9
----------------------------------------------------------------------------------------------------------------
Note: Numbers may not sum to totals due to rounding.
Administrative Impact: This section begins with cost estimates for
the four provisions expected to have the most significant effect on
State agencies', local governments', and CACFP and SFSP providers'
administrative responsibilities. We follow that with a qualitative
discussion of the potential administrative impact of the rule's
remaining provisions.
State Agency Review Requirements in CACFP: This provision is
expected to be implemented by 2025. The CNI final rule increases the
minimum frequency of review, from once every three years to once every
two, for certain CACFP institutions--independent centers or sponsoring
organizations that have been identified as having or are at risk of
having serious management problems, and sponsors of up to 100
facilities that conduct activities in addition to the CACFP (known as
multi-purpose sponsors). (Sponsoring organizations with more than 100
facilities already must be reviewed at least once every two years.)
The cost of this provision is included in the burden estimate under
the Paperwork Reduction Act, so it is included in our estimate of the
total reporting and recordkeeping costs for State and local government
and for businesses. It accounts for 6,728 of the increased burden
hours, or 12.5% of the total increase in burden hours attributed to the
rule as estimated in Table 10. At a rate of $67.97, based on 2022 BLS
State and Government Management and Professional compensation rates,
this is an estimated annual cost of approximately $457,302.
The administrative costs of this provision may vary across States
with the relative concentration of small multi-purpose and other high-
risk sponsors. In FY2022, FNS administrative data shows that there were
19,460 sponsors and independent centers, and a total of 140,434 centers
and homes participating in CACFP. About 53 percent of CACFP providers
are day care homes, and childcare centers account for about 46 percent
of CACFP providers. At least for family day care homes, there is
considerable variation in the distribution of homes per sponsor across
the States (Table 2). For example, in November 2022, all sponsors of
day care homes in New Hampshire oversaw 1 to 50 homes. Conversely, in
Oregon, 67 percent of sponsoring organizations of day care homes
oversaw 200 to 1,000 homes. Table 2 shows that 18 States report that
more than half of their family day care home sponsors administer
between 1 and 50 homes.
Independent childcare centers made up 10.6% of all childcare
providers in 2015 and are more likely to operate fewer than 10 sites.
Among family day care home sponsors, 14.7 percent have 10 or fewer
sites compared to 94.6 percent of childcare center and 75.4 percent of
Head Start center sponsors. Conversely, 38.3 percent of family day care
home sponsors have more than 100 sites compared to less than 0.2
percent of childcare centers and 0.1 percent of Head Start center
sponsors. FNS data cannot distinguish multi-purpose sponsors from other
sponsors that oversee no more than 100 daycare homes. FNS
administrative data offer some indication that the administrative
burden associated with this provision may vary across States. States
with the highest percentage of small family day care home sponsors
(those responsible for no more than 100 homes) may have a
disproportionate number of small multi-purpose sponsors and may
therefore be disproportionately impacted by this provision.\1\
---------------------------------------------------------------------------
\1\ Source: FNS Administrative Data.
[[Page 57816]]
Table 2--Profile Sponsoring Organizations of Day Care Homes
----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Percent of sponsoring organizations Percent of sponsoring organizations Percent of sponsoring organizations Percent of sponsoring organizations
administering 1-50 day care homes administering 51-200 day care homes administering 201-1000 day care homes administering 1000 + day care homes
States * -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
1% to 25% 26% to 50% 51% to 75% >75% 1% to 25% 26% to 50% 51% to 75% >75% 1% to 25% 26% to 50% 51% to 75% >75% 1% to 25% 26% to 50% 51% to 75% >75%
----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
November 2022
----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
10 16 8 10 9 22 9 5 16 9 2 1 3 0 0 0
----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
* 52 States including DC and Puerto Rico.
Source: FNS Administrative Data.
[[Page 57817]]
Financial Review of Sponsoring Organizations in CACFP: This
provision amends current regulations at 7 CFR 226.7(b) and 7 CFR
226.10(c) and is expected to be implemented by 2025. The cost of this
provision is included in the burden estimate as published in the ICR
that accompanies this rule, so it is included in our estimate of the
total reporting and recordkeeping costs for State and local government
and for businesses in Table 10. The estimated burden associated with
this provision is 6,638 hours annually, making up 12.4% of total
increase in burden. At a rate of $67.97, based on 2022 BLS State and
Government Management and Professional compensation rates, this is an
estimated annual cost of approximately $451,185.
CACFP Audit Funding: Section 17(i) of the NSLA (42 U.S.C. 1766(i))
was amended by Section 335 of the Healthy, Hunger-Free Kids Act of 2010
(P.L. 111-296) to provide additional CACFP audit funding. This
provision will codify the already-implemented increase of the maximum
amount of CACFP audit funding from 1.5 percent to 2 percent of CACFP
expenditures. The provision took effect in FY 2016. Consistent with
current program rules, audit funds are computed as a percent of CACFP
spending in the second preceding year. Table 3 contains the
Department's actual value of CACFP audit distributions to the States in
FY 2020, FY 2021, and FY 2022 for illustrative purposes.\2\
---------------------------------------------------------------------------
\2\ Figures used in these actuals and in the FY2025-FY2029
projections were prepared for the FY 2024 President's Budget.
\3\ The years most affected by the COVID-19 pandemic (2019-2021)
resulted in a lower percent of available 0.5% funds used compared to
other years.
Table 3--Federal Transfers to State Agencies for CACFP Audit Funding
----------------------------------------------------------------------------------------------------------------
Fiscal year (millions)
CACFP projections -----------------------------------------------
2020 2021 2022
----------------------------------------------------------------------------------------------------------------
Maximum Available Audit Funding Projections from 2020 $70.1 $71.8 $58.4
President's Budget (1.5% + 0.5%)...............................
1.5% Share Max Available........................................ $52.6 $53.9 $43.8
0.5% Share Max Available........................................ $17.5 $18.0 $14.6
Actual 1.5% funds used.......................................... $52.0 $53.6 $43.4
Actual 0.5% funds used.......................................... $4.3 $4.9 $6.2
Percent of available 0.5% funds used \3\........................ 24.4% 27.5% 42.4%
----------------------------------------------------------------------------------------------------------------
If all State agencies request and demonstrate the need for
additional funds under this provision, then projected extra FY 2025
CACFP funds would be calculated by multiplying CACFP expenditures by
the full \1/2\ percent, giving an increase in FY 2025 audit funding of
$20.3 million. We use the same methodology to estimate the upper bound
estimate in Tables 1 and 4. Our upper bound estimate assumes that all
State agencies will request and use the full \1/2\ percent increase in
audit funds.
In practice, additional audit funds are only made available to
States that are able to justify a need for the funds. States are
required to detail their plans for the use of additional funds in
written requests to USDA. In FY 2018, 47.3% of these available funds
were actually spent; in FY 2022, 42.4% of the available funds were
actually spent.\4\ Therefore, we may assume that, in most years, fewer
than 100% of States Agencies will request 100% of the available 0.5% in
additional audit funding. USDA estimates an additional four burden
hours per State that chooses to submit a plan and request for
additional funding, as outlined in the ICR and our estimate of the
administrative burden below.
---------------------------------------------------------------------------
\4\ USDA administrative data.
---------------------------------------------------------------------------
To account for the additional reviews required by this final rule,
we estimate the costs of increasing CACP audit funding in Table 4. We
establish our lower bound estimate at 25% of the maximum additional
audit funding available.
Table 4--Cost of Increase in State Audit funding in CACFP
----------------------------------------------------------------------------------------------------------------
Fiscal year (millions)
-----------------------------------------------------------------------------
2025 2026 2027 2028 2029 Total
----------------------------------------------------------------------------------------------------------------
Increase in Federal audit funding (CACFP)
----------------------------------------------------------------------------------------------------------------
Lower estimate (25% of available $5.1 $5.2 $5.4 $5.6 $5.9 $27.2
funding).........................
Upper bound (100% of available 20.3 20.9 21.7 22.6 23.4 108.9
funding).........................
----------------------------------------------------------------------------------------------------------------
Administrative Review Cycle: The transition from a 5-year cycle to
a 3-year cycle for the administrative review process resulted in some
State agencies and SFAs struggling to complete reviews and oversight
activities. This provision is expected to be implemented in all States
agencies by 2025. Thirty-six State agencies had a waiver in place
allowing reviews to be conducted on a 5-year review cycle prior to
publication of the rule proposing this provision. USDA has received
feedback through several avenues regarding the difficulties faced by
State agencies. The Child Nutrition Burden Study was conducted in SY
2017-2018 in response to a Congressional mandate in House Report 114-
531 to identify areas to reduce burden in the Child Nutrition Programs.
This study collected data through workgroups with State and local
Program operators, as well as a survey from a census of all State
agencies and a nationally representative sample of SFAs. One
reoccurring theme in this study, from both the State agency and SFA
perspectives, was the burden associated with the 3-year administrative
review cycle. To comply with the 3-year administrative review
requirements, some State agencies and
[[Page 57818]]
SFAs were sacrificing staff resources needed for program
administration, including providing technical assistance. State
agencies face a number of time and resource constraints, and Program
operators struggled to adopt the new procedures and timeframes.
It is important to assess the impact of returning to a 5-year
cycle. Fewer SFAs would be reviewed each year, resulting in the
potential for program error to continue for longer. Table 5 shows the
projected number of annual reviews that would be conducted using a 5-
year cycle and the number of annual reviews that would be conducted
using a 3-year cycle. It also provides the number of actual reviews
conducted in SY 2018- 2019.
Table 5--Number of Annual Reviews Conducted
----------------------------------------------------------------------------------------------------------------
Number of SFAS Number of SFAs Number of SFAs
Total number of SFAs in SY 2018-19 reviewed during reviewed during reviewed SY
5-year cycle 3-year cycle 2018-19
----------------------------------------------------------------------------------------------------------------
18,925....................................................... 3,785 6,308 5,972
----------------------------------------------------------------------------------------------------------------
To better understand the impact of the proposed follow-up review
for the designated high-risk SFAs, the data from the SY 2018-2019
review year was analyzed to estimate the potential number of follow-up
reviews that may have been conducted, if the proposed follow-up reviews
were implemented. The criteria used in this simulation only focuses on
the results of the administrative reviews and does not account for
other important criteria that the State agency may identify or items
that may be identified through public comments. To estimate the
potential number of follow-up reviews, FNS forms 640A and 640B were
analyzed to group reviewed SFAs by the number of error flags triggered
during administrative reviews in SY 2018-2019. The methodology of this
flag count analysis has been updated since the 2020 proposed rule to
reduce the margin of error in the flag counts for SY 2018-19 data.
Forms 640A and 640B document administrative review findings,
including types of errors found during the review. For this analysis, a
flag was assigned to unique SFAs per type of error, not for every error
found (Table 6). SFAs with any application errors (for example missing
child or household name or income information) were assigned an error
flag for applications, the same process was done for SFAs with
certification benefit issuance errors (for example, during a review, a
sampled student was approved for free meals but was not eligible). SFAs
with a fiscal action amount that was not disregarded were assigned a
fiscal action error flag. SFAs were also assigned an error flag if they
triggered the risk flag for the resource management errors (nonprofit
school food service account, Paid Lunch Equity, revenue from nonprogram
foods, and indirect costs) or served meals missing components.
Table 6--Number of SFAs by Error Flag
[SY 2018-19 Reviews]
--------------------------------------------------------------------------------------------------------------------------------------------------------
Certification
Total SFAs reviewed No error flags Application benefit error Fiscal action Resource Incomplete meal
error flags flag taken flag management flag error flag
--------------------------------------------------------------------------------------------------------------------------------------------------------
5,972............................................. 1,289 869 874 411 3,845 663
--------------------------------------------------------------------------------------------------------------------------------------------------------
Table 7--Number of SFAs by Error FlagSY 2018-19 Reviews
------------------------------------------------------------------------
Percent of SFAs
Number of error flags Count of SFAs reviewed by number
of flags (percent)
------------------------------------------------------------------------
0........................... 1,289 21.6
1........................... 3,241 54.3
2........................... 1,002 16.8
3........................... 354 5.9
4........................... 76 1.3
5........................... 10 0.2
------------------------------------------------------------------------
The number of SFAs by type of error flag is presented in Table 6.
Similarly, the number of SFAs reviewed by total number of error flags
is in Table 7. It is important to note this analysis does not consider
the magnitude of a particular error, just the presence of an error
found during an administrative review.
[[Page 57819]]
Table 8--Annual and 5-Year Cost Difference of Optional 5-Year Administrative Review Cycle & Targeted, Follow-Up Reviews for High-Risk SFAs
--------------------------------------------------------------------------------------------------------------------------------------------------------
Fiscal year (millions)
---------------------------------------------------------------------------------------------------------------------------------------------------------
2025 2026 2027 2028 2029 Total
--------------------------------------------------------------------------------------------------------------------------------------------------------
-$3.3.............................................................. -$3.4 -$3.5 -$3.6 -$3.7 -$17.4
--------------------------------------------------------------------------------------------------------------------------------------------------------
Based on the projected number of reviews in a 5-year cycle compared
to a 3-year cycle (Table 5), there would be about 2,244 fewer annual
reviews conducted under this proposed change assuming about 7 percent
of SFAs with 3 or more flags require follow-up review (Table 7). This
reduction in reviews leaves the potential for issues to continue for
additional years. However, the targeted nature of the follow-up review,
in both selection and scope, would aim to redirect resources to fixing
program issues and providing the necessary technical assistance that is
currently difficult to do for some resource-strapped States under the
current 3-year cycle.
This final rule also amends NSLP regulations to change frequency of
food service management company review from 3-year to 5-year cycle, in
alignment with the changes to the administrative review cycle. State
agencies would still be allowed to review SFAs contracting with food
service management companies more frequently if they choose.
An overall decrease in burden hours (-42,760 hours) is expected for
moving from a 3-year to a 5-year review cycle. The targeted nature of
the follow-up reviews are intended to be more directly focused on
noncompliance and high-risk areas and therefore be less burdensome than
the initial review. This aids in streamlining the review procedures
while balancing the need to quickly resolve program errors and the
importance of addressing noncompliance in high-risk SFAs. This is
intended to help State and local operators focus resources on technical
assistance and technology to improve Program operations.
These changes are anticipated to save $17.4 million over 5 years,
calculated by multiplying the total burden hour reduction over 5 years
by projected 2025-2029 management and professional wages according to
BLS.\5\ The savings shown in Table 8 isolates the cost impact specific
to this provision and are factored into total reporting and
recordkeeping cost impacts in Table 10. The change in estimate from the
2020 proposed rule is largely due to the change in reporting and
recordkeeping burden estimates (from -171,330 hours) according to the
NSLP ICR, along with state and local government occupation wage
increases over recent years.
---------------------------------------------------------------------------
\5\ Based on reported wage rate for State and local government
sector management, professional, and related workers from the Bureau
of Labor Statistics' ``Table 3. State and local government workers
by occupational and industry group'' database (https://www.bls.gov/news.release/ecec.t03.htm). For FY 2022 (September), the total
compensation per hour for these positions averaged $67.96 per hour.
We inflate this figure through FY 2029 with projected growth in the
State and Local Expenditure Index prepared by OMB for use in the FY
2024 President's Budget.
---------------------------------------------------------------------------
Fines for Violating CN Program Requirements: This provision is
expected to be in effect by 2025. FNS stresses that the statutory
authority conferred on State administering agencies to impose fines on
SFAs will be used rarely and only against egregious and repeat
violators of program rules. For example, fines may be warranted to
address a serious violation, such as the deliberate destruction of
records or the deliberate misappropriation of program funds. Fines
would not be warranted for routine problems, such as a menu planning or
meal pattern violation or a recordkeeping or resource management error,
which can be corrected with State agency oversight and technical
assistance.
A fine would never replace established technical assistance,
corrective action, or fiscal action measures to solve commonplace or
unintentional problems. Rather, the assessment of fines provides a new
accountability tool for FNS and State agencies to use when there are
severe or repeated non-criminal violations--the types of programs
abuses that seriously threaten the integrity of Federal funds or
significantly impair the delivery of service to eligible students. Each
situation is different, and FNS and State agencies, in consultation
with their legal counsel, will carefully consider whether a fine is the
appropriate response. USDA expects that the risk of more substantial
financial penalties will further reduce the already low incidence of
severe or repeated violations, making the need to exercise the
authority under the rule unnecessary, except in extreme circumstances.
Similarly, we do not expect this statutory authority to result in
substantial fines by USDA against State agencies. The authority to
impose fines against State agencies places additional pressure on those
agencies to reduce the incidence of severe mismanagement and repeat
violations of program rules at the provider and sponsor levels. The
expected effect of this authority is increased vigilance by State
administrators against exceptional mismanagement at the provider and
sponsor levels.
State Liability for Payments to Aggrieved Child Care Institutions:
This provision is expected to be in effect by 2025. The data collected
in the 2010 and the 2011 Targeted Management Evaluations (TMEs), an
instrument used by USDA to monitor State agency compliance with CACFP
regulation, provides some of the measures used in estimating the impact
of this provision. Twenty-one States \6\ reported the average number of
days elapsed between the State agency's receipt of an institution's
request for a hearing and the date of the hearing official's decision
on their 2010 and 2011 TMEs. Ten percent of those States reported no
requests for hearings; 33 percent reported averages of 60 days or less;
19 percent reported averages between 61 and 90 days; and 38 percent
reported averages over 91 days. This data show that in the absence of a
financial penalty, 43 percent of the States reporting information
either had no appeals or provided a determination within the 60-day
timeframe.
---------------------------------------------------------------------------
\6\ Twenty-one States reported information about ten of their
appeals of a Notice of Proposed Termination during the 2010 and the
2011 Targeted Management Evaluations (TMEs). More recent data on
delay times are not available.
---------------------------------------------------------------------------
We expect that increased monitoring by FNS and a shift in the
responsibility for program payments to the States will encourage the
States to resolve administrative reviews within the established
regulatory timeframe of 60 days. Although the provision is intended to
speed the processing of administrative reviews, it is not intended or
expected to add significantly to the States' cost of
[[Page 57820]]
handling those reviews. Procurement Training Requirement for State
Agency and SFA Staff: The CNI final rule requires State directors of
school nutrition programs, State directors of distributing agencies,
and school nutrition program directors, management, and staff who work
on NSLP procurement activities to successfully complete procurement
training annually. The required training would cover the procurement
topics specified in subsection 210.21(h).
FNS expects that State Agencies and SFAs will integrate this
training requirement into their current training curriculums required
under the Professional Standards Rule,\7\ with no additional annual
training hours required on average. Furthermore, the final rule
preamble notes that State agencies may use SAE funds to pay for the
costs of receiving or delivering annual NSLP procurement training. This
is expected to be implemented by 2025.
---------------------------------------------------------------------------
\7\ ``Professional Standards for State and Local School
Nutrition Programs Personnel as Required by the Healthy, Hunger-Free
Kids Act of 2010,'' Federal Register Vol 80, No. 40 (March 2, 2015),
p. 11077-11096.
---------------------------------------------------------------------------
Performance-based Reimbursement Quarterly Report: This proposed
change would reduce, from quarterly to annually, the frequency of a
State Agency report on the status of SFAs certified for the
performance-based reimbursement. As of February 2019, 99 percent of
SFAs are certified to receive the performance-based reimbursement. This
change responds to feedback from the Child Nutrition Program Reducing
Burden Study; State agencies requested USDA to review the reporting
requirements and determine areas to streamline reporting. USDA
currently receives a count of the monthly number of lunches receiving
the performance-based reimbursement on the Report of School Meal
Operations (form FNS-10) from States.
The reduced frequency of the quarterly certification report aims to
enable State and local Program operators to direct resources to
maintain effective and efficient program operations while still
providing USDA the necessary information on SFA certification. Along
with the monthly FNS-10 reporting, the annual update will be sufficient
for USDA to track the status of SFA certification. This change slightly
decreases the burden hours associated with moving the frequency of
reporting from quarterly to annually. This is a small reduction of 42
annual burden hours, which is about $3,000 annually. This is expected
to be implemented by 2025.
Standard Agreements Between Sponsoring Organizations and Sponsored
Centers: This provision is already in effect. The State Agency must
develop/revise and provide a sponsoring organization agreement between
sponsor and facilities, which must have standard provisions. Sponsoring
organizations must enter into permanent agreements with their
unaffiliated centers and annually provide State agencies with bank
account activity against other associated records to verify that the
transactions meet program requirements. FNS estimates that there are
18,601 sponsoring organizations that are businesses, each of which will
submit 1 month's bank statement to their State agency.
The terms of the standard agreement adds requirements of centers to
allow visits by sponsoring organizations or State Agencies to review
meal service and records, promptly inform sponsors about any change in
licensing or approval status, meet any State agency approved time limit
for submissions of meal records, and distribute to parents a copy of
the sponsoring organization's notice to parents if directed by the
sponsor. This provision contributes 5,646 additional burden hours that
are accounted for in the projected reporting and recordkeeping costs
(Table 10).
Elimination of the Annual Application for Institutions: This
provision has already been implemented. This final rule codified
elimination of the requirement for renewing institutions to submit an
annual application for renewal; however, these institutions must
demonstrate that they are capable of operating the Program in
accordance with this part as set forth in Sec. 226.6b(b) by reviewing
annual certification of an institution's eligibility to continue
participating in CACFP (replaces the renewal application process).
Therefore, a total of 3,005 burden hours associated with the renewing
institutions to submit an annual application has been removed because
of this rule. This difference is included in Table 10.
Collection and Transmission of Household Income Information: This
provision is already in effect. This final rule codifies the right of
tier II day care homes to assist in collecting meal benefit forms from
households and transmitting the forms to the sponsoring organization on
the household's behalf. If a tier II day care home elects to assist in
collecting and transmitting the applications to the sponsoring
organization, sponsoring organizations must establish procedures to
ensure the provider does not review or alter the application. The
burden associated with this is 5,199 hours, which are accounted for in
the projected reporting and recordkeeping costs in Table 10. This
provision has been a standard operating practice for sponsoring
organizations of day care homes since 2011.
Carryover of Administrative Funding for Sponsoring Organizations of
Day Care Homes: This provision is already in effect. The final rule
codifies allowing sponsoring organizations of day care homes to carry
over up to 10 percent of unspent administrative reimbursement from the
current federal fiscal year to the next fiscal year. The sponsoring
organizations of day care homes seeking to carry over administrative
funds must submit an amended budget, to include an estimate of
requested administrative fund carryover amounts and a description of
proposed purpose for which those funds would be obligated or expended.
The State agency must review the budget and supporting
documentation prior to approval, for sponsoring organizations of day
care homes seeking to carry over administrative funds. The State agency
must establish procedures to recover administrative funds from
sponsoring organizations of day care homes that are not properly
payable under FNS Instruction 796-2, administrative funds that are in
excess of the 10 percent maximum carryover amount, and carryover
amounts that are not expended or obligated by the end of the fiscal
year following the fiscal year in which they were received. This
provision is codifying standard operating practice. The burden
associated with this is 1,462 hours, which are accounted for in the
projected reporting and recordkeeping costs in Table 10.
Remaining Provisions: The CNI final rule's remaining provisions are
expected to have only modest impacts on State agency or sponsor
administrative costs. State agency and sponsor responsibilities under
these provisions are limited largely but not entirely to improved
documentation.
The following provisions will likely have no costs or negligible
cost impacts:
1. Varied Timing of Reviews Conducted by CACFP Sponsoring
Organizations
(a) Program impact: Reviews are more effective at ensuring program
integrity when they are unannounced and unpredictable. Sponsoring
organization are already required to conduct two unannounced reviews
out of 3 reviews per year in a manner that makes the reviews
unpredictable to sponsored facilities. One of the unannounced reviews
must include observation of a
[[Page 57821]]
meal service. This provision requires the timing of the mandatory
unannounced reviews and type of meal serviced reviewed to vary and is
already in effect.
(b) Cost Impact: We estimate no change in cost associated with this
provision. This change merely requires sponsors to vary the timing of
unannounced reviews but does not impact the frequency. This provision
has also been a standard operating practice for sponsoring
organizations and State agencies since 2011.
2. Fiscal Action for Meal Pattern Violations
(a) Program impact: This provision gives State agencies the
discretion to take fiscal action against SFAs for repeated violations
of milk type and vegetable subgroup requirements, instead of requiring
fiscal action. This amendment aligns with State's existing discretion
to take fiscal action for repeated violations concerning food
quantities, whole grain-rich foods, and the dietary specifications.
(b) Cost Impact: We estimate no change in cost associated with this
provision. Fiscal action will be at the discretion of the State
agencies, instead of required. Waivers have been in place during the
COVID-19 public health emergency to allow for State agency discretion
for meal pattern violations, and we expect this provision to be fully
implemented by 2025.
3. NSLP Resource Management Module
(a) Program impact: Flexibility and discretion is allowed to State
agencies in this provision. FNS will no longer require that this
assessment take place off-site before the administrative review.
Although the State agency should make this assessment in the school
year that the review began, completion of the resource management
module may occur before, during, or after the on-site portion of the
administrative review.
(b) Cost Impact: We estimate no change in cost associated with this
provision. This does not change frequency or burden of conducting
assessment of SFA's nonprofit school food service account. This
provision merely allows State agencies to complete the assessment of an
SFA's nonprofit school food service account and to conduct the resource
management module at any point in the review process.
4. Buy American Review
(a) Program impact: Program regulations under 7 CFR 210.21(d) and 7
CFR 220.16(d) describe requirements SFAs to purchase, to the maximum
extent practicable, domestic commodities or products, and State
agencies already review this provision as a part of the administrative
review. However, Buy American is not currently included in regulation
as part of the general areas of the administrative review. FNS proposed
including compliance with the Buy American requirements as a general
area of review, under 7 CFR 210.18(h)(2), that State agencies must
monitor when they conduct administrative reviews.
