Serious Deficiency Process in the Child and Adult Care Food Program and Summer Food Service Program
| Published date | 21 February 2024 |
| Record Number | 2024-02108 |
| Citation | 89 FR 13150 |
| Court | Food And Nutrition Service |
| Section | Proposed rules |
Federal Register, Volume 89 Issue 35 (Wednesday, February 21, 2024)
[Federal Register Volume 89, Number 35 (Wednesday, February 21, 2024)]
[Proposed Rules]
[Pages 13150-13229]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-02108]
[[Page 13149]]
Vol. 89
Wednesday,
No. 35
February 21, 2024
Part IIDepartment of Agriculture-----------------------------------------------------------------------Food and Nutrition Service-----------------------------------------------------------------------7 CFR Parts 210, 215, 220, et al.Serious Deficiency Process in the Child and Adult Care Food Program and
Summer Food Service Program; Proposed Rule
Federal Register / Vol. 89 , No. 35 / Wednesday, February 21, 2024 /
Proposed Rules
[[Page 13150]]
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DEPARTMENT OF AGRICULTURE
Food and Nutrition Service
7 CFR Parts 210, 215, 220, 225, and 226
[FNS-2024-0005]
RIN 0584-AE83
Serious Deficiency Process in the Child and Adult Care Food
Program and Summer Food Service Program
AGENCY: Food and Nutrition Service (FNS), USDA.
ACTION: Proposed rule.
-----------------------------------------------------------------------
SUMMARY: This rulemaking proposes important modifications to make the
application of serious deficiency procedures in the Child and Adult
Care Food Program and Summer Food Service Program consistent,
effective, and in line with current requirements under the Richard B.
Russell National School Lunch Act. The serious deficiency process
provides a systematic way for State agencies and sponsoring
organizations to correct serious management problems, and when that
effort fails, protect Child Nutrition Program integrity through due
process. In response to public comments received on a prior rulemaking,
the Food and Nutrition Service (FNS) proposes improvements to ensure
that application of the serious deficiency process is fair and fully
implemented. FNS proposes to add clarity to the serious deficiency
process by defining key terms, establishing a timeline for full
correction, and establishing criteria for determining when the serious
deficiency process must be implemented. This rulemaking will also
address termination for cause and disqualification, implementation of
legal requirements for records maintained on individuals on the
National Disqualified List, and participation of multi-State sponsoring
organizations.
DATES: Written comments must be received on or before May 21, 2024 to
be assured of consideration.
ADDRESSES:
Federal eRulemaking Portal: Go to https://www.regulations.gov.
Follow the online instructions for submitting comments.
Mail: Send comments to: Navneet Kaur Sandhu, Program Integrity and
Innovation Division, USDA Food and Nutrition Service, 1320 Braddock
Place, Alexandria, VA 22314.
All written comments submitted in response to the provisions of
this proposed rule will be included in the record and will be made
available to the public. Please be advised that the substance of the
comments and the identity of the individuals or entities submitting the
comments will be subject to public disclosure. USDA will make the
written comments publicly available on the internet via https://www.regulations.gov.
FOR FURTHER INFORMATION CONTACT: Navneet Kaur Sandhu, Program Integrity
and Innovation Division, USDA Food and Nutrition Service, 703-305-2728,
[email protected].
SUPPLEMENTARY INFORMATION:
I. Background
II. Section-By-Section Discussion of the Regulatory Provisions
A. Child and Adult Care Food Program (CACFP)
1. The CACFP Serious Deficiency Process
2. Oversight and Implementation of the Serious Deficiency
Process in Institutions
3. Oversight and Implementation of the Serious Deficiency
Process in Day Care Homes and Unaffiliated Sponsored Centers
B. Summer Food Service Program (SFSP)
1. Applying the Serious Deficiency Process to SFSP
2. Oversight and Implementation of the Serious Deficiency
Process in SFSP
C. Suspension
D. Disqualification and the National Disqualified List
1. Termination for Cause and Disqualification
2. Reciprocal Disqualification in Child Nutrition Programs
3. Legal Requirements for Records Maintained on Disqualified
Individuals
E. Multi-State Sponsoring Organizations
F. Summary of Regulatory Provision Proposals
III. Procedural Matters
A. Executive Orders 12866, 13563 and 114094
B. Regulatory Flexibility Act
C. Unfunded Mandates Reform Act
D. Executive Order 112372
E. Federalism Summary Impact Statement
F. Executive Order 12988, Civil Justice Reform
G. Civil Rights Impact Analysis
H. Executive Order 13175
I. Paperwork Reduction Act
J. E-Government Act Compliance
I. Background
Integrity is essential to meeting the mission of all Child
Nutrition Programs. To improve program operations, the Food and
Nutrition Service (FNS) works in close collaboration with State and
local partners. In the Child and Adult Care Food Program (CACFP), State
agencies are responsible for approving and monitoring institutions--
independent child and adult care centers and sponsoring organizations
of family day care homes and centers--to maintain program integrity and
ensure compliance with program requirements. State agencies have a
similar responsibility for oversight of sponsors in the Summer Food
Service Program (SFSP).
More than 20 years ago, FNS established a system for protecting
CACFP against the incidence of mismanagement, abuse, and fraud by
institutions and facilities participating in the program. The serious
deficiency process was implemented in response to Federal reviews that
revealed critical weaknesses in State agency and institution management
controls over program operations. The reviews uncovered examples of
regulatory noncompliance by institutions and facilities, including
improper use of program funds, inadequate financial and administrative
controls, and documented instances of mismanagement and, in some cases,
fraud, by program participants.
These findings raised questions regarding Federal and State
administration of CACFP that led to increased focus on program
management and integrity in CACFP. The Agricultural Risk Protection Act
of 2000, Public Law 106-224, established statutory requirements under
section 17 of the Richard B. Russell National School Lunch Act (NSLA),
at 42 U.S.C. 1766(d)(5), for terminating or suspending participating
institutions and day care home providers. The Grains Standards and
Warehouse Improvement Act of 2000 and Healthy Hunger-Free Kids Act of
2010, Public Laws 106-472 and 111-296, respectively, further amended
those provisions.
In response to the Federal reviews, FNS published guidance to help
State agencies implement the statutory requirements relating to a
serious deficiency determination, corrective action, suspension,
termination, and disqualification of institutions and responsible
principals and responsible individuals in CACFP. FNS implemented these
as requirements through publication of the Child and Adult Care Food
Program; Implementing Legislative Reforms to Strengthen Program
Integrity interim rule, 67 FR 43447, June 27, 2002; and Child and Adult
Care Food Program Improving Management and Integrity final rule, 76 FR
34542, June 13, 2011. These rulemakings established a serious
deficiency process at 7 CFR 226.6 and 226.16 that requires a process
for addressing severe and pervasive problems, with a structured series
of steps that give CACFP institutions and day care homes the
opportunity for corrective action and due process.
[[Page 13151]]
To protect program integrity, these rulemakings implemented
procedures that would correct problems in a timely manner. That is why
there are corrective action timeframes for completion of corrective
action and milestones for monitoring progress towards meeting the
deadline. The serious deficiency process for CACFP starts when the
State agency identifies a serious problem and concludes when that
serious problem is resolved, either through corrective action or by
termination and disqualification. The regulations identify lists of
serious deficiencies and describe corrective action, termination, and
disqualification procedures.
The current CACFP serious deficiency process at 7 CFR 226.6(c)
includes procedures to help the State agency document the case to
terminate and disqualify non-performing CACFP institutions that are
unwilling to or incapable of resolving their serious deficiencies. The
process also includes procedures to provide seriously deficient
institutions the opportunity to appeal the State agency's adverse
actions and to continue to receive payments of valid claims while they
receive a fair hearing. CACFP sponsoring organizations implement a
similar process to correct serious problems of noncompliance in day
care homes, as described in 7 CFR 226.16(l).
Until enactment of the Healthy, Hunger-Free Kids Act of 2010
(HHFKA), there were no corresponding statutory requirements for
implementing a serious deficiency process for SFSP. However, through
HHFKA, Congress established requirements relating to the termination of
participation of service institutions which included maintaining a list
of disqualified service institutions and individuals. The regulations
under 7 CFR 225.6(h) specify criteria State agencies must consider when
approving sites for participation; provide authority for the State
agency to terminate sponsor participation at 7 CFR 225.11(c); and
establish procedures for sponsors to appeal adverse actions, including
termination of a sponsor or site and denial of an application for
participation, at 7 CFR 225.13. However, SFSP regulations do not
currently reflect the statutory requirement to disqualify service
institutions and individuals that are seriously deficient from
participating in SFSP, or any other Child Nutrition Program, the
provision for a fair hearing and prompt determination, or placement on
a list of disqualified institutions and individuals.
In developing the proposed rule, Child Nutrition Program Integrity,
81 FR 17563, March 29, 2016, FNS applied existing serious deficiency
requirements to establish a serious deficiency process for service
institutions and individuals, i.e., sponsors and sites in SFSP and
unaffiliated child care centers and unaffiliated adult day care centers
in CACFP. To strengthen management practices and eliminate gaps that
put program integrity at risk, FNS proposed amendments that would:
Extend the serious deficiency process to unaffiliated
centers in CACFP;
Implement a serious deficiency process in SFSP;
Require each SFSP State agency to provide appeal
procedures to sponsors, annually and upon request;
Specify the types of adverse actions that cannot be
appealed in SFSP;
Establish a list of disqualified institutions and
individuals 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;
Require the State agency to deny the application of any
applicant that has been terminated for cause from any Child Nutrition
Program or placed on a CACFP or SFSP list of disqualified institutions
and individuals;
Require the State agency to terminate an agreement
whenever a program operator's participation ends; and
Require action by the State agency to terminate an
agreement for cause, through the serious deficiency process or
placement on list of disqualified institutions and individuals.
FNS also published a notice, Request for Information: The Serious
Deficiency Process in the Child and Adult Care Food Program, 84 FR
22431, May 17, 2019, to gather information to help FNS understand
firsthand the experiences of State agencies and program operators. An
analysis of the comments on the proposed rule and responses to the
notice convinced FNS that important modifications were needed to make
the application of the serious deficiency process consistent and
effective, and to ensure it is in line with current statutory
requirements.
On August 23rd, 2023, FNS published the Child Nutrition Program
Integrity final rule, 88 FR 57792, which codifies changes required
under HHFKA to strengthen administration of Child Nutrition Programs,
at all levels, through enhanced oversight and enforcement tools. As
proposed, the Child Nutrition Program Integrity final rule included
amendments related to serious deficiency and termination procedures in
SFSP, serious deficiency and termination procedures for unaffiliated
sponsored centers in CACFP, and reciprocal disqualification of
applicants terminated for cause and placed on the National Disqualified
List. However, FNS received comments expressing concern about using the
CACFP serious deficiency process as a model for establishing procedures
in other Child Nutrition Programs. The comments suggested that FNS
further investigate and attempt to address potential inconsistencies in
implementation of the serious deficiency process among States.
Ultimately, FNS agreed that further changes from what was proposed in
the Child Nutrition Program Integrity rule are needed to improve the
serious deficiency process and ensure its application is fair and fully
implemented. Instead of finalizing the proposed rule as it related to
the serious deficiency process, FNS decided to pursue a separate
rulemaking in order to consider improvements to the serious deficiency
process before extending serious deficiency, termination, and
disqualification procedures to SFSP.
To better serve administering agencies and program operators, this
proposed rule is intended to make the application of the serious
deficiency process for CACFP and SFSP consistent, effective and in line
with current statutory requirements. FNS proposes improvements to
ensure that the serious deficiency process is fair, equitable, and
effective. This new rulemaking proposes amendments to CACFP and SFSP
regulations that are designed to increase program operators'
accountability and operational efficiency, while improving the ability
of administering agencies to address severe or repeated violations of
Federal requirements.
While minimizing changes to procedures, FNS proposes to add clarity
to the serious deficiency process by defining key terms, establishing a
timeline for full correction, and establishing criteria for determining
when the serious deficiency process must be implemented. This proposed
rule also addresses agreements that are terminated for cause,
disqualification from participation in CACFP or SFSP, reciprocal
disqualification from any Child Nutrition Program, legal requirements
for records maintained on individuals on the National Disqualified
List, and participation of multi-State sponsoring organizations.
This rulemaking also re-examines the concept of good standing in
light of recent rulemaking. The final rule, Streamlining Program
Requirements and Improving Integrity in the Summer
[[Page 13152]]
Food Service Program (SFSP), 87 FR 57304, September 19, 2022,
established that a program operator would be considered in ``good
standing'' if it were reviewed by the State agency with no major
program findings or it had completed and implemented all corrective
actions from the last compliance review. Good standing reflects a
program operator's status and is considered by State agencies as a
factor when making decisions around frequency of reviews. Therefore,
FNS recognized that providing further clarification to determine what
good standing means across all Child Nutrition Programs would benefit
State agencies and program operators. This proposed rule would define
the status of good standing as a program operator that meets its
program responsibilities, is current with its financial obligations,
and, if applicable, has fully implemented all corrective actions within
the required period of time. This would serve as a general definition
that would apply to all program operators across Child Nutrition
Programs and would be added to 7 CFR 210.2, 215.2, 220.2, 225.2, and
226.2.
FNS also proposes to reorganize the CACFP and SFSP regulations to
improve readability and reduce duplication of information in the
serious deficiency process. For CACFP, references to program operations
that are seriously deficient and corresponding requirements pertaining
to appeals, suspension of participation, termination of agreements, and
disqualification are found in multiple sections of existing
regulations. This proposed rule would move these requirements into a
new single subchapter under 7 CFR 226.25. The other provisions
described under 7 CFR part 226, subpart G would be renumbered to
correspond with this proposed change. FNS also proposes to reorganize
SFSP regulations by collecting all provisions of the serious deficiency
process under a single subchapter at 7 CFR 225.18 and renumbering the
other sections of 7 CFR part 225, subpart D.