(b) Cost Impact: We estimate no change in cost associated with this
provision. Existing Guidance is codified and modifies the technical
definition of ``General Areas'' in this provision with no practical
change in current program operations.
5. State Administrative Expense Funds
(a) Program impact: This amendment updated regulatory language that
would require State agencies to return any unobligated SAE funds--
instead of unexpended--to give State agencies more flexibility to spend
their funds.
(b) Cost Impact: We estimate a negligible change in cost associated
with this provision by 2025. The regulatory language increases
flexibility of State agencies to utilize their SAE funds but is not
expected to have measurable impacts on the amount of funds returned.
Between 2018 and 2021 unobligated SAE funds ranged from approximately 1
to 3 percent.
6. Administrative Payment Rates to Sponsoring Organizations for Day
Care Homes
(a) Program impact: This rule amends 7 CFR 226.12(a) to simplify
the calculation of monthly administrative reimbursement that sponsoring
organizations of day care homes are eligible to receive. To determine
the amount of payment, the State agency must multiply the appropriate
administrative reimbursement rate, which is announced annually in the
Federal Register, by the number of day care homes submitting claims for
reimbursement during the month. This provision has been a standard
operating practice for State agencies since 2010.
(b) Cost Impact: Existing practice is codified. We estimate a
negligible cost (104 hours) of this provision that is accounted for in
projected reporting and recordkeeping costs (Table 10).
The following are provisions that may have minor, non-quantifiable
administrative impacts:
(1) NSLP Integrity-focused Process improvements
(a) Program impact: The administrative review process is an
integral part of program integrity but is burdensome to State agency
staff and resources. Impacts of this rule include FNS seeking out input
to develop a series of optional process reforms. The process
improvements would give State agencies more flexibility to satisfy
parts of the administrative review and reduce or eliminate human
errors. State agencies will require FNS approval of process reforms.
(b) Cost Impact: This provision may incur minor potential future
costs that are not quantifiable at the time of this rule, but USDA does
not expect these costs to be material.
(2) NSLP Third-party Audits
(a) Program impact: With FNS approval, third party audits may be
used in lieu of reviewing the same information on an administrative
review. This will give State agencies more flexibility to satisfy parts
of the administrative review and limit needless duplication through
activities they already perform if the audit activity complies with the
same standard that govern the federal single audit.
(b) Cost Impact: The variation in what is used to satisfy parts of
an administrative review is too wide to be able to quantify.
(3) Completion of Review Requirements Outside of the Administrative
Review
(a) Program impact: With FNS and regional office approval, State
agencies are allowed to satisfy sections of the administrative review
through equivalent State oversight activities that take place outside
of the formal administrative review process. This gives State agencies
more flexibility and limits redundancies to satisfy parts of the
administrative review through activities they already perform.
(b) Cost Impact: This provision will have minimal administrative
savings that are not quantified.
Management Information System (MIS) Upgrade Costs: FNS expects that
SAs, SFAs, SFSP and CACFP program operators will be able to implement
the vast majority of the provisions of the rule with no changes to
their current management information systems (MIS) or information
technology (IT) infrastructure.
However, FNS acknowledges that this will not be universally true,
and that some SAs, SFAs, SFSP, and/or CACFP program operators may incur
some one-time and/or ongoing IT costs to be able to implement the
required provisions of the rule. In most cases, FNS expects these
additional IT costs to be marginal or minimal, and that most or all of
the additional costs to SAs, SFAs, SFSP, and CACFP program operators
will be administrative, as estimated elsewhere in this document.
[[Page 57822]]
Two of the finals rule's requirements--that CACFP administering SAs
must annually review at least one month's bank account activity of all
sponsoring organizations against documents adequate to support that the
financial transactions meet Program requirements, and that CACFP
administering SA's must annually review actual expenditures reported of
Program funds and the amount of meal reimbursement funds retained from
unaffiliated centers to support the sponsoring organization's
administrative costs--have the potential to incur larger costs to the
respective SAs, as these provisions may require those SAs to integrate
new functions into their MIS.
FNS does not have information specifically on the cost to SAs to
make changes to their CACFP MIS, but an internal FNS data collection
from all NSLP/SBP SAs on the 2016-2017 school year provides some
information on MIS costs to SAs running NSLP/SBP, and this is the best
proxy we have available for potential costs for a CACFP MIS. This data
collection found that only a couple of complex modules (menu planning
and direct certification/matching) tend to cost more than $500,000 to
develop, while less complex modules (e.g., federal reporting, nutrient
analysis, financial management for SFAs, and professional standards
training) tend to cost less than $100,000. We assume that the
requirements of this rule are of the less complex nature.
Similarly, upgrade costs for NSLP/SBP SA modules tended to be
greater for more complex modules, and less for less complex modules.
However, between 20% and 50% of SAs reported no direct costs to the SA
when upgrading modules, so some SAs may be able to absorb these
functions into their existing MIS maintenance with no additional costs
beyond costs already budgeted for planned maintenance.
Given this wide variation in MIS development and maintenance costs,
FNS is providing both a point estimate and range for possible costs for
MIS upgrades required to implement the provisions of the CNI final
rule. The lower-bound estimate of MIS costs is $0 per SA, if SAs are
able to absorb these functions into their MIS as part of their existing
MIS modules and/or maintenance schedule.
At the upper-bound, it is possible that a SA may have to develop a
new module for reviewing bank account activity and may have to upgrade
their existing module for reviewing sponsors' expenditures. If we
assume that the new module costs $100,000, and upgrading an existing
module costs $50,000, then our initial upper-bound estimate would be
$150,000 per SA for initial development/upgrade costs. Average annual
maintenance fees for NSLP/SBP SA MIS are approximately $225,000 per
year; if we assign 5% of these costs to the new rule, then we have an
average annual maintenance cost of $11,250 per SA that we assign to
this final rule.
For an intermediate point estimate (which we present as our primary
estimate), FNS expects that SAs will be able to implement the
requirements of this rule with a single upgrade to an existing module.
FNS assumes the cost of this upgrade will be $50,000 per SA, and the
annual maintenance cost of this upgrade will be an additional $1,000
per SA above SAs' baseline MIS maintenance costs. Table 9 presents 5-
year estimates of the cost ranges (including inflation).
Table 9--MIS Upgrade Costs to CACFP Administering SAs
----------------------------------------------------------------------------------------------------------------
Fiscal year (millions)
-----------------------------------------------------------------------------
2025 2026 2027 2028 2029 Total
----------------------------------------------------------------------------------------------------------------
Primary Estimate.................. $2.9 $0.1 $0.1 $0.1 $0.1 $3.1
Lower-Bound Estimate.............. 0.0 0.0 0.0 0.0 0.0 0.0
Upper-Bound Estimate.............. 9.1 0.7 0.7 0.7 0.6 11.6
----------------------------------------------------------------------------------------------------------------
However, establishing and maintaining information systems required
for the management of Child Nutrition Programs is an allowable cost
covered by SAE funds. In addition, once all CACFP audits are funded,
CACFP audit funds may be used for systems improvements reasonably
connected to monitoring, oversight, and maintaining the operational
integrity for the CACFP. Therefore, SAs may use these funds to cover
costs to update their State systems as a result of changes in Program
requirements due to this final rule. If SAs apply for and receive
additional audit funding to make the MIS upgrades and maintenance
necessary for these provisions, the net MIS cost to SAs because of this
final rule could be $0, depending on the cost of the upgrades and the
availability of additional audit funding. Furthermore, USDA regularly
makes available a variety of competitive grants that could further
defray these potential cost increases for SAs (e.g., Administrative
Review and Training Grants and Technology Innovation Grants).
Access Impacts--General: Several of the CNI final rule's provisions
restrict participation by service providers, sponsoring organizations,
or administering officials in USDA's child nutrition programs who
violate program rules or have otherwise been determined to be risks to
program integrity.
State Agency Reporting and Recordkeeping: As noted above, several
of the provisions in the CNI final rule increase the information
collection burden on State and local government agencies and on
businesses (i.e., CACFP sponsors and providers). In total, the
Department estimates that State and local government agencies will
spend an additional 3,869 hours complying with the rule's reporting
requirements each year, and an additional 4,297 hours on recordkeeping.
Businesses will spend about an additional 13,399 hours complying with
the rule's reporting requirements. The total increase in burden hours
is estimated to be 7,536 hours per year. These estimates, prepared in
satisfaction of the requirements of the Paperwork Reduction Act of
1995, are summarized in the preamble to the rule.
We estimate the State agency cost of complying with the CNI final
rule's information collection requirements by applying an average wage
for State and local government professional employees to these
additional reporting and recordkeeping hours.\8\ These costs are
summarized by program in Table 10.
---------------------------------------------------------------------------
\8\ Based on reported wage rate for State and local government
sector management, professional, and related workers from the Bureau
of Labor Statistics' ``Table 3. State and local government workers
by occupational and industry group'' database (https://www.bls.gov/news.release/ecec.t03.htm). For FY 2022 (September), the total
compensation per hour for these positions averaged $67.96 per hour.
We inflate this figure through FY 2029 with projected growth in the
State and Local Expenditure Index prepared by OMB for use in the FY
2024 President's Budget.
[[Page 57823]]
Table 10--Projected Reporting and Recordkeeping Cost Differences
----------------------------------------------------------------------------------------------------------------
Fiscal year (millions)
-----------------------------------------------------------------------------
2025 2026 2027 2028 2029 Total
----------------------------------------------------------------------------------------------------------------
NSLP:
State and Local Government-- $0.17 $0.18 $0.18 $0.19 $0.20 $0.92
Recordkeeping *..............
State and Local Government-- -$1.36 -$1.40 -$1.44 -$1.49 -$1.54 -$7.23
Reporting *..................
-----------------------------------------------------------------------------
Total..................... -1.18 -1.22 -1.26 -1.30 -1.34 -6.31
----------------------------------------------------------------------------------------------------------------
CACFP:
State and Local Government-- 0.19 0.19 0.20 0.21 0.21 1.00
Recordkeeping *..............
State and Local Government-- 0.55 0.57 0.59 0.60 0.62 2.93
Reporting *..................
Businesses--Reporting *....... 1.12 1.16 1.20 1.24 1.28 6.00
-----------------------------------------------------------------------------
Total..................... 1.86 1.92 1.98 2.05 2.11 9.93
----------------------------------------------------------------------------------------------------------------
SFSP:
State and Local Government-- (*) (*) (*) (*) (*) (*)
Recordkeeping *..............
State and Local Government-- (*) (*) (*) (*) (*) 0.04
Reporting *..................
-----------------------------------------------------------------------------
Total..................... (*) (*) (*) (*) (*) 0.04
----------------------------------------------------------------------------------------------------------------
Total Difference for 0.69 0.71 0.73 0.75 0.78 3.65
Final Rule...........
----------------------------------------------------------------------------------------------------------------
* Estimated at less than $10,000.
Note: Sums may not match due to rounding or to the addition of sums below $10,000 to totals.
Benefits: The provisions codified in the CNI final rule are
designed to increase program operators' accountability and operational
efficiency, while improving the ability of FNS and State agencies to
address severe or repeated violations of program requirements. The
final rule's provisions add new requirements to existing reviews of
child nutrition program sponsors, subject additional sponsors to
periodic review, and increase USDA and State agency authority to fine
seriously deficient sponsors and prohibit their participation in CN
programs.
We note the following specific benefits of particular provisions of
the final rule:
Extending the administrative review cycle: This
maximizes operational efficiency by relieving time and resources for
State Agency staff to focus reviews on SFAs at risk of integrity issues
instead of on SFAs without management issues. State agency and SFA
cooperation with one another to administer school meal programs is
central to ensure the delivery of nutritional food to school children.
The Federal funding that supports school meal programs (NSLP and SBP)
is to be used and protected with the highest level of integrity by
State agencies and SFAs. While the administrative review enforces
accountability of these Federal resources, extending to a 5-year review
allows State agencies to perform reviews more effectively, allocate
more time and resources towards school meal program administration,
technical assistance, and program improvement.
Implementation of fines, referred to as
assessments in the proposed rule: This provision provides a new
accountability tool for FNS and State agencies to use when there are
severe or repeated non-criminal violations--the types of programs
abuses that seriously threaten the integrity of Federal funds or
significantly impair the delivery of service to eligible students.
More frequent reviews of childcare institutions
and adult care institutions that are at risk of having serious
management problems: This will focus additional resources on those
providers who are at greatest risk of intentionally or unintentionally
violating program requirements. State agencies are invited to propose
alternative approaches for determining review priorities in
consultation with the FNS Regional Offices.
Additional State agency funding for audits of
childcare institutions and adult care institutions: This provision
provides States with additional resources to audit CACFP providers to
ensure program integrity and remedy potential wrongdoing. FNS continues
to encourage all State agencies to make wider use of SAE along with the
additional CACFP audit funds to help ease any burden.
Increased financial oversight of sponsoring
organizations' bank account activity and reporting requirements: An OIG
audit \9\ found that reviewing bank activity (in addition to reviewing
budgets) would be effective at uncovering and preventing misuse of
funds in a cost-effective manner.
---------------------------------------------------------------------------
\9\ Review of Management Controls for the Child and Adult Care
Food Program, available online at https://www.usda.gov/oig/webdocs/27601-0012-SF.pdf.
---------------------------------------------------------------------------
Option to carry over unspent federal
reimbursement into the new fiscal year: This provides State agencies
the flexibility to rollover up to 10 percent of unspent reimbursement
from the previous fiscal year into the following fiscal year.
Fiscal action discretion: This provision
provides State agencies with more discretion on when to apply fiscal
action for meal pattern violations during an administrative review in
the School Meals programs. The requirement that State agencies must
take fiscal action against SFAs for repeated violations of milk type
and vegetable subgroup violations is removed, allowing states to
provide assistance and support instead. Removing the fiscal action
requirement increases operational efficiency for State agency staff.
States are now only required to take fiscal action for a missing
component violation, which is in alignment with the DGA rule.
We are not able to quantify potential nutritional benefits stemming
from increased accountability and operational efficiency, nor can we
quantify the dollar effects of the actions and transfers listed above,
as we do not know the rates or magnitudes of error in the population.
Many of the changes are already in effect and the variation in
implementation makes it difficult to know the percentage of errors that
will
[[Page 57824]]
be avoided or rectified due to the implementation of these provisions.
Accounting Statement: As required by OMB Circular A-4, available at
https://www.whitehouse.gov/wp-content/uploads/legacy_drupal_files/omb/circulars/A4/a-4.pdf, we have prepared an accounting statement
summarizing the annualized estimates of benefits, costs and transfers
associated with the provisions of this rule.
The benefits of the CNI final rule include increasing program
operators' accountability and operational efficiency, while improving
the ability of FNS and State agencies to address severe or repeated
violations of program requirements. Monetary benefits are not
quantified in this analysis.
The costs associated with provisions of the final rule are incurred
primarily by State agencies, program sponsors, and SFAs. These include
the following, only some of which are quantified in Table 11 below:
The costs of conducting additional CACFP sponsor reviews
and
The cost of reviewing CACFP sponsor bank account
statements and expenditure reports of unaffiliated sponsored centers.
Transfers include distribution of new CACFP audit funds from the
USDA to State agencies (which has been quantified), and the return of
(or reduction in) misappropriated program funds and improper payments
(which has not been quantified).
Table 11--Undiscounted Stream of Quantifiable Costs and Transfers
----------------------------------------------------------------------------------------------------------------
Fiscal year (millions)
-----------------------------------------------------------------------------
2025 2026 2027 2028 2029 Total
----------------------------------------------------------------------------------------------------------------
Nominal cost stream to States..... $2.4 -$0.4 -$0.4 -$0.4 -$0.4 $0.7
Nominal cost stream to Businesses. 1.1 1.2 1.2 1.2 1.3 6.0
----------------------------------------------------------------------------------------------------------------
Nominal transfer stream:
low estimate.................. 5.1 5.2 5.4 5.6 5.9 27.2
high estimate................. 20.3 20.9 21.7 22.6 23.4 108.9
----------------------------------------------------------------------------------------------------------------
Applying 3 percent and 7 percent real discount rates to these
nominal streams gives present values (in 2023 dollars): \10\
---------------------------------------------------------------------------
\10\ Note that the discounted transfer streams include two
components--3 and 7 percent discount rates plus the 3.2% inflation
rate used to inflate future nominal costs. Therefore, the discount
rates applied to the nominal streams to generate these estimates are
approximately 6 percent and 10 percent, respectively.
Table 12--Discounted Costs and Transfers
----------------------------------------------------------------------------------------------------------------
Fiscal year (millions)
-----------------------------------------------------------------------------
2025 2026 2027 2028 2029 Total
----------------------------------------------------------------------------------------------------------------
Discounted cost stream to States:
3 percent..................... $2.1 -$0.3 -$0.3 -$0.3 -$0.3 $0.9
7 percent..................... 2.0 -0.3 -0.3 -0.3 -0.2 0.9
Discounted cost stream to
Businesses:
3 percent..................... 1.0 1.0 0.9 0.9 0.9 4.7
7 percent..................... 0.9 0.9 0.8 0.8 0.7 4.1
Discounted transfer stream:
low estimate:
3 percent................. 4.5 4.4 4.3 4.2 4.1 21.4
7 percent................. 4.2 3.9 3.7 3.5 3.3 18.5
high estimate:
3 percent................. 18.0 17.5 17.1 16.7 16.3 85.5
7 percent................. 16.7 15.6 14.7 13.9 13.1 74.0
----------------------------------------------------------------------------------------------------------------
Table 13 takes the discounted streams from Table 12 and computes
annualized values in FY 2023 dollars.
Table 13--Accounting Statement
----------------------------------------------------------------------------------------------------------------
Discount
Range Estimate Year dollar rate (%) Period covered
----------------------------------------------------------------------------------------------------------------
Benefits
----------------------------------------------------------------------------------------------------------------
Qualitative: Increased program integrity and accountability.
----------------------------------------------------------------------------------------------------------------
Program participants:
Annualized Monetized n.a. n.a. n.a. n.a. FY 2025-2029.
($millions/year).
----------------------------------------------------------------------------------------------------------------
[[Page 57825]]
Costs
----------------------------------------------------------------------------------------------------------------
Quantitative: Cost of a subset of administrative expenses related to additional reviews, documentation,
reporting, training, recordkeeping, and MIS upgrades. (Only a portion of these costs have been estimated.)
----------------------------------------------------------------------------------------------------------------
State agencies, SFAs, and
Institutions (Businesses):
Annualized Monetized n.a $1.0 2023 10 FY 2025-2029.
($millions/year).
1.1 2023 6
----------------------------------------------------------------------------------------------------------------
Transfers
----------------------------------------------------------------------------------------------------------------
Quantitative: Distribution of CACFP audit funds to State agencies.
Non-quantified: The return of (or reduction in) misappropriated program funds and improper payments.
----------------------------------------------------------------------------------------------------------------
From USDA to State Agencies:
Annualized Monetized low 3.7 2023 10 FY 2025-2029.
($millions/year).
4.3 2023 6
---------------------------------------------------
high 14.8 2023 10
17.1 2023 6
----------------------------------------------------------------------------------------------------------------
Regulatory Flexibility Act
The Regulatory Flexibility Act, 5 U.S.C. 601-612, requires agencies
to analyze the impact of rulemaking on small entities and consider
alternatives that would minimize any significant impacts on a
substantial number of small entities. The FNS Administrator has
certified that this final rule will not have a significant economic
impact on a substantial number of small entities. This rulemaking
codifies provisions designed to increase program operators'
accountability and operational efficiency, while improving the ability
of FNS and State agencies to address severe or repeated violations of
program requirements. While this rulemaking will affect State agencies,
sponsoring organizations, school food authorities, and day care homes
and centers, any economic effect will not be significant.
Unfunded Mandates Reform Act
Title II of the Unfunded Mandate 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 UMRA, FNS
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 rulemaking, section 205
of UMRA generally requires FNS 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 rulemaking. This final rule contains no Federal
mandates, under the regulatory provisions of title II of UMRA, for
State, local, and tribal governments, or the private sector, of $100
million or more in any one year. Therefore, this rulemaking is not
subject to the requirements of sections 202 and 205 of UMRA.
Executive Order 12372
The Child and Adult Care Food Program is listed in the Assistance
Listings under the Catalog of Federal Domestic Assistance Number
10.558. The Summer Food Service Program is listed under No. 10.559. The
National School Lunch Program and School Breakfast Program are listed
under No. 20.555 and 10.553, respectively. They are subject to
Executive Order 12372, which requires intergovernmental consultation
with State and local officials. Since the Child Nutrition Programs are
State-administered, FNS has formal and informal discussions with State
and local officials, including representatives of Indian tribal
organizations, on an ongoing basis regarding program requirements and
operations. This provides FNS with the opportunity to receive regular
input from State administrators and local program operators, which
contributes to the development of feasible requirements.
Federalism Summary Impact Statement
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. FNS has
determined that this final rule has federalism implications.
1. Prior Consultation with State and Local Agencies:
FNS has been gathering input from National, State, and local
community partners through a variety of public engagement activities.
Webinars, listening sessions, and town hall meetings have helped FNS
monitor program operations, identify best practices, and take into
consideration requests from States and local program operators. Since
Child Nutrition Programs are State administered, federally-funded
programs, FNS Regional offices have informal and formal discussions
with State and local officials on an ongoing basis regarding program
implementation and performance. Additionally, FNS published rulemaking
actions to obtain formal public comment.
2. Nature of Concerns and the Need to Issue this Rulemaking:
State agencies and local program operators have provided wide
support for implementing robust integrity practices and valuable
suggestions for improvement. Most of their concerns relate to the
current serious deficiency process as a model for establishing
procedures in other Child Nutrition Programs, fiscal consequences of
the provisions addressing fines and State liability, and the overall
impact of provisions that may increase administrative burden. This
rulemaking allows FNS to address these concerns while meeting statutory
obligations.
3. Extent to Which We Meet These Concerns:
[[Page 57826]]
FNS has made every effort to address these concerns, balancing the
goal of strengthening program integrity against the need to minimize
administrative burden, within the constraints of statutory authority.
This final rule is responsive to public input requesting that FNS make
improvements to the serious deficiency process, limit the assessment of
fines, and allow exceptions in cases involving State liability. There
will be a 1-year delay to provide the additional time stakeholders have
requested to implement many of the provisions. FNS will provide
guidance and technical assistance to State agencies and local program
operators to ensure the provisions of this final rule are implemented
efficiently and in a manner that is least burdensome.
Executive Order 12988, Civil Justice Reform
This final rule has been reviewed under Executive Order 12988,
Civil Justice Reform. This rulemaking 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. This rulemaking is not intended to have
retroactive effect. Prior to any judicial challenge to the application
of the provisions of this rulemaking, all applicable administrative
procedures must be exhausted.
Civil Rights Impact Analysis
FNS has reviewed the final rule, in accordance with the Department
Regulation 4300-004, ``Civil Rights Impact Analysis'' to identify and
address any major civil rights impacts the final rule may have on
participants on the basis of age, race, color, national origin, sex,
and disability. Due to the unavailability of data, FNS is unable to
determine whether this rule will have an adverse or disproportionate
impact on protected classes among entities that administer and
participate in the Child Nutrition programs. The promulgation of this
final rule will impact State agencies that administer FNS Child
Nutrition programs and program operators by increasing accountability
and operational efficiency while improving the ability of State
agencies to address severe or repeated violations of program
requirements. Children and adults participating in NSLP, SMP, SBP,
SFSP, and CACFP may be impacted by the final rule if an operating
agreement in the CACFP or SFSP is terminated. However, the FNS Civil
Rights Division finds that the current mitigation strategies outlined
in this CRIA provide ample consideration to participants' ability to
participate in Child Nutrition programs. Additionally, the FNS Civil
Rights Division finds that mitigation strategies, such as delaying
implementation of several provisions to allow FNS to evaluate
regulatory improvements, developing resources, and providing technical
assistance, may lessen the impacts on State agencies and program
operators. If deemed necessary, the FNS Civil Rights Division will
propose further mitigation to alleviate impacts that may result from
the implementation of the final rule.
Executive Order 13175, Consultation and Coordination With Indian Tribal
Governments
Executive Order 13175 requires Federal agencies to consult and
coordinate with 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. Tribal representatives were
informed about this rulemaking during the FNS listening session at the
meeting of the National Congress of American Indians in February 2020
and at the tribal consultation that took place on May 23, 2023. FNS
anticipates that this rulemaking will have no significant cost and no
major increase in regulatory burden on tribal organizations.
Paperwork Reduction Act
The Paperwork Reduction Act of 1995 (44 U.S.C. Chapter 35; see 5
CFR part 1320) requires that the Office of Management and Budget (OMB)
approve all collection of information requirements by a Federal agency
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 will implement statutory requirements
and policy improvements to strengthen administrative oversight and
operational performance of the Child Nutrition Programs. As FNS
continues to work towards improving integrity in these programs, this
final rule establishes criteria and procedures required under the
Healthy, Hunger-Free Kids Act of 2010 to help FNS and State
administering agencies reduce program errors of all types, resulting in
more effective operations and improved compliance with program
requirements. FNS is also using this opportunity to codify statutory
requirements that are designed to improve the administration and
operational efficiency of the Child and Adult Care Food Program, with
less paperwork. This rulemaking also simplifies monitoring requirements
in the National School Lunch and School Breakfast Programs to reduce
administrative burden by providing targeted flexibilities designed to
allow States to tailor oversight to meet program circumstances.