This proposed rule gives the public the opportunity to provide
comments that will inform the development of a final rule on the
oversight and implementation of the serious deficiency process in CACFP
and SFSP. FNS will consider all relevant comments submitted during the
60-day comment period for this rulemaking. FNS invites the public to
submit comments on all aspects of this proposed rule, including
comments in response to specific program changes that are found
throughout this preamble and alternatives that are suggested for
certain provisions. FNS also invites comments from administering
agencies and program operators on the administrative cost of compliance
and the potential impact on program access of any of the provisions in
this rulemaking.
Please select those issues that most concern and affect you, or
that you best understand, and include examples of how the proposed rule
would impact you, positively or negatively. Consider what could be done
to foster incentives for flexibility, consistency, eliminating
duplication, ensuring compliance, and protecting program integrity.
Your written comments should be specific to the issues raised in this
proposed rule and explain the reasons for any changes you recommend or
proposals you oppose. Where possible, please reference the specific
section or paragraph of the proposal you are addressing and whether the
concern is related to either CACFP or SFSP, or both.
II. Section-By-Section Discussion of the Regulatory Provisions
A. Child and Adult Care Food Program (CACFP)
1. The CACFP Serious Deficiency Process
Defining Serious Deficiency
Underlying the concerns of the serious deficiency process is the
broader, systemic issue of what constitutes a serious deficiency and
how State agencies and sponsoring organizations should utilize the
serious deficiency process as an effective tool in managing program
operations. Public comments that FNS has received in response to
previous rulemakings and informal feedback from CACFP professionals and
advocates consistently point out that the lack of defined terminology
confuses program administrators and contributes to errors in responding
to serious management problems. Before extending the serious deficiency
process to unaffiliated centers or establishing a process for SFSP,
these stakeholders asked FNS to define terms in 7 CFR 226.2 that align
with the statutory structure and are consistent across CACFP and SFSP.
As explained in the Child and Adult Care Food Program; Implementing
Legislative Reforms to Strengthen Program Integrity interim rule, prior
to 2002, the term ``serious deficiency'' was used to describe program
performance at two very different stages of an oversight process. In
the first instance, an institution failing to perform under the terms
of its agreement was notified by its State agency that it was seriously
deficient in its operation of CACFP and was given an opportunity to
take corrective action. Later, if the institution failed to take
corrective action during the specified time, its agreement was
terminated by the State agency and the institution was placed on a list
of seriously deficient institutions. The use of the same term in both
instances, as stakeholders pointed out, caused confusion for State
agencies and institutions.
The concept of serious deficiency changed when the first interim
rule addressing management improvement and oversight, Child and Adult
Care Food Program; Implementing Legislative Reforms to Strengthen
Program Integrity, 67 FR 43447, June 27, 2002, was published. This
interim rule amended 7 CFR 226.2 to define seriously deficient as ``the
status of an institution or a day care home that has been determined to
be non-compliant in one or more aspects of its operation of the
program.'' Serious deficiency is a larger concept in that it reflects
the situation before the opportunity for corrective action or the right
to appeal is exercised by an institution. In the interim rule preamble,
FNS attempted to explain this concept, emphasizing that the serious
deficiency process should refer to every action that happens after a
serious deficiency is declared, beginning with the determination of the
finding, and ending with full and permanent resolution or
disqualification.
Although current CACFP regulations define ``seriously deficient,''
other terms that affect implementation of the current serious
deficiency process are not clearly defined. For example, there is no
corresponding definition of ``serious deficiency'' under 7 CFR 226.2.
The regulations do not clearly define standards for determining the
severity of a problem identified as a finding and when that finding
rises to the level of a serious deficiency. The regulations are also
ambiguous with regard to differentiating between occasional
administrative errors and systemic management problems. Some terms have
multiple connotations--for example, administrative review may mean a
fair hearing or it may mean an evaluation of program operations--while
other terms, such as good standing, are vague or subjective. As public
comments and stakeholder feedback have revealed, these gaps have long
been of concern to the CACFP community.
Under this proposed rule, the findings that trigger the serious
deficiency
[[Page 13153]]
process would be defined as serious management problems, which are
currently known as serious deficiencies. This term appears in section
17 of the NSLA, at 42 U.S.C. 1766(d), which requires State agencies to
conduct more frequent reviews of any institution that has serious
management problems or is at risk of having serious management
problems. The proposed definition characterizes a serious management
problem as the type of administrative weakness that affects an
institution's ability to meet CACFP performance standards--financial
viability, administrative capability, and program accountability--or
that affects the quality of meals served or the integrity of a claim
for reimbursement in a day care home or center. For example, a
sponsoring organization that operates a variety of community programs
may be at risk of serious management problems if it has limited
staffing to support program operations or is devoting too small of a
share of administrative resources to CACFP. More frequent monitoring by
the State agency and sponsoring organization would help improve CACFP
operations by identifying and addressing these weaknesses. However, if
these measures are not effective, the State agency would have to apply
the serious deficiency process to require the sponsoring organization
to take specific corrective actions to protect program integrity.
FNS proposes that the serious deficiency process provide program
operators with the opportunity to correct serious management problems
through a corrective action plan. Institutions would develop corrective
action plans to identify the steps they will take to correct serious
management problems, or serious deficiencies as they are known under
the current process.
Prior to 2011, serious deficiencies were ``rescinded'' when an
institution's corrective action plan was approved. Unfortunately,
rescinding the serious deficiency that early in the process often
resulted in later reviews that demonstrated the serious deficiency had
not been corrected, or that the corrective action left institutions
vulnerable to other serious deficiencies. As a result, FNS changed the
process to temporarily defer a finding of serious deficiency. In
current regulations at 7 CFR 226.6(c)(1)(iii)(B), (c)(2)(iii)(B), and
(c)(3)(iii)(B), the State agency is required to temporarily defer the
institution's serious deficiency. However, under this process,
institutions were never able to have their serious deficiency status
removed, even after years of reviews with no additional findings.
Through this rulemaking, changing the serious deficiency determination
to occur at the point of termination aligns the regulations with
statute at section 17 of the NSLA, at 42 U.S.C. 1766(a), which asserts
that an institution that has been seriously deficient in operating any
Child Nutrition Program cannot be eligible to participate in CACFP.
Terms under the current serious deficiency process have led to
confusion. The term ``fully and permanently corrected'' lacks clarity,
particularly in cases where the same findings reoccur and the program
operator's agreement is proposed to be terminated. The term
``permanent'' is contradictory as it assumes that the same findings
cannot arise again, regardless of the amount of time that has passed
since the initial findings. The term ``temporarily deferred'' is
confusing and the existing process does not establish limits on the
duration of the deferment after corrective actions have taken place.
Instead, this proposed rule would create a path to full correction
within a defined period of time. When achieved, the serious management
problem would be vacated, not deferred. If the same finding occurs
after full correction is achieved, it will not lead directly to
proposed termination.
FNS recognizes that clearly defined terminology is essential to
fully understand and correctly implement the serious deficiency
process. FNS proposes to amend 7 CFR 226.2 to clarify existing terms,
remove terms that are confusing, and add definitions to terms that had
not previously been defined in the regulations. This proposed rule
includes the following list of terms that relate to proposed
modifications to the serious deficiency process described in this
rulemaking:
Contingency plan means the State agency's
written process for the transfer of sponsored centers and day care
homes that will help ensure that program meals for children and adult
participants will continue to be available without interruption if a
sponsoring organization's agreement is terminated.
Corrective action means implementation of a
solution, written in a corrective action plan, to address the root
cause and prevent the recurrence of a serious management problem.
Disqualified means the status of an institution,
facility, responsible principal, or responsible individual who is
ineligible for participation in the program.
Fair hearing means due process provided upon
request to:
[cir] An institution that has been given notice by the State agency
of an action that will affect participation or reimbursement under the
program;
[cir] A principal or individual responsible for an institution's
serious management problem and issued a notice of proposed termination
and proposed disqualification from program participation; or
[cir] An individual responsible for a day care home or unaffiliated
center's serious management problem and issued a notice of proposed
disqualification from program participation.
Finding means a violation of a regulatory
requirement identified during a review.
Fiscal action means the recovery of an
overpayment or claim for reimbursement that is not properly payable
through direct assessment of future claims, offset of future claims,
disallowance of overclaims, submission of a revised claim for
reimbursement, or disallowance of funds for failure to take corrective
action to meet program requirements.
Full correction means the status achieved after
a corrective action plan is accepted and approved, all corrective
actions are fully implemented, and no new or repeat serious management
problem is identified in subsequent reviews, as described in proposed
Sec. 226.25(c).
Good standing means the status of a program
operator that meets its program responsibilities, is current with its
financial obligations, and if applicable, has fully implemented all
corrective actions within the required period of time.
Hearing official means an individual who is
responsible for conducting an impartial and fair hearing--as requested
by an institution, responsible principal, or responsible individual
responding to a proposal for termination--and rendering a decision.
Lack of business integrity means the conviction
or concealment of a conviction for fraud, antitrust violations,
embezzlement, theft, forgery, bribery, falsification or destruction of
records, making false statements, receiving stolen property, making
false claims, or obstruction of justice.
Legal basis means the lawful authority
established in statute or regulation.
National Disqualified List (NDL) means a system
of records, maintained by the Department, of institutions, responsible
principals, and responsible individuals disqualified from participation
in the program.
Notice means a letter sent by certified mail,
return receipt (or the equivalent private delivery service), by
[[Page 13154]]
facsimile, or by email, that describes an action proposed or taken by a
State agency or FNS with regard to an institution's program
reimbursement or participation. Notice also means a letter sent by
certified mail, return receipt (or the equivalent private delivery
service), by facsimile, or by email, that describes an action proposed
or taken by a sponsoring organization with regard to a day care home or
unaffiliated center's participation.
Program operator means any entity that
participates in one or more Child Nutrition Programs.
Responsible individual means any individual
employed by, or under contract with an institution or facility, or any
other individual, including uncompensated individuals, who the State
agency or FNS determines to be responsible for an institution or
facility's serious management problem.
Responsible principal means any principal, as
described in this section, who the State agency or FNS determined to be
responsible for an institution's serious management problem.
Review cycle means the frequency and number of
required reviews of institutions and facilities.
Serious management problem means the finding(s)
that relates to an institution's inability to meet the program's
performance standards or that affects the integrity of a claim for
reimbursement or the quality of meals served in a day care home or
center.
Seriously deficient means the status of an
institution or facility after it is determined that full corrective
action will not be achieved and termination for cause is the only
appropriate course of action.
State agency list means an actual paper or
electronic list, or the retrievable paper records, maintained by the
State agency, that includes information on institutions and day care
home providers or unaffiliated centers through the serious deficiency
process in that State. The list must be made available to FNS upon
request and must include information specified in proposed Sec.
226.25(b).
Termination for cause means the termination of a
program agreement due to considerations related to an institution or a
facility's performance of program responsibilities under the agreement
between:
[cir] A State agency and the independent center,
[cir] A State agency and the sponsoring organization,
[cir] A sponsoring organization and the unaffiliated center, or
[cir] A sponsoring organization and the day care home.
Accordingly, this proposed rule would define additional terms under
7 CFR 226.2 by defining contingency plan, corrective action, fair
hearing, finding, fiscal action, full correction, good standing,
hearing official, lack of business integrity, legal basis, responsible
individual, responsible principal, review cycle, and serious management
problem. Definitions of disqualified, National Disqualified List,
notice, seriously deficient, State agency list, and termination for
cause that are currently listed under 7 CFR 226.2 would be amended.
Definitions of administrative review, administrative review official,
and the combined term, ``responsible principal or responsible
individual'' would be removed from 7 CFR 226.2.
Current Requirements of the CACFP Serious Deficiency Process
Historically, the CACFP serious deficiency process established a
systematic way for an administering agency--a State agency or
sponsoring organization--to correct problems and protect program
integrity. Serious deficiency, termination, and disqualification
procedures already exist for institutions, day care homes, responsible
principals, and responsible individuals in CACFP under section 17 of
the NSLA, 42 U.S.C. 1766(d)(5), and codified in regulations at 7 CFR
226.6(c), 226.6(k), 226.6(l), and 226.16(l).
These procedures give institutions and day care homes the
opportunity for corrective action and due process. They are also
designed to help administering agencies (State agencies and sponsoring
organizations) document the case to terminate and remove from CACFP any
program operator that is unwilling or incapable of resolving serious
deficiencies that place program integrity at risk. Current CACFP
regulations allow only two possible outcomes of the serious deficiency
process, either the correction of the serious deficiency to the
administering agency's satisfaction within stated timeframes, or the
administering agency's proposed termination of the agreement and
disqualification of the program operator and its responsible principals
and responsible individuals. However, even when the serious deficiency
is corrected, it is still only temporarily deferred.
Current Sec. Sec. 226.6(c) and 226.16(l) describe steps that start
when the administering agency identifies a serious deficiency and end
when that finding of serious deficiency has been resolved, either
through corrective action or termination and disqualification. FNS has
provided guidance for administering agencies on the serious deficiency
process, including steps in the Serious Deficiency, Suspension, and
Appeals for State Agencies and Sponsoring Organizations handbook. These
steps include that the administering agency:
1. Identify a finding that rises to the level of serious
deficiency. There are several factors to consider in deciding that a
program finding is a serious deficiency, including the severity of the
problem, the degree of responsibility attributable to the program
operator, the program operator's past performance and training, the
nature of the requirements that relate to the problem, and the degree
to which the problem impacts program integrity.
2. Issue a notice of a serious deficiency. A formal notice must
provide information to the program operator, responsible principals,
and responsible individuals that explains all of the cited findings,
describes the actions required to fully and permanently correct the
serious deficiencies, and provide a definite and appropriate time limit
for the corrective action to be implemented.
3. Receive and assess a written corrective action plan. The program
operator must submit a corrective action plan that describes what
actions and management controls have been implemented to address each
serious deficiency. The administering agency must evaluate the plan to
determine that actions taken to correct each serious deficiency are
adequate and that management controls are in place to ensure that the
serious deficiencies are fully and permanently corrected.
4. Issue a notice of temporary deferral of the serious deficiency
or a notice of proposed termination and disqualification. If the
program operator submits a corrective action plan that satisfactorily
corrects the serious deficiencies within the allotted period of time,
the serious deficiency determination is temporarily deferred. The
administering agency issues a notice to advise the responsible
principals and or responsible individuals that the corrective action is
successful and the serious deficiency determination is temporarily
deferred. If it is later, at any time, determined that the serious
deficiency has recurred, the administering agency must immediately
issue a new notice of proposed termination and disqualification. If no
corrective action plan is submitted or if the corrective action is not
permanent or not adequate, the administering agency
[[Page 13155]]
issues a notice of proposed termination for cause and disqualification
with appeal rights and procedures.
5. Provide an appeal of the proposed termination and
disqualification if requested by the program operator. An institution
and its responsible principals and responsible individuals may request
an in person hearing or an administrative review of documents to
determine whether the State agency's actions comply with program
requirements. A day care home also has the right to appeal a proposed
termination through an administrative review of documents. The day care
home may review the record on which the termination decision was based
and refute the action in writing. The administrative review official is
not required to hold a hearing.
6. Issue a notice of final termination and disqualification or a
notice of temporary deferral. On the date when the time for requesting
an appeal expires or the administrative review official upholds the
proposed termination and disqualification, the administering agency
immediately terminates the program operator's agreement, disqualifies
the program operator and its responsible principals and responsible
individuals, and adds their names to the National Disqualified List. If
the administrative review official vacates the proposed termination,
the administering agency issues a notice to withdraw the serious
deficiency determination and temporarily defer the proposed
termination.
Once on the National Disqualified List, an institution, day care
home, responsible principal, or responsible individual is ineligible to
participate in CACFP in any State as an institution, a facility under a
sponsoring organization, or as part of a different institution or
facility. FNS believes it is critical to the effectiveness of the
serious deficiency process that these procedures are consistently
applied when an institution or provider is declared seriously
deficient. For example, if the serious deficiency process is not
completed, an individual who was found responsible for the serious
deficiency in one institution might simply re-incorporate under a new
name and be admitted to participate in CACFP in another State.
Public comments on prior rulemaking have disclosed that
implementation may vary widely. Respondents described weaknesses in
existing regulations that created a process that they perceived to be
unreasonable, ineffective, and punitive. This perception undermines the
goal of the serious deficiency process to strengthen program compliance
and integrity. FNS agrees that improvements to the serious deficiency
process are needed to ensure its application is fair and fully
implemented. To better serve State agencies and program operators, FNS
is proposing modifications that will make the application of the
serious deficiency process more consistent and more effective.
Proposed Changes to the CACFP Serious Deficiency Process
As noted earlier, FNS has carefully examined the serious deficiency
process and the lessons learned through policy development and
operational experience, to understand how to address and correct
serious management problems in the CACFP. FNS's understanding is that
the steps described above have been useful for administering agencies
dealing with serious failure to perform, and not just for the worst
examples of potential fraud. This proposed rule would maintain the
steps that have been proven effective--basic procedures guiding
administering agencies in identifying serious management problems,
requiring corrective action, providing appeals, continuing payments of
valid claims until the appeals are resolved, and taking actions on
termination and disqualification. However, based on that examination,
several key changes are proposed in this rule.
Currently, the administering agency identifies a serious deficiency
violation, which is defined in regulation. For new institutions,
current Sec. 226.6(c)(1)(ii) provide that serious deficiencies include
the submission of false information and concealment of a conviction
during the past 7 years that indicates a lack of business integrity.
Examples are provided in current regulation for offenses that indicate
a lack of business integrity, with discretion allowed for the State to
determine other offenses that may indicate a lack of business integrity
or any other action affecting the institution's ability to administer
the program in accordance with program requirements.
Under this proposed rule, a program finding identified during a
review will no longer be considered a serious deficiency, but a serious
management problem, if certain standards are met. This is a change in
the terminology used to describe the process of identifying problems
that needs correction. While FNS issued a CACFP handbook, Serious
Deficiency, Suspension, and Appeals for State Agencies and Sponsoring
Organizations, in February 2015, which recommends a framework to guide
decision making, the current regulations are unclear about what
standards apply to distinguish between errors and more serious
findings.
Under this proposed rule, FNS is proposing to codify the criteria
found in the CACFP handbook, Serious Deficiency, Suspension, and
Appeals for State Agencies and Sponsoring Organizations, that the State
agency must consider when determining whether a program violation is a
serious management problem. This rulemaking also proposes several
questions to assist the administering agency. In addition to inviting
comments on this proposed rule in general, FNS specifically welcomes
public comments on the following five criteria:
1. The severity of the problem. Is the noncompliance on a minor or
substantial scale? Are the findings indicative of a systemic problem,
or is the problem truly an isolated event? There is a point at which
continued problems indicate serious mismanagement. Problems that
initially appear manageable may become serious if not corrected within
a reasonable period of time. Even minor problems may be serious if
systemic. Some problems are serious even though they have occurred only
once. For example, missing the recording of meal counts at the point of
service for one day out of a month could be resolved with technical
assistance. However, a second review with the same problem or an
initial review with multiple days of incomplete point-of-service meal
counts could rise to the level of a serious management problem.
2. The degree of responsibility attributable to the program
operator. To the extent that evidence is available, can the
administering agency determine whether the findings were inadvertent
errors of an otherwise responsible institution or facility? Is there
evidence of negligence or a conscious indifference to regulatory
requirements or is there evidence of deception?
3. The program operator's history of participation and training in
CACFP. Is this the first time the institution, day care home or
unaffiliated center is having problems or has noncompliance occurred
frequently at the same institution or facility?
4. The nature of the requirements that relate to the problem. Are
the program operator's actions a clear violation of CACFP requirements?
Has the program operator implemented new policies correctly?
5. The degree to which the problem impacts program integrity. Is
the finding undermining the intent or purpose of the CACFP, such as
misuse of program
[[Page 13156]]
funds, or is it simply an administrative error?
Current Sec. Sec. 226.6(c)(3)(iii)(A) and 226.16(l)(3)(i) require
the administering agency to issue a notice of the serious deficiency
identified. The program operator must submit a corrective action plan
to resolve the serious deficiency. Under this proposed rule, the
administering agency would declare the program operator to be seriously
deficient at the point of termination. A notice of proposed serious
deficiency and proposed termination would be issued after the program
operator has been provided an opportunity to correct serious management
problems through a corrective action plan. If corrective action is not
submitted, not approved, or not implemented, the administering agency
would move to propose termination, with the opportunity to request a
fair hearing. If the termination is upheld, the agreement is terminated
for cause and the program operator is declared seriously deficient.
Current Sec. Sec. 226.6(c)(3)(iii)(B) and 226.16(l)(3)(i)(B)
require the corrective action plan to detail the program operator's
response to the notice of serious deficiency. The program operator must
submit a written plan that describes the internal controls that are
being implemented to ensure that the serious deficiency is fully and
permanently corrected. Under this proposed rule, the corrective action
plan must address the root causes, i.e., the underlying, true causes,
of the serious management problem. By doing so, the corrective action
plan should support elimination of the underlying challenges
experienced by the program operator for long term program improvement.
The program operator would be required to submit a written plan that
describes the actions to be taken to correct the root causes of the
identified problem, expected period of time for the corrective action
to be put into place, and interim milestones for reaching
implementation that would lead to full correction.
Under current Sec. 226.6(c)(3)(iii)(C), a notice of proposed
termination and disqualification specifies the same set of outcomes for
all types of institutions--the institution is terminated for cause,
disqualified, and placed on the National Disqualified List. FNS is
considering alternatives for institutions that are school food
authorities, including an option that would require termination of the
program agreement allowing participation in CACFP, but would not
subject the school food authority to disqualification and placement on
the National Disqualified List. In the discussion of reciprocal
disqualification in Child Nutrition Programs, under section II-D-3 of
this preamble, FNS requests specific input on this proposal to
implement an alternative to disqualification for program operators that
are school food authorities. Public comments on this alternative will
be critical as FNS develops the final rule.
Under current Sec. 226.6(c)(1), if an applying institution does
not meet all of the application requirements, the State agency must
deny the application and initiate action through the serious deficiency
process, which could lead to the disqualification of the new
institution, the person who signs the application, and any other
responsible principal or responsible individual. However, FNS
recognizes that the intent of the serious deficiency process is to
address program performance under a legally binding agreement. Under
this rulemaking, at proposed Sec. 226.6(c), a separate process--not
the serious deficiency process--would provide applicants the
opportunity to correct the application and request due process if the
application is denied.
While current Sec. 226.2 includes a combined term of ``responsible
principal or responsible individual,'' this proposed rule would set out
separate definitions. Each State agency determines which people are
responsible for a program operator's serious management problem. In
most cases, State agencies designate the executive director, director,
and board chair as the positions that would represent the institution
or sponsor and be held responsible for any serious management problem.
For a for-profit organization, it would include the owner. For a public
agency, a responsible principal might also include a supervisor or
department head. FNS proposes to require any principals who fill
positions that the State agency designates as responsible to certify
their role as a responsible principal, as described in the definition.
Under current Sec. Sec. 226.6(c)(3)(iii)(B)(1)(i) and
226.16(l)(3)(ii), if a corrective action plan is approved and
implemented, the program operator's serious deficiency is temporarily
deferred and the serious deficiency is considered fully and permanently
corrected. If the same finding reoccurs at any time in the future, the
serious deficiency process resumes and may lead to termination. Under
this proposed rule, if the corrective action plan is approved and
implemented within a defined period of time, the administering agency
will provide increased oversight and conduct more frequent reviews, as
described in proposed Sec. Sec. 226.6(k)(2) and 226.16(d)(4)(iv) and
(v). Corrective action would no longer be described as permanent.
Instead, FNS proposes that the serious deficiency process provide
program operators with the opportunity to correct serious management
problems through a corrective action plan, which would occur within a
defined period of time and result in full correction. When achieved,
the serious management problem would be vacated, not deferred.
Temporary deferment would no longer be applicable, because this
rulemaking proposes a path to full correction and changes the point at
which a program operator is declared seriously deficient to occur at
the point of termination. If the same serious management problem occurs
after the time period under which full correction is achieved, it would
not lead directly to proposed termination. ``Full correction'' would
describe the status achieved after a corrective action plan is accepted
and approved, all corrective actions are fully implemented, and no new
or repeat serious management problems are identified in at least two
full reviews occurring once every 2 years. Additionally, institutions
would only achieve ``full correction'' if the first and last full
review is at least 24 months apart and all review, including follow up
reviews, in between the first and last full review reveal no new or
repeat serious management problems.
Under proposed Sec. 226.25(c)(3)(i), institutions may achieve full
correction after at least two full reviews occurring in separate review
cycles--with the first and last full review at least 24 months apart
reveal no new or repeat serious management problems. A ``review cycle''
refers to the frequency and number of required reviews of institutions
and facilities. The Child Nutrition Program Integrity Final Rule
amended current Sec. 226.6(m) to require State agencies to review
program operators with serious management problems at least once every
2 years. FNS analyzed a large sample of serious deficiency notices and
determined that most repeat serious deficiencies occurred within a 2-
year period, with many repeat serious deficiencies reoccurring within
just a matter of months. As a result, this rulemaking proposes a
standard of ``two full reviews, occurring once every 2 years and at
least 24 months apart'' for an institution to achieve full correction.
FNS welcomes public comments on this standard.
To understand how the defined period of time for full correction of
serious management problems would be determined, consider an example: a
State agency cites a sponsoring
[[Page 13157]]
organization for a serious management problem in June 2020. The
sponsoring organization is now subject to reviews at least once every 2
years. Subsequent full reviews took place in May 2021 and May 2023.
Neither reviews revealed new or repeat serious management problems. The
sponsoring organization achieved full correction in May 2023. The
serious management problems are ``fully corrected'' if subsequent
reviews result in no new or repeat serious management problems over a
minimum of two full reviews occurring at least once every 2 years and
with the first and last full review taking place at least 24 months
apart. The State agency has discretion to conduct reviews more
frequently and, in these cases, all reviews must result in no new or
repeat serious management findings in order for the sponsoring
organization to achieve full correction.
A second example: A State agency reviews a sponsoring organization
in June 2020 and identifies a serious management problem. The
sponsoring organization submits a corrective action plan that is
approved by the State agency and the sponsoring organization enters a
2-year review cycle. The State agency does a follow up review in August
2020 to ensure the corrective action plan has been implemented. The
State agency determines that the corrective action plan has been fully
implemented. The State agency conducts the first full review in July
2021 and no new or repeat serious management problems are identified.
The sponsoring organization is reviewed again in April 2022 and again,
no new or repeat serious management problems are identified. Because 24
months have not passed (July 2021 and August 2022) between the first
and last full review, the serious management problems are not
considered fully corrected. The sponsoring organization receives a full
review again in December 2023 and again, no new or repeat serious
management problems are identified. At that point, full correction is
achieved, i.e., all the reviews revealed no new or repeat serious
management problems and at least 24 months passed between the first and
last full reviews.
Current Sec. Sec. 226.6(c)(3)(iii)(B)(3) and 226.16(l)(3)(ii)
establish that repeat serious deficiencies may lead directly to
proposed termination. If it were discovered that the program operator's
corrective action was not adhered to and the serious deficiency was
repeated, the administering agency could resume the serious deficiency
process by immediately issuing a notice of proposed termination and
disqualification. Under this proposed rule, a serious management
problem that occurs again, after full correction is achieved, would not
be considered a repeat serious management problem and would not
directly result in proposed termination. However, the recurrence of a
serious management problem during the time before full correction is
achieved would lead directly to proposed termination. If new serious
management problems occur before an institution achieves full
correction of its initial serious management problem, the institution
would continue to be reviewed once every 2 years until at least two
full reviews occurring at least 24 months apart reveal no new or repeat
serious management problems.
For another example, consider that a State agency reviews an
independent center in April 2021 and identifies a serious management
problem. The independent center submits a corrective action plan that
is approved by the State agency and the State agency does a follow up
review in July 2021 to ensure the corrective action plan has been
implemented. The State agency returns to conduct a full review in
January 2023 and no new or repeat serious management problems are
identified. The State agency conducts a second full review of the
independent center in February 2025, the same serious management
problem reoccurs. Because full correction was not achieved, this
serious management problem is considered repeat. The State agency would
propose to terminate the independent center. At this point, the
independent center would have a right to a fair hearing.