In accordance with the Paperwork Reduction Act of 1995, this final
rule revises existing information collection requirements and contains
new information collection requirements, which are subject to review
and approval by the Office of Management and Budget. These existing
requirements are currently approved under OMB Control Number 0584-0055,
``7 CFR part 226 Child and Adult Care Food Program,'' expiration date
March 31, 2025, OMB Control Number 0584-0280, ``7 CFR Summer Food
Service Program,'' expiration date September 30, 2025, and OMB Control
Number 0584-0006, ``7 CFR part 210 National School Lunch Program,''
expiration date July 31, 2023.
In connection with the proposed rule, ``Child Nutrition Program
Integrity,'' published in the Federal Register on March 29, 2016 (Vol.
81, No. 60, page 17564), USDA submitted an Information Collection
Request (ICR) discussing the information requirements impacted by the
rule to OMB for review. The final rule codifies into regulations many
of the provisions incorporated under the proposed rule, as well as
modifies some to ensure compliance by State agencies and program
operators. It also adds additional integrity safeguards, including
incorporating provisions from the proposed rules, ``Simplifying Meal
Service and Monitoring Requirements in the National School Lunch and
School Breakfast Programs'' and ``Child and Adult Care Food Program:
Amendments Related to the Healthy, Hunger-Free Kids Act of 2010.''
The majority of the information collection requirements and
associated burdens will remain the same as previously proposed.
However, there are a few changes in the requirements and burden. The
revisions to the existing information collection requirements and the
introduction of new information collection requirements will result in
an overall increase in burden hours and responses on the State
agencies, local government, and business respondents to this final
rule.
[[Page 57827]]
Therefore, FNS is submitting for public comment the changes in the
information collection burden that would result from adoption of the
proposals in this final rule. These burden estimates are contingent
upon OMB approval under the Paperwork Reduction Act of 1995. When the
final rulemaking information collection request is approved, the
Department will publish a separate notice in the Federal Register
announcing OMB's approval.
This is a new information collection, assigned OMB Control Number
0584-0610 by OMB in August 2016 at the proposed rule stage, which is
being submitted in support of the final rule, ``Child Nutrition Program
Integrity (RIN 0584-AE08).'' In connection with the proposed rule,
``Child Nutrition Program Integrity, published in the Federal Register
on March 29, 2016 (81 FR 17564),'' FNS submitted an ICR discussing the
information requirements impacted by the rule to the Office of
Management and Budget (OMB) for review.
The final rule codifies many of the changes proposed by FNS based
on amendments to the Richard B. Russell National School Lunch Act
(NSLA), enacted under the Healthy, Hunger-Free Kids Act of 2010
(HHFKA), Public Law 111-296. The final rule incorporates provisions
from the Child and Adult Care Food Program: Amendments Related to the
Healthy, Hunger-Free Kids Act of 2010 Proposed Rule and the Simplifying
Meal Service and Monitoring Requirements in the National School Lunch
and School Breakfast Programs Proposed Rule. The information collection
associated with this rule is necessary to ensure compliance with
legislative and regulatory requirements amended to the NSLA and
contained in HHFKA.
Since FNS had requested a new information collection at the
proposed rule stage, due to the information collection inventories
affected by this rulemaking undergoing renewal, the proposals outlined
in this final rule will be captured in a new information collection
under OMB Control Number 0584-0610 as an increase to the information
collection inventory. After OMB has approved the information collection
requirements submitted in conjunction with the final rule and the
current renewals of the impacted information collections are completed,
FNS will merge these requirements and their burden into OMB Control
Number 0584-0055, ``7 CFR part 226 Child and Adult Care Food Program,''
expiration date March 31, 2025, OMB Control Number 0584-0280, ``7 CFR
Summer Food Service Program,'' expiration date September 30, 2025, and
OMB Control Number 0584-0006, ``7 CFR part 210 National School Lunch
Program,'' expiration date July 31, 2023. At this point, the decreases
in burden noted throughout this section will be fully captured in the
burden for the various collections.
Comments on the Paperwork Reduction Act section of this final rule
must be received by October 23, 2023. Please send comments to Program
Monitoring and Operational Support Division 1320 Braddock Place,
Alexandria, VA 22314. For further information, please contact Megan
Geiger, [email protected].
Comments are invited on: (a) Whether the proposed collection of
information is necessary for the proper performance of the functions of
the agency, including whether the information shall have practical
utility; (b) the accuracy of the agency's estimate of the burden of the
proposed collection of information, including the validity of the
methodology and assumptions used; (c) ways to enhance the quality,
utility, and clarity of the information to be collected; and (d) ways
to minimize the burden of the collection of information on those who
are to respond, including use of appropriate automated, electronic,
mechanical, or other technological collection techniques or other forms
of information technology. All responses to this notice will be
summarized and included in the request for OMB approval. All comments
will also become a matter of public record.
Title: Child Nutrition Program Integrity.
Form Number: None.
OMB Control Number: 0584-0610.
Expiration Date: Not Yet Determined.
Type of Request: New Collection. While OMB assigned an OMB Control
Number to this collection during the proposed rule stage, the
collection is not yet part of the active information collection
inventory.
Abstract: This is a new information collection that contains new
information collection requirements that will eventually be
incorporated into OMB Control Number 0584-0055, ``7 CFR part 226 Child
and Adult Care Food Program,'' OMB Control Number 0584-0280, ``7 CFR
Summer Food Service Program,'' and OMB Control Number 0584-0006, ``7
CFR part 210 National School Lunch Program.'' This new information
collection also revises existing information collection requirements in
the same OMB Control Numbers that are also impacted by this final rule.
This final rule codifies provisions designed to increase program
operators' accountability and operational efficiency, while improving
the ability of FNS and State agencies to address severe or repeated
violations of program requirements. This rulemaking impacts information
reporting, recordkeeping, and public notification at the State and
local government levels (State agencies and sponsoring organizations)
and at the businesses level (sponsoring organizations) in the Child and
Adult Care Food Program (CACFP); at the State and local government
level (State agencies and School Food Authorities (SFAs)) in the Summer
Food Service Program (SFSP); and at the State and local government
level (State agencies and SFAs) in the National School Lunch Program
(NSLP).
FNS is using the publication of the Child Nutrition Program
Integrity final rule as an opportunity to additionally merge sections
of two previously published rules that were not finalized and codified.
This includes the Simplifying Meal Service and Monitoring Requirements
in the National School Lunch and School Breakfast Programs and Child
and Adult Care Food Program: Amendments Related to the Healthy, Hunger-
Free Kids Act of 2010.
In the proposed rule, Simplifying Meal Service and Monitoring
Requirements in the National School Lunch and School Breakfast Programs
(85 FR 4094, January 23, 2020), FNS included a number of discretionary
changes to streamline the administrative review process for schools,
without compromising State agency and school food authority efforts to
maintain accountability and integrity. Through the Child Nutrition
Program Integrity final rule, FNS is taking action to codify the
proposed changes that impact monitoring. These amendments will give
State agencies greater flexibility, eliminate redundancy, and target
limited State resources to higher risk school food authorities.
Provisions in Simplifying Meal Service and Monitoring Requirements in
the National School Lunch and School Breakfast Programs unrelated to
monitoring and oversight will not be finalized in the Child Nutrition
Program Integrity Final Rule and will instead be incorporated in other
rulemaking.
The proposed rule, Child and Adult Care Food Program: Amendments
Related to the Healthy, Hunger-Free Kids Act of 2010 (77 FR 21018,
April 9, 2012), included amendments to codify statutory requirements
designed to improve the administration and operational efficiency of
CACFP, with
[[Page 57828]]
less paperwork. However, in the intervening years since publication of
the proposed rule, FNS was unable to publish a subsequent rulemaking to
incorporate these amendments into CACFP regulations under 7 CFR part
226. Through the Child Nutrition Program Integrity final rule, FNS is
taking action to codify these statutory requirements, which will
provide clarity and consistency in their implementation. FNS will not
codify any of the discretionary provisions included in the proposed
rule.
The changes proposed in the Child Nutrition Program Integrity Rule
that will not be finalized are the requirement that SFAs contracting
with an FSMC can no longer use cost-reimbursable contracts, reciprocal
disqualification in CACFP and SFSP, and serious deficiency process and
disqualification in SFSP and CACFP. FNS will pursue a separate rule
making for the reciprocal disqualification in CACFP and SFSP, as well
as the serious deficiency process and disqualification in SFSP and
CACFP in response to public comments. FNS intends to seek more
information on the fixed-price contract provision in response to
information collected during the COVID-19 public health emergency.
In total, FNS estimates that the changes to the Child Nutrition
Program requirements as a result of this rule decrease the burden for
the NSLP information collection, OMB Control Number 0584-0006, by
14,734 hours; increase the burden for the SFSP information collection,
OMB Control Number 0584-0280, by 80.81 hours; and increase the burden
for the CACFP information collection, OMB Control Number 0584-0055, by
22,190.72 hours. The provisions from the previously proposed rules that
are included in this final rule are related to increasing program
integrity and codifying statutory requirements into regulations.
In the proposed Child Nutrition Integrity Rule, FNS expected 23,113
responses and 16,060.5 burden hours. For this final rule, because of
changes due to merging this rule with two other rules, moving some
provisions to another rulemaking (on Serious Deficiency), and other
changes due to public feedback, FNS has adjusted the burden for this
final rule. FNS now expects that this final rule will increase over
that estimated in the proposed rule, to 225,205 total responses and
190,924 total burden hours.
Below is a summary of the changes in the final rule and the
accompanying reporting, recordkeeping, and public notification
requirements that will impact the burden that these program
requirements have on State agencies, local governments, and businesses.
Reporting: NSLP
Affected Public: State Agencies
The changes proposed in this rule will impact the existing
reporting requirements currently approved under OMB Control Number
0584-0006 and found at 7 CFR part 210, National School Lunch Program.
The below information provides details regarding the reporting changes
associated with OMB Control Number 0584-0006 as a result of the Child
Nutrition Program Integrity final rule OMB Control Number 0584-0610.
The final rule adjusts a requirement at Section 210.18(i)(3) for
the State agencies to notify the School Food Authorities (SFAs) in
writing of review findings, corrective actions, deadlines, and
potential fiscal action with grounds and right to appeal. FNS estimates
that 56 State agencies will respond, for a total of 3,808 responses (56
x 68 = 3,808). The estimated average number of burden hours per
response is 8 hours resulting in an estimated total annual burden hours
of 30,464 (3,808 x 8 = 30,464). FNS estimates that this information
requirement will have 30,464 burden hours and 3,808 responses. Once the
requirements and burden from this new collection are merged into OMB
Control Number 0584-0006 (7 CFR PART 210 NATIONAL SCHOOL LUNCH
PROGRAM), FNS estimates that this final rule will reduce the burden
hours by 20,160 hours, from 50,624 to 30,464 hours. It will also reduce
the responses by 2,520, from 6,328 to 3,808 responses. This reduction
is due to a program change reducing the frequency of the administrative
review cycle.
The final rule amends the requirements found at Section
210.5(d)(2)(ii) (now at Section 210.5(d)(3)) that SAs submit a
quarterly report to FNS detailing the disbursement of performance-based
reimbursement to SFAs by changing the frequency of the report to
annually. FNS estimates that there are 56 SAs that will each file 1
report annually for a total of 56 responses (56 x 1 = 56). The
estimated average number of burden hours per response is 15 minutes
(0.25 hours) resulting in an estimated total annual burden hours of 14
(56 x 0.25 = 14). FNS estimates that this information requirement will
have 14 burden hours and 56 responses. The previous burden (OMB#0584-
0006) was 56 hours, so with this final rule, FNS estimates that the
burden will be reduced by 42 burden hours. The final rule will also
reduce the responses by 168, from 224 to 56 responses. These reductions
are due to a program change reducing the frequency of this report.
The final rule adds a requirement at Section 210.18(c)(2) that
State agencies with a review cycle longer than 3 years must submit a
plan to FNS describing the criteria that it will use to identify high-
risk SFAs for targeted follow-up reviews. FNS estimates there are 56
SAs that will each file 1 report for a total of 56 responses (56 x 1 =
56). The estimated average number of burden hours per response is 8
hours resulting in an estimated total annual burden hours of 488 (56 x
8 = 448). FNS estimates that this information requirement will have 448
burden hours and 56 responses. Once this requirement and its associated
burden is merged into OMB Control Number 0584-0006, FNS estimates that
this final rule will add 448 hours and 56 responses to OMB's inventory
due to a program change.
This final rule adds a specific requirement to Section 210.21(h),
that State agencies complete procurement training requirements
annually. FNS estimates that each of the 56 SAs will complete
procurement training requirements annually, for a total of 56 responses
annually (56 x 1 = 56). The estimated average number of burden hours
per response is 1 hour resulting in estimated total burden hours of 56
(56 x 1 = 56). FNS estimates that this information requirement will
have 56 burden hours and 56 responses. Once this requirement and its
associated burden is merged into OMB Control Number 0584-0006, FNS
estimates that this final rule will add 56 hours and 56 responses to
OMB's inventory due to a program change.
Section 210.26(b)(4) requires that State agencies notify SFAs of
fines and specific violations or actions that constituted the fine, and
of appeal rights and procedures, and submit a copy of the notice to
FNS. FNS estimates that each of the 56 State agencies will notify SFAs
of fines, specific violations, actions that constituted the fine,
appeal rights, and procedures, and submit a copy of the notice to FNS
0.09 times, for a total of 5.04 notifications annually (56 x 0.09 =
5.04). The estimated average number of burden hours per response is 3
hours, resulting in estimated total burden hours of 15.12 (5.04 x 3 =
15.12) FNS estimates that this information requirement will have 15.12
burden hours and 5.04 responses. Once this requirement and its
associated burden is merged into OMB Control Number 0584-0006, FNS
estimates that this final rule will add 15.12 hours and 5.04
[[Page 57829]]
responses to OMB's inventory due to a program change.
Affected Public: SFAs/Local Education Agency Level
Sections 210.15(a)(3) and 210.18(j)(2) require SFAs to submit to
the SA a written response to reviews documenting corrective action
taken for Program deficiencies. FNS estimates 3,804 SFAs will each file
1 report annually for a total of 3,804 responses (3,804 x 1 = 3,804).
The estimated average number of burden hours per response is 8 hours
resulting in an estimated total annual burden hours of 30,430 (3,804 x
8 = 30,430). FNS estimates that this information requirement will have
30,430 burden hours and 3,804 responses. Once the requirements and
burden from this new collection are merged into OMB Control Number
0584-0006, FNS estimates that this final rule will reduce the burden
hours by 20,290 hours, from 50,720 to 30,430 hours. It will also reduce
the responses by 2,536, from 6,340 to 3,804 responses. This reduction
is due to a program change reducing the frequency of the administrative
review cycle.
Section 210.21(h) requires that SFAs complete procurement training
requirements annually. FNS estimates that 19,019 SFAs will complete
procurement training requirements annually, for a total of 19,019
records annually (19,019 x 1 = 19,019). The estimated average number of
burden hours per response is 1 hour and 15 minutes (1.25 hours)
resulting in estimated total burden hours of 23,774 (19,019 x 1.25 =
23,774). FNS estimates that this information requirement will have
23,774 burden hours and 19,019 responses. Once this requirement and its
associated burden is merged into OMB Control Number 0584-0006, FNS
estimates that this final rule will add 23,774 hours and 19,019
responses to OMB's inventory due to a program change.
Section 210.26(b)(5) states that SFAs may appeal State agency's
determination of violations and fines. SFAs must submit to the Stage
agency any pertinent information, explanation, or evidence addressing
the Program violations identified by the SA. Any SFA seeking to appeal
the SA determination must follow SA appeal procedures. FNS estimates
that 5 SFAs will appeal the State agency's determination of violations
and fines, for a total of 5 records annually (5 x 1 = 5). The estimated
average number of burden hours per response is 8 hours resulting in
estimated total burden hours of 40 (5 x 8 = 40). FNS estimates that
this information requirement will have 40 hours and 5 responses. Once
this requirement and its associated burden is merged into OMB Control
Number 0584-0006, FNS estimates that this final rule will add 40 hours
and 5 responses to OMB's inventory due to a program change.
Recordkeeping: NSLP
Affected Public: State Agencies
Section 210.18(h)(2)(iv) requires each SA to ensure that the LEA
and SFA comply with the nutrition standards for all competitive food
and maintain records documenting compliance. FNS estimates that 56 SAs
will each maintain 68 records annually for a total estimated number of
records of 3,808 (56 x 68 = 3,808). The estimated average number of
burden hours per record is 15 minutes (0.25 hours) resulting in an
estimated total annual burden hours of 952 (3,808 x 0.25 = 952). When
OMB approves the information collection request (ICR) for this final
rule, FNS estimates that this information requirement will have 952
burden hours and 3,808 responses. Once the requirements and burden from
this new collection are merged into OMB Control Number 0584-0006, FNS
estimates that this final rule will reduce the burden hours by 630
hours, from 1,582 hours to 952 hours. It will also reduce the responses
by 2,520, from 6,328 responses to 3,808 responses. This reduction is
due to a program change from the Final Rule, reducing the number of
compliance reviews.
Sections 210.20(b)(6); 210.18(o)(f)(k)(l)(m); and 210.23(c) require
the SA to maintain records of all reviews and audits (including Program
violations, corrective action, fiscal action, and withholding of
payments). The currently approved burden for this activity is 50,638.
FNS estimates that there are 56 SAs that will each file 68 records
annually for a total of 3,808 records (56 x 68 = 3,808). The estimated
average number of burden hours per record is 8.00214 hours resulting in
a revised estimated total annual burden hours of 30,472 hours (3,808 x
8.00214 = 30,472). When OMB approves the information collection request
(ICR) for this final rule, FNS estimates that this information
requirement will have 30,472 burden hours and 3,808 responses. Once the
requirements and burden from this new collection are merged into OMB
Control Number 0584-0006, FNS estimates that this final rule will
reduce the burden hours by 20,166 hours, from 50,638 hours to 30,472
hours. It will also reduce the responses by 2,520, from 6,328 to 3,808
responses. This reduction is due to a program change from the Final
Rule, reducing the number of compliance reviews.
Sections 210.20(b)(7); 210.19(c); and 210.18(o) require the SA
document fiscal action taken to disallow improper claims submitted by
SFAs, as determined through claims processing, reviews and USDA audits.
FNS estimates that there are 56 SAs that will each file 68 records
annually for a total of 3,808 records (56 x 68 = 3,808). The estimated
average number of burden hours per record is 30 minutes (0.50 hours)
resulting in an estimated total annual burden hours of 1,904 hours
(3,808 x 0.5 = 1,904). When OMB approves the information collection
request (ICR) for this final rule, FNS estimates that this information
requirement will have 1,904 burden hours and 3,808 responses. Once the
requirements and burden from this new collection are merged into OMB
Control Number 0584-0006, FNS estimates that this final rule will
reduce the burden hours by 1,260 hours, from 3,164 hours to 1,904
hours. It will also reduce the responses by 2,520, from 6,328 to 3,808
responses. The reduction in burden is due to a program change from the
Final Rule, reducing the number of compliance reviews.
Sections 210.18(c-h) require the SA to complete and maintain
documentation used to conduct Administrative Reviews. FNS estimates
there are 56 SAs that will each file 68 reports annually for a total of
3,808 responses (56 x 68 = 3,808). The estimated average number of
burden hours per response is 30 minutes (.50 hours) resulting in an
estimated total annual burden hours of 1,904 (3,808 x .5 = 1,904). When
OMB approves the information collection request (ICR) for this final
rule, FNS estimates that this information requirement will have 1,904
burden hours and 3,808 responses. Once the requirements and burden from
this new collection are merged into OMB Control Number 0584-0006, FNS
estimates that this final rule will reduce the burden hours by 1,269
hours, from 3,173 hours to 1,904 hours. It will also reduce the
responses by 2,520, from 6,328 to 3,808 responses. The reduction in
burden is due to a program change from the Final Rule, reducing the
number of compliance reviews.
Section 210.18(c) requires the SA to complete and maintain
documentation used to conduct targeted Follow Up Administrative Review.
FNS estimates there are 56 SAs that will each file 23 reports annually
for a total of 1,288 responses (56 x 23 = 1,288). The estimated average
number of burden hours per response is 16 hours resulting
[[Page 57830]]
in an estimated total annual burden hours of 20,608 (1,288 x 16 =
20,608). When OMB approves the information collection request (ICR) for
this final rule, FNS estimates that this information requirement will
have 20,608 burden hours and 1,288 responses. Once this requirement and
its associated burden is merged into OMB Control Number 0584-0006, FNS
estimates that this final rule will add 20,608 hours and 1,288
responses to OMB's inventory due to a program change.
Section 210.15(b)(8) requires that State agencies maintain records
to document compliance with the procurement training requirements. FNS
estimates that each of the 56 State agencies will maintain 1 record to
document compliance with the procurement training requirements, for a
total of 56 records annually (56 x 1 = 56). The estimated average
number of burden hours per response is 15 minutes (0.25 hours)
resulting in estimated total burden hours of 14 (56 x 0.25 = 14). When
OMB approves the information collection request (ICR) for this final
rule, FNS estimates that this information requirement will have 14
burden hours and 56 responses. Once this requirement and its associated
burden is merged into OMB Control Number 0584-0006, FNS estimates that
this final rule will add 14 hours and 56 responses to OMB's inventory
due to a program change.
Section 210.26(b) requires that State agencies maintain records
related to fines and specific violations. FNS estimates that each of
the 56 State agencies will maintain 0.09 records to related fines and
specific violations, for a total of 5.04 records annually (56 x 0.09 =
5.04). The estimated average number of burden hours per response is 15
minutes (0.25 hours) resulting in estimated total burden hours of 1.26
hours (5.04 x 0.25 = 1.26). When OMB approves the information
collection request (ICR) for this final rule, FNS estimates that this
information requirement will have 1.26 burden hours and 5.04 responses.
Once this requirement and its associated burden is merged into OMB
Control Number 0584-0006, FNS estimates that this final rule will add
1.26 hours and 5.04 responses to OMB's inventory due to a program
change.
Affected Public SFAs/LEAs
Section 210.21(h) requires that SFAs maintain document compliance
with the procurement training requirements. FNS estimates that 19,019
SFAs will maintain document compliance with the procurement training
requirements, for a total of 19,019 records annually (19,019 x 1 =
19,019). The estimated average number of burden hours per response is
15 minutes (0.25 hours) resulting in estimated total burden hours of
4,755 hours (19,019 x 0.25 = 4,755). When OMB approves the information
collection request (ICR) for this final rule, FNS estimates that this
information requirement will have 4,755 burden hours and 19,019
responses. Once this requirement and its associated burden is merged
into OMB Control Number 0584-0006, FNS estimates that this final rule
will add 4,755 hours and 19,019 responses to OMB's inventory due to a
program change.
Public Notification: NSLP
Affected Public: State Agencies
Section 210.18(m)(1) requires SAs to make the most recent final
administrative review results available to the public in an easily
accessible manner (by posting a summary to the SA website and making a
copy available upon request). FNS estimates there are 56 SAs that will
each file 68 reports annually for a total of 3,808 responses (56 x 68 =
3,808). The estimated average number of burden hours per response is 15
minutes (0.25 hours) resulting in an estimated total annual burden
hours of 952 (3,808 x 0.25 = 952). FNS estimates that this information
requirement will have 952 burden hours and 3,808 responses. The
previous burden (OMB# 0584-0006) was 1,582 hours and 6,328 responses.
Once this requirement and its associated burden is merged into OMB
Control Number 0584-0006, FNS estimates that this final rule results in
a decrease of 630 burden hours and a decrease of 2,520 responses, from
6,328 responses to 3,808 due to a program change reducing the frequency
of the administrative review.
Reporting SFSP
Affected Public: State Agencies
The changes proposed in this rule will impact the reporting burden
currently approved under OMB Control Number 0584-0280 and found at 7
CFR part 225, Summer Food Service Program. The below information
provides details regarding the reporting changes associated with OMB
Control Number 0584-0280 as a result of the Child Nutrition Program
Integrity final rule, OMB control number 0584-0610.
Section 225.6(i) requires that State agencies consult with FNS
prior to taking any action to terminate for convenience. This is a new
information requirement resulting from this final rule. FNS estimates
that each of the 53 State agencies will consult with FNS once prior to
taking any action to terminate for convenience, for a total of 53
consultations (53 x 1 = 53). The estimated average number of burden
hours per notification is 30 minutes (0.5 hours) resulting in estimated
total burden hours of 27 (53 x 0.5 = 27). FNS estimates that this
information requirement will have 27 burden hours and 53 responses.
Once this requirement and its associated burden is merged into OMB
Control Number 0584-0280 (7 CFR Summer Food Service Program), FNS
estimates that this final rule results in an increase of 27 burden
hours and 53 responses due to a program change.
Section 225.18(k) requires that State agencies notify SFAs of fines
and submit a copy of the notice to FNS.FNS estimates that each of the
53 State agencies will notify SFAs of fines and submit a copy of the
notice to FNS 0.09 times, for a total of 4.77 notifications annually
(53 x 0.09 = 4.77). The estimated average number of burden hours per
response is 3 hours, resulting in estimated total burden hours of 14.31
(4.77 x 3 = 14.31). FNS estimates that this information requirement
will have 14.31 hours and 4.77 responses. Once this requirement and its
associated burden is merged into OMB Control Number 0584-0280, FNS
estimates that this final rule results in an increase of 14.31 burden
hours and 4.77 responses due to a program change.
Section 225.18(k) states that SFAs may appeal State agency's
determination of fines. SFAs must submit to the State agency any
pertinent information, explanation, or evidence addressing the Program
violations identified by the State agency. Any SFA seeking to appeal
the State agency determination must follow State agency appeal
procedures.FNS estimates that 5 SFAs will appeal the State agency's
determination of violations and fines, for a total of 5 records
annually (5 x 1 = 5). The estimated average number of burden hours per
response is 8 hours resulting in estimated total burden hours of 40 (5
x 8 = 40). FNS estimates that this information requirement will have 40
burden hours and 5 responses. Once this requirement and its associated
burden is merged into OMB Control Number 0584-0280, FNS estimates that
the final rule will result in an increase of 40 burden hours and 5
responses due to a program change.
Record Keeping: SFSP
There is no change in burden for the record keeping requirements in
the SFSP due to this rulemaking.
[[Page 57831]]
Reporting: CACFP
The changes proposed in this rule will impact the existing
reporting requirements currently approved under OMB Control Number
0584-0055 and found at 7 CFR part 226, Child and Adult Care Food
Program. The below information provides details regarding the reporting
changes associated with OMB Control Number 0584-0055 as a result of the
Child Nutrition Program Integrity final rule, OMB control number 0584-
0610.
Affected Public: State Agencies
Section 226.4(j) requires State agencies to submit a plan to FNS
for additional audit funding. This is a new information requirement
resulting from this final rule. FNS estimates that on average there are
8 State agencies that will each file 1 report annually for a total of 8
responses (8 x 1=8). The estimated average number of burden hours per
response is 4 hours resulting in estimated total burden hours of 32 (8
x 4 =32). FNS estimates that this information requirement will have 32
hours and 8 responses. Once this requirement and its associated burden
is merged into OMB Control Number 0584-0055 (7 CFR part 226 Child and
Adult Care Food Program), FNS estimates that this final rule will add
32 burden hours and 8 responses to OMB's inventory due to a program
change.
Section 226.6(k)(11)(iii) allows the SA to submit, for FNS review,
information supporting a request for a reduction in the State's
liability, a reconsideration of the State's liability, or an exception
to the 60-day deadline, for exceptional circumstances. FNS estimates
that on average there will be 5 State agencies that will each file 1
request annually for a total of 5 responses (5 x 1 = 5). The estimated
average number of burden hours per response is 4 hours resulting in
estimated total burden hours of 20 (5 x 4 = 20). FNS estimates that
this information requirement will have 20 burden hours and 5 responses.
Once this requirement and its associated burden is merged into OMB
Control Number 0584-0055, FNS estimates that this final rule will add
20 hours and 5 responses to OMB's inventory due to a program change.
Section 226.6(b)(4)(ii) requires State agencies to consult with FNS
prior to taking action to terminate for convenience. FNS estimates that
each of the 56 State agencies will consult with FNS once per year prior
to terminating a sponsoring organization for convenience, for a total
of 56 responses annually (56 x 1 = 56). The estimated average number of
burden hours per response is 30 minutes (0.5 hours), resulting in
estimated total burden hours of 28 hours (56 x 0.5 = 28). FNS estimates
that this information requirement will have 28 burden hours and 56
responses. Once this requirement and its associated burden is merged
into OMB Control Number 0584-0055, FNS estimates that this final rule
results in an increase of 28 burden hours and 56 responses due to a
program change.
Section 226.6(m)(6) requires that State agencies conduct reviews
every two years for sponsoring organizations with less than 100
facilities and conduct activities other than the CACFP or are at risk
of having serious management problems.FNS estimates that each of the 56
State agencies will each conduct 20 reviews for sponsoring
organizations every two years (nationwide, average 10 with less than
100 centers and conduct activities other than CACFP and average 10
having serious management problems), for a total of 1,120 reviews
biennially (56 x 20 = 1,120). The estimated average number of burden
hours per response is 4 hours resulting in estimated total burden hours
of 4,480 (1,064 x 4 = 4,480). FNS estimates that this information
requirement will have 4,480 burden hours and 1,120 responses. Once this
requirement and its associated burden is merged into OMB Control Number
0584-0055, FNS estimates that this results in an increase of 4,480
burden hours and 1,120 responses due to a program change.
Section 226.7(b)(1) requires that State agencies have procedures in
place for annually reviewing at least one month of the sponsoring
organization's bank account activity against other associated records
to verify that the transactions meet program requirements.FNS estimates
that each of the 56 State agencies will each have reviewing procedures
in place to review sponsoring organization's bank account activity, for
a total of 56 procedures annually (56 x 1 = 56). The estimated average
number of burden hours per response is 1 hour resulting in estimated
total burden hours of 56 (56 x 1 = 56). FNS estimates that this
information requirement will have 56 burden hours and 56 responses.
Once this requirement and its associated burden is merged into OMB
Control Number 0584-0055 (7 CFR part 226 Child and Adult Care Food
Program), FNS estimates that this results in an increase of 56 burden
hours and 56 responses to OMB's inventory due to a program change.
Section 226.7(b)(1)(ii) requires that State agencies have
procedures for annually reviewing a sponsoring organization's actual
expenditures of CACFP funds and the amount of meal reimbursement funds
retained from unaffiliated centers. FNS estimates that there are 56
State agencies that will each have reviewing procedures in place to
review sponsoring organizations' CACFP funds and meal reimbursement
funds retained from unaffiliated centers, for a total of 56 reviewing
procedures annually (56 x 1 = 56). The estimated average number of
burden hours per reviewing procedures is 1 hour resulting in estimated
total burden hours of 56 (56 x 1 = 56). FNS estimates that this
information requirement will have 56 burden hours and 56 responses.
Once this requirement and its associated burden is merged into OMB
Control Number 0584-0055, FNS estimates that this results in an
increase of 56 burden hours and 56 responses to OMB's inventory due to
a program change.
Section 226.25(j) requires that State agencies notify SFAs of fines
and submit a copy of the notice to FNS. FNS estimates that each of the
56 State agencies will notify SFAs of fines and submit a copy of the
notice to FNS 0.09 times, for a total of 5.04 notifications annually
(56 x 0.09 = 5.04). The estimated average number of burden hours per
response is 3 hours, resulting in estimated total burden hours of 15.12
(5.04 x 3 = 15.12). FNS estimates that this information requirement
will have 15.12 burden hours and 5.04 responses. Once this requirement
and its associated burden is merged into OMB Control Number 0584-0055,
FNS estimates that this final rule results in an increase of 15.12
burden hours and 5.04 responses to OMB's inventory due to a program
change.
Section 226.6(b)(2) requires that State agencies review annual
certification of an institution's eligibility to continue participating
in CACFP (which replaces the renewal application process). FNS
estimates that there are 56 State agencies that will each have to
review 390 certifications, for a total of 21,840 reviews annually (56 x
390 = 21,840). The estimated average number of burden hours per review
is 20 minutes (.334 hours), resulting in estimated total burden hours
of 7,295 (21,840 x .334 = 7,295). When OMB approves the information
collection request (ICR) for this final rule, FNS estimates that this
information requirement will have 7,295 burden hours and 21,840
responses. Once the requirements and burden from this new collection
are merged into OMB Control Number 0584-0055, FNS estimates that this
final rule will reduce the burden hours by 3,625 hours, from 10,920 to
7,295 hours. The number of responses will remain at 21,840
[[Page 57832]]
responses. This reduction is the result of a program change due to the
Final Rule, due to the reduced number of hours it will take State
agencies for this review.
Section 226.6(m)(3)(ix) requires that State agencies assess the
timing of each sponsoring organization's reviews of day care homes and
sponsored centers. FNS estimates that there are 56 State agencies that
will each have to review the timing of 390 sponsors, for a total of
21,840 reviews annually (56 x 390 = 21,840). The estimated average
number of burden hours per review is 10 minutes (.167 hours), resulting
in estimated total burden hours of 3,640 (21,840 x .17 = 3,640). FNS
estimates that this information requirement will have 3,640 burden
hours and 21,840 responses. Once this requirement and its associated
burden is merged into OMB Control Number 0584-0055, FNS estimates that
this final rule results in an increase of 3,640 burden hours and 21,840
responses to OMB's inventory due to a program change.
Section 226.6(p) requires State agencies to develop/revise and
provide a sponsoring organization agreement between sponsor and
facilities, which must have standard provisions. FNS estimates that
there are 56 State agencies that will each have to develop 1 agreement,
for a total of 56 agreements, as a one-time burden (56 x 1 = 56). The
estimated average number of burden hours per agreement is 6 hours,
resulting in estimated total burden hours of 336 (56 x 6 = 336). FNS
estimates that this information requirement will have 336 burden hours
and 56 responses. Once this requirement and its associated burden is
merged into OMB Control Number 0584-0055, FNS estimates that this
results in an increase of 336 burden hours and 56 responses to OMB's
inventory due to a program change.
Section 226.12(a) requires the State agency to multiply the
appropriate administrative reimbursement rate by the number of day care
homes submitting claims for reimbursement during the month, to
determine the amount of payment that sponsoring organizations will
receive. FNS estimates that there are 56 State agencies that will each
determine payments for 11 sponsors, for a total of 623 sponsors paid
annually (56 x 11 = 623). The estimated average number of burden hours
per sponsor's calculation is ten minutes per year (.167 hours),
resulting in estimated total burden hours of 104 (623 x .167 = 104).
FNS estimates that this information requirement will have 104 burden
hours and 623 responses. Once this requirement and its associated
burden is merged into OMB Control Number 0584-0055, FNS estimates that
this results in an increase of 104 burden hours and 623 responses to
OMB's inventory due to a program change.
Section 226.7(g)(2) requires the State agency to review the budget
and supporting documentation prior to approval, for sponsoring
organizations of day care homes seeking to carry over administrative
funds. FNS estimates that there are 56 State agencies that will each
review and approve 11 budgets, for a total of 623 responses (56 x 11 =
623). The estimated average number of burden hours per State agency is
1 hour, resulting in estimated total burden hours of 623 (1 x 623 =
623). FNS estimates that this information requirement will have 623
burden hours and responses. Once this requirement and its associated
burden is merged into OMB Control Number 0584-0055, FNS estimates that
this results in an increase of both 623 burden hours and responses to
OMB's inventory due to a program change.
Section 226.7(j) requires each State agency to establish procedures
to recover administrative funds from sponsoring organizations of day
care homes that are not properly payable under FNS Instruction 796-2,
administrative funds that are in excess of the 10 percent maximum
carryover amount, and carryover amounts that are not expended or
obligated by the end of the fiscal year following the fiscal year in
which they were received. FNS estimates that there are 56 State
agencies that will each establish 1 procedure, for a one-time burden
total of 56 responses (56 x 1 = 56). The estimated average number of
burden hours per State agency is 2 hours, resulting in estimated total
burden hours of 112 (2 x 56 = 112). FNS estimates that this information
requirement will have 112 burden hours and 56 responses. Once this
requirement and its associated burden is merged into OMB Control Number
0584-0055, FNS estimates that this results in an increase of 112 burden
hours and 56 responses to OMB's inventory due to a program change.
Affected Public: Local Governments (Sponsoring Organizations)
Section 226.7(b)(1) requires sponsoring organizations to annually
provide State agencies with bank account activity against other
associated records to verify that the transactions meet program
requirements. FNS estimates that there are 3,257 sponsoring
organizations that are local agencies. Each sponsoring organization
will submit 1 bank statement to their respective State agency,
resulting in 3,257 annual records (3,257 x 1 = 3,257). FNS estimates
that it will take an average of 15 minutes (0.25 hours) per response;
therefore, this change will result in an estimated total burden hours
of 814 hours annually (3,257 x 0.25 = 814). FNS estimates that this
information requirement will have 814 burden hours and 3,257 responses.
Once this requirement and its associated burden is merged into OMB
Control Number 0584-0055, FNS estimates that this results in an
increase of 814 burden hours and 3,257 responses to OMB's inventory due
to a program change.
Section 226.7(b)(1)(i) requires sponsoring organizations to provide
State agency with actual expenditures of CACFP funds and the amount of
meal reimbursement funds retained from unaffiliated centers to support
the sponsoring organization's administrative costs. FNS estimates that
32 sponsoring organizations will provide their State agency with 1
actual expenditure of CACFP funds and the amount of meal reimbursement
funds retained from unaffiliated centers, for a total of 32
expenditures annually (32 x 1 = 32). FNS estimates that it will take an
average of 1 hour per submission; therefore, this change will result in
an estimated total burden hours of 32 hours annually (32 x 1 = 32). FNS
estimates that this information requirement will have 32 burden hours
and responses. Once this requirement and its associated burden is
merged into OMB Control Number 0584-0055, FNS estimates that this
results in an increase of both 32 burden hours and responses to OMB's
inventory due to a program change.
Section 226.6(b) requires that each participating institution
submit annual updates to continue its participation (annual
certification of information, updated licensing information, and a
budget). This replaces the renewal application process in
226.6(f)(2)(i). FNS estimates that there are 3,257 institutions that
will each have 1 annual update, for a total of 3,257 updates annually
(3,257 x 1 = 3,257). The estimated average number of burden hours per
review is 20 minutes (.33 hours), resulting in estimated total burden
hours of 1,088 (3,257 x .334 = 1,088). FNS estimates that this
information requirement will have 1,088 burden hours and 3,257
responses. Once this requirement and its associated burden is merged
into OMB Control Number 0584-0055, FNS estimates that this final rule
will reduce the burden hours by 541 hours, from 1,629 to 1,088 hours.
The number of responses will remain at 3,257 responses. This reduction
is due to a program change
[[Page 57833]]
from the Final Rule, due to the lower amount of time it will take
institutions to submit updates rather than renewal applications.
Sections 226.6(p), 226.17(e), (f), 226.17a(f), 226.19(d), and
226.19a(d) require that each sponsoring organization must enter into
permanent agreements with their unaffiliated centers. FNS estimates
that there are 32 sponsoring organizations that will each enter into 10
agreements, for a total of 320 agreements as a one-time burden (32 x 10
= 320). The estimated average number of burden hours per review is 30
minutes (.5 hours), resulting in estimated total burden hours of 160
(320 x .5 = 160). FNS estimates that this information requirement will
have 160 burden hours and 320 responses. Once this requirement and its
associated burden is merged into OMB Control Number 0584-0055, FNS
estimates that this results in an increase of 160 burden hours and 320
responses to OMB's inventory due to a program change.
Section 226.6(f)(1)(iv) requires sponsoring organizations of day
care homes seeking to carry over administrative funds to submit an
amended budget, to include an estimate of requested administrative fund
carryover amounts and a description of proposed purpose for which those
funds would be obligated or expended. FNS estimates that there are 83
sponsoring organizations that will each file 1 report, for a total of
83 reports (83 x 1 = 83). The estimated average number of burden hours
per report is 1 hour, resulting in estimated total burden hours of 83
(1 x 83 = 83). FNS estimates that this information requirement will
have 83 burden hours and responses. Once this requirement and its
associated burden is merged into OMB Control Number 0584-0055, FNS
estimates that this results in an increase of both 83 burden hours and
responses to OMB's inventory due to a program change.
Section 226.25 states that SFAs may appeal the State agency's
determination of fines. SFAs must submit to the State agency any
pertinent information, explanation, or evidence addressing the Program
violations identified by the State agency. FNS estimates that 5 SFAs
will appeal the State agency's determination of violations and fines,
for a total of 5 records annually (5 x 1 = 5). The estimated average
number of burden hours per response is 8 hours resulting in estimated
total burden hours of 40 (5 x 8 = 40). FNS estimates that this
information requirement will have 40 burden hours and 5 responses. Once
this requirement and its associated burden is merged into OMB Control
Number 0584-0055, FNS estimates that the final rule will result in an
increase of 40 burden hours and 5 responses to OMB's inventory due to a
program change.
Section 226.23(e)(1)(vii) states that if a tier II day care home
elects to assist in collecting and transmitting the applications to the
sponsoring organization, sponsoring organizations must establish
procedures to ensure the provider does not review or alter the
application. FNS estimates that 83 sponsoring organizations will
establish procedures, for a total of 83 records as a one-time burden
(83 x 1 = 83). The estimated average number of burden hours per
response is 1 hour resulting in estimated total burden hours of 83 (83
x 1 = 83). FNS estimates that this information requirement will have 83
burden hours and responses. Once this requirement and its associated
burden is merged into OMB Control Number 0584-0055, FNS estimates that
the final rule will result in an increase of both 83 burden hours and
responses to OMB's inventory due to a program change.
Affected Public: Businesses
Section 226.7(b)(1)(i) requires sponsoring organizations to
annually provide State agencies with bank account activity against
other associated records to verify that the transactions meet program
requirements. FNS estimates that there are 18,601 sponsoring
organizations that are businesses, each of which will submit 1 month's
bank statement to their State agency for a total of 18,601 annual
records. FNS expects it will take an average of 15 minutes (0.25 hours)
for the sponsoring organization to report their bank activity to the
State agency, resulting in estimated total burden hours of 4,650
(18,601 x 0.25 = 4,650). FNS estimates that this information
requirement will have 4,650 burden hours and 18,601 responses. Once
this requirement and its associated burden is merged into OMB Control
Number 0584-0055, FNS estimates that the final rule will result in an
increase of 4,650 burden hours and 18,601 responses to OMB's inventory
due to a program change.
Section 226.7(b) requires that sponsoring organizations provide the
State agency with actual expenditures of CACFP funds and the amount of
meal reimbursement funds retained from unaffiliated centers to support
the sponsoring organization's administrative costs. FNS estimates that
1,030 sponsoring organizations of unaffiliated centers will provide
their State agency with actual expenditures of CACFP funds and the
amount of meal reimbursement funds retained from 1 unaffiliated center
to support the sponsoring organization's administrative costs for a
total of 1,030 annual records (1,030 x 1 = 1,030). FNS expects it will
take an average of 1 hour for the sponsoring organization to report
CACFP funds and meal reimbursement funds to the State agency, resulting
in an estimated total burden hours of 1,030 (1,030 x 1 = 1,030). FNS
estimates that this information requirement will have 1,030 burden
hours and responses. Once this requirement and its associated burden is
merged into OMB Control Number 0584-0055, FNS estimates that this final
rule results in an increase of both 1,030 burden hours and responses to
OMB's inventory due to a program change.
Section 226.6(b) requires that each participating institution
submit annual updates to continue its participation (annual
certification of information, updated licensing information, and a
budget). This replaces the renewal application process in
226.6(f)(2)(i). FNS estimates that there are 18,601 institutions that
will each have 1 annual update, for a total of 18,601 updates annually
(18,601 x 1 = 18,601). The estimated average number of burden hours per
review is 20 minutes (.334 hours), resulting in estimated total burden
hours of 6,213 (18,601 x .334 = 6,138). FNS estimates that this
information requirement will have 6,213 burden hours and 18,601
responses. Once this requirement and its associated burden is merged
into OMB Control Number 0584-0055, FNS estimates that this final rule
will reduce the burden hours by 3,088 hours, from 9,301 to 6,213 hours.
The number of responses will remain at 18,601 responses. This reduction
is due to a program change due to the Final Rule, due to the lower
amount of time it will take institutions to submit updates rather than
renewal applications.
Sections 226.6(p), 226.17(e), (f), 226.17a(f), 226.19(d), and
226.19a(d) require that each sponsoring organization must enter into
permanent agreements with their unaffiliated centers. FNS estimates
that there are 1,030 institutions that will each enter into 10
agreements, for a total of 10,300 agreements as a one-time burden
(1,030 x 10 = 10,300). The estimated average number of burden hours per
review is 30 minutes (0.5 hours), resulting in estimated total burden
hours of 5,150 (10,300 x .5 = 5,150). FNS estimates that this
information requirement will have 5,150 burden hours and 10,300
responses. Once this requirement and its associated burden is merged
into OMB Control Number 0584-0055, FNS estimates that this final rule
results in
[[Page 57834]]
an increase of 5,150 burden hours and 10,300 responses to OMB's
inventory due to a program change.
Section 226.23(e)(1)(vii) states that if a tier II day care home
elects to assist in collecting and transmitting the applications to the
sponsoring organization, sponsoring organizations must establish
procedures to ensure the provider does not review or alter the
application. FNS estimates that 540 sponsoring organizations will
establish procedures, for a total of 540 records as a one-time burden
(540 x 1 = 540). The estimated average number of burden hours per
response is 1 hour resulting in estimated total burden hours of 540
(540 x 1 = 540). FNS estimates that this information requirement will
have 540 burden hours and responses. Once this requirement and its
associated burden is merged into OMB Control Number 0584-0055, FNS
estimates that the final rule will result in an increase of both 540
burden hours and responses to OMB's inventory due to a program change.
Section 226.6(f)(1)(iv) requires sponsoring organizations of day
care homes seeking to carry over administrative funds to submit an
amended budget, to include an estimate of requested administrative fund
carryover amounts and a description of proposed purpose for which those
funds would be obligated or expended. FNS estimates that there are 540
sponsoring organizations that will each file 1 report, for a total of
540 reports (540 x 1 = 540). The estimated average number of burden
hours per report is 1 hour, resulting in estimated total burden hours
of 540 (1 x 540 = 540). FNS estimates that this information requirement
will have 540 burden hours and responses. Once this requirement and its
associated burden is merged into OMB Control Number 0584-0055, FNS
estimates that the final rule will result in an increase of both 540
burden hours and responses to OMB's inventory due to a program change.
Affected Public: Business Level (Facilities)
Section 226.18(b)(12) allows tier II day care homes to assist in
collecting meal benefit forms from households and transmitting the
forms to the sponsoring organization on the household's behalf. FNS
estimates that there are 9,321 tier II day care homes that will each
collect and transmit 5.88 forms, for a total of 54,804 forms annually
(9,321 x 5.88 = 54,804). The estimated average number of burden hours
per form is five minutes (.0835 hours), resulting in estimated total
burden hours of 4,576 (54,804 x .0835 = 4,576). FNS estimates that this
information requirement will have 4,576 burden hours and 54,804
responses. Once this requirement and its associated burden is merged
into OMB Control Number 0584-0055, FNS estimates that the final rule
will result in an increase of 4,576 burden hours and 54,804 responses
to OMB's inventory due to a program change.
Recordkeeping: CACFP
Affected Public: State Agencies
Section 226.4(j) requires that State agencies maintain a plan for
additional audit funds. FNS estimates that on average there are 8 State
agencies that will each file 1 report annually for a total of 8
responses (8 x 1 = 8). The estimated average number of burden hours per
response is 30 minutes (0.5 hours) resulting in estimated total burden
hours of 4 (8 x 0.5 = 4). FNS estimates that this information
requirement will have 4 burden hours and 8 responses. Once this
requirement and its associated burden is merged into OMB Control Number
0584-0055, FNS estimates that the final rule will result in an increase
of 4 burden hours and 8 responses to OMB's inventory due to a program
change.
Section 226.6(m)(6) requires that State agencies maintain records
for reviewing Sponsoring organizations with less than 100 facilities
and conduct activities other than the CACFP, or are at risk of having
serious management problems every two years. FNS estimates that there
are 56 State agencies that will each maintain 20 records for reviewing
sponsoring organizations with less than 100 facilities and conducting
activities other than the CACFP, for a total of 1,120 records annually
(56 x 20 = 1,120). The estimated average number of burden hours per
response is 2 hours resulting in estimated total burden hours of 2,240
(1,120 x 2 = 2,240). FNS estimates that this information requirement
will have 2,240 burden hours and 1,120 responses. Once this requirement
and its associated burden is merged into OMB Control Number 0584-0055,
FNS estimates that the final rule will result in an increase of 2,240
burden hours and 1,120 responses due to a program change.
Annualized Costs
For the CACFP, given the wide variation in MIS development and
maintenance costs across State agencies, FNS estimates a cost of
$50,000 per State agency to perform system upgrades and an additional
cost of $1,000 per State agency for annual maintenance for respondents
of this final rule ICR. Therefore, as a result of the proposals
outlined in this final rule, FNS estimates that this collection is
expected to have $2,800,000 in costs related to system upgrades and
$56,000 in annual maintenance. As a result of the provisions in this
final rule, FNS estimates that a total of $2,856,000 in combined system
upgrades and annual maintenance costs will be added to the currently
approved burden for the CACFP under OMB Control Number 0584-0055.
As a result of the proposals outlined in this final rule, FNS
estimates that this new information collection will have 46,997
respondents, 225,205 responses, and 190,924 burden hours. The average
burden per response and the annual burden hours are explained below and
summarized in the charts that follow. Once the ICR for the final rule
is approved, the information collection requirements and their
associated burden will be merged into the corresponding existing
collections. In the case of OMB Control Number 0584-0006, FNS estimates
that this final rule will increase the burden by 21,666 responses from
the currently approved 47,631,996 responses to 47,653,662 and will
decrease the burden by 14,734 burden hours from the currently approved
9,808,454 hours to 9,793,720. It will not change the burden for the
number of respondents (it will remain at 115,935). For OMB Control
Number 0584-0280, FNS estimates that this final rule will not change
the burden for the number of respondents (it will remain at 63,942),
but the rule will increase the responses by 63 from 391,795 to 391,858
and will increase the burden by 80.81 burden hours from the currently
approved 462,698.97 hours to 462,779.78. For OMB Control Number 0584-
0055, FNS estimates that this final rule will increase the burden by
115,171 responses from the currently approved 16,213,093 responses to
16,328,263.76 and will increase the burden by 22,190.724 burden hours
from the currently approved 4,213,210.886 hours to 4,235,401.61. It
will not change the number of respondents (it will remain at
3,794,949).
NSLP
Reporting
Respondents (Affected Public): State, Local, and Tribal Government.
The identified respondent groups include 56 State agencies and 19,019
School Food Authorities that will participate in this collection.
Estimated Number of Respondents: 19,075.
Estimated Number of Responses per Respondent: 1.41.
[[Page 57835]]
Estimated Total Annual Responses: 26,809.
Estimate Time per Response: 3.18 hours.
Estimated Total Annual Burden: 85,241 hours.
Recordkeeping
Respondents (Affected Public): State, Local, and Tribal Government.
The identified respondent groups include an estimated 56 State agencies
and 19,019 School Food Authorities that will participate in this
collection.
Estimated Number of Respondents: 19,075.
Estimated Number of Responses per Respondent: 1.87.