Current regulations do not define good standing. Under the
definition of ``good standing'' in this proposed rule, the proposed
serious deficiency process in CACFP would impact an institution's good
standing status. In the proposed serious deficiency process,
identification of a serious management problem would move an
institution out of good standing. An institution would need to fully
implement all corrective actions and fully pay any debts owed to the
program to return to good standing. Until these criteria are met, the
institution would remain out of good standing. This proposed standard
ensures that the institution is complying with requirements of the
serious deficiency process and is working towards achieving full
correction of its serious management problem. FNS welcomes public
comments on this proposed standard of good standing in the serious
deficiency process.
For example, let's say, a review in May 2022 of a sponsoring
organization reveals a serious management problem that results in an
overclaim. At this point, the sponsoring organization would not be in
good standing. In June 2022, the State agency conducts a follow up
review and determines that the corrective actions are fully implemented
and the unearned reimbursement is fully repaid. At this point, at the
State agency's discretion, the sponsoring organization returns to good
standing. However, the serious management problem is not yet considered
fully corrected.
2. Oversight and Implementation of the Serious Deficiency Process in
Institutions
State agencies are responsible for oversight of institutions--i.e.,
sponsoring organizations, independent child care centers, and
independent adult day care centers that enter into agreements with the
State agency to participate in CACFP. FNS is proposing to modify the
serious deficiency process to improve State agency oversight efforts.
FNS proposes to codify standards to help State agencies distinguish
occasional administrative errors from systemic management problems,
determine that corrective action plans are adequate, put in place a
fair hearing process that is accessible and fair, and prepare well-
written notices of actions throughout the course of the serious
deficiency process.
Current program regulations describe serious deficiency
notification procedures for participating institutions, responsible
principals, and responsible individuals at 7 CFR 226.6(c)(3)(iii). This
section includes requirements for the notice of serious deficiency at 7
CFR 226.6(c)(3)(iii)(A). Corrective action is described in 7 CFR
226.6(c)(3)(iii)(B) and (c)(4). Administrative review procedures for
the provision of a fair hearing are found at 7 CFR 226.6(k).
Termination is at 7 CFR 226.6(c)(3)(iii)(C) and (E) and (c)(4).
Disqualification and placement on the National Disqualified List are at
7 CFR 226.6(c)(iii)(E) and (c)(7). FNS proposes to move these
requirements from subpart C, State Agency Provisions, to a new
subchapter addressing administrative actions under subpart G at 7 CFR
226.25.
This rulemaking proposes to codify standards, under proposed Sec.
226.25(a)(3), to help State agencies distinguish occasional
administrative errors from systemic management problems. These
standards would guide the State agency's efforts in identifying
systemic errors that reflect an institution's inability to effectively
manage the program as required under
[[Page 13158]]
the regulations. The State agency would have to consider:
The severity of the problem;
The degree of responsibility attributable to the
institution;
The institution's history of CACFP participation and
training;
The nature of the requirements that relate to the problem;
and
The degree to which the problem impacts program integrity.
An institution would no longer be in good standing if the State
agency determines that a finding rises to the level of a serious
management problem. Information about the institution and its
responsible principals and responsible individuals would be added to
the State agency list, which State agencies are required to maintain
and update through each step of the serious deficiency process.
Requirements for the State agency list in current Sec. 226.6(c)(8)
would move to proposed Sec. 226.25(b). Maintenance of this list allows
the State agency to track the institution's progress towards resolving
each serious management problem.
If the State agency determines that a program finding rises to the
level of a serious management problem, the State agency would issue a
written notice that is easy to understand, documenting each finding
that must be addressed and corrected. The notice requirements in
current Sec. 226.6(c)(3)(iii)(A) would move to proposed Sec.
226.25(a)(6)(i). The State agency would send the notice to the
institution, the management officials who bear responsibility for the
poor performance, and other responsible individuals, including
nonsupervisory employees, contractors, and unpaid staff who have been
directly involved in causing the serious management problem. A well-
written notice will: provide a detailed explanation of each serious
management problem; list appropriate regulatory citations to support
the notice; identify the responsible principals and responsible
individuals; provide a clear description of the actions required in
order to correct the serious management problem; and provide a definite
and appropriate time limit for the corrective action.
The assessment of corrective action in current Sec.
226.6(c)(3)(iii)(B) would move to proposed Sec. 226.25(c). This
proposed rule would require the institution to take corrective action
to address the root cause of each finding. At proposed Sec.
226.25(c)(1), this rulemaking outlines the information that would guide
the institution's development of a corrective action plan that
demonstrates that the noncompliance is resolved. The State agency's
approval of the corrective action plan would include a review of the
institution's responses to these questions:
What is the serious management problem and the action
taken to address it?
Who addressed the serious management problem?
When was the action taken to address the serious
management problem?
Where is documentation of the corrective action plan
filed?
How were staff and providers informed of the new policies
and procedures?
The timelines for corrective action, at proposed Sec.
226.25(c)(2), with an emphasis on correcting problems quickly, remain
unchanged from the requirements at current Sec. 226.6(c)(4).
Corrective action must be taken within reasonable timeframes
established in the current regulations that ensure that each serious
management problem is quickly addressed and corrected. The timeframe
must fit the type of serious management problem found. The allotted
time begins on the date the institution receives the notice--up to 30
days for a false claim or unlawful practice, up to 90 days for
correction of other problems, and more than 90 days for management
system or process changes, if the State agency determines that a longer
time frame is needed. Although the institution may take corrective
action at any point in the serious deficiency process, the State agency
would issue a notice of proposed termination if any of the deadlines
described in proposed Sec. 226.25(c)(2)(ii) through (iv) are not met.
State agencies would have to prioritize monitoring resources to
conduct more frequent reviews of institutions with serious management
problems. FNS has recently published a final rule, Child Nutrition
Program Integrity, 88 FR 57792, August 23, 2023, that requires State
agencies to schedule reviews at least once every 2 years of
institutions that have had serious management problems in previous
reviews or are at risk of having serious management problems. This
rulemaking would move this requirement from current Sec. 226.6(m) to
proposed Sec. 226.6(k).
Current Sec. 226.6(c)(3)(iii)(B)(1) requires the State agency to
establish that corrective action is permanent. Proposed Sec.
226.25(c)(3)(i) would take a different approach to the determination of
full correction. This proposed rule would create a path to full
correction for institutions with serious management problems if at
least two full reviews, occurring once every 2 years and the first and
last full review occurring at least 24 months apart demonstrate that
the institution has the ability to operate CACFP with no new or repeat
serious management problems. Once the State agency approves a
corrective action plan, the institution must receive full reviews at
least two times and at least once every 2 years before full correction
is achieved.
If corrective actions are fully implemented, the State agency would
issue a notice to advise the institution, responsible principals, and
responsible individuals of successful corrective action. The notice
requirements in current Sec. 226.6(c)(3)(iii)(B) would move to
proposed Sec. 226.25(a)(6)(ii). The State agency would continue to
provide oversight to ensure that the corrective actions to correct the
serious management problem remain in place. If corrective action is
complete for the institution but not for all the responsible principals
and responsible individuals or vice versa, proposed Sec.
226.25(a)(6)(ii)(A)(2) addresses partial achievement of corrective
action.
If corrective action is not submitted, approved or implemented, the
State agency proposes to terminate the institution. Current Sec.
226.6(k) describes administrative review procedures for the provision
of a fair hearing. Termination is described in current Sec.
226.6(c)(3)(iii)(C) and (E) and (c)(4) and disqualification and
placement on the National Disqualified List are described in current
sections 7 CFR 226.6(c)(3)(iii)(E) and (c)(6). This rulemaking
describes procedures the State agency should follow for fair hearings
at proposed Sec. 226.25(g), termination for cause at proposed Sec.
226.25(d)(1), notice of serious deficiency status at proposed Sec.
226.25(a)(6)(iii)(B), and placement on the National Disqualified List
at proposed Sec. 226.25(e)(2)(i).
Current Sec. 226.6(k) addresses due process. In this rulemaking,
proposed Sec. 226.25(g) describes the institution's right to a fair
hearing, parameters for conducting a fair hearing, and guidance on the
role of the hearing official and the decision-making. The purpose of
the fair hearing is limited to a determination by the hearing official
that the State agency has complied with CACFP requirements in taking
the actions that are under appeal. It is not to determine whether to
uphold duly promulgated Federal and State program requirements.
State agencies must provide a fair hearing to institutions when
they take actions affecting an institution's participation or its claim
for reimbursement, such as application denial, claim denial,
overpayment
[[Page 13159]]
demands. During the serious deficiency process, the State agency's
issuance of a notice of proposed termination is the only action that is
subject to administrative review. Although FNS proposes to replace the
term ``administrative review'' with the term ``fair hearing,'' and move
the requirements from current Sec. 226.6(k)(5) to proposed Sec.
226.25(g)(2), the provision of due process remains unchanged, which is:
The State agency must give notice of the proposed
termination and procedures for requesting a fair hearing to the
institution, its executive director, board chair, owner, any other
responsible principals and responsible individuals.
The State agency's notice must specify the basis for
proposing termination and the procedures under which the institution,
responsible principals, or responsible individuals may request a fair
hearing.
The appellant must submit a written request for a fair
hearing within 15 calendar days of receipt of State agency's notice of
proposed termination. If the State agency's fair hearing procedures
direct the appellant to send the request to the hearing official, then
the procedures must identify which office will be responsible for
acknowledging the appellant's request.
The State agency must acknowledge receipt of the fair
hearing request within 10 calendar days of receiving it.
If a fair hearing is requested, the State agency must
continue to pay any valid claims for reimbursement of eligible meals
served and allowable administrative expenses incurred until the hearing
official issues a decision.
Any information upon which the State agency based the
proposed termination must be available to the appellants for inspection
from the date of receipt of the hearing request.
Appellants may contest the proposed termination in person
or by submitting written documentation to the hearing official.
Appellants may represent themselves, retain legal counsel,
or be represented by another person.
All documentation must be submitted prior to the beginning
of the hearing. All parties, including the State agency, must submit
written documentation to the hearing official within 30 calendar days
of receipt of the notice of proposed termination.
Hearing officials must be independent and impartial. Even
if they are employees of the State agency, hearing officials cannot be
involved in the action that is the subject of the fair hearing, cannot
occupy any position which would potentially subject to them to undue
influence from other State employees who are responsible for the State
agency's action, or have any direct personal or financial interest in
the outcome of the fair hearing.
Hearing officials must issue decisions within 60 calendar
days of the State agency's receipt of the appellants' hearing request,
based solely on the information provided by the parties. 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 fair hearing process.
The hearing official's decision is the final
administrative decision. Appellants may not administratively contest
the hearing official's decision.
If the appellant prevails, the State agency would issue a notice
that confirms that the proposed termination of the institution,
responsible principals, and responsible individuals is vacated, as
described in proposed Sec. 226.25(a)(6)(iii)(A). However, the
institution would still have to implement procedures and policies to
fully correct the serious management problem.
If the hearing official upholds the State agency's proposed
termination action, the State agency would immediately notify the
institution, executive director, owner, board chair, and any other
responsible principals and responsible individuals that the
institution's agreement is terminated, as described in proposed Sec.
226.25(a)(6)(iii)(B). It is at this point in the process that this
rulemaking proposes to declare the institution seriously deficient. The
State agency would issue a serious deficiency notice that informs the
institution, responsible principals, and responsible individuals of
their disqualification from CACFP participation. Termination of the
agreement and disqualification described in current Sec.
226.6(c)(3)(iii)(E) would move to proposed Sec. 226.25(d) and proposed
Sec. 226.25(e), respectively. The State agency would provide a copy of
the serious deficiency notice to FNS, with the mailing address and date
of birth for each responsible principal and responsible individual, and
the full amount of any determined debt associated with the institution,
responsible principals, and responsible individuals, for inclusion on
the National Disqualified List. Requirements at current Sec.
226.6(c)(6) describing placement on the National Disqualified List
would move to proposed Sec. 226.25(e)(2).
Proposed Sec. 226.25(h) addresses the State agency's
responsibilities for the payment of valid claims found in current Sec.
226.6(c)(5)(i)(D); collection of unearned payments found in current
Sec. 226.14(a); suspension of payments found in current Sec.
226.6(c)(5)(ii)(E); and State liability for payments found in current
Sec. 226.6(h)(11). Requirements from current Sec. 226.6(c)(iii)(6)
for State agency action in response to the independent determination of
a serious management problem by FNS would move to proposed Sec.
226.25(i).
Accordingly, this proposed rule would amend CACFP regulations by
removing the requirements describing termination of a participating
institution's agreement, including serious deficiency notification
procedures, successful corrective action, agreement termination,
corrective action timeframes, administrative review, and State agency
list, under 7 CFR 226.6(c) and (k). This rulemaking proposes to address
all requirements for State agency oversight and implementation of the
serious deficiency process in institutions under 7 CFR 226.25.
Corresponding amendments are proposed at 7 CFR 226.2, 226.6(b)(1) and
(2), 226.6(c), (k), and (m)(3), and 226.16(l).
3. Oversight and Implementation of the Serious Deficiency Process in
Day Care Homes and Unaffiliated Sponsored Centers
Sponsoring organizations enter into agreements with day care homes,
unaffiliated child care centers, and unaffiliated adult day care
centers to oversee their participation and meal service operations. The
sponsoring organization is financially responsible for any meals served
incorrectly or served to ineligible children and adults, making it even
more important that serious management problems are properly identified
and corrected.
The serious deficiency process offers a clear way for sponsoring
organizations to take actions guiding day care homes and unaffiliated
centers to correct problems that affect the integrity of their meal
service operations. It gives day care homes and centers the opportunity
for improvement, technical assistance, and due process. For sponsoring
organizations, it is a critical tool for resolving performance issues
and correcting serious management problems at the operational level.
Current program regulations describe serious deficiency
notification procedures for participating day care homes at 7 CFR
226.16(l)(3). This section includes requirements for the notice of
serious deficiency at 7 CFR
[[Page 13160]]
226.16(l)(3)(i). Corrective action is described in 7 CFR
226.16(l)(3)(ii). Administrative review procedures for the provision of
a fair hearing are found at 7 CFR 226.6(l). Termination and
disqualification are described at 7 CFR 226.16(l)(3)(iii) and (v). FNS
proposes to move these requirements of the serious deficiency process
for day care homes to a new subchapter addressing administrative
actions under subpart G at 7 CFR 226.25. This proposed rule would also
require sponsoring organizations to follow these procedures to
implement the serious deficiency process for unaffiliated centers.
Under this proposed rule, many of the sponsoring organization
responsibilities and actions would be identical to the provisions
outlined for State agencies. However, FNS is proposing key changes to
not only recognize CACFP requirements that are simplified for day care
homes, but also to distinguish between the center that participates
directly under the State agency and the center that elects to
participate through a sponsoring organization.
Part of a strong and sustained effort to ensure program integrity
is the enhanced oversight that sponsoring organizations provide day
care homes and unaffiliated centers. For example, while the State
agency is generally required to conduct onsite reviews at least once
every 2 or 3 years, depending on the size and circumstances of the
institution being reviewed, a sponsoring organization will have
conducted a minimum of six to nine reviews of each of its day care
homes and unaffiliated centers during the same time period. The serious
deficiency process that FNS proposes for day care homes and
unaffiliated centers takes into account the additional monitoring,
training, and technical assistance that sponsoring organizations must
provide.
This rulemaking proposes to codify standards, under proposed Sec.
226.25(a)(3), to help sponsoring organizations distinguish occasional
administrative errors from systemic management problems. The sponsoring
organization would have to consider:
The severity of the problem;
The degree of responsibility attributable to the day care
home or unaffiliated center;
The day care home or unaffiliated center's history of
CACFP participation and training;
The nature of the requirements that relate to the problem;
and
The degree to which the problem impacts program integrity.
Whenever a sponsoring organization identifies a serious management
problem, the day care home or unaffiliated center can no longer be
considered to be in good standing. The sponsoring organization must
provide information to the State agency to keep the State agency list
updated through each step of the serious deficiency process. Current
Sec. 226.6(c)(7) requires the State agency list to include information
about institutions and day care homes that are seriously deficient.
This proposed rule would expand the list to include information on any
unaffiliated center that has a serious management problem, as described
in proposed Sec. 226.25(b).
Current Sec. 226.16(l)(3)(i) addressing the notice of serious
deficiency would move to proposed Sec. 226.25(a)(7)(i). If the
sponsoring organization determines that a program finding rises to the
level of a serious management problem, the sponsoring organization
would issue a notice documenting, in plain language, each serious
management problem that must be corrected. The sponsoring organization
would issue the notice to the day care home provider, center director,
and any other responsible principals or responsible individuals who
have been directly involved in causing the serious management problem.
A well-written notice will: provide a detailed explanation of each
serious management problem; list appropriate regulatory citations to
support the notice; identify the responsible principals and responsible
individuals; provide a clear description of the actions required in
order to correct the serious management problem; and provide a definite
time limit for the corrective action.
Corrective action described in current Sec. 226.16(l)(3)(ii) would
move to proposed Sec. 226.25(c). Day care homes and unaffiliated
centers would be required to take corrective action to address each
serious management problem. The day care home or unaffiliated center
would submit a written corrective action plan for the sponsoring
organization to approve. The corrective action plan would have to
address the root cause of each finding, with enough detail explaining
the implementation--i.e., what, how, when, and by whom--for the
sponsoring organization to make an assessment regarding its
effectiveness in fully correcting the serious management problem. It
would also describe where the documentation of changes will be filed.
The emphasis of the timeline for corrective action is on correcting
problems quickly, as described in current Sec. 226.16(l)(3)(i)(C).
Under proposed Sec. 226.25(c)(2)(i), day care homes and unaffiliated
centers would have up to 30 days to take corrective action that, in the
sponsoring organization's judgment, will correct the serious management
problem. Although corrective action may occur at any point in the
serious deficiency process, the sponsoring organization would issue a
notice of serious deficiency if the 30-day deadline is not met.
If the corrective action plan is accepted, the sponsoring
organization would confirm that the corrective actions are fully
implemented. Current Sec. 226.16(l)(3)(ii) temporarily defers a
determination of serious deficiency if the sponsoring organization
establishes that corrective action is successful. This proposed rule
would create a path to full correction if follow-up reviews, as
described in current Sec. 226.16(d)(4)(v), demonstrate that the day
care home or unaffiliated center has the ability to operate CACFP with
no new or repeat serious management problems. The day care home or
unaffiliated center would be reviewed at the same frequency as existing
regulations require, as described in current Sec. 226.16(d)(4)(iii).
Full correction is achieved when, after three consecutive reviews are
complete, the day care home or unaffiliated center demonstrates that it
has no new or repeat serious management problems, as described in
proposed Sec. 226.25(c)(3)(ii) and (iii). After full correction is
achieved, any recurrence of the same serious management problem would
require the sponsoring organization to issue a new notice to restart
the serious deficiency process. Serious management problems that occur
after full correction is achieved would not lead to an immediate
proposal of termination. However, as described in proposed Sec.
226.25(c)(3)(iv), the recurrence of a serious management problem before
full correction is achieved would lead directly to proposed
termination.
Successful corrective action is described in current Sec.
226.16(l)(3)(ii). If corrective actions are fully implemented, the
sponsoring organization would issue a notice of successful corrective
action to the day care home, unaffiliated center, responsible
principals, and responsible individuals of, as described in proposed
Sec. 226.25(a)(7)(ii)(A). The sponsoring organization would continue
to provide oversight to ensure that the procedures and policies to
fully correct the serious management problem are implemented.
Current Sec. 226.16(l)(3)(iii) and (v) address the sponsoring
organization's actions when full and permanent correction is not
achieved. If the corrective action plan is not accepted or a repeat
serious management problem occurs before full correction is achieved,
[[Page 13161]]
this proposed rule describes the procedures the sponsoring organization
would follow for fair hearings at proposed Sec. 226.25(g)(1)(ii) and
(g)(2), termination for cause and notification of serious deficiency
status at proposed Sec. 226.25(a)(7)(iii), and placement on the
National Disqualified List at proposed Sec. 226.25(e)(2).
The sponsoring organization would issue a proposed termination
notice, and a fair hearing would be offered. If a fair hearing is
requested and the fair hearing upholds the proposal to terminate or the
time frame for requesting a fair hearing has passed, the sponsoring
organization would issue a notice of serious deficiency and
termination. If the fair hearing vacates the proposed termination, the
sponsoring organization would issue a notice to vacate the proposed
termination as described in proposed Sec. 226.26(c)(7)(iii)(A).
However, the day care home or unaffiliated center must still implement
procedures and policies to fully correct the serious management
problem.
As described in current Sec. 226.6(l)(1), the State agency will
continue to have authority to decide whether a fair hearing will be
heard by the state or by the sponsoring organization. As described in
proposed Sec. 226.25(g)(3), hearing officials, whether retained by the
state or the sponsoring organization, must be independent, impartial,
and have no involvement in the action that is the subject of the fair
hearing. Their decisions must be based on a review of written
submissions by all parties. They are not required to hold an in-person
hearing for day care homes or unaffiliated centers.
If the hearing official upholds the proposed termination, the
sponsoring organization would immediately notify the day care home
provider, center director, owner, board chair, and any other
responsible principals and responsible individuals that the agreement
is terminated, as described in proposed Sec. 226.25(c)(7)(iii)(B).
This would also be the point in the process when the day care home or
unaffiliated center would be declared seriously deficient. The
sponsoring organization would issue a serious deficiency notice that
informs the day care home, unaffiliated center, responsible principals,
and responsible individuals of their disqualification from CACFP
participation.
The sponsoring organization would provide a copy of the serious
deficiency notice to the State agency, with the mailing address and
date of birth for each responsible principal and responsible
individual, and the full amount of any determined debt associated with
the day care home or unaffiliated center. The State agency would
continue to update the State agency list and provide this information
to FNS for inclusion on the National Disqualified List.
Accordingly, this proposed rule would amend CACFP regulations by
removing the requirements describing the termination of agreements for
cause, including serious deficiency notification procedures, under 7
CFR 226.16(l). This rulemaking would address all requirements for
sponsoring organization oversight and implementation of the serious
deficiency process in day care homes and unaffiliated centers under 7
CFR 226.25.
B. Summer Food Service Program (SFSP)
1. Applying the Serious Deficiency Process to SFSP
Section 13 of the NSLA, at 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 must also maintain a disqualification list
for State agencies to use in approving or renewing sponsor
applications.
Prior to enactment of the Healthy Hunger-Free Kids Act of 2010,
SFSP regulations included provisions addressing corrective action,
termination, and appeals. Current SFSP regulations specify:
Criteria State agencies must consider when approving sites
for participation; provide authority for the State agency to terminate
sponsor participation, as described in 7 CFR 225.6(h);
List the types of program findings that would be grounds
for application denial or termination, as described in 7 CFR 225.11(c);
Require State agencies to terminate participation of sites
or sponsors for failure to correct program findings within timeframes
specified in a corrective action plan as described in 7 CFR 225.11(f);
and
Set out procedures for sponsors to appeal adverse actions,
including termination of a sponsor or site and denial of an application
for participation, as described in 7 CFR 225.13.
However, the regulations do not provide explicit authority to FNS
or State agencies to disqualify sponsors or any of the people who are
responsible for the types of findings that weaken program management
and integrity. Under the Healthy Hunger-Free Kids Act of 2010, Congress
established requirements related to service institutions that were
terminated, including maintaining a list of disqualified service
institutions and individuals. To implement those requirements, in this
proposed rule, specific steps are provided to establish a serious
deficiency process in SFSP, building on the proposals outlined in the
previous sections of this preamble. This rulemaking also proposes
expansion of the National Disqualified List, establishment of State
agency lists, and changes to termination and appeal procedures that
would hold sponsors, responsible principals, and responsible
individuals accountable for serious management problems in SFSP. These
modifications are set out in the regulatory text section of this
rulemaking in proposed Sec. 225.18.
In applying the serious deficiency process to SFSP, this rulemaking
would expand the list of defined terms under 7 CFR 225.2. This
rulemaking proposes definitions of the following terms that relate to
important aspects of program management and the serious deficiency
process:
Contingency plan means the State agency's
written process for the transfer of sponsored site service area that
will help ensure that Program meals for children will continue to be
available without interruption if a sponsor's agreement is terminated.
Corrective action means implementation of a
solution, written in a corrective action plan, to address the root
cause and prevent the recurrence of a serious management problem.
Disqualified means the status of a sponsor,
responsible principal, or responsible individual who is ineligible for
participation in the program.
Fair hearing means due process provided upon
request to:
[cir] A sponsor that has been given notice by the State agency of
an action that will affect participation or reimbursement under the
program;
[cir] A principal or individual responsible for a sponsor's serious
management problems and issued a notice of proposed termination and
proposed disqualification from Program participation; or
[cir] A sponsor that has been given notice of proposed termination.
Finding means a violation of a regulatory
requirement identified during a review.
[[Page 13162]]
Fiscal action means the recovery of an
overpayment or claim for reimbursement that is not properly payable
through direct assessment of future claims, offset of future claims,
disallowance of overclaims, submission of a revised claim for
reimbursement, disallowance of funds for failure to take corrective
action to meet program requirements.
Full correction means the status achieved after
a corrective action plan is accepted and approved, all corrective
actions are fully implemented, and no new or repeat serious management
problems are identified in subsequent reviews, as described in proposed
Sec. 225.18(c)(3).
Good standing means the status of a program
operator that meets its program responsibilities, is current with its
financial obligations, and, if applicable, has fully implemented all
corrective actions within the required period of time.
Hearing official means an individual who is
responsible for conducting an impartial and fair hearing--as requested
by a sponsor, responsible principal, or responsible individual
responding to a proposal for termination--and rendering a decision.
Lack of business integrity means the conviction
or concealment of a conviction for fraud, antitrust violations,
embezzlement, theft, forgery, bribery, falsification or destruction of
records, making false statements, receiving stolen property, making
false claims, obstruction of justice.
Legal basis means the lawful authority
established in statute or regulation.
National Disqualified List (NDL) means a system
of records, maintained by the Department, of sponsors, responsible
principals, and responsible individuals disqualified from participation
in the program.
Notice means a letter sent by certified mail,
return receipt (or the equivalent private delivery service), by
facsimile, or by email, that describes an action proposed or taken by a
State agency or FNS with regard to a sponsor's program reimbursement or
participation.
Principal means any individual who holds a
management position within, or is an officer of, a sponsor or a
sponsored site, including all members of the sponsor's board of
directors or the sponsored site's board of directors.
Program operator means any entity that
participates in one or more child nutrition programs.
Responsible individual means any individual
employed by, or under contract with a sponsor or an individual,
including uncompensated individuals, who the State agency or FNS
determines to be responsible for a sponsor's serious management
problems.
Responsible principal means any principal, as
described in this section, who the State agency or FNS determines to be
responsible for a sponsor's serious management problems.
Review cycle means the frequency and number of
required reviews of sponsors and sites.
Serious management problem means the finding(s)
that relate to a sponsor's inability to meet the program's performance
standards or that affect the integrity of a claim for reimbursement or
the quality of meals served at a site.
Seriously deficient means the status of a
sponsor after it is determined that full correction has not been
achieved and termination for cause is the only appropriate course of
action.
State agency list means an actual paper or
electronic list, or the retrievable paper records, maintained by the
State agency, that includes information on sponsors through the serious
deficiency process in that State. The list must be made available to
FNS upon request and must include information specified in proposed
Sec. 225.18(b).
Termination for cause means the termination of a
Program agreement due to considerations related to a sponsor's
performance of Program responsibilities under the agreement between the
State agency and sponsor.
Accordingly, this proposed rule would amend 7 CFR 226.2 by adding
definitions for contingency plan, corrective action, disqualified, fair
hearing, finding, fiscal action, full correction, good standing,
hearing official, lack of business integrity, legal basis, National
Disqualified List, notice, principal, program operator, responsible
individual, responsible principal, review cycle, serious management
problem, seriously deficient, State agency list, and termination for
cause.