Estimated Total Annual Responses: 35,600.
Estimate Time per Response: 1.70 hours.
Estimated Total Annual Burden: 60,610 hours.
Public Notification
Respondents (Affected Public): State, Local, and Tribal Government.
The identified respondent groups include 56 State agencies that will
participate in this collection.
Estimated Number of Respondents: 56.
Estimated Number of Responses per Respondent: 68.
Estimated Total Annual Responses: 3,808.
Estimate Time per Response: .25 hours.
Estimated Total Annual Burden: 952 hours.
SFSP
Reporting
Respondents (Affected Public): State, Local, and Tribal Government.
The identified respondent groups include 53 State agencies and 5 local
governments that will participate in this collection.
Estimated Number of Respondents: 58.
Estimated Number of Responses per Respondent: 1.08.
Estimated Total Annual Responses: 62.77.
Estimate Time per Response: 1.29 hours.
Estimated Total Annual Burden: 80.81 hours.
CACFP
Reporting
Respondents (Affected Public): State, Local, and Tribal Government,
For Profit, and Non-Profit Businesses. The respondent groups include 56
State agencies, 3,257 Local governments, 18,601 sponsoring
organizations, and 9,321 facilities that will participate in this
collection.
Estimated Number of Respondents: 31,235.
Estimated Number of Responses per Respondent: 5.05.
Estimated Total Annual Responses: 157,797.04.
Estimate Time per Response: 0.26 hours.
Estimated Total Annual Burden: 41,795.72 hours.
Recordkeeping
Respondents (Affected Public): State, Local, and Tribal Government.
The respondent groups include 56 State agencies that will participate
in this collection.
Estimated Number of Respondents: 56.
Estimated Number of Responses per Respondent: 20.14.
Estimated Total Annual Responses: 1,128.
Estimate Time per Response: 1.99 hours.
Estimated Total Annual Burden: 2,244 hours.
OMB Control Number 0584-0006, ``7 CFR Part 210 National School Lunch
Program''
[[Page 57836]]
Reporting
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Estimated
Estimated # Responses Total avg. # of Estimated Current OMB Due to Total
Program rule CFR citation Title respondents per annual hours per total hours approved program difference
respondents records response burden hrs change
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
State Agency Level
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
210.18(i)(3)............ SA notifies SFAs in 56 68 3,808 8.00 30,464 50,624 -20,160 -20,160
writing of review
findings, corrective
actions, deadlines,
and potential fiscal
action with grounds
and right to appeal.
210.5(d)(3)............. SAs submit an annual 56 1 56 0.25 14 56 -42 -42
report to FNS
detailing the
disbursement of
performance-based
reimbursement to SFAs
(in FPRS).
210.18(c)(2)............ SAs with a review cycle 56 1 56 8.00 448 0 448 448
longer than 3-years
submit a plan to FNS
describing the
criteria that it will
use to identify high-
risk SFAs for targeted
follow-up reviews.
CN Integrity......................... 210.21(h)............... State agencies must 56 1 56 1.00 56 0 56 56
complete procurement
training requirements
annually.
CN Integrity......................... 210.26(b)(4)............ SAs must notify SFAs of 56 0.09 5.04 3.00 15.12 0 15.12 15.12
fine and specific
violations or actions
that constituted the
fine, and of appeal
rights and procedures;
submit a copy of the
notice to FNS.
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
State Agency Level Total............................................................ 56.00 71.09 3,981.04 7.79 30,997.12 50,680.00 -19,683 -19,683
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
School Food Authority/Local Education Agency Level
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
210.15(a)(3) & SFA submits to the SA a 3,804 1 3,804 8.00 30,430 50,720 -20,290 -20,290
210.18(j)(2). written response to
reviews documenting
corrective action for
Program deficiencies.
CN Integrity......................... 210.21(h)............... SFAs must complete 19,019 1 19,019 1.25 23,774 0 23,774 23,774
procurement training
requirements annually.
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
CN Integrity......................... 210.26(b)(5)............ SFAs may appeal SA's 5 1 5 8.00 40 0 40 40
determination of
violations and fines.
SFAs must submit to
the State agency any
pertinent information,
explanation, or
evidence addressing
the Program violations
identified by the SA.
Any SFA seeking to
appeal the SA
determination must
follow SA appeal
procedures.
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
School Food Authority Level Total................................................... 19,019 1.200 22,828 2.38 54,244 50,720 3,525 3,525
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
School Level
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Total Reporting Burden.............................................................. 19,075 1.41 26,809 3.18 85,241 101,400 -16,158 (16,158)
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Recordkeeping
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Estimated Due to
Estimated # Records per Total avg. # of Estimated Current OMB program Total
Program rule CFR citation Title record- recordkeeper annual hours per total hours approved change-- difference
keepers records record burden hrs rule
A B C = (A * B) D E = (C * D) F G = E - F
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
State Agency Level
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
210.18(h)(2)(iv)....... SA maintains 56 68 3,808 0.25 952 1,582 -630 -630
documentation of LEA/
SFA compliance with
nutrition standards
for competitive foods.
[[Page 57837]]
210.20(b)(6) & SA maintains records of 56 68 3,808 8.00 30,472 50,638 -20,166 -20,166
210.18(o)(f)(k,l,m) & all reviews and audits
210.23(c). (including Program
violations, corrective
action, fiscal action
and withholding of
payments).
210.20(b)(7) & SA maintains 56 68 3,808 0.50 1,904 3,164 -1,260 -1,260
210.19(c) & 210.18(o). documentation of
fiscal action taken to
disallow improper
claims submitted by
SFAs, as determined
through claims
processing, reviews,
and USDA audits.
210.18(c-h)............ SA completes and 56 68 3,808 0.50 1,904 3,173 -1,269 -1,269
maintains
documentation used to
conduct Administrative
Review.
210.18(c).............. SA completes and 56 23 1,288 16.00 20,608 0 20,608 20,608
maintains
documentation used to
conduct targeted
Follow Up
Administrative Review.
CN Integrity......................... 210.15(b)(8)........... State agencies must 56 1 56 0.25 14 0 14 14
maintain records to
document compliance
with the procurement
training requirements.
CN Integrity......................... 210.26(b).............. State agencies must 56 0.09 5.04 0.25 1.26 0 1.26 1.26
maintain records to
related fines and
specific violations.
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
State Agency Level Total........................................................... 56 296 16,581 3.37 55,855 58,557 -2,702 -2,702
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
School Food Authority/Local Education Agency Level
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
CN Integrity......................... 210.21(h).............. School food authorities 19,019 1 19,019 0.25 4,755 0 4,755 4,755
must maintain document
compliance with the
procurement training
requirements.
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
School Food Authority Level Total.................................................. 19,019 1 19,019 0.25 4,755 0 4,756 4,756
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
School Level
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
0 0 0 0 0 ........... ...........
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
School Level Total................................................................. 0 ............ ........... ........... ........... ........... 0 0
--------------------------------------------------------------------------------------------------------
Total Recordkeeping Burden......................................................... 19,075 1.87 35,600 1.70 60,610 58,557 2,054 2,054
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Public Notification
----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Current Due to
Responses Estimated OMB Due to program
Program rule CFR citation Title Form Estimated # per Total annual avg. # of Estimated approved authorizing change-- Due to an Total
No. respondents respondents records hours per total hours burden statute final adjustment difference
response hrs rule
A B C = (A * B) D E = (C * D) F G = E - F
----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
210.18(m)(1).............. SA must post a summary of ....... 56 68 3,808 0.25 952.0 1,582.0 ............ -630 ........... -630
the most recent
administrative review
results of SFAs on the
SA website and make a
copy available upon
request.
----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
State Agency Level Total.................................................................. ....... 56 68.00 3,808 0.25 952 1,582 0 -630 0 -630
-----------------------------------------------------------------------------------------------------------------------------------------
Local Educational Agency/School Food Authority Level Total.................................... ....... 0 #DIV/0! 0 #DIV/0! 0 0 0 0 0 0
----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
School Level Total............................................................................ ....... ............ ............ ............ ......... ............ ......... ............ 0 ........... 0
----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Total Public Notification Burden.......................................................... ....... 56 68.00 3,808 0.25 952 1,582 0 -630 0 -630
----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Grand Total for NSLP Due to Final Rule (as shown in OMB#0584-0610).................... ....... 19,075 3.47 66,217 2.22 146,803 0 0 146,803 0 146,803
----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
[[Page 57838]]
OMB Control Number 0584-0280, ``7 CFR Summer Food Service Program''
[[Page 57839]]
Reporting
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Estimated
Estimated # Responses Total avg. # of Estimated Current OMB Due to Total
Program rule CFR citation Title respondents per annual hours per total hours approved program difference
respondents records response burden hrs adjustment
A B C = (A * B) D E = (C * D) F G = E - F
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
State/Local/Tribal Governments
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Integrity............................ 225.6(i)................ State agency must 53.00 1.00 53.00 0.50 26.50 0.00 26.50 26.50
consult with FNS prior
to taking any action
to terminate for
convenience.
Integrity............................ 225.18(k)............... State agencies must 53.00 0.09 4.77 3.00 14.31 0.00 14.31 14.31
notify SFAs of fines
and submit a copy of
the notice to FNS.
Integrity............................ 225.18(k)............... SFAs may appeal State 5.00 1.00 5.00 8.00 40.00 ........... 40.00 40.00
agency's determination
of fines. SFAs must
submit to the State
agency any pertinent
information,
explanation, or
evidence addressing
the Program violations
identified by the
State agency. Any SFA
seeking to appeal the
State agency
determination must
follow State agency
appeal procedures.
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
State/Local/Tribal Governments Total................................................ 58 1 63 1.29 81 0 81 80.81
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Businesses (Non-profit Institutions and Camps)
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
........... ........... ........... ........... ........... 0 0.00 0.00
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
........... ........... ........... ........... ........... 0.00 0 0
........... ........... ........... ........... ........... 0.00 0 0.00
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Total Reporting Burden.......................................................... 58 1.08 62.77 1.29 80.81 0.00 81 81
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
[[Page 57840]]
OMB Control Number 0584-0055, ``7 CFR Part 226 Child and Adult Care
Food Program''
[[Page 57841]]
Reporting
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Estimated Due to
Estimated # Responses Total avg. # of Estimated Current OMB program Total
CFR citation Title respondents per annual hours per total hours approved change-- difference
respondents records response burden hrs rulemaking
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
State and Local Government Level
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
State Agency
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
226.4(j)....................................... SAs may submit plan to FNS for 8 1 8 4 32 0 32.00 32
additional audit funding.
226.6(k)(11)(iii).............................. SA to submit, for FNS review, 5 1 5 4 20 0 20.00 20
information supporting a request for a
reduction in the State's liability, a
reconsideration of the State's
liability, or an exception to the 60-
day deadline, for exceptional
circumstances.
226.6(b)(4)(ii)................................ State agency must consult with FNS 56 1 56 0.50 28 0 28.00 28
prior to any taking action to
terminate for convenience.
226.6(m)(6).................................... SAs to conduct reviews every two years 56 20 1120 4.00 4,480 0 4,480.00 4,480
for sponsoring organizations with less
than 100 facilities and conduct
activities other than the CACFP or are
at risk of having serious management
problems.
226.7(b)(1).................................... Have procedures in place for annually 56 1 56 1.00 56 0 56.00 56
reviewing at least one month of the
sponsoring organization's bank account
activity against other associated
records to verify that the
transactions meet program requirements.
226.7(b)(1)(ii)................................ State agency must have procedures for 56 1 56 1.00 56 0 56.00 56
annually reviewing a sponsoring
organization's actual expenditures of
CACFP funds and the amount of meal
reimbursement funds retained from
unaffiliated centers.
226.25(j)...................................... State agencies must notify SFAs of 56 0.09 5.04 3.00 15.12 0 15.12 15.12
fines and submit a copy of the notice
to FNS.
226.6(b)(2).................................... SAs must review annual certification of 56 390 21,840 0.334 7,295 10,920 -3,625.44 -3,625
an institution's eligibility to
continue participating in CACFP
(replaces the renewal application
process).
226.6(m)(3)(ix)................................ The State agency is required to assess 56 390 21,840 0.167 3,640 0 3,640.00 3,640
the timing of each sponsoring
organization's reviews of day care
homes and sponsored centers.
226.6(p)....................................... The SA must develop/revise and provide 56 1 56 6.00 336 0 336.00 336
a sponsoring organization agreement
between sponsor and facilities, which
must have standard provisions.
226.12(a)...................................... SAs must multiply the appropriate 56 11 623 0.167 104 0 103.83 104
administrative reimbursement rate by
the number of day care homes
submitting claims for reimbursement
during the month, to determine the
amount of payment that sponsoring
organizations will receive.
226.7(g)(2).................................... State agency must review the budget and 56 11 623 1.00 623 0 623.00 623
supporting documentation prior to
approval, for sponsoring organizations
of day care homes seeking to carry
over administrative funds.
226.7(j)....................................... State agency must establish procedures 56 1 56 2.00 112 0 112.00 112
to recover administrative funds from
sponsoring organizations of day care
homes that are not properly payable
under FNS Instruction 796-2,
administrative funds that are in
excess of the 10 percent maximum
carryover amount, and carryover
amounts that are not expended or
obligated by the end of the fiscal
year following the fiscal year in
which they were received.
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
State agency Subtotal............................................................... 56 827.57 46,344 0.36 16,797 10,920 5,877 5,877
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Local Governments (Sponsoring Organizations)
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
226.7(b)(1).................................... Sponsoring organizations have to 3,257 1 3,257 0.25 814 0 814 814
annually provide State agencies with
bank account activity against other
associated records to verify that the
transactions meet program requirements.
[[Page 57842]]
226.7(b)(1)(i)................................. Sponsoring organizations must provide 32 1 32 1 32 0 32 32.00
State agency with actual expenditures
of CACFP funds and the amount of meal
reimbursement funds retained from
unaffiliated centers to support the
sponsoring organization's
administrative costs.
226.6(b)....................................... Each participating institution must 3,257 1 3,257 0.33 1,088 1,629 -541 -540.66
submit annual updates to continue its
participation (annual certification of
information, updated licensing
information, and a budget).
226.6(p), 226.17(e),(f), 226.17a(f), 226.19(d), Sponsoring organizations must enter 32 10 320 0.50 160 0 160 160.00
and 226.19a(d). into permanent agreements with their
unaffiliated centers.
226.6(f)(1)(iv)................................ Sponsoring organizations of day care 83 1 83 1.00 83 0 83 83.00
homes seeking to carry over
administrative funds must submit an
amended budget, to include an estimate
of requested administrative fund
carryover amounts and a description of
proposed purpose for which those funds
would be obligated or expended.
226.25......................................... SFAs may appeal the State agency's 5 1 5 8.00 40 0 40 40.00
determination of fines. SFAs must
submit to the State agency any
pertinent information, explanation, or
evidence addressing the Program
violations identified by the State
agency.
226.23(e)(1)(vii).............................. If a tier II day care home elects to 83 1 83 1.00 83 0 83 83
assist in collecting and transmitting
the applications to the sponsoring
organization, sponsoring organizations
must establish procedures to ensure
the provider does not review or alter
the application.
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Local Govt Subtotal................................................................. 3,257 2.16 7,037 0.33 2,300.09 1,629 671.59 671.59
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Reporting burden for State and Local Government Level........................... 3,313 16.11 53,381 0.36 19,096.60 12,549 6,548.10 6,548.10
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Businesses Level (Institutions)
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
226.7(b)(1)(i)................................. Sponsoring organizations have to 18,601 1.00 18,601 0.25 4,650 0 4,650 4,650
annually provide State agencies with
bank account activity against other
associated records to verify that the
transactions meet program requirements.
226.7(b)....................................... Sponsoring organizations must provide 1,030 1 1,030 1 1,030 0 1,030 1,030.00
State agency with actual expenditures
of CACFP funds and the amount of meal
reimbursement funds retained from
unaffiliated centers to support the
sponsoring organization's
administrative costs.
226.6(b)....................................... Each participating institution must 18,601 1 18,601 0.33 6,213 9301 (3,088) (3,088)
submit annual updates to continue its
participation (annual certification of
information, updated licensing
information, and a budget).
226.6(p), 226.17(e),(f), 226.17a(f), 226.19(d), Sponsoring organizations must enter 1,030 10 10,300 0.50 5,150 0 5,150 5,150
and 226.19a(d). into permanent agreements with their
unaffiliated centers.
226.23(e)(1)(vii).............................. If a tier II day care home elects to 540 1 540 1.00 540 0 540 540
assist in collecting and transmitting
the applications to the sponsoring
organization, sponsoring organizations
must establish procedures to ensure
the provider does not review or alter
the application.
226.6(f)(1)(iv)................................ Sponsoring organizations of day care 540 1 540 1.00 540 0 540 540
homes seeking to carry over
administrative funds must submit an
amended budget, to include an estimate
of requested administrative fund
carryover amounts and a description of
proposed purpose for which those funds
would be obligated or expended.
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Total Burden for Businesses (Sponsoring Organizations).............................. 18,601 2.67 49,612.00 0.37 18,122.98 9,301 8,822.48 8,822.48
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
[[Page 57843]]
Business Level (Facilities)
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
226.18(b)(12).................................. Tier II day care homes may assist in 9,321 5.88 54,804 0.08 4,576 0 4,576 4,576
collecting meal benefit forms from
households and transmitting the forms
to the sponsoring organization on the
household's behalf.
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Total Burden for Businesses (Facilities)............................................ 9,321 5.88 54,804.00 0.08 4,576.13 0.00 4,576.13 4,576.13
------------------------------------------------------------------------------------------------------------------------------------------------
Total for Businesses................................................................ 27,922 3.74 104,416 .217 22,699.11 9,301 13,398.61 13,398.61
-------------------------------------------------------------------------------------------------------
Total Reporting Burden.......................................................... 31,235 5.05 157,797.04 0.26 41,795.72 21,849 19,946.72 19,946.72
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Recordkeeping
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Estimated Due to
Estimated # Records per Total avg. # of Estimated Current OMB program Total
Program rule Title recordkeepers recordkeeper annual hours per total hours approved change-- difference
records record burden hrs rulemaking
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
State and Local Government Level
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
State Agency
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
226.4(j).................................. SAs to maintain a plan for 8 1 8 0.50 4 0 4 4
additional audit funds.
226.6(m)(6)............................... Maintain records for reviewing 56 20 1,120 2 2,240 0 2,240 2,240
Sponsoring organizations with
less than 100 facilities and
conduct activities other than the
CACFP, or are at risk of having
serious management problems every
two years.
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
State agency subtotal..................................................... 56 20.14 1,128 1.99 2,244 0 2,244 2,244
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Local Governments (Sponsoring Organizations)
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Total Recordkeeping Burden................................................ 56 20.14 1,128 1.99 2,244.00 0.00 2,244.00 2,244.00
-----------------------------------------------------------------------------------------------------------------
Grand Total for CACFP Due to Final Rule (as shown in OMB#0584-0610)... 31,235 5 158,925.04 .28 44,039.72 0 44,039.72 44,039.72
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
[[Page 57844]]
------------------------------------------------------------------------
OMB #0584-0280 Once merged with
due to final rule OMB #0584-0280
------------------------------------------------------------------------
Total No. Respondents............. 58 63,942
Average No. Responses Per 1.08 6.13
Respondent.......................
Total Annual Responses............ 63 391,858
Average Hours Per Response........ 1.29 1.181
Total Burden Hours................ 80.81 462,779.78
Current OMB Inventory............. 0 462,698.97
Difference Due To Rulemaking...... 80.81 80.81
------------------------------------------------------------------------
------------------------------------------------------------------------
OMB #0584-0055 Once merged with
due to final rule OMB #0584-0055
------------------------------------------------------------------------
Total No. Respondents............. 31,235 3,794,949
Average No. Responses Per 5 4
Respondent.......................
Total Annual Responses............ 158,925.04 16,328,263.76
Average Hours Per Response........ 0.28 .26
Total Burden Hours................ 44,039.72 4,235,401.61
Current OMB Inventory............. 0 4,213,210.886
Difference Due To Rulemaking...... 44,039.72 22,190.72
------------------------------------------------------------------------
E-Government Act Compliance
FNS is committed to complying with the E-Government Act, 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 210
Grant programs--education, Grant programs--health, Infants and
children, Nutrition, Penalties, Reporting and recordkeeping
requirements, School breakfast and lunch programs, Surplus agricultural
commodities.
7 CFR Part 215
Food assistance programs, Grant programs--education, Grant
programs--health, Infants and children, Milk, Reporting and
recordkeeping requirements.
7 CFR Part 220
Grant programs--education, Grant programs--health, Infants and
children, Nutrition, Reporting and recordkeeping requirements, School
breakfast and lunch programs.
7 CFR Part 225
Food assistance programs, Grant programs--health, Infants and
children, Labeling, Reporting and recordkeeping requirements.
7 CFR Part 226
Accounting, Aged, Day care, Food assistance programs, Grant
programs, Grant programs--health, American Indians, Individuals with
disabilities, Infants and children, Intergovernmental relations, Loan
programs, Reporting and recordkeeping requirements, Surplus
agricultural commodities.
7 CFR Part 235
Administrative practice and procedure, Food assistance programs,
Grant programs--education, Grant programs--health, Infants and
children, Reporting and recordkeeping requirements, School breakfast
and lunch programs.
Accordingly, 7 CFR parts 210, 215, 220, 225, 226, and 235 are
amended as follows:
PART 210--NATIONAL SCHOOL LUNCH PROGRAM
0
1. The authority citation for part 210 continues to read as follows:
Authority: 42 U.S.C. 1751-1760, 1779.
0
2. Amend Sec. 210.2 by adding, in alphabetical order, the definition
of ``Fixed-price contract'' to read as follows:
Sec. 210.2 Definitions.
* * * * *
Fixed-price contract means a contract that charges a fixed cost per
meal, or a fixed cost for a certain time period. Fixed-price contracts
may include an economic price adjustment tied to a standard index.
* * * * *
0
3. In Sec. 210.5, revise paragraphs (d)(2) and (3) to read as follows:
Sec. 210.5 Payment process to States.
* * * * *
(d) * * *
(2) Quarterly report. Each State agency administering the National
School Lunch Program must submit to FNS a quarterly Financial Status
Report (FNS-777) on the use of Program funds. Such reports must be
postmarked and/or submitted no later than 30 days after the end of each
fiscal year quarter.
(3) End of year reports. (i) Each State agency must submit an
annual report detailing the disbursement of performance-based cash
assistance described in Sec. 210.4(b)(1). The report must be submitted
no later than 30 days after the end of each fiscal year. The report
must include the total number of school food authorities in the State
and the names of certified school food authorities. If all school food
authorities in the State have been certified, the State agency is no
longer required to submit the report.
(ii) Each State agency must submit a final Financial Status Report
(FNS-777) for each fiscal year. This final fiscal year grant closeout
report must be postmarked or submitted to FNS within 120 days after the
end of each fiscal year or part thereof that the State agency
administered the Program. Obligations must be reported only for the
fiscal year in which they occur. FNS will not be responsible for
reimbursing Program obligations reported later than 120 days after the
close of the fiscal year in which they were incurred. Grant closeout
procedures are to be carried out in accordance with 2 CFR part 200,
subpart D and USDA implementing regulations 2 CFR part 400 and part
415.
0
4. In Sec. 210.7, revise paragraph (d) to read as follows:
Sec. 210.7 Reimbursement for school food authorities.
* * * * *
(d) Performance-based cash assistance. The State agency must
provide performance-based cash
[[Page 57845]]
assistance as authorized under Sec. 210.4(b)(1) for lunches served in
school food authorities certified by the State agency to be in
compliance with meal pattern and nutrition requirements set forth in
Sec. 210.10 and, if the school food authority participates in the
School Breakfast Program (7 CFR part 220), Sec. 220.8 or Sec. 220.23
of this chapter, as applicable. State agencies must establish
procedures to certify school food authorities for performance-based
cash assistance in accordance with guidance established by FNS. Such
procedures must ensure State agencies:
(1) Make certification procedures readily available to school food
authorities and provide guidance necessary to facilitate the
certification process.
(2) Require school food authorities to submit documentation to
demonstrate compliance with meal pattern requirements set forth in
Sec. 210.10 and Sec. 220.8 of this chapter, as applicable. Such
documentation must reflect meal service at or about the time of
certification.
(3) State agencies must review certification documentation
submitted by the school food authority to ensure compliance with meal
pattern requirements set forth in Sec. 210.10, or Sec. 220.8 of this
chapter, as applicable. For certification purposes, State agencies
should consider any school food authority compliant:
(i) If when evaluating daily and weekly range requirements for
grains and meat/meat alternates, the certification documentation shows
compliance with the daily and weekly minimums for these two components,
regardless of whether the school food authority has exceeded the
maximums for the same components.
(ii) If when evaluating the service of frozen fruit, the school
food authority serves products that contain added sugar.
(4) Certification procedures must ensure that no performance-based
cash assistance is provided to school food authorities for meals served
prior to October 1, 2012.
(5) Within 60 calendar days of a certification submission or as
otherwise authorized by FNS, review submitted materials and notify
school food authorities of the certification determination, the date
that performance-based cash assistance is effective, and consequences
for non-compliance,
(6) Disburse performance-based cash assistance for all lunches
served beginning with the start of certification provided that
documentation reflects meal service in the calendar month the
certification materials are submitted or, in the month preceding the
calendar month of submission.
* * * * *
0
5. In Sec. 210.16, add paragraph (c)(4) to read as follows:
Sec. 210.16 Food service management companies.
* * * * *
(c) * * *
(4) Provisions in part 250, subpart D of this chapter must be
included to ensure the value of donated foods, i.e., USDA Foods, are
fully used in the nonprofit food service and credited to the nonprofit
school food service account.
* * * * *
0
6. In Sec. 210.18:
0
a. Amend paragraph (b) by revising the definitions of ``Administrative
review'' and ``General areas'';
0
b. Revise paragraphs (c), (f), (g) introductory text, (h) introductory
text, and (h)(1);
0
c. Add paragraph (h)(2)(xi);
0
d. Revise paragraph (l) introductory text and paragraph (l)(2); and
0
e. Revise the first sentence of paragraph (p) introductory text and
paragraph (p)(1).
The addition and revisions read as follows:
Sec. 210.18 Administrative Reviews.
* * * * *
(b) * * *
Administrative reviews means the comprehensive evaluation of all
school food authorities participating in the programs specified in
paragraph (a) of this section. It includes a review of both critical
and general areas in accordance with paragraphs (g) and (h) of this
section, as applicable for each reviewed program. With FNS approval,
the administrative review may include other areas of program operations
determined by the State agency.
* * * * *
General areas means the areas of review specified in paragraph (h)
of this section. These areas include free and reduced-price process,
civil rights, school food authority on-site monitoring, reporting and
recordkeeping, food safety, competitive food services, water, program
outreach, resource management, Buy American, and other areas identified
by FNS.
* * * * *
(c) Review cycle. State agencies must conduct administrative
reviews of all school food authorities participating in the National
School Lunch Program (including Afterschool Snacks and the Seamless
Summer Option) and the School Breakfast Program at least once during a
5-year review cycle, provided that each school food authority is
reviewed at least once every 6 years, depending on review cycle
observed. At a minimum, the on-site portion of the administrative
review must be completed during the school year in which the review
began.
(1) Targeted follow-up reviews. A State agency that reviews school
food authorities on a cycle longer than 3 years must identify school
food authorities that are high-risk to receive a targeted follow-up
review. A State agency must develop and receive FNS approval of a plan
to identify school food authorities that meet the high-risk criteria.
(2) High-risk criteria for targeted follow-up reviews. At a
minimum, a State plan should identify as high-risk those school food
authorities that during the most recent administrative review conducted
in accordance with this Sec. 210.18 had one or more of the following
risk factors as determined by the State Agency: a 10 percent or greater
certification and benefit issuance error rate; incomplete verification
for the review year; or one or more significant or systemic errors in
Performance Standard 1 as defined at (g)(1) of this section,
Performance Standard 2 as defined at paragraph (g)(2) of this section,
or allowable costs.
(3) Timing and scope of targeted follow-up reviews. Within two
years of the review, high-risk school food authorities must receive a
targeted follow-up review. Targeted follow-up reviews must include the
areas of significant or systemic error identified in the previous
review, and may include other areas at the discretion of the State
agency. The State agency may conduct targeted follow-up reviews in the
same school year as the administrative review, and may conduct any
additional reviews at its discretion.
* * * * *
(f) Scope of review. During the course of an administrative review
for the National School Lunch Program and the School Breakfast Program,
the State agency must monitor compliance with the critical and general
areas in paragraphs (g) and (h) of this section, respectively. Selected
critical and general areas must be monitored when reviewing the
National School Lunch Program's Afterschool Snacks and the Seamless
Summer Option, the Special Milk Program, and the Fresh Fruit and
Vegetable Program, as applicable and as specified in the FNS
Administrative Review Manual. State agencies may add
[[Page 57846]]
additional review areas with FNS approval.
(1) Review forms. State agencies must use the administrative review
forms, tools and workbooks prescribed by FNS.
(2) Timeframes covered by the review. (i) The timeframes covered by
the administrative review include the review period and the day of
review, as defined in paragraph (b) of this section.
(ii) Subject to FNS approval, the State agency may conduct a review
early in the school year, prior to the submission of a Claim for
Reimbursement. In such cases, the review period must be the prior month
of operation in the current school year, provided that such month
includes at least 10 operating days.
(3) Audit results. The State agency may use any recent and
currently applicable results from Federal, State, or local audit
activity to meet FNS monitoring requirements. Such results may be used
only when they pertain to the reviewed school(s) or the overall
operation of the school food authority, when they are relevant to the
review period, and when they adhere to audit standards contained in 2
CFR part 200, subpart F. The State agency must document the source and
the date of the audit. The content of local level audits activity
requires the approval of FNS to ensure that these audits align with
Federal audit standards.
(4) Completion of review requirements outside the administrative
review. State agencies may, with FNS approval, omit specific, redundant
areas of the administrative review, when sufficient oversight is
conducted outside of the administrative review.
(5) Error reduction strategies. State agencies may omit designated
areas of review, in part or entirely, where a school food authority or
State agency has implemented FNS-approved error reduction strategies or
utilized FNS-approved monitoring efficiencies.
(g) Critical areas of review. The performance standards listed in
this paragraph are directly linked to meal access and reimbursement,
and to the meal pattern and nutritional quality of the reimbursable
meals offered. These critical areas must be monitored by the State
agency when conducting administrative reviews of the National School
Lunch Program and the School Breakfast Program. Selected aspects of
these critical areas must also be monitored, as applicable, when
conducting administrative reviews of the National School Lunch
Program's Afterschool Snacks and the Seamless Summer Option, and of the
Special Milk Program. State agencies may omit designated critical areas
of review, in part or entirely, where school food authority or State
agency has implemented FNS-specified error reduction strategies or
utilized FNS-specified monitoring efficiencies.
* * * * *
(h) General areas of review. The general areas listed in this
paragraph reflect requirements that must be monitored by the State
agency when conducting administrative reviews of the National School
Lunch Program and the School Breakfast Program. Selected aspects of
these general areas must also be monitored, as applicable and as
specified in the FNS Administrative Review Manual, when conducting
administrative reviews of the National School Lunch Program's
Afterschool Snacks and Seamless Summer Option, the Fresh Fruit and
Vegetable Program, and the Special Milk Program. State agencies may
omit designated general areas of review, in part or entirely, where the
school food authority or State agency has implemented FNS-specified
error reduction strategies or utilized FNS-specified monitoring
efficiencies. State agencies may omit designated general areas of
review, in part or entirely, where the school food authority or State
agency has implemented FNS-specified error reduction strategies or
utilized FNS-specified monitoring efficiencies. The general areas of
review must include, but are not limited to, the following:
(1) Resource management. The State agency must conduct an
assessment of the school food authority's nonprofit school food service
account to evaluate the risk of noncompliance with resource management
requirements. If risk indicators show that the school food authority is
at high risk for noncompliance with resource management requirements,
the State agency must conduct a comprehensive review including, but not
limited to, the following areas using procedures specified in the FNS
Administrative Review Manual.
* * * * *
(2) * * *
(xi) Buy American. The State agency must ensure that the school
food authority complies with the Buy American requirements set forth in
Sec. 210.21(d) and 7 CFR 220.16(d), as specified in the FNS
Administrative Review Manual.
* * * * *
(l) Fiscal action. The State agency must take fiscal action for all
Performance Standard 1 violations and specific Performance Standard 2
violations identified during an administrative review, including
targeted follow-up review or other reviews, as specified in this
section. Fiscal action must be taken in accordance with the principles
in Sec. 210.19(c) and the procedures established in the FNS
Administrative Review Manual. The State agency must follow the fiscal
action formula prescribed by FNS to calculate the correct entitlement
for a school food authority or a school. While there is no fiscal
action required for general area violations, the State agency has the
ability to withhold funds for repeat or egregious violations occurring
in the majority of the general areas as described in paragraph
(k)(1)(iv) of this section.
* * * * *
(2) Performance Standard 2 violations. Fiscal action for
Performance Standard 2 violations applies as follows:
(i) For missing food components or missing production records cited
under paragraph (g)(2) of this section, the State agency must apply
fiscal action.
(ii) For repeated violations involving food quantities, whole
grain-rich foods, milk type, and vegetable subgroups cited under
paragraph (g)(2) of this section, the State agency has discretion to
apply fiscal action as follows:
(A) If the meals contain insufficient quantities of the required
food components, the deficient meals may be disallowed and reclaimed.
(B) If no whole grain-rich foods are offered during the week of
review, meals for up to the entire week of review may be disallowed and
reclaimed.
(C) If insufficient whole grain-rich foods are offered during the
week of review, meals for up to the entire week of review may be
disallowed and/or reclaimed.
(D) If an unallowable milk type is offered, or no milk variety is
offered, the deficient meals may be disallowed and reclaimed.
(E) If one vegetable subgroup is not offered over the course of the
week of review, meals for up to the entire week of review may be
disallowed and reclaimed.
(F) If a weekly vegetable subgroup is offered in insufficient
quantity to meet the weekly vegetable subgroup requirement, meals for
one day of the week of review may be disallowed and reclaimed.
(G) If the amount of juice offered exceeds the weekly limitation,
meals for up to the entire week of review may be disallowed and/or
reclaimed.
(iii) For repeated violations of calorie, saturated fat, sodium,
and trans fat dietary specifications cited under paragraph (g)(2)(ii)
of this section, the
[[Page 57847]]
State agency has discretion to apply fiscal action to the reviewed
school as follows:
(A) If the average meal offered over the course of the week of
review does not meet one of the dietary specifications, meals for the
entire week of review may be disallowed and reclaimed; and
(B) Fiscal action is limited to the school selected for the
targeted menu review and must be supported by a nutrient analysis of
the meals at issue using USDA-approved software.
(iv) The following conditions must be met prior to applying fiscal
action as described in paragraphs (l)(2)(ii) and (iii) of this section:
(A) Technical assistance has been given by the State agency;
(B) Corrective action has been previously required and monitored by
the State agency; and
(C) The school food authority remains noncompliant with the meal
requirements established in part 210 and part 220 of this chapter.
* * * * *
(p) * * * Except for FNS-conducted reviews authorized under Sec.
210.29(d)(2), each State agency must establish an appeal procedure to
be followed by a school food authority requesting a review of a denial
of all or a part of the Claim for Reimbursement, withholding payment
arising from administrative or follow-up review activity conducted by
the State agency under this Sec. 210.18, or fines established under
Sec. 210.26, or Sec. 215.15 or Sec. 220.18 of this chapter. * * *
(1) The written request for a review must be postmarked within 15
calendar days of the date the appellant received the notice of the
denial of all or a part of the Claim for Reimbursement, withholding of
payment, or fines established under Sec. 210.26, or Sec. 215.15 or
Sec. 220.18 of this chapter, and the State agency must acknowledge the
receipt of the request for appeal within 10 calendar days;
* * * * *
0
7. In Sec. 210.19, revise paragraph (a)(5) to read as follows:
Sec. 210.19 Additional Responsibilities.
(a) * * *
(5) Food service management companies. (i) The State agency must
annually review and approve each contract and contract amendment,
including all supporting documentation, between any school food
authority and food service management company before implementation of
the contract by either party to ensure compliance with all the
provisions and standards set forth in this part.
(A) When the State agency develops a prototype contract for use by
the school food authority that meets the provisions and standards set
forth in this part, this annual review may be limited to changes made
to that contract.
(B) The State agency may establish due dates for submission of the
contract or contract amendment documents.
(ii) The State agency must perform a review of each school food
authority that contracts with a food service management company, at
least once during each 5-year period. The reviews must examine the
school food authority's compliance with Sec. 210.16 of this part.
(iii) The State agency may require all food service management
companies to register with the State agency prior to contracting for
food service with any school food authority in the State.
(iv) State agencies must provide assistance to school food
authorities upon request to assure compliance with the requirements for
contracting with a food service management company.
* * * * *
Sec. 210.20 [Amended]
0
8. In Sec. 210.20, amend paragraph (b)(14) by removing the term
``Sec. 235.11(g)'' and adding in its place the term ``Sec.
235.11(h)''.
0
9. In Sec. 210.21 add paragraph (h) to read as follows:
Sec. 210.21 Procurement.
* * * * *
(h) Procurement training. (1) State directors of school nutrition
programs, State directors of distributing agencies, and school
nutrition program directors, management, and staff tasked with National
School Lunch Program procurement responsibilities must complete annual
training on Federal procurement standards annually.
(2) Procurement training may count towards the professional
standards training standards at Sec. 210.30(g) of this part and Sec.
235.11(h) of this chapter.
(3) State agencies and school food authorities must retain records
to document compliance with the requirement in this section.
0
10. Revise Sec. 210.26 to read as follows:
Sec. 210.26 Penalties and fines.
(a) Penalties. Whomever embezzles, willfully misapplies, steals, or
obtains by fraud any funds, assets, or property provided under this
part whether received directly or indirectly from the Department will,
if such funds, assets, or property are of a value of $100 or more, be
fined no more than $25,000 or imprisoned not more than 5 years or both;
or if such funds, assets, or property are of a value of less than $100,
be fined not more than $1,000 or imprisoned not more than 1 year or
both. Whomever receives, conceals, or retains for personal use or gain,
funds, assets, or property provided under this part, whether received
directly or indirectly from the Department, knowing such funds, assets,
or property have been embezzled, willfully misapplied, stolen, or
obtained by fraud, will be subject to the same penalties.
(b) Fines. (1) The State agency may establish a fine against any
school food authority when it has determined that the school food
authority or a school under its agreement has:
(i) Failed to correct severe mismanagement of this Program or a
Child Nutrition Program under parts 225 or 226 of this chapter;
(ii) Disregarded a Program requirement of which the school food
authority or school had been informed; or
(iii) Failed to correct repeated violations of Program requirements
under this part or under parts 225 or 226 of this chapter.
(2) FNS may direct the State agency to establish a fine against any
school food authority when it has determined that the school food
authority or school meets the criteria set forth under paragraph (b)(1)
of this section.
(3) Funds used to pay fines established under this paragraph must
be derived from non-Federal sources. The State agency must calculate
the fine based on the amount of Program reimbursement earned by the
school food authority or school for the most recent fiscal year for
which full year data is available, provided that the fine does not
exceed the equivalent of:
(i) For the first fine, 1 percent of the amount of meal
reimbursement earned for the fiscal year;
(ii) For the second fine, 5 percent of the amount of meal
reimbursement earned for the fiscal year; and
(iii) For the third or subsequent fine, 10 percent of the amount of
meal reimbursement earned for the fiscal year.
(4) The State agency must inform FNS at least 30 days prior to
establishing the fine under this paragraph. The State agency must send
the school food authority written notification of the fine established
under this paragraph and provide a copy of the notification to FNS. The
notification must:
(i) Specify the violations or actions which constitute the basis
for the fine and indicate the amount of the fine;
(ii) Inform the school food authority that it may appeal the fine
and advise
[[Page 57848]]
the school food authority of the appeal procedures established under
Sec. 210.18(p);
(iii) Indicate the effective date and payment procedures should the
school food authority not exercise its right to appeal within the
specified timeframe.
(5) Any school food authority subject to a fine under paragraph
(b)(1) of this section may appeal the State agency's determination. In
appealing a fine, the school food authority must submit to the State
agency any pertinent information, explanation, or evidence addressing
the Program violations identified by the State agency. Any school food
authority seeking to appeal the State agency determination must follow
State agency appeal procedures.
(6) The decision of the State agency review official is final and
not subject to further administrative or judicial review. Failure to
pay a fine established under this paragraph may be grounds for
suspension or termination.
(7) Money received by the State agency as a result of a fine
established under this paragraph against a school food authority and
any interest charged in the collection of these fines must be remitted
to FNS, and then remitted to the United States Treasury.
0
11. In Sec. 210.30, add paragraph (g)(3) to read as follows:
Sec. 210.30 School nutrition program professional standards.
* * * * *
(g) * * *
(3) Each employee tasked with Program procurement has completed
annual procurement training, as required under Sec. 210.21(h), by the
end of each school year.
0
12. Revise Sec. 210.32 to read as follows:
Sec. 210.32 Program information.
Persons seeking information about this Program should contact their
State administering agency or the appropriate FNSRO. The FNS website
has contact information for State agencies at https://www.fns.usda.gov/contacts and FNSROs at https://www.fns.usda.gov/fns-regional-offices.
PART 215--SPECIAL MILK PROGRAM
0
13. The authority citation for part 215 continues to read as follows:
Authority: 42 U.S.C. 1772 and 1779.
0
14. Revise Sec. 215.15 to read as follows:
Sec. 215.15 Withholding payments and establishing fines.
(a) Withholding payments. In accordance with Departmental
regulations 2 CFR 200.338 through 200.342, the State agency must
withhold Program payments, in whole or in part, from any school food
authority which has failed to comply with the provisions of this part.
Program payments must be withheld until the school food authority takes
corrective action satisfactory to the State agency, or gives evidence
that such corrective actions will be taken, or until the State agency
terminates the grant in accordance with Sec. 215.16. Subsequent to the
State agency's acceptance of the corrective actions, payments will be
released for any milk served in accordance with the provisions of this
part during the period the payments were withheld.
(b) Fines. (1) The State agency may establish a fine against any
school food authority when it has determined that the school food
authority or a school under its agreement has:
(i) Failed to correct severe mismanagement of the Program;
(ii) Disregarded a Program requirement of which the school food
authority or school had been informed; or
(iii) Failed to correct repeated violations of Program
requirements.
(2) FNS may direct the State agency to establish a fine against any
school food authority when it has determined that the school food
authority or school meets the criteria set forth under paragraph (b)(1)
of this section.
(3) Funds used to pay a fine established under this paragraph must
be derived from non-Federal sources. The State agency must calculate
the fine based on the amount of Program reimbursement earned by the
school food authority or school for the most recent fiscal year for
which full year data is available, provided that the fine does not
exceed the equivalent of:
(i) For the first fine, 1 percent of the amount of reimbursement
for milk earned for the fiscal year;
(ii) For the second fine, 5 percent of the amount of reimbursement
for milk earned for the fiscal year; and
(iii) For the third or subsequent fine, 10 percent of the amount of
reimbursement for milk earned for the fiscal year.
(4) The State agency must inform FNS at least 30 days prior to
establishing a fine under this paragraph. The State agency must send
the school food authority written notification of the fine established
under this paragraph and provide a copy of the notification to FNS. The
notification must:
(i) Specify the violations or actions which constitute the basis
for the fine and indicate the amount of the fine;
(ii) Inform the school food authority that it may appeal the fine
and advise the school food authority of the appeal procedures
established under Sec. 210.18(p) of this chapter;
(iii) Indicate the effective date and payment procedures should the
school food authority not exercise its right to appeal within the
specified timeframe.
(5) Any school food authority subject to a fine under paragraph
(b)(1) of this section may appeal the State agency's determination. In
appealing a fine, the school food authority must submit to the State
agency any pertinent information, explanation, or evidence addressing
the Program violations identified by the State agency. Any school food
authority seeking to appeal the State agency determination must follow
State agency appeal procedures.
(6) The decision of the State agency review official is final and
not subject to further administrative or judicial review. Failure to
pay a fine established under this paragraph may be grounds for
suspension or termination.
(7) Money received by the State agency as a result of a fine
established under this paragraph against a school food authority and
any interest charged in the collection of these fines must be remitted
to FNS, and then remitted to the United States Treasury.
0
15. Revise Sec. 215.17 to read as follows:
Sec. 215.17 Program information.
Persons seeking information about this Program should contact their
State administering agency or the appropriate FNSRO. The FNS website
has contact information for State agencies at https://www.fns.usda.gov/contacts and FNSROs at https://www.fns.usda.gov/fns-regional-offices.
PART 220--SCHOOL BREAKFAST PROGRAM
0
16. The authority citation for part 220 continues to read as follows:
Authority: 42 U.S.C. 1773, 1779, unless otherwise noted.
0
17. In Sec. 220.2, add in alphabetical order the definition ``Fixed-
price contract'' to read as follows:
Sec. 220.2 Definitions.
* * * * *
Fixed-price contract means a contract that charges a fixed cost per
meal, or a fixed cost for a certain time period. Fixed-price contracts
may include an economic price adjustment tied to a standard index.
* * * * *
0
18. In Sec. 220.7, add paragraph (d)(3)(iv) to read as follows:
Sec. 220.7 Requirements for participation.
* * * * *
[[Page 57849]]
(d) * * *
(3) * * *
(iv) Provisions in part 250, subpart D of this chapter must be
included to ensure the value of donated foods, i.e., USDA Foods, are
fully used in the nonprofit food service and credited to the nonprofit
school food service account.
* * * * *
0
19. Revise Sec. 220.18 to read as follows:
Sec. 220.18 Withholding payments and establishing fines.
(a) Withholding payments. In accordance with 2 CFR 200.338 through
342, the State agency must withhold Program payments, in whole or in
part, from any school food authority which has failed to comply with
the provisions of this part. Program payments must be withheld until
the school food authority takes corrective action that is satisfactory
to the State agency, or gives evidence that such corrective actions
will be taken, or until the State agency terminates the grant in
accordance with Sec. 220.19. Subsequent to the State agency's
acceptance of the corrective actions, payments will be released for any
breakfasts served in accordance with the provisions of this part during
the period the payments were withheld.
(b) Fines. (1) The State agency may establish a fine against any
school food authority when it has determined that the school food
authority or a school under its agreement has:
(i) Failed to correct severe mismanagement of the Program or a
Child Nutrition Program under parts 225 or 226 of this chapter;
(ii) Disregarded a Program requirement of which the school food
authority or school had been informed; or
(iii) Failed to correct repeated violations of Program requirements
under this part or under parts 225 or 226 of this chapter.
(2) FNS may direct the State agency to establish a fine against any
school food authority when it has determined that the school food
authority or school meets the criteria set forth under paragraph (b)(1)
of this section.
(3) Funds used to pay a fine established under this paragraph must
be derived from non-Federal sources. The State agency must calculate
the fine based on the amount of Program reimbursement earned by the
school food authority or school for the most recent fiscal year for
which full year data are available, provided that the fine does not
exceed the equivalent of:
(i) For the first fine, 1 percent of the amount of meal
reimbursement earned for the fiscal year;
(ii) For the second fine, 5 percent of the amount of meal
reimbursement earned for the fiscal year; and
(iii) For the third or subsequent fine, 10 percent of the amount of
meal reimbursement earned for the fiscal year.
(4) The State agency must inform FNS at least 30 days prior to
establishing a fine under this paragraph. The State agency must send
the school food authority written notification of the fine established
under this paragraph and provide a copy of the notification to FNS. The
notification must:
(i) Specify the violations or actions which constitute the basis
for the fine and indicate the amount of the fine;
(ii) Inform the school food authority that it may appeal the fine,
and advise the school food authority of the appeal procedures
established under Sec. 210.18(p) of this chapter;
(iii) Indicate the effective date and payment procedures should the
school food authority not exercise its right to appeal within the
specified timeframe.
(5) Any school food authority subject to a fine under paragraph
(b)(1) of this section may appeal the State agency's determination. In
appealing a fine, the school food authority must submit to the State
agency any pertinent information, explanation, or evidence addressing
the Program violations identified by the State agency. Any school food
authority seeking to appeal the State agency determination must follow
State agency appeal procedures.
(6) The decision of the State agency review official is final and
not subject to further administrative or judicial review. Failure to
pay a fine established under this paragraph may be grounds for
suspension or termination.
(7) Money received by the State agency as a result of a fine
established under this paragraph against a school food authority and
any interest charged in the collection of these fines must be remitted
to FNS, and then remitted to the United States Treasury.
0
20. Revise Sec. 220.21 to read as follows:
Sec. 220.21 Program information.
Persons seeking information about this Program should contact their
State administering agency or the appropriate FNSRO. The FNS website
has contact information for State agencies at https://www.fns.usda.gov/contacts and FNSROs at https://www.fns.usda.gov/fns-regional-offices.
PART 225--SUMMER FOOD SERVICE PROGRAM
0
21. The authority citation for part 225 continues to read as follows:
Authority: Secs. 9, 13, and 14, Richard B. Russell National
School Lunch Act, as amended, 42 U.S.C. 1758, 1761 and 1762a.
0
22. In Sec. 225.2, add in alphabetical order a definition for
``Termination for convenience'' to read as follows:
Sec. 225.2 Definitions.
* * * * *
Termination for convenience means:
(1) Termination of a State agency's participation in the Program in
whole, or in part, when FNS and the State agency agree that the
continuation of the Program would not produce beneficial results
commensurate with the further expenditure of funds; or
(2) Termination of a permanent operating agreement by a State
agency or sponsor due to considerations unrelated to either party's
performance of Program responsibilities under the agreement.
* * * * *
0
23. In Sec. 225.6, revise paragraph (c)(1)(i) and paragraph (i)
introductory text to read as follows:
Sec. 225.6 State agency responsibilities.
* * * * *
(c) * * *
(1) * * *
(i) The sponsor must submit a written application to the State
agency for participation in the Program. The State agency may use the
application form developed by FNS, or develop its own application form,
provided that the form requests the full legal name, any previously
used names, mailing address; date of birth of the sponsor's responsible
principals, which include the executive director and board chair; and
the sponsor's Federal Employer Identification Number (FEIN) or Unique
Entity Identifier (UEI). Application to sponsor the Program must be
made on a timely basis within the deadlines established under paragraph
(b)(1) of this section.
* * * * *
(i) State-Sponsor agreement. A sponsor approved for participation
in the Program must enter into a permanent written agreement with the
State agency. The existence of a valid permanent agreement does not
limit the State agency's ability to terminate the agreement, as
provided under Sec. 225.11(c). The State agency must terminate the
sponsor's agreement whenever a sponsor's participation in the Program
ends. The State agency or sponsor may terminate the agreement at its
convenience for considerations unrelated to the sponsor's performance
of Program responsibilities under the agreement. However, any action
[[Page 57850]]
initiated by the State agency to terminate an agreement for its
convenience requires prior consultation with FNS. All sponsors must
agree in writing to:
* * * * *
0
24. In Sec. 225.18, add paragraph (k) to read as follows:
Sec. 225.18 Miscellaneous administrative provisions.