2. Oversight and Implementation of the Serious Deficiency Process in
SFSP
Sponsors that enter into agreements with the State agency to
operate SFSP must be able to assume responsibility for the entire
administration of the program at all their meal service sites. They are
required to demonstrate that they have the necessary financial and
administrative capability to comply with SFSP requirements. If a
sponsor is unable to properly manage the program, the serious
deficiency process provides a clear way for the State agency to
identify and correct serious management problems and improve integrity
of meal service operations at the local level.
Although SFSP and CACFP are autonomous programs with unique
operational requirements, they are often administered by the same State
agency. To facilitate consistent and equitable application of the
serious deficiency process, within and across States, FNS proposes a
set of procedures for SFSP that is similar to the modifications this
rulemaking proposes to make in CACFP.
As in CACFP, the intent of the serious deficiency process for SFSP
is to offer a systematic way for an administering agency to correct
problems and protect program integrity. The process would include
procedures to identify serious management problems--what 7 CFR part 225
refers to as significant operational problems--and provide
opportunities for corrective action and due process. The steps of the
serious deficiency process would also be designed to help the State
agency document the case to terminate and remove any sponsor that is
unwilling to or incapable of resolving serious management problems that
place program integrity at risk.
This proposed rule would reorganize existing regulations into a new
subchapter at 7 CFR 225.18, amend termination procedures, and establish
a disqualification process similar to the process employed in CACFP,
with modifications reflecting the shorter duration of meal service
operations in SFSP. For example, the proposed maximum timeframe for
which the corrective action plan may be implemented in SFSP would be up
to 10 calendar days, whereas in CACFP the maximum timeframe could be up
to 90 calendar days for institutions.
To examine how State agencies can minimize risk to SFSP integrity,
this rulemaking proposes to codify standards under proposed Sec.
225.18(a) to help State agencies distinguish occasional administrative
errors from systemic management problems. These standards would guide
the State agency's efforts in identifying systemic errors that reflect
sponsor's inability to effectively manage the program as required under
the regulations. The State agency would have to consider the following
criteria, which FNS welcomes public comments on:
1. The severity of the problem. Is the noncompliance on a minor or
substantial scale? Are the findings indicative of a systemic problem or
is the problem truly an isolated event? There is a point at which
continued problems indicate serious
[[Page 13163]]
mismanagement. Problems that initially appear manageable may become
serious if not corrected within a reasonable period of time. Even minor
problems may be serious if systemic. Some problems are serious even
though they have occurred only once. For example, missing the recording
of meal counts at the point of service for one day out of a month could
be resolved with technical assistance. However, a second review with
the same problem or an initial review with multiple days of incomplete
point-of-service meal counts could rise to the level of a serious
management problem.
2. The degree of responsibility attributable to the sponsor. To the
extent that evidence is available, can the State agency determine
whether the findings were inadvertent errors? Is there evidence of
negligence or a conscious indifference to regulatory requirements, or
even worse, is there evidence of deception?
3. The sponsor's history of participation and training in SFSP. Is
this the first time the sponsor is having problems or has noncompliance
occurred frequently?
4. The nature of the requirements that relate to the problem. Are
the sponsor's actions a clear violation of SFSP requirements? Has the
sponsor implemented new policies correctly?
5. The degree to which the problem impacts program integrity. Is
the finding undermining program intent or purpose, such as misuse of
program funds, or is it simply an administrative error?
When the State agency identifies a serious management problem, the
sponsor can no longer be in good standing. At proposed Sec. 225.18(b),
this proposed rule would require the State agency to maintain a State
agency list to track each sponsor's progress towards resolving each
serious management problem. The State agency would add information
about the sponsor and its responsible principals and responsible
individuals to the list and keep the list updated through each step of
the serious deficiency process.
If the State agency determines that a finding rises to the level of
a serious management problem, the State agency would issue a notice
documenting in plain language each problem that must be addressed and
corrected, as described under proposed Sec. 225.18(a)(6)(i). The State
agency would send the notice to the sponsor, the management officials
who bear responsibility for the poor performance, and other responsible
principals and individuals, including nonsupervisory employees,
contractors, and unpaid staff who have been directly involved in
causing the serious management problem. A well-written notice will:
provide a detailed explanation of each serious management problem; list
appropriate regulatory citations to support the notice; identify the
responsible principals and responsible individuals; provide a clear
description of the actions required in order to fully correct the
serious management problem; and provide a definite and appropriate time
limit for the corrective action.
At proposed Sec. 225.18(c)(1), this proposed rule outlines the
information that would guide the sponsor's development of a corrective
action plan that would address the root cause of each finding, while
also demonstrating that the noncompliance is resolved. The State
agency's approval of the corrective action plan would include a review
of the sponsor's responses to these questions:
What is the serious management problem and the action
taken to address it?
Who addressed the serious management problem?
When was the action taken to address the serious
management problem?
Where is documentation of the corrective action plan
filed?
How were the sponsor's staff informed of the new policies
and procedures?
The section on assessing corrective action at proposed Sec.
225.18(c)(2), requires a short timeline to ensure that problems are
corrected quickly, particularly given SFSP's brief period of operation.
If corrective action cannot be achieved, the regulations describe
procedures the State agency should follow for fair hearings,
termination for cause, notices of serious deficiency status, and
placement on the National Disqualified List. Although corrective action
may occur at any point in the serious deficiency process, the State
agency would issue a notice of proposed termination if the deadline
described in proposed paragraph (c)(2) is not met.
If corrective action is fully implemented, the State agency would
issue a notice to advise the sponsor, responsible principals, and
responsible individuals of successful corrective action, as described
in proposed Sec. 225.18(a)(6)(ii)(A). The State agency would continue
to provide oversight to ensure that the procedures and policies the
sponsor implemented to fully correct the serious management problem are
still in place. If corrective action is complete for some but not all
of the serious management problems, proposed Sec.
225.18(a)(6)(ii)(A)(2) addresses partial achievement of corrective
action. If corrective actions are not implemented, this rulemaking
describes procedures the State agency should follow for fair hearings
in proposed Sec. 225.18(f), notice of serious deficiency status in
proposed Sec. 225.18(a)(6)(iii)(B), termination for cause in proposed
Sec. 225.18(d), and placement on the National Disqualified List in
proposed Sec. 225.18(e)(2).
This proposed rule would create a path to full correction if at
least two full reviews, occurring once every year--with the first and
last full review occurring at least 12 months apart--demonstrate that
the sponsor has the ability to operate SFSP with no new or repeat
serious management problems. Additionally, all reviews in between the
first and last full review, including follow up reviews, would need to
demonstrate that the sponsor has no new or repeat serious management
problems. As described under proposed Sec. 225.18(c)(3), once the
State agency approves a corrective action plan, the sponsor must be
reviewed at least two times, at least once every year, before full
correction is achieved. Current Sec. 225.7(e)(4)(ii) requires the
State agency to annually review every sponsor that has experienced
significant operational problems in the prior year. This proposed rule
would make a corresponding change to replace the term ``significant
operational problem'' with the term ``serious management problem.''
Serious management problems would be considered fully corrected if two
consecutive reviews--one full review each year for 2 years and at least
12 months apart--indicate no new serious management problems or no
repeat of a serious management problem. FNS welcomes public comments on
this standard.
For example, let's say a State agency reviews a sponsor in June
2022 and identifies a serious management problem. The sponsor submits a
corrective action plan that is approved by the State agency and sponsor
enters a once every year review cycle. The State agency does a follow
up review in August of 2022 to ensure that actions are fully
implemented. The State agency determines that the corrective action
plan has been fully implemented and all debts owed to the program are
fully repaid. At this point the sponsor returns to good standing. The
State agency conducts a full review in June of 2023 and again in June
of 2024. All reviews reveal no new or repeat serious management
problems and the first and last full review are at least 12 months
apart. At this point, the sponsor's serious management problem is
[[Page 13164]]
considered fully corrected and the sponsor has achieved full
correction.
Under proposed Sec. 225.18(c)(3)(iv), a serious management problem
that occurs again, after full correction is achieved, would not be
considered a repeat serious management problem and would not directly
result in proposed termination. However, the recurrence of a serious
management problem before full correction is achieved would be
considered repeat and would lead directly to proposed termination. If
new serious management problems occur before a sponsor achieves full
correction of its serious management problems, the sponsor would
continue to be reviewed at least once every year until at least two
full reviews--with the first and last review occurring at least 12
months apart--reveal no new or repeat serious management problems.
State agencies must provide appeal rights when they take actions
affecting a sponsor or site's participation, claim for reimbursement,
request for advance payments, or registration of a food service
management company, as described in current Sec. 225.13(a). Appeal
procedures, which are described in current Sec. 225.13(b), would be
replaced by the fair hearing procedures of the serious deficiency
process, at proposed Sec. 225.18(f). This section describes the
sponsor's right to a fair hearing, parameters for conducting a fair
hearing, and guidance on the role of the hearing official and the
decision-making.
The purpose of the fair hearing is limited to a determination by
the hearing official that the State agency has complied with SFSP
requirements in taking the actions that are under appeal. As with
CACFP, it is not to determine whether to uphold duly promulgated
Federal and State program requirements. FNS welcomes comments on the
following points at issue. As described in proposed Sec. 225.18(f),
this rulemaking proposes the following set of actions:
The State agency must give notice of the proposed
termination and procedures for requesting a fair hearing to the
sponsor, its executive director, board chair, and any other responsible
principals and responsible individuals.
The State agency's notice must specify the basis for
proposing termination and the procedures under which the sponsor,
responsible principals, or responsible individuals may request a fair
hearing.
The appellant must submit a written request for a fair
hearing within 10 calendar days after receipt of the State agency's
notice of proposed termination. If the State agency's fair hearing
procedures direct the appellant to send the request to the hearing
official, then the procedures must identify which office will be
responsible for acknowledging the appellant's request.
The State agency must acknowledge receipt of the fair
hearing request within 5 calendar days of receiving it.
If a fair hearing is requested, the State agency must
continue to pay any valid claims for reimbursement of eligible meals
served until the hearing official issues a decision.
Any information upon which the State agency based the
proposed termination must be available to the appellants for inspection
from the date of receipt of the hearing request.
Appellants may contest the proposed termination in person
or by submitting written documentation to the hearing official.
Appellants may represent themselves, retain legal counsel,
or be represented by another person.
All documentation must be submitted prior to the beginning
of the hearing. All parties, including the State agency, must submit
written documentation to the hearing official within 20 calendar days
after sponsor's receipt of the notice of proposed termination.
Hearing officials must be independent and impartial. Even
if they are employees of the State agency, hearing officials cannot be
involved in the action that is the subject of the fair hearing, cannot
occupy any position which would potentially subject to them to undue
influence from other State employees who are responsible for the State
agency's action, or have any direct personal or financial interest in
the outcome of the fair hearing.
Hearing officials must issue decisions within 30 calendar
days of the State agency's receipt of the appellants' hearing request,
based solely on the information provided by the parties. 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 fair hearing process.
The hearing official's administrative decision is final.
Appellants may not administratively contest the hearing official's
decision.
If the appellant prevails, the State agency would issue a notice
that confirms the proposed termination of the sponsor, responsible
principals, and responsible individuals is vacated, as described in
proposed Sec. 225.18(a)(6)(iii)(A). However, the sponsor would still
have to implement procedures and policies to fully correct the serious
management problem.
If the hearing official upholds the State agency's proposed
termination action, the State agency would immediately notify the
sponsor, executive director, board chair, and any other responsible
principals and responsible individuals that the sponsor's agreement is
terminated, as described in proposed Sec. 225.18(a)(6)(iii)(B). As
with CACFP, it is at this point in the process that this rulemaking
proposes to declare the sponsor seriously deficient. The State agency
would issue a serious deficiency notice that informs the sponsor,
responsible principals, and responsible individuals of their
disqualification from SFSP participation. This proposed rule describes
termination of the agreement at proposed Sec. 225.18(d) and
disqualification at proposed Sec. 225.18(e).
The State agency would provide a copy of the serious deficiency
notice to FNS, with the mailing address and date of birth for each
responsible principal and responsible individual, and the full amount
of any determined debt associated with the sponsor, responsible
principals, and responsible individuals, for inclusion on the National
Disqualified List. Requirements at proposed Sec. 226.25(e)(2) describe
placement on the National Disqualified List. Extension of the National
Disqualified List to SFSP would make a list of disqualified sponsors
and individuals available to State agencies to use in approving or
renewing sponsor applications.
Proposed Sec. 225.18(g) addresses the State agency's
responsibilities for the payment of valid claims and the collection of
unearned payments. Requirements for State agency action in response to
the independent determination of a serious management problem by FNS is
described in proposed Sec. 225.18(h).
Accordingly, this proposed rule would establish a serious
deficiency process to address serious management problems in SFSP. This
rulemaking would address State agency oversight and implementation of
the serious deficiency process under 7 CFR 225.18. Corresponding
amendments are proposed at 7 CFR 225.2, 225.6(b)(9), 225.11(c), and
225.13.
C. Suspension
Section 17 of the NSLA, at 42 U.S.C. 1766(d)(5), recognizes that
there are circumstances that may require the immediate suspension of
program operations, where continued participation in CACFP is
inappropriate because health, safety, or program
[[Page 13165]]
integrity are at risk. Current Sec. Sec. 226.6(c)(5)(i) and
226.16(l)(4) describe a set of actions that an administering agency
must implement if a program operator's participation poses an imminent
threat to the health or safety of children, adult participants, or the
public. Under current Sec. 226.6(c)(5)(ii), the regulations outline
administrative procedures when a State agency determines a false or
fraudulent claim is submitted. There is no corresponding statute or
regulations for suspension of participation in SFSP.
Suspension requirements would move to proposed Sec. 226.25(f).
FNS does not propose any procedural changes for administering agencies
when there is an imminent threat to health and safety through the
suspension process. However, FNS is proposing to strengthen
requirements for State agency action when a program operator knowingly
submits a false or fraudulent claim. Proposed Sec. 226.25(f)(2) would
require State agencies to exercise their authority to suspend CACFP
participation when it is determined that a claim for reimbursement is
fraudulent or cannot be verified with required documentation.