* * * * *
(k) Fines. (1) A sponsor that is a school food authority may be
subject to fines. The State agency may establish an assessment when it
has determined that the sponsor or its site has:
(i) Failed to correct severe mismanagement of the Program;
(ii) Disregarded a Program requirement of which the sponsor or its
site had been informed; or
(iii) Failed to correct repeated violations of Program
requirements.
(2) FNS may direct the State agency to establish a fine against any
sponsor when it has determined that the sponsor or its site has
committed one or more acts under paragraph (k)(1) of this section.
(3) Funds used to pay a fine established under this paragraph must
be derived from non-Federal sources. In calculating an assessment, the
State agency must calculate the fine based on the amount of Program
reimbursement earned by the sponsor or its site for the most recent
fiscal year for which full year data is available, provided that the
fine does not exceed the equivalent of:
(i) For the first fine, 1 percent of the amount of meal
reimbursement earned for the fiscal year;
(ii) For the second fine, 5 percent of the amount of meal
reimbursement earned for the fiscal year; and
(iii) For the third or subsequent fine, 10 percent of the amount of
meal reimbursement earned for the fiscal year.
(4) The State agency must inform FNS at least 30 days prior to
establishing the fine under this paragraph. The State agency must send
the sponsor written notification of the fine established under this
paragraph and provide a copy of the notification to FNS. The
notification must:
(i) Specify the violations or actions which constitute the basis
for the fine and indicate the amount of the fine;
(ii) Inform the institution that it may appeal the fine and advise
the sponsor of the appeal procedures established under Sec. 225.13;
(iii) Indicate the effective date and payment procedures should the
sponsor not exercise its right to appeal within the specified
timeframe.
(5) Any sponsor subject to a fine under paragraph (k)(1) of this
section may appeal the State agency's determination. In appealing a
fine, the sponsor must submit to the State agency any pertinent
information, explanation, or evidence addressing the Program violations
identified by the State agency. Any sponsor seeking to appeal the State
agency determination must follow State agency appeal procedures.
(6) The decision of the State agency review official is final and
not subject to further administrative or judicial review. Failure to
pay a fine established under this paragraph may be grounds for
suspension or termination.
(7) Money received by the State agency as a result of a fine
established under this paragraph against a sponsor and any interest
charged in the collection of these fines must be remitted to FNS, and
then remitted to the United States Treasury.
0
25. Revise Sec. 225.19 to read as follows:
Sec. 225.19 Program information.
Persons seeking information about this Program should contact their
State administering agency or the appropriate FNSRO. The FNS website
has contact information for State agencies at https://www.fns.usda.gov/contacts and FNSRO at https://www.fns.usda.gov/fns-regional-offices.
PART 226--CHILD AND ADULT CARE FOOD PROGRAM
0
26. The authority citation for 7 CFR part 226 continues to read as
follows:
Authority: Secs. 9, 11, 14, 16, and 17, Richard B. Russell
National School Lunch Act, as amended, 42 U.S.C. 1758, 1759a, 1762a,
1765 and 1766.
0
27. In Sec. 226.2:
0
a. Revise the definitions for ``Facility'' and ``New institution'';
0
b. Add in alphabetical order definitions for ``Participating
institution'';
0
c. Revise the definition of ``Renewing institution'';
0
d. Add the definition of ``Sponsored center'';
0
e. Revise the definitions for ``Sponsoring organization'', ``TANF
recipient'', and ``Termination for convenience''.
The revisions and additions read as follows:
Sec. 226.2 Definitions.
* * * * *
Facility means a sponsored center or a day care home.
* * * * *
New institution means a sponsoring organization or an independent
center making an application to participate in the Program or applying
to participate in the Program after a lapse in participation.
* * * * *
Participating institution means a sponsoring organization or an
independent center, including a renewing institution, that holds a
current agreement with the State agency to operate the Program.
* * * * *
Renewing institution means a sponsoring organization or an
independent center that is participating in the Program at the time it
submits annual renewal information.
* * * * *
Sponsored center means a child care center, an at-risk afterschool
care center, an adult day care center, an emergency shelter, or an
outside-school-hours care center that operates the Program under the
auspices of a sponsoring organization. The two types of sponsored
centers are as follows:
(1) An affiliated center is a part of the same legal entity as the
CACFP sponsoring organization; or
(2) An unaffiliated center is legally distinct from the sponsoring
organization.
Sponsoring organization means a public or nonprofit private
organization that is entirely responsible for the administration of the
food program in:
(1) One or more day care homes;
(2) A child care center, emergency shelter, at-risk afterschool
care center, outside-school-hours care center, or adult day care center
which is a legally distinct entity from the sponsoring organization;
(3) Two or more child care centers, emergency shelters, at-risk
afterschool care centers, outside-school-hours care center, or adult
day care centers; or
(4) Any combination of child care centers, emergency shelters, at-
risk afterschool care centers, outside-school-hours care centers, adult
day care centers, and day care homes.
The term ``sponsoring organization'' also includes an organization
that is entirely responsible for administration of the Program in any
combination of two or more child care centers, at-risk afterschool care
centers, adult day care centers or outside-school-hours care centers,
which meet the definition of For-profit center in this section and are
part of the same legal entity as the sponsoring organization.
* * * * *
TANF recipient means an individual or household receiving
assistance (as defined in 45 CFR 260.31) under a State-
[[Page 57851]]
administered Temporary Assistance for Needy Families program.
Termination for convenience means termination of a Program
agreement due to considerations unrelated to either party's performance
of Program responsibilities under the agreement between:
(1) A State agency and the independent center,
(2) A State agency and the sponsoring organization,
(3) A sponsoring organization and the unaffiliated center, or
(4) A sponsoring organization and the day care home.
* * * * *
0
28. In Sec. 226.4, revise paragraph (j) to read as follows:
Sec. 226.4 Payments to States and use of funds.
* * * * *
(j) Audit funds. (1) Funds are available to each State agency in an
amount equal to 1.5 percent of the Program funds used by the State
during the second fiscal year preceding the fiscal year for which these
funds are to be made available. These funds are for the expense of
conducting audits under Sec. 226.8 and Program monitoring under Sec.
226.6(m).
(2) State agencies may request an increase in the amount of funds
made available under this paragraph.
(i) FNS approval for increased funding will be based on the State
agency's expressed need for an increase in resources to meet audit
requirements, fulfill monitoring requirements, or effectively improve
Program management.
(ii) The total amount of audit funds made available to any State
agency under this paragraph may not exceed 2 percent of Program funds
used by the State during the second fiscal year preceding the fiscal
year for which the funds are made available.
(iii) The amount of assistance provided to a State agency under
this paragraph in any fiscal year may not exceed the State's
expenditures under Sec. Sec. 226.6(m) and 226.8 during the fiscal year
in which the funds are made available.
* * * * *
0
29. In Sec. 226.6:
0
a. Revise paragraph (b) introductory text, paragraphs (b)(1)(xv),
(b)(2), (3), (4), and (f)(1)(iv);
0
b. Remove paragraph (f)(2) and redesignate paragraph (f)(3) as
paragraph (f)(2);
0
c. Add a sentence at the end of paragraph (k)(5)(ii);
0
d. Add a sentence at the end of paragraph (k)(5)(ix);
0
e. Add paragraph (k)(11); and
0
f. Revise paragraphs (m)(3), (m)(6); and (p).
The additions and revisions read as follows:
Sec. 226.6 State agency administrative responsibilities.
* * * * *
(b) Program applications and agreements. Each State agency must
establish application review procedures, as described in paragraph
(b)(1) of this section, to determine the eligibility of new
institutions and facilities for which applications are submitted by
sponsoring organizations. Each State agency must establish procedures
for the review of renewal information, as described in paragraph (b)(2)
of this section, to determine the continued eligibility of renewing
institutions. The State agency must enter into written agreements with
institutions, as described in paragraph (b)(4) of this section.
(1) * * *
(xv) Certification of truth of applications and submission of names
and addresses. Institutions must submit a certification that all
information on the application is true and correct, along with the
names, mailing addresses, and dates of birth of the institution's
executive director and chair of the board of directors or the owner, in
the case of a for-profit center that does not have an executive
director or is not required to have a board of directors. In addition,
the institution's Federal Employer Identification Number (FEIN) or the
Unique Entity Identifier (UEI) must be provided;
* * * * *
(2) Annual information submission requirements for State agency
review of renewing institutions. Each State agency must establish
annual information submission procedures to confirm the continued
eligibility of renewing institutions under this part. Renewing
institutions must not be required to submit a free and reduced-price
policy statement or a nondiscrimination statement unless they make
substantive changes to either statement. In addition, the State
agency's review procedures must ensure that institutions annually
submit information or certify that certain information is still true
based on the requirements of this section. For information that must be
certified, any new changes made in the past year and not previously
reported to the State agency must be updated in the annual renewal
information submission. Any additional information submitted in the
renewal must be certified by the institution to be true.
(i) This paragraph (b)(2) contains the information that must be
certified. The State agency must ensure that renewing independent
centers certify the following to be true:
(A) The institution and its principals are not currently on the
National disqualified list, per paragraph (b)(1)(xii) of this section;
(B) A list of any publicly funded programs that the sponsoring
organization and its principals have participated in, in the past 7
years, is current, per paragraph (b)(1)(xiii)(B) of this section;
(C) The institution and its principals have not been determined
ineligible for any other publicly funded programs due to violation of
that program's requirements, in the past 7 years, per paragraphs
(b)(1)(xiii)(B) and (C) of this section;
(D) No principals have been convicted of any activity that occurred
during the past 7 years and that indicated a lack of business
integrity, per paragraph (b)(1)(xiv)(B) of this section;
(E) The names, mailing addresses, and dates of birth of all current
principals have been submitted to the State agency, per paragraph
(b)(1)(xv) of this section;
(F) The institution is currently compliant with the required
performance standards of financial viability and management,
administrative capability, and program accountability, per paragraph
(b)(1)(xviii) of this section; and
(G) Licensing or approval status of each child care center or adult
day care center is up-to-date.
(ii) The State agency must ensure that renewing sponsoring
organizations certify the following to be true:
(A) All of the requirements under paragraph (b)(2)(i) of this
section are certified to be true;
(B) The management plan on file with the State agency is complete
and up to date, per paragraph (b)(1)(iv) of this section;
(C) No sponsored facility or principal of a sponsored facility is
currently on the National disqualified list, per paragraph (b)(1)(xii)
of this section;
(D) The outside employment policy most recently submitted to the
State agency remains current and in effect, per paragraph (b)(1)(xvi)
of this section;
(E) Licensing or approval status of each sponsored child care
center, adult day care center, or day care home is up-to-date;
(F) The list of the sponsoring organization's facilities on file
with the State agency is up-to-date; and
(G) All facilities under the sponsoring organization's oversight
have adhered to Program training requirements.
[[Page 57852]]
(iii) State agency review of institution information. The State
agency's review of information that must be submitted, certified or
updated annually is as follows:
(A) Management plan. The State agency must ensure that renewing
sponsoring organizations certify that the sponsoring organization has
reviewed the current management plan on file with the State agency and
that it is complete and up to date. If the management plan has changed,
the sponsoring organization must submit updates to the management plan
that meet the requirements of Sec. 226.16(b)(1). The State agency must
establish factors, consistent with Sec. 226.16(b)(1), that it will
consider in determining whether a renewing sponsoring organization has
sufficient staff to perform required monitoring responsibilities at all
of its sponsored facilities. As part of its management plan review, the
State agency must determine the appropriate level of staffing for the
sponsoring organization, consistent with the staffing range of monitors
set forth at Sec. 226.6(b)(1) and the factors the State agency has
established.
(B) Administrative budget submission. The State agency must ensure
that renewing sponsoring organizations submit an administrative budget
for the upcoming year with sufficiently detailed information concerning
projected CACFP administrative earnings and expenses, as well as other
non-Program funds to be used in Program administration. The State
agency must be able to determine the allowability, necessity, and
reasonableness of all proposed expenditures, and to assess the
sponsoring organization's capability to manage Program funds. The
administrative budget must demonstrate that the sponsoring organization
will expend and account for funds in accordance with regulatory
requirements, FNS Instruction 796-2 (Financial Management in the Child
and Adult Care Food Program), 2 CFR part 200, subpart D and USDA
implementing regulations 2 CFR part 400 and part 415, and applicable
Office of Management and Budget circulars. The administrative budget
submitted by a sponsoring organization of centers must demonstrate that
the administrative costs to be charged to the Program do not exceed 15
percent of the meal reimbursements estimated or actually earned during
the budget year, unless the State agency grants a waiver, as described
in Sec. 226.7(g). For sponsoring organizations of day care homes
seeking to carry over administrative funds, as described in Sec.
226.12(a)(3), the budget must include an estimate of requested
administrative fund carryover amounts and a description of proposed
purpose for which those funds would be obligated or expended.
(C) Presence on the National disqualified list. The State agency
must ensure that renewing institutions certify that neither the
institution nor its principals are on the National disqualified list.
The State agency must also ensure that renewing sponsoring
organizations certify that no sponsored facility or facility principal
is on the National disqualified list.
(D) Ineligibility for other publicly funded programs. A State
agency is prohibited from approving a renewing institution or
facility's application if, during the past 7 years, the institution,
facility, responsible principals, or responsible individuals have been
declared ineligible for any other publicly funded program by reason of
violating that program's requirements. However, this prohibition does
not apply if the institution, facility, responsible principals, or
responsible individuals have been fully reinstated in or determined
eligible for that program, including the payment of any debts owed. The
State agency must follow up with the entity administering the publicly
funded program to gather sufficient evidence to determine whether the
institution or its principals were, in fact, determined ineligible.
(E) Information on criminal convictions. The State agency must
ensure that renewing institutions certify that the institution's
principals have not been convicted of any activity that occurred during
the past 7 years and that indicates a lack of business integrity, as
defined in paragraph (c)(1)(ii)(A) of this section.
(F) Submission of names and addresses. The State agency must ensure
that renewing institutions submit a certification attesting to the
validity of the following information: full legal name and any names
previously used, mailing address, and dates of birth of the
institution's executive director and chair of the board of directors or
the owner, in the case of a for-profit center that does not have an
executive director or is not required to have a board of directors. In
addition, the institution's Federal Employer Identification Number
(FEIN) or the Unique Entity Identifier (UEI) must be provided.
(G) Outside employment policy. The State agency must ensure that
renewing sponsoring organizations certify that the outside employment
policy most recently submitted to the State agency remains current and
in effect or the sponsoring organization must submit an updated outside
employment policy at the time of renewal. The policy must restrict
other employment by employees that interferes with an employee's
performance of Program-related duties and responsibilities, including
outside employment that constitutes a real or apparent conflict of
interest.
(H) Compliance with performance standards. The State agency must
ensure that each renewing institution certifies that it is still in
compliance with the performance standards described in paragraph
(b)(1)(xviii) of this section, meaning it is financially viable, is
administratively capable of operating the Program in accordance with
this part, and has internal controls in effect to ensure
accountability.
(I) Licensing. The State agency must ensure that each independent
center certifies that its licensing or approval status is up-to-date
and that it continues to meet the licensing requirements described in
paragraphs (d) and (e) of this section. Sponsoring organizations must
certify that the licensing or approval status of their facilities is
up-to-date and that they continue to meet the licensing requirements
described in paragraphs (d) and (e) of this section. If the independent
center or facility has a new license not previously on file with the
State agency, a copy must be submitted, unless the State agency has
other means of confirming the licensing or approval status of any
independent center or facility providing care.
(J) Facility lists. The State agency must ensure that each
sponsoring organization certifies that the list of all of their
applicant day care homes, child care centers, outside-school-hours-care
centers, at-risk afterschool care centers, emergency shelters, and
adult day care centers on file with the State agency is up-to-date.
(K) Facility training. The State agency must ensure that renewing
sponsoring organizations certify that all facilities under their
oversight have adhered to the training requirements set forth in
Program regulations.
(iv) Additional Information collection. Institutions must provide
information to the State agency as specified in paragraphs (f)(3),
(f)(4), and (f)(7) of this section.
(3) State agency notification requirements. (i) Any new institution
applying for participation in the Program must be notified in writing
of approval or disapproval by the State agency, within 30 calendar days
of the State agency's receipt of a complete application. Whenever
possible, State agencies should provide assistance to institutions that
have submitted an
[[Page 57853]]
incomplete application. Any disapproved applicant institution must be
notified of the reasons for its disapproval and its right to appeal, as
described in paragraph (k) of this section. Any disapproved applicant
day care home or unaffiliated center must be notified of the reasons
for its disapproval and its right to appeal, as described in paragraph
(l) of this section.
(ii) Any renewing institution must be provided written notification
indicating whether it has completely and sufficiently met all renewal
information requirements within 30 days of the submission of renewal
information. Whenever possible, State agencies should provide
assistance to institutions whose information is incomplete.
(4) Program agreements. (i) The State agency must require each
institution that has been approved for participation in the Program to
enter into a permanent agreement governing the rights and
responsibilities of each party. The existence of a valid permanent
agreement, however, does not eliminate the need for an institution to
comply with the annual information submission requirements and related
provisions at paragraphs (b) and (f) of this section.
(ii) The existence of a valid permanent agreement does not limit
the State agency's ability to terminate the agreement, as provided
under paragraph (c)(3) of this section. The State agency must terminate
the institution's agreement whenever an institution's participation in
the Program ends. The State agency must terminate the agreement for
cause based on violations by the institution, facility, responsible
principals, or responsible individuals, as described in paragraph (c)
of this section. The State agency or institution may terminate the
agreement at its convenience for considerations unrelated to the
institution's performance of Program responsibilities under the
agreement. However, any action initiated by the State agency to
terminate an agreement for its convenience requires prior consultation
with FNS. Termination for convenience does not result in ineligibility
for any program authorized under this part or parts 210, 215, 220, or
225 of this chapter.
(iii) The Program agreement must include the following
requirements:
(A) The responsibility of the institution to accept final financial
and administrative management of a proper, efficient, and effective
food service, and comply with all requirements under this part.
(B) The responsibility of the institution to comply with all
requirements of title VI of the Civil Rights Act of 1964, title IX of
the Education Amendments of 1972, section 504 of the Rehabilitation Act
of 1973, the Age Discrimination Act of 1975, and the Department's
regulations concerning nondiscrimination (parts 15, 15a and 15b of this
title), including requirements for racial and ethnic participation data
collection, public notification of the nondiscrimination policy, and
reviews to assure compliance with the nondiscrimination policy, to the
end that no person may, on the grounds of race, color, national origin,
sex, age, or disability, be excluded from participation in, be denied
the benefits of, or be otherwise subjected to discrimination under, the
Program.
(C) The right of the State agency, the Department, and other State
or Federal officials to make announced or unannounced reviews of their
operations during the institution's normal hours of child or adult care
operations, and that anyone making such reviews must show photo
identification that demonstrates that they are employees of one of
these entities.
(f) * * *
(1) * * *
(iv) Require each sponsoring organization to submit an
administrative budget with sufficiently detailed information concerning
projected CACFP administrative earnings and expenses, as well as other
non-Program funds to be used in Program administration, for the State
agency to determine the allowability, necessity, and reasonableness of
all proposed expenditures, and to assess the sponsoring organization's
capability to manage Program funds. The administrative budget must
demonstrate that the sponsoring organization will expend and account
for funds in accordance with regulatory requirements, FNS Instruction
796-2 (Financial Management--Child and Adult Care Food Program), 2 CFR
part 200, subpart D, and USDA implementing regulations 2 CFR part 400
and part 415, and applicable Office of Management and Budget circulars.
The administrative budget submitted by a sponsoring organization of
centers must demonstrate that the administrative costs to be charged to
the Program do not exceed 15 percent of the meal reimbursements
estimated or actually earned during the budget year, unless the State
agency grants a waiver, as described in Sec. 226.7(g). For sponsoring
organizations of day care homes seeking to carry over administrative
funds, as described in Sec. 226.12(a)(3), the budget must include an
estimate of requested administrative fund carryover amounts and a
description of proposed purpose for which those funds would be
obligated or expended.
* * * * *
(k) * * *
(5) * * *
(ii) * * * The State agency must provide a copy of the written
request for an administrative review, including the date of receipt of
the request to FNS within 10 days of its receipt of the request.
* * * * *
(ix) * * * State agencies failing to meet the timeframe set forth
in this paragraph are liable for all valid claims for reimbursement to
aggrieved institutions, as specified in paragraph (k)(11)(i) of this
section.
* * * * *
(11) State liability for payments. (i) A State agency that fails to
meet the 60-day timeframe set forth in paragraph (k)(5)(ix) of this
section must pay, from non-Federal sources, all valid claims for
reimbursement to the institution during the period beginning on the
61st day and ending on the date on which the hearing determination is
made, unless FNS determines that an exception should be granted.
(ii) FNS will notify the State agency of its liability for
reimbursement at least 30 days before liability is imposed. The
timeframe for written notice from FNS is an administrative requirement
and may not be used to dispute the State's liability for reimbursement.
(iii) The State agency may submit, for FNS review, information
supporting a request for a reduction in the State's liability, a
reconsideration of the State's liability, or an exception to the 60-day
deadline, for exceptional circumstances. After review of this
information, FNS will recover any improperly paid Federal funds.
* * * * *
(m) * * *
(3) Review content. As part of its conduct of reviews, the State
agency must assess each institution's compliance with the requirements
of this part pertaining to:
(i) Recordkeeping;
(ii) Meal counts;
(iii) Administrative costs;
(iv) Any applicable instructions and handbooks issued by FNS and
the Department to clarify or explain this part, and any instructions
and handbooks issued by the State agency which are not inconsistent
with the provisions of this part;
(v) Facility licensing and approval;
[[Page 57854]]
(vi) Compliance with the requirements for annual updating of
enrollment forms;
(vii) Compliance with the requirements for submitting and ensuring
the accuracy of the annual renewal information;
(viii) If an independent center, observation of a meal service;
(ix) If a sponsoring organization, training and monitoring of
facilities, including the timing of reviews, as described in Sec.
226.16(d)(4)(iii);
(x) If a sponsoring organization, implementation of the household
contact system established by the State agency pursuant to paragraph
(m)(5) of this section;
(xi) If a sponsoring organization of day care homes, the
requirements for classification of tier I and tier II day care homes;
and
(xii) All other Program requirements.
* * * * *
(6) Frequency and number of required institution reviews. The State
agency must annually review at least 33.3 percent of all institutions.
At least 15 percent of the total number of facility reviews required
must be unannounced. The State agency must review institutions
according to the following schedule:
(i) At least once every 3 years, independent centers and sponsoring
organizations that operate 1 to 100 facilities must be reviewed. A
sponsoring organization review must include reviews of 10 percent of
the sponsoring organization's facilities.
(ii) At least once every 2 years, sponsoring organizations that
operate more than 100 facilities, that conduct activities other than
CACFP, that have been identified during a recent review as having
serious management problems, or that are at risk of having serious
management problems must be reviewed. These reviews must include
reviews of 5 percent of the sponsoring organization's first 1,000
facilities and 2.5 percent of the sponsoring organization's facilities
in excess of 1,000.
(iii) At least once every 2 years, independent centers that conduct
activities other than CACFP, that have been identified during a recent
review as having serious management problems, or that are at risk of
having serious management problems must be reviewed.
(iv) New sponsoring organizations that operate five or more
facilities must be reviewed within the first 90 days of Program
operations.
* * * * *
(p) Sponsoring organization agreement. (1) Each State agency must
develop and provide for the use of a standard form of written permanent
agreement between each sponsoring organization and the day care homes
or unaffiliated child care centers, outside-school-hours-care centers,
at-risk afterschool care centers, emergency shelters, or adult day care
centers for which it has responsibility for Program operations. The
agreement must specify the rights and responsibilities of both parties.
The State agency may, at the request of the sponsoring organization,
approve an agreement developed by the sponsoring organization. Nothing
in this paragraph limits the ability of the sponsoring organization to
suspend or terminate the permanent agreement, as described in Sec.
226.16(l).
(2) At a minimum, the standard agreement must require day care
homes and centers to:
(i) Allow visits by sponsoring organizations or State agencies to
review meal service and records;
(ii) Promptly inform the sponsoring organization about any change
in its licensing or approval status;
(iii) Meet any State agency approved time limit for submission of
meal records; and
(iv) Distribute to parents a copy of the sponsoring organization's
notice to parents if directed to do so by the sponsoring organization.
(3) The agreement must include the right of day care homes and
centers to receive timely reimbursement. The sponsoring organization
must pay program funds to day care homes and centers within 5 working
days of receipt from the State agency.
(4) The State agency must include in this agreement its policy to
restrict transfers of day care homes among sponsoring organizations.
The policy must restrict the transfers to no more frequently than once
per year, except under extenuating circumstances, such as termination
of the sponsoring organization's agreement or other circumstances
defined by the State agency.
(5) The State agency may, at the request of the sponsoring
organization, approve an agreement developed by the sponsoring
organization.
* * * * *
0
30. In Sec. 226.7:
0
a. Revise paragraphs (b), (g), and (j); and
0
b. Remove paragraph (m).
The revisions read as follows:
Sec. 226.7 State agency responsibilities for financial management.
* * * * *
(b) Financial management system. Each State agency must establish
and maintain an acceptable financial management system, adhere to
financial management standards and otherwise carry out financial
management policies in accordance with 2 CFR parts 200, 400, 415, 416,
417, 418, and 421, and FNS Instruction 796-2, as applicable, and
related FNS guidance to identify allowable Program costs and establish
standards for institutional recordkeeping and reporting. The State
agency must provide guidance on financial management requirements to
each institution.
(1) State agencies must also have a system in place for:
(i) Annually reviewing at least 1 month's bank account activity of
all sponsoring organizations against documents adequate to support that
the financial transactions meet Program requirements. The State agency
may expand the review to examine additional months of bank account
activity if discrepancies are found. If the State agency identifies and
is unable to verify any expenditures that have the appearance of
violating Program requirements, or if the discrepancy is significant,
the State agency must refer the sponsoring organization's bank account
activity to the appropriate State authorities.