This rulemaking also includes technical amendments to correspond
with the proposed changes in terminology and reorganization of the
serious deficiency process regulations. Under proposed Sec. 226.25(f),
a suspension would remain in effect until the serious management
problem is corrected, as in the case of a suspension based on a false
or fraudulent claim, or a fair hearing of the proposed termination is
completed. Although the agreement is not formally terminated, a program
operator cannot participate in CACFP during the period of suspension.
Suspension for Health or Safety Threat
CACFP participation must be suspended if an imminent threat is
identified that places the health or safety of children, adult
participants, or the public at risk. The suspension is immediate and
cannot be appealed. The administering agency must notify the program
operator, responsible principals, and responsible individuals that
participation and payments are suspended and termination and
disqualification are proposed. The notice must identify the serious
management problem and include procedures for requesting a fair hearing
of the proposed termination and disqualification, as described in
current Sec. Sec. 226.6(c)(5)(i)(B) and 226.16(l)(4)(ii). Proposed
Sec. 226.25(f)(1)(i)(A) would address the notice of suspension of an
institution and proposed Sec. 226.25(f)(1)(ii)(A) would address the
notice of suspension of a day care home or an unaffiliated center.
The administering agency is prohibited from offering an appeal
prior to the commencement of the suspension and payments will remain
suspended until the fair hearing is concluded. If the hearing official
overturns the suspension, the program operator may claim reimbursement
for eligible meals served during the suspension. Current Sec.
226.6(c)(5)(i)(C), which addresses termination of the agreement by the
program operator and placement on the National Disqualified List, would
move to proposed Sec. 226.25(f)(1)(i)(B) and (f)(1)(ii)(B). If a
program operator voluntarily terminates its agreement after receiving
the notice of proposed termination, the program operator will still be
terminated for cause and disqualified.
Proposed Suspension for Fraud or Fraudulent Claim
Submission of a false claim for reimbursement in facilities is a
serious management problem that must be addressed through the serious
deficiency process. However, an institution is subject to suspension
for the submission of a false claim for reimbursement. Current Sec.
226.6(c)(5)(ii), authorizes State agencies to suspend participation, at
their discretion, if the State agency determines that a claim for
reimbursement is fraudulent or cannot be verified with required
documentation. Under proposed Sec. 226.25(f)(2) of this rulemaking,
FNS would require State agencies to suspend participation of
institutions in all cases of false or fraudulent claims. Suspension
stops the flow of payments to those institutions and provides
protection against misuse of program funds.
Suspension for false or fraudulent claims is not immediate. At the
time suspension is proposed, the State agency must initiate action to
terminate the agreement to disqualify the institution, responsible
principals, and responsible individuals. Suspension for false or
fraudulent claims becomes effective if the institution does not appeal
the proposed termination and disqualification or, if a suspension
review is requested, the hearing official upholds the State agency's
proposed action. If a suspension for submission of a false or
fraudulent claim is overturned, the serious deficiency process to
address the institution's serious management problems would still
continue.
All of the requirements for suspending an institution for
submitting a fraud or fraudulent claim that are found in current Sec.
226.6(c)(5)(ii) would move to proposed Sec. 226.25(f)(2). Suspension
of payments would move from current Sec. Sec. 226.6(c)(5)(i)(D),
226.6(c)(5)(ii)(E), and 226.16(l)(4)(iv) to proposed Sec.
226.25(h)(2). When the State agency proposes to suspend an
institution's participation, including program payments for the
submission of a false or fraudulent claim, the State agency must issue
a combined notice of serious management problems and proposed
suspension, which would include a description of the serious management
problem and the State agency's fair hearing procedures for suspension
and termination. The institution has the right to request a suspension
review as well as a fair hearing of the proposed termination and
disqualification action.
The suspension is implemented if the institution does not appeal
the action or, if an appeal is filed, the hearing official upholds the
action proposed by the State agency. If the suspension review official
overturns the proposed suspension, the institution may claim
reimbursement for eligible meals served during the proposed suspension.
A State agency must not reimburse an institution for that portion of a
claim that the State agency knows to be invalid. Voluntary termination
of the institution's agreement with the State agency after having
received the notice would still result in termination for cause and
placement on the National Disqualified List.
Suspension of participation and suspension of payments add strong
integrity protections against the submission of false and fraudulent
claims in CACFP. FNS is concerned that there are similar circumstances
in SFSP where continuing program operations is inappropriate, yet there
are no corresponding requirements authorizing the State agency to
suspend participation and payments. FNS recognizes that additional
public input is needed to consider the use of suspension to protect
against the submission of false or fraudulent claims in SFSP. Public
comments on the following proposed options will be critical as FNS
develops the final rule:
1. Option 1 of this proposed rule would require the State agency to
apply the serious deficiency process when it determines that a sponsor
in SFSP has submitted a false or fraudulent claim. The serious
deficiency process would provide the sponsor the opportunity for
corrective action and a fair hearing, with no suspension of
participation. The sponsor would be eligible to continue to participate
in SFSP and receive
[[Page 13166]]
payments for all valid claims that are submitted to the State agency
for reimbursement.
2. Option 2 would require the State agency to propose suspension
based on a sponsor's submission of a false or fraudulent claim, at the
same time that the serious deficiency process is implemented. The
suspension would remain in effect until the false or fraudulent claim
is corrected or a fair hearing of the suspension completed. Although
there would be no formal termination of the agreement, the sponsor
would not be eligible to participate in SFSP during the period of
suspension. All payments of claims for reimbursement would be
suspended. If a fair hearing overturns the suspension, the sponsor
would be eligible for retroactive reimbursement.
Accordingly, this rulemaking proposes to make corresponding changes
to 7 CFR 226.2 and 226.25 to align the proposed amendments to the
serious deficiency process. This proposed rule would move State agency
actions to suspend participation if health or licensing officials cite
an institution for serious health or safety violations from 7 CFR
226.6(c)(5)(i) through 226.25(f)(1). Requirements for the State agency
to exercise its authority to suspend participation if it determines
that an institution knowingly submitted a claim for reimbursement that
is fraudulent or that cannot be verified with required documentation
would move from 7 CFR 226.6(c)(5)(ii) to 226.25(f)(2). Fair hearing
procedures at 7 CFR 226.6(k) and (l) would move to Sec. 226.25(g).
Sponsoring organization actions to suspend participation of day care
homes that are currently found at 7 CFR 226.16(l)(4) would move to
Sec. 226.25(f). Requirements for the suspension of payments would move
from 7 CFR 226.6(c)(5)(i)(D), 226.6(c)(5)(ii)(E), and 226.16(l)(4)(iv)
to 226.25(h)(2).
D. Disqualification and the National Disqualified List
1. Termination for Cause and Disqualification
The serious deficiency process gives program operators the
opportunity for corrective action and due process. The administering
agency can accept corrective action at any point up until the program
agreement is terminated. If the administering agency determines that
the program operator, whose ability to manage the program has already
been called into question, fails to take successful corrective action,
the program agreement must be terminated for cause. Under this proposed
rule, the administering agency would declare the program operator to be
seriously deficient at the point of termination, which would be
followed by disqualification.
Termination for Cause
The Child Nutrition Program Integrity Final Rule amended CACFP and
SFSP regulations to allow a program operator to terminate an agreement
for convenience for considerations unrelated to its program
performance, at current Sec. Sec. 225.6(i) and 226.6(b)(4)(ii). In the
serious deficiency process, due to a program operator's inability to
properly perform its responsibilities under its program agreement,
termination must always be for cause, not convenience. Current Sec.
226.16(l) also addresses a sponsoring organization's actions to
terminate a day care home's agreement for cause. There are no
regulations describing the termination for cause of a CACFP institution
or unaffiliated center or an SFSP sponsor's agreement related to the
performance of program requirements.
To strengthen management practices and eliminate gaps that put
program integrity at risk, FNS proposes to amend current Sec. Sec.
225.2 and 226.2 to include definitions of ``Termination for cause'' to
describe the administering agency's action to end an agreement with a
sponsor, an institution, an unaffiliated center, or a day care home for
reasons related to proper performance of program responsibilities. This
proposed rule would also require action by the State agency to:
Terminate an agreement whenever a sponsor's participation
in SFSP or an institution's participation in CACFP ends at proposed
Sec. Sec. 225.6(i) and 226.6(b)(4)(iii), respectively;
Terminate an agreement for cause, as described under the
serious deficiency process proposed Sec. Sec. 225.18(d)(1) and
226.25(d)(1); and
Terminate an agreement for cause if a program operator,
responsible principal, or responsible individual is on the National
Disqualified List, at proposed Sec. Sec. 225.18(e)(1) and
226.25(e)(1).
Disqualification
The National Disqualified List was established to prevent a
disqualified institution or day care home from being approved to
participate in CACFP or any other Child Nutrition Program. As described
in the next section of this preamble, FNS proposes to amend 7 CFR
210.9(d), 215.7(g), 220.7(i), 225.6(b)(13), and 226.6(b)(1)(xiii), to
establish a reciprocal disqualification process that would prohibit
State agencies from approving an application for any program operator
that is terminated for cause and placed on a National Disqualified
List.
In CACFP, if a new institution's application does not meet program
requirements under 7 CFR 226.6(b), 226.15(b), or 226.16(b), the State
agency must deny the application and disqualify the applicant
institution, the person who signed the application, and any other
responsible principals or responsible individuals, as described in
proposed Sec. 226.6(c). The State agency must ensure that
participating institutions annually certify that neither the
institution nor its principals are on the National Disqualified List.
The State agency must also ensure that participating sponsoring
organizations annually certify that no sponsored facility or facility
principal is on the National Disqualified List.
When a new application is denied, current Sec. 226.6(c)(1)
requires the State agency to follow the procedures for implementing the
serious deficiency process. However, FNS recognizes that the intent of
the serious deficiency process is to address program performance under
a legally binding agreement. It may be more appropriate to address the
denial of a program application through a remedial application process,
instead of the serious deficiency process. This rulemaking would amend
7 CFR 226.6(c)(1) to propose a separate set of procedures that would
provide applicants the opportunity to correct the application and
request due process if the application is denied. Similarly, the
serious deficiency process would not apply to a denial of a sponsor's
application for SFSP, as described in 7 CFR 225.11(c).
2. Reciprocal Disqualification in Child Nutrition Programs
Section 12(r) of the NLSA, 42 U.S.C. 1760(r), specifies 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. FNS proposes 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 and the applicant
is on the National Disqualified List for CACFP or SFSP. This process is
called ``reciprocal disqualification.''
The establishment of a reciprocal disqualification process supports
[[Page 13167]]
integrity when it is determined that a program operator currently
participating in a Child Nutrition Program is terminated for cause from
another Child Nutrition Program and placed on the National Disqualified
List. Proposed Sec. 226.6(b)(1)(xiii) would prohibit State agencies
from approving an application for participation in any Child Nutrition
Program for any program operator that is terminated for cause and
placed on the National Disqualified List. Current Sec.
226.6(c)(1)(iii)(C)(3) and proposed Sec. Sec. 226.6(c)(6)(iii) and
226.25(g)(1)(i)(A) provide the right to a fair hearing to program
operators whose applications are denied. The right to a fair hearing of
an application denial for program operators based on the National
Disqualified List is solely granted to contest the accuracy of the
information on the National Disqualified List or the match to the
National Disqualified List. The basis for denial, termination for
cause, and placement on the National Disqualified List, is not subject
to an additional hearing. The right to a fair hearing already would
have been provided prior to termination and disqualification.
Proposed Sec. 226.25(e)(1) would apply reciprocal disqualification
for termination and placement on a National Disqualified List for
program operators with an existing program agreement. This rulemaking
would also apply termination procedures, under 7 CFR 210.25, 215.16,
220.19, 225.11, 226.6, and 226.16, when it is determined that a program
operator currently participating in a Child Nutrition Program is
terminated for cause from another Child Nutrition Program and placed on
a National Disqualified List. The State agency would have to make an
effort to ensure that eligible children and adult participants continue
to have access to important nutrition benefits. For example, if a CACFP
sponsoring organization is terminated and disqualified, the State
agency should have a contingency plan for the transfer of homes or
unaffiliated centers. A contingency plan, as defined in proposed
Sec. Sec. 225.2 and 226.2, and further described in proposed
Sec. Sec. 225.18(d)(2) and 226.25(d)(2), would help ensure that meal
services continue to be available, without interruption.
This proposed rule would require the State agency to follow the
same procedures to address serious management problems through
corrective action and due process for all types of program operators.
However, at the point when a proposed termination action is upheld and
the program operator is declared seriously deficient, as described in
proposed Sec. 226.25(a)(6)(iii)(B) and (d)(1), FNS has determined that
there are circumstances that may warrant an alternative to
disqualification for institutions or sponsors that are also school food
authorities. FNS recognizes that school food authorities are
responsible to safeguard school meal benefits to children. Additional
public input is needed to consider a different procedure when a school
food authority that is also an institution or sponsor operating CACFP
or SFSP, respectively, is declared seriously deficient. Public comments
on the following options will be critical as FNS develops the final
rule:
1. Option 1 would require the State agency to terminate,
disqualify, and place on the National Disqualified List any school food
authority that is declared seriously deficient, just like any other
type of institution or sponsor that is operating CACFP and SFSP. If a
school food authority is determined to be seriously deficient, the
school food authority's agreement to operate CACFP or SFSP would be
terminated, and it would be disqualified and placed on the National
Disqualified List, as described under proposed Sec. Sec. 225.18(e) and
226.25(e). Placement on the National Disqualified List would prohibit
the school food authority from operating the National School Lunch
Program, School Breakfast Program, or any other Child Nutrition
Program. The responsible principals and responsible individuals would
also be disqualified from program participation and placed on the
National Disqualified List.
2. Option 2 would require the State agency to terminate the school
food authority's agreement to operate CACFP or SFSP. In this case, the
responsible principals and responsible individuals would be
disqualified from program participation, placed on the National
Disqualified List, and ineligible to participate in any Child Nutrition
Program. However, the State agency would have discretion to disqualify
and place the school food authority, itself, on the National
Disqualified List. If the State agency determines that the school food
authority should not be subject to disqualification and placement on
the National Disqualified List, there would be no impact on the school
food authority's ability to operate other Child Nutrition Programs,
including the National School Lunch and School Breakfast Programs.