(ii) Annually reviewing actual expenditures reported of Program
funds and the amount of meal reimbursement funds retained from centers,
if any, for administrative costs for all sponsoring organizations of
unaffiliated centers. State agencies must reconcile reported
expenditures with Program payments to ensure that funds are fully
accounted for, and use the reported actual expenditures as the basis
for selecting a sample of expenditures for validation. If the State
agency identifies and is unable to verify any expenditures that have
the appearance of violating Program requirements, the State agency must
refer the sponsoring organization's bank account activity to the
appropriate State authorities.
(iii) Monitoring and reviewing the institutions' documentation of
their nonprofit status to ensure that all Program reimbursement funds
are used solely for the conduct of the food service operation or to
improve food service operations, principally for the benefit of
children or adult participants.
(2) The financial management system standards for institutional
recordkeeping and reporting must:
(i) Prohibit claiming reimbursement for meals provided by a child
or an adult participant's family, except as authorized at Sec. Sec.
226.18(e) and 226.20(b)(2), (g)(1)(ii), and (g)(2)(ii); and
[[Page 57855]]
(ii) Allow the cost of meals served to adults who perform necessary
food service labor under the Program, except in day care homes.
* * * * *
(g) Budget approval. The State agency must review institution
budgets and must limit allowable administrative claims by each
sponsoring organization to the administrative costs approved in its
budget, except as provided in this section. The budget must demonstrate
the institution's ability to manage Program funds in accordance with
this part, FNS Instruction 796-2, 2 CFR part 200, subpart D and USDA
implementing regulations 2 CFR part 400 and part 415, and applicable
Office of Management and Budget circulars. Sponsoring organizations
must submit an administrative budget to the State agency annually, and
independent centers must submit budgets as frequently as required by
the State agency. Budget levels may be adjusted to reflect changes in
Program activities. If the institution does not intend to use non-CACFP
funds to support any required CACFP functions, the institution's budget
must identify a source of non-Program funds that could be used to pay
overclaims or other unallowable costs. If the institution intends to
use any non-Program resources to meet CACFP requirements, these non-
Program funds should be accounted for in the institution's budget, and
the institution's budget must identify a source of non-Program funds
that could be used to pay overclaims or other unallowable costs.
(1) For sponsoring organizations of centers, the State agency is
prohibited from approving the sponsoring organization's administrative
budget, or any amendments to the budget, if the administrative budget
shows the Program will be charged for administrative costs in excess of
15 percent of the meal reimbursements estimated to be earned during the
budget year. However, the State agency may waive this limit if the
sponsoring organization provides justification that it requires Program
funds in excess of 15 percent to pay its administrative costs and if
the State agency is convinced that the institution will have adequate
funding to provide meals meeting the requirements of Sec. 226.20. The
State agency must document all waiver approvals and denials in writing
and provide a copy of all such letters to the appropriate FNSRO.
(2) For sponsoring organizations of day care homes seeking to carry
over administrative funds, as described in Sec. 226.12(a)(3), the
State agency must require the budget to include an estimate of the
requested administrative fund carryover amount and a description of the
purpose for which those funds would be obligated or expended by the end
of the fiscal year following the fiscal year in which they were
received. In approving a carryover request, State agencies must take
into consideration whether the sponsoring organization has a financial
management system that meets Program requirements and is capable of
controlling the custody, documentation, and disbursement of carryover
funds. As soon as possible after fiscal year close-out, the State
agency must require sponsoring organizations carrying over
administrative funds to submit an amended budget for State agency
review and approval. The amended budget must identify the amount of
administrative funds actually carried over and describe the purpose for
which the carry-over funds have been or will be used.
* * * * *
(j) Recovery of overpayments. Each State agency must establish
procedures to recover outstanding start-up, expansion, and advance
payments from institutions which, in the opinion of the State agency,
will not be able to earn these payments. In addition, each State agency
must establish procedures to recover administrative funds from
sponsoring organizations of day care homes that are not properly
payable under FNS Instruction 796-2, administrative funds that are in
excess of the 10 percent maximum carryover amount, and carryover
amounts that are not expended or obligated by the end of the fiscal
year following the fiscal year in which they were received.
* * * * *
0
31. In Sec. 226.10, revise paragraph (c) to read as follows:
Sec. 226.10 Program payment procedures.
* * * * *
(c) Claims for Reimbursement must report information in accordance
with the financial management system established by the State agency,
and in sufficient detail to justify the reimbursement claimed and to
enable the State agency to provide the final Report of the Child and
Adult Care Food Program (FNS 44) required under Sec. 226.7(d). In
submitting a Claim for Reimbursement, each institution must certify
that the claim is correct and that records are available to support
that claim.
(1) Prior to submitting its consolidated monthly claim to the State
agency, each sponsoring organization must perform edit checks on each
facility's meal claim. At a minimum, the sponsoring organization's edit
checks must:
(i) Verify that each facility has been approved to serve the types
of meals claimed; and
(ii) Compare the number of children or eligible adult participants
enrolled for care at each facility, multiplied by the number of days on
which the facility is approved to serve meals, to the total number of
meals claimed by the facility for that month. Discrepancies between the
facility's meal claim and its enrollment must be subjected to more
thorough review to determine if the claim is accurate.
(2) Sponsoring organizations of unaffiliated centers must make
available to the State agency an annual report detailing actual
expenditures of Program funds and the amount of meal reimbursement
funds retained from centers, if any, for administrative costs for the
year to which the claims apply. The report must use the same cost
categories as the approved annual budget submitted by the sponsoring
organization.
(3) Sponsoring organizations of for-profit child care centers or
for-profit outside-school-hours care centers must submit the number and
percentage of children in care--enrolled or licensed capacity,
whichever is less--that documents that at least 25 percent are eligible
for free or reduced-price meals or are title XX beneficiaries.
Sponsoring organizations must not submit a claim for any for-profit
center in which less than 25 percent of the children in care--enrolled
or licensed capacity, whichever is less--during the claim month were
eligible for free or reduced-price meals or were title XX
beneficiaries.
(4) For each month they claim reimbursement, independent for-profit
child care centers and independent for-profit outside-school-hours care
centers must submit the number and percentage of children in care--
enrolled or licensed capacity, whichever is less--that documents at
least 25 percent are eligible for free or reduced-price meals or are
title XX beneficiaries. However, children who only receive at-risk
afterschool meals or snacks must not be considered in determining this
eligibility.
(5) For each month they claim reimbursement, independent for-profit
adult day care centers must submit the percentages of enrolled adult
participants receiving title XIX or title XX benefits for months in
which not less than 25 percent of enrolled adult participants were
title XIX or title XX beneficiaries. For the claim, sponsoring
[[Page 57856]]
organizations of adult day care centers must submit the percentage of
enrolled adult participants receiving title XIX or title XX benefits
for each center. Sponsoring organizations must not submit claims for
adult day care centers for months in which less than 25 percent of
enrolled adult participants were title XIX or title XX beneficiaries.
* * * * *
0
32. In Sec. 226.12, revise paragraph (a) to read as follows:
Sec. 226.12 Administrative payments to sponsoring organizations for
day care homes.
(a) General. Sponsoring organizations of day care homes receive
payments for administrative costs, subject to the following conditions:
(1) Sponsoring organizations will receive reimbursement for the
administrative costs of the sponsoring organization in an amount that
is not less than the product obtained each month by multiplying:
(i) The number of day care homes of the sponsoring organization
submitting a claim for reimbursement during the month, by
(ii) The appropriate administrative rates announced annually in the
Federal Register.
(2) FNS determines administrative reimbursement by annually
adjusting the following base administrative rates, as set forth in
Sec. 226.4(i):
(i) Initial 50 day care homes, 42 dollars;
(ii) Next 150 day care homes, 32 dollars;
(iii) Next 800 day care homes, 25 dollars;
(iv) Additional day care homes, 22 dollars.
(3) With State agency approval, a sponsoring organization may carry
over a maximum of 10 percent of administrative funds received under
paragraph (a)(1) of this section for use in the following fiscal year.
If any carryover funds are not obligated or expended in the following
fiscal year, they must be returned to the State agency, as described in
Sec. 226.7(j).
(4) State agencies must recover any administrative funds not
properly payable, as described in FNS Instruction 796-2.
* * * * *
0
33. In Sec. 226.13, revise paragraph (a) to read as follows:
Sec. 226.13 Food service payments to sponsoring organizations for day
care homes.
(a) Payments will be made only to sponsoring organizations
operating under an agreement with the State agency for the meal types
specified in the agreement served to enrolled nonresident children and
eligible enrolled children of day care home providers, at approved day
care homes. Each State agency must base reimbursement to each approved
day care home on daily meal counts recorded by the provider.
* * * * *
0
34. In Sec. 226.15, revise paragraph (b) to read as follows:
Sec. 226.15 Institution provisions.
* * * * *
(b) New applications and renewals. Each new institution must submit
to the State agency an application with all information required for
its approval, as set forth in Sec. Sec. 226.6(b)(1) and 226.6(f). This
information must demonstrate that a new institution has the
administrative and financial capability to operate the Program, as
described in the performance standards set forth in Sec.
226.6(b)(1)(xviii). Renewing institutions must annually certify that
they are capable of operating the Program, as set forth in Sec.
226.6(b)(2).
* * * * *
0
35. Amend Sec. 226.16 as follows:
0
a. In paragraphs (b)(2) and (b)(3), remove the words ``child care and
adult day care'';
0
b. In paragraph (b)(4), remove the words ``on or after June 20, 2000'';
0
c. Remove the word ``and'' at the end of paragraph (b)(7);
0
d. Remove the ``.'' at the end of paragraph (b)(8) and add in its place
``; and'';
0
e. Add paragraph (b)(9);
0
f. In paragraphs (c) and (d)(1), remove the words ``child care and
adult day care'';
0
g. Revise paragraph (d)(3);
0
h. Add paragraphs (d)(4)(iii)(E) and (F);
0
i. In paragraph (i), remove the words ``child and adult day care'';
0
j. Revise paragraph (m).
The additions and revisions read as follows:
Sec. 226.16 Sponsoring organization provisions.
* * * * *
(b) * * *
(9) For sponsoring organizations of unaffiliated centers, the name
and mailing address of each center.
* * * * *
(d) * * *
(3) Additional mandatory training sessions, as defined by the State
agency, for key staff from all sponsored facilities not less frequently
than annually. At a minimum, this training must include instruction,
appropriate to the level of staff experience and duties, on the
Program's meal patterns, meal counts, claims submission and review
procedures, recordkeeping requirements, and reimbursement system.
(4) * * *
(iii) * * *
(E) The timing of unannounced reviews must be varied so that they
are unpredictable to the facility; and
(F) All types of meal service must be subject to review and
sponsoring organizations must vary the meal service reviewed.
* * * * *
(m) Sponsoring organizations of day care homes or unaffiliated
centers must not make payments to employees or contractors solely on
the basis of the number of homes or centers recruited. However,
employees or contractors may be paid or evaluated on the basis of
recruitment activities accomplished.
0
36. In Sec. 226.17, add paragraphs (e) and (f) to read as follows:
Sec. 226.17 Child care center provisions.
* * * * *
(e) Unaffiliated sponsored child care centers must enter into a
written permanent agreement with the sponsoring organization. The
agreement must specify the rights and responsibilities of both parties.
At a minimum, the agreement must include the provisions set forth in
paragraph (b) of this section.
(f) Independent child care centers must enter into a written
permanent agreement with the State agency. The agreement must specify
the rights and responsibilities of both parties as required by Sec.
226.6(b)(4). At a minimum, the agreement must include the provisions
set forth in paragraph (b) of this section.
0
37. In Sec. 226.17a, revise paragraphs (f)(2) and (g) to read as
follows:
Sec. 226.17a At-risk afterschool care center provisions.
* * * * *
(f) * * *
(2) Agreements. The State agency must enter into a permanent
agreement with an institution approved to operate one or more at-risk
afterschool care centers, as described in Sec. 226.6(b)(4). The
agreement must describe the approved afterschool care programs and list
the approved centers. The agreement must also require the institution
to comply with the applicable requirements of this part 226.
(i) Unaffiliated sponsored afterschool care centers must enter into
a written permanent agreement with the
[[Page 57857]]
sponsoring organization. The agreement must specify the rights and
responsibilities of both parties. At a minimum, the agreement must
include the applicable provisions set forth in this section.
(ii) Independent afterschool care centers must enter into a written
permanent agreement with the State agency. The agreement must specify
the rights and responsibilities of both parties as required by Sec.
226.6(b)(4). At a minimum, the agreement must include the applicable
provisions set forth in this section.
(g) Application process in subsequent years. To continue
participating in the Program, independent at-risk afterschool care
centers must comply with the annual information submission
requirements, as described in Sec. Sec. 226.6(b)(2)(i) and (f)(3)(ii).
Sponsoring organizations of at-risk afterschool care centers must
comply with the annual information submission requirements, as
described in in Sec. 226.6(b)(2)(ii), and provide area eligibility
data, as described in Sec. 226.15(g).
* * * * *
0
38. In Sec. 226.18:
0
a. Revise paragraph (b)(11);
0
b. Redesignate paragraphs (b)(13) through (b)(16) as paragraphs (b)(14)
through (b)(17), respectively; and
0
c. Add new paragraph (b)(13).
The addition and revision read as follows:
Sec. 226.18 Day care home provisions.
* * * * *
(b) * * *
(11) The responsibility of the sponsoring organization to inform
tier II day care homes of all of their options for receiving
reimbursement for meals served to enrolled children. These options
include:
(i) Receiving tier I rates for the meals served to eligible
enrolled children, by electing to have the sponsoring organization
identify all income-eligible children through the collection of free
and reduced-price applications and the sponsoring organization or day
care home's possession of other proof of a child or household's
participation in a categorically eligible program;
(ii) Receiving tier I rates for the meals served to eligible
enrolled children, by electing to have the sponsoring organization
identify only those children for whom the sponsoring organization or
day care home possess documentation of the child or household's
participation in a categorically eligible program, under the expanded
categorical eligibility provision, as described in Sec. 226.23(e)(1);
or
(iii) Receiving tier II rates of reimbursement for all meals served
to enrolled children;
* * * * *
(13) The right of the tier II day care home to assist in collecting
applications from households and transmitting the applications to the
sponsoring organization. However, a tier II day care home may not
review the collected applications. The sponsoring organizations may
prohibit a tier II day care home from assisting in collection and
transmittal of applications if the day care home does not comply with
the process, as described in Sec. 226.23(e)(2)(viii);
* * * * *
0
39. In Sec. 226.19, add paragraphs (d) and (e) to read as follows:
Sec. 226.19 Outside-school-hours care center provisions.
* * * * *
(d) Unaffiliated sponsored outside-school-hours-care centers must
enter into a written permanent agreement with the sponsoring
organization. The agreement must specify the rights and
responsibilities of both parties. At a minimum, the agreement must
include the provisions set forth in paragraph (b) of this section.
(e) Independent outside-school-hours care centers must enter into a
written permanent agreement with the State agency. The agreement must
specify the rights and responsibilities of both parties as required by
Sec. 226.6(b)(4). At a minimum, the agreement must include the
provisions described in paragraph (b) of this section.
0
40. In Sec. 226.19a, add paragraphs (d) and (e) to read as follows:
Sec. 226.19a Adult day care center provisions.
* * * * *
(d) Unaffiliated sponsored adult day care centers must enter into a
written permanent agreement with the sponsoring organization. The
agreement must specify the rights and responsibilities of both parties.
At a minimum, the agreement must address the provisions set forth in
paragraph (b) this section.
(e) Independent adult day care centers must enter into a written
permanent agreement with the State agency. The agreement must specify
the rights and responsibilities of both parties as required by Sec.
226.6(b)(4). At a minimum, the agreement must include the provisions
described in paragraph (b) of this section.
0
41. In Sec. 226.21, revise paragraph (a) introductory text to read as
follows:
Sec. 226.21 Food service management companies.
(a) Any institution may contract with a food service management
company. An institution which contracts with a food service management
company must remain responsible for ensuring that the food service
operation conforms to its agreement with the State agency. All
procurements of meals from food service management companies must
adhere to the procurement standards set forth in Sec. 226.22 and
comply with the following procedures intended to prevent fraud, waste,
and Program abuse:
* * * * *
0
42. Revise Sec. 226.22 to read as follows:
Sec. 226.22 Procurement standards.
(a) General. This section establishes standards and guidelines for
the procurement of foods, supplies, equipment, and other goods and
services. These standards are furnished to ensure that goods and
services are obtained efficiently and economically and in compliance
with the provisions of applicable Federal law and Executive orders.
(b) Compliance. Institutions may use their own procedures for
procurement with Program funds to the extent that:
(1) Procurements by public institutions comply with applicable
State or local laws and standards set forth in 2 CFR part 200, subpart
D and USDA implementing regulations 2 CFR parts 400 and 415; and
(2) Procurements by private nonprofit institutions comply with
standards set forth in 2 CFR part 200, subpart D and USDA implementing
regulations 2 CFR parts 400 and 415.
(c) Geographic preference. (1) Institutions participating in the
Program may apply a geographic preference when procuring unprocessed
locally grown or locally raised agricultural products. When utilizing
the geographic preference to procure such products, the institution
making the purchase has the discretion to determine the local area to
which the geographic preference option will be applied;
(2) For the purpose of applying the optional geographic preference
in paragraph (c)(1) of this section, ``unprocessed locally grown or
locally raised agricultural products'' means only those agricultural
products that retain their inherent character. The effects of the
following food handling and preservation techniques will not be
considered as changing an agricultural product into a product of a
different
[[Page 57858]]
kind or character: Cooling; refrigerating; freezing; size adjustment
made by peeling, slicing, dicing, cutting, chopping, shucking, and
grinding; forming ground products into patties without any additives or
fillers; drying/dehydration; washing; packaging (such as placing eggs
in cartons), vacuum packing and bagging (such as placing vegetables in
bags or combining two or more types of vegetables or fruits in a single
package); addition of ascorbic acid or other preservatives to prevent
oxidation of produce; butchering livestock and poultry; cleaning fish;
and the pasteurization of milk.
0
43. In Sec. 226.23, add paragraph (e)(1)(vii) to read as follows:
Sec. 226.23 Free and reduced-price meals.
* * * * *
(e) * * *
(1) * * *
(vii) If a tier II day care home elects to assist in collecting and
transmitting the applications to the sponsoring organization, it is the
responsibility of the sponsoring organization to establish procedures
to ensure the provider does not review or alter the application. The
household consent form must explain that:
(A) The household is not required to complete the income
eligibility form in order for their children to participate in CACFP:
(B) The household may return the application to either the
sponsoring organization or the day care home provider;
(C) By signing the letter and giving it to the day care home
provider, the household has given the day care home provider written
consent to collect and transmit the household's application to the
sponsoring organization; and
(D) The application will not be reviewed by the day care home
provider.
* * * * *
0
44. In Sec. 226.25, add paragraph (j) to read as follows:
Sec. 226.25 Other provisions.
* * * * *
(j) Fines. (1) An institution that is a school food authority may
be subject to fines. The State agency may establish an assessment when
it has determined that the institution or its facility has:
(i) Failed to correct severe mismanagement of the Program;
(ii) Disregarded a Program requirement of which the institution or
its facility had been informed; or
(iii) Failed to correct repeated violations of Program
requirements.
(2) FNS may direct the State agency to establish a fine against any
institution when it has determined that the institution or its facility
has committed one or more acts under paragraph (j)(1) of this section.
(3) Funds used to pay a fine established under this paragraph must
be derived from non-Federal sources. In calculating an assessment, the
State agency must calculate the fine based on the amount of Program
reimbursement earned by the institution or its facility for the most
recent fiscal year for which full year data is available, provided that
the fine does not exceed the equivalent of:
(i) For the first fine, 1 percent of the amount of meal
reimbursement earned for the fiscal year;
(ii) For the second fine, 5 percent of the amount of meal
reimbursement earned for the fiscal year; and
(iii) For the third or subsequent fine, 10 percent of the amount of
meal reimbursement earned for the fiscal year.
(4) The State agency must inform FNS at least 30 days prior to
establishing the fine under this paragraph. The State agency must send
the institution written notification of the fine established under this
paragraph and provide a copy of the notification to FNS. The
notification must:
(i) Specify the violations or actions which constitute the basis
for the fine and indicate the amount of the fine;
(ii) Inform the institution that it may appeal the fine and advise
the institution of the appeal procedures established under Sec.
226.6(k);
(iii) Indicate the effective date and payment procedures should the
institution not exercise its right to appeal within the specified
timeframe.
(5) Any institution subject to a fine under paragraph (j)(1) of
this section may appeal the State agency's determination. In appealing
a fine, the institution must submit to the State agency any pertinent
information, explanation, or evidence addressing the Program violations
identified by the State agency. Any institution seeking to appeal the
State agency determination must follow State agency appeal procedures.
(6) The decision of the State agency review official is final and
not subject to further administrative or judicial review. Failure to
pay a fine established under this paragraph may be grounds for
suspension or termination.
(7) Money received by the State agency as a result of a fine
established under this paragraph against an institution and any
interest charged in the collection of these fines must be remitted to
FNS, and then remitted to the United States Treasury.
0
45. Revise Sec. 226.26 to read as follows:
Sec. 226.26 Program information.
Persons seeking information about this Program should contact their
State administering agency or the appropriate FNSRO. The FNS website
has contact information for State agencies at https://www.fns.usda.gov/fns-contacts and FNSROs at https://www.fns.usda.gov/fns-regional-offices.
PART 235--STATE ADMINISTRATIVE EXPENSE FUNDS
0
46. The authority citation for part 235 continues to read as follows:
Authority: Secs. 7 and 10 of the Child Nutrition Act of 1966,
80 Stat. 888, 889, as amended (42 U.S.C. 1776, 1779).
Sec. 235.4 [Amended]
0
47. In Sec. 235.4, amend paragraph (b)(2) by removing the term ``Sec.
235.11(g)'' and add in its place the term ``Sec. 235.11(h)''.
0
48. In Sec. 235.5:
0
a. Revise paragraph (d); and
0
b. Amend paragraph (e)(2) by removing the word ``unexpended'' and
adding in its place the word ``unobligated''.
The revision reads as follows:
Sec. 235.5 Payments to States.
* * * * *
(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 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 obligated in the following fiscal year and any funds carried
over from the prior fiscal year which remain unobligated at the end of
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
[[Page 57859]]
implement its approved plan under this section.
* * * * *
Sec. 235.6 [Amended]
0
49. In Sec. 235.6, amend paragraph (a) by:
0
a. Redesignating as paragraph (a-1) as paragraph (a)(1);
0
b. In newly redesignated paragraph (a)(1), removing the term ``Sec.
235.11(g)(3)'' and adding in its place the term ``Sec. 235.11(h)(3)''
and removing the term ``Sec. 235.11(g)(1) and (2)'' and adding in its
place the term ``Sec. Sec. 235.11(h)(1) and (2)''; and
0
c. Redesignating paragraph (a-2) as paragraph (a)(2).
0
50. In Sec. 235.11:
0
a. Redesignate paragraphs (c) through (g) as paragraphs (d) through
(h), respectively, and add new paragraph (c);
0
b. In newly redesignated paragraph (e), remove the term ``paragraphs
(b) or (c)'' and add in its place the term ``paragraphs (b), (c), or
(d)'';
0
c. In redesignated paragraph (g), remove the term ``paragraph (b)'' and
add in its place the term ``paragraphs (b) and (c)'' and add the words
``or fine'' after the word ``sanction'' each time it appears; and
0
d. Revise redesignated paragraph (h)(3).
The addition and revision read as follows:
Sec. 235.11 Other provisions.
* * * * *
(c) Fines. (1) FNS may establish a fine against any State agency
administering the programs under parts 210, 215, 220, 225, 226, and 250
of this chapter, as it applies to the operation of the Food
Distribution Program in schools and child and adult care institutions,
when it has determined that the State agency has:
(i) Failed to correct severe mismanagement of the programs;
(ii) Disregarded a program requirement of which the State has been
informed; or
(iii) Failed to correct repeated violations of program
requirements.
(2) Funds used to pay a fine established under paragraph (c)(1) of
this section must be derived from non-Federal sources. The amount of
the fine will not exceed the equivalent of:
(i) For the first fine, 1 percent of all allocations made available
under Sec. 235.4 during the most recent fiscal year for which full
year data are available;
(ii) For the second fine, 5 percent of all allocations made
available under Sec. 235.4 during the most recent fiscal year for
which full year data are available; and
(iii) For the third or subsequent fines, 10 percent of all
allocations made available under Sec. 235.4 during the most recent
fiscal year for which full year data are available.
(3) State agencies seeking to appeal a fine established under this
paragraph must follow the procedures set forth in this paragraph (g).
* * * * *
(h) * * *
(3) Continuing education and training standards for State directors
of school nutrition programs and distributing agencies. Each school
year, all State directors with responsibility for the National School
Lunch Program under part 210 of this chapter and the School Breakfast
Program under part 220 of this chapter, as well as those responsible
for the distribution of USDA donated foods under part 250 of this
chapter, must complete a minimum of 15 hours of training in core areas
that may include nutrition, operations, administration, communications
and marketing. State directors tasked with National School Lunch
Program procurement responsibilities must complete annual procurement
training, as required under Sec. 210.21(h) of this chapter. Additional
hours and topics may be specified by FNS, as needed, to address program
integrity and other critical issues.
* * * * *
Cynthia Long,
Administrator, Food and Nutrition Service.
[FR Doc. 2023-17992 Filed 8-22-23; 8:45 am]
BILLING CODE 3410-30-P