This rulemaking would not affect the eligibility of a school food
authority that only operates the National School Lunch, School
Breakfast, or Special Milk Programs to continue to participate in those
programs. FNS does not anticipate that it will impact most school food
authorities that operate CACFP or SFSP. With their experience managing
the school nutrition programs, school food authorities are well-
positioned to successfully operate CACFP and SFSP.
There may also be circumstances when a school food authority may be
a meal vendor for a program operator that has been placed on the
National Disqualified List. If the school food authority is not
otherwise connected to the management of CACFP or SFSP, the school food
authority would continue to be eligible to participate in the Child
Nutrition Programs, because it would not be responsible for program
operations. School food authorities, sponsors, and institutions are
only responsible for the schools, sites, and facilities identified in
their State agency agreements.
Accordingly, this proposed rule would amend 7 CFR 225.2 and 226.2
to include definitions of termination for cause and contingency plan.
Additional amendments to 7 CFR 210.9(d), 215.7(g), 220.7(i),
225.6(b)(13), 225.18(d) and (e), 226.6(b)(1)(xiii) and (b)(2)(iii)(D),
and 226.25(d) and (e) would prohibit State agencies from approving an
application for participation in any Child Nutrition Program for a
program operator that is terminated for cause and that is listed on a
National Disqualified List. This rulemaking would also amend 7 CFR
225.11(c) and 226.6(c) to ensure that the appropriate procedures are
followed for a denial of a sponsor's or institution's application.
3. Legal Requirements for Records Maintained on Disqualified
Individuals
The National Disqualified List is a Federal computer matching
program that uses a Computer Matching and Privacy Protection Act system
of records of information on institutions and individuals who are
disqualified from participation in CACFP. This is a mandatory
collection under section 243(c) of Public Law 106-224, the Agricultural
Risk Protection Act of 2000, which amended section 17 of the Richard B.
Russell National School Lunch Act, at 42 U.S.C. 1766(d)(5)(E)(i) and
(ii), and under 7 CFR 226.6(c)(7)(i). This proposed rule would expand
the National Disqualified List to include the records of sponsors,
sites, responsible principals, and responsible individuals who have
been disqualified from SFSP, in compliance with section 13 of the NSLA,
at 42 U.S.C. 1761(q)(3), and the Computer Matching Act, at 5 U.S.C.
552a. The Computer Matching Act applies when a Federal agency conducts
[[Page 13168]]
a computer match of two or more personally identifiable information
records for establishing or verifying eligibility under a Federal
benefit program. The Computer Matching Act also applies when a non-
Federal agency compares information with a Federal system of records to
determine eligibility for a Federal benefit program. A computer match
takes information provided by a Federal source and compares it to a
State record, using a computer to perform the comparison.
The National Disqualified List supports program integrity by
preventing institutions whose program agreements were terminated for
cause and disqualified in one State from being approved for
participation in another State. It prevents disqualified responsible
principals from continuing to be involved in program administration by
forming a new corporate entity and entering the program under a
different organizational name. It also prevents day care home providers
and responsible individuals who have been terminated and disqualified
by one sponsoring organization from re-entering the program under the
auspices of a different sponsoring organization. Once disqualified,
program participation is prohibited for 7 years from the effective date
of the disqualification and until any debt is paid.
The records of institutions, responsible principals, and
responsible individuals who have been disqualified from participation
in CACFP are part of the National Disqualified List. As FNS described
in the notice, Privacy Act of 1974; System of Records Revision, 86 FR
48975, September 1, 2021, many of the steps of the serious deficiency
process align with requirements of the Computer Matching Act. For
example, the State agency initiating a National Disqualified List
search must independently verify records to determine accuracy before
taking adverse action against a program applicant or participant. FNS
uploads every certified notice of serious deficiency into the system,
which the State agency may use to verify that the match is correct.
After records are verified, the State agency must notify the
disqualified program applicant or participant of the match findings.
However, current Sec. 226.6(c)(6) describing the National Disqualified
List does not address procedures or protections for data disclosure and
privacy specified for records maintained on any person in a computer
matching program under the Computer Matching Act.
This proposed rule would close the gap by codifying the
responsibilities of administering agencies in implementing systems of
records, as described in the Computer Matching Act. Under proposed
Sec. Sec. 225.18(e)(3) and 226.25(e)(3), each State agency would enter
into a written matching agreement with FNS to address procedures and
protections for disclosure and privacy of personally identifiable
information records on the National Disqualified List. Additional
amendments would advise State agencies on the use of matching
agreements, independent verification of matching information, use of
disqualification data, and safeguards to protect individuals who may be
incorrectly placed on the National Disqualified List through human
error or technical lapses in the system. Before a CACFP or an SFSP
application is denied, the State agency would also have to notify any
individual whom the application identifies as being placed on the
National Disqualified List. The State agency must provide an
opportunity for the individual to ensure that the record is accurate.
Current CACFP regulations at 7 CFR 226.6(b)(1)(xii) and
(b)(2)(iii)(C) require State agencies and sponsoring organizations to
verify that applicants are not on the National Disqualified List prior
to approval or annual certification of participation. Similarly, before
hiring, CACFP sponsoring organizations must check the National
Disqualified List to verify that any new employee whose position will
be supported by program funds or who will be working in CACFP is not on
the National Disqualified List. Proposed Sec. 226.25(e)(3)(i)(C) would
require the State agency initiating a computer match to verify the
disqualification before taking adverse action against a program
applicant, participant, or employee. The State agency could contact the
originating administering agency or check the certified notices that
are uploaded to the system to verify the disqualification.
The serious deficiency process requires three types of certified
notices that are uploaded to the system, which administering agencies
may use to independently verify the accuracy of a computer match. This
rulemaking would also amend the definition of ``notice'' under 7 CFR
226.2 and address the content and delivery requirements for all of the
notifications that are transmitted as part of the serious deficiency
process at proposed Sec. 226.25(a)(5).
This proposed rule would also expand the National Disqualified List
to include the records of sponsors, sites, responsible principals, and
responsible individuals who have been disqualified from SFSP, as
required under section 13 of the NSLA, at 42 U.S.C. 1761(q)(3). FNS
proposes to amend SFSP regulations to address termination for cause at
proposed Sec. 225.18(d)(1); disqualification and placement on the
National Disqualified List at proposed Sec. 225.18(e)(2); and the
State agency's responsibilities under the Computer Matching Act at
proposed Sec. 225.18(e)(3).
Accordingly, this proposed rule would amend 7 CFR 225.18(e)(3) and
226.25(e)(3) to address compliance with the Computer Matching Act's
protections for data disclosure and privacy specified for records
maintained on any person on the National Disqualified List. This
rulemaking would also amend the definition of ``notice'' under 7 CFR
225.2 and 226.2 and further amend 225.18(a)(5) and (e)(3)(v), and
226.25(a)(5) and (e)(3)(v) to address the content and delivery
requirements for serious deficiency process notifications and
independent verification of a computer match.
E. Multi-State Sponsoring Organizations (MSSO)
A sponsoring organization is a type of public or private nonprofit
institution that is entirely responsible for the administration of
CACFP in any day care home, unaffiliated public or private nonprofit
center, or affiliated for-profit center. Day care homes are required to
participate in CACFP through a sponsoring organization. Although
centers may enter into an agreement directly with the State agency,
many centers find it is easier to participate in CACFP under an
existing sponsoring organization. As a growing number of sponsoring
organizations expand to serve multiple types of facilities in multiple
States, State agencies are faced with unique challenges, particularly
when serious management problems arise. Without regulated practices,
assignment of State agency responsibilities and protocol of
communication, State agencies dealing with multi-state sponsoring
organizations (MSSOs) could duplicate each other's efforts and could be
unaware of potential serious management problems occurring in another
State. In SFSP, FNS understands there are an increasing number of
sponsors operating summer meal programs at sites in more than one
State.
FNS is taking this opportunity to propose regulations to strengthen
State agency administration when a sponsoring organization operates the
program in more than one State. This
[[Page 13169]]
proposed rule addresses provisions to facilitate the State agency's
review of administrative budgets and allocation of shared costs,
performance of monitoring and audit-related activities, and oversight
when procurement standards vary from State to State. FNS recognizes
that improved information sharing, collaboration, and coordination
among administering agencies are also essential to ensure that
participation of MSSOs is administered properly, with less duplication
and burden.
At 7 CFR 226.2, FNS proposes to define an MSSO as a sponsoring
organization that operates CACFP in more than one State. This proposed
rule would define an MSSO as a sponsor that operates SFSP in more than
one State, under 7 CFR 225.2. An MSSO enters into a written agreement
with the administering agency in each State where it is approved to
provide CACFP or SFSP meal services. An independently owned or
franchised organization operating multiple centers, day care homes, or
sites in a single State would not be an MSSO. However, a franchise
operating multiple centers, day care homes, or sites in more than one
State would be an MSSO. A for-profit organization is an MSSO when the
parent corporation operates multiple affiliated centers or affiliated
sites in more than one State.
The State agency must determine if program operations will be
provided in more than one State, as part of the application process.
Proposed Sec. Sec. 225.6(c)(5), 226.6(b)(1)(xix), and
226.6(b)(2)(iii)(L) would require the State agency to ask all
applicants if they are approved or intend to submit an application to
participate in any other State. The application of a potential MSSO
would have to provide: additional information on the number of
affiliated and unaffiliated facilities or sites it operates; its use of
program funds for administrative expenses; and its nonprofit or for-
profit status. The application would also have to include a
comprehensive budget that provides the sum of all costs to be incurred,
identifies costs that attribute directly to operations within each
State, and sets out a cost allocation plan for costs benefiting more
than one State.
For program purposes, a cognizant agency is any State agency or FNS
Regional office that is responsible for oversight of CACFP or SFSP in
the State where the MSSO's headquarters is located. The location of the
MSSO's headquarters is the determining factor in assigning the role of
the cognizant agency. This rulemaking proposes to add definitions of
Cognizant State agency and Cognizant Regional office, under 7 CFR 225.2
and 226.2, to recognize the roles that these administering agencies
have when an MSSO participates in CACFP or SFSP. These terms are
currently not defined in regulation. By assigning responsibilities to
the Cognizant State agency and Cognizant Regional office, this will
eliminate a duplication of effort and increase program integrity by
increasing awareness of the MSSO's performance in other States. FNS
seeks input on how MSSO's headquarters are identified.
Over the years, FNS has issued CACFP guidance to clarify
responsibilities--particularly with regard to participation of
franchises and for-profit organizations, review of administrative
budgets, allocation of shared costs, availability of records,
performance of monitoring and audit-related activities, and procurement
actions--for agencies that assume cognizance. This set of guidance
includes FNS Instruction 788-5, Approval of Administrative Budgets for
Multi-State Sponsoring Organizations of Family Day Care Homes--Child
Care Food Program, October 25, 1982; FNS Instruction 788-16,
Administrative Procedures for Multi-State Sponsoring Organization--
Child Care Food Program, October 19, 1983; FNS Instruction 788-6,
Revision 2, Availability of Institutions' Records to Administering
Agencies, November 1, 1991; FNS Instruction 796-2, Revision 4,
Financial Management--Child and Adult Care Food Program, December 11,
2013; and the memorandum, Applicability of FNS Instruction 788-16 to
Multi-State Proprietary CACFP Sponsors, June 25, 2003.
FNS proposes to amend CACFP regulations at 7 CFR 226.6(q) to
address the responsibilities of the administering agency in all States
where MSSOs operate and describe the unique role of the cognizant
agency in the State where the MSSO is headquartered. This proposed rule
would add similar amendments to SFSP regulations under 7 CFR 225.6(n).
This rulemaking would require all CACFP State agencies and SFSP
State agencies to:
Determine if an applicant is an MSSO. As part of the
application process, the State agency must ask all applicants if their
organization operates in more than one State.
Obtain administrative and financial information from each
MSSO. The following information must be obtained initially on the
MSSO's application and annually certified or updated:
[ballot] The number of affiliated facilities or sites it operates,
by State;
[ballot] The number of unaffiliated facilities or sites it
operates, by State;
[ballot] The names, addresses, and phone numbers of the
organization's headquarters and the official who has administrative
responsibility;
[ballot] The names, addresses, and phone numbers of the financial
records center and the official who has financial responsibility; and
[ballot] The organization's decision whether or not to use program
funds for administrative expenses.
Approve the administrative budgets of any MSSOs operating
within their respective States. The State agency is responsible for
approving budget line items that are directly attributable to
operations within the State. The State agency must notify the cognizant
State agency of any CACFP administrative costs that exceed the 15
percent limit, as described in current Sec. 226.6(f)(1)(iv). In SFSP,
the State agency must notify the cognizant State agency if it has
determined that the ratio of administrative to operating costs is high
or that the net cash resources of an MSSO's nonprofit food service
exceeds the limits that are described in 7 CFR 225.7(m).
Enter into a permanent written agreement with each MSSO
operating within the State. Each MSSO must enter into an agreement with
the State agency to assume final administrative and financial
responsibility for program management in each State in which it
operates.
Track State-specific costs. The State agency is
responsible for approving State-specific costs, which include the State
agency's portion of budget line item costs that are shared among other
administering agencies, as well as costs that attribute directly to
program operations within the State.
Conduct oversight of MSSO operations within the State.
State agencies must comply with SFSP and CACFP monitoring and program
assistance requirements under proposed Sec. Sec. 225.6(n)(2) and
226.6(q), respectively, to conduct reviews, training, and other
oversight activities of MSSOs operating within their respective States.
The review cycle would be based on the number of sites or facilities
operating within the State. To reduce administrative burden, the State
agency may use information from the cognizant State agency's monitoring
activities to assess compliance in areas where the scope of review
overlaps, during the same review cycle. In those circumstances, the
State agency may choose to only review those aspects of CACFP or SFSP
that are outside the scope of the cognizant agency's review,
[[Page 13170]]
such as implementation of additional State agency requirements or
financial records to support State-specific administrative costs.
Summaries of reviews conducted within each State must be provided to
the cognizant State agency. The State agency may also choose to conduct
a full review at the MSSO headquarters and financial records center, by
requesting the necessary records from the cognizant State agency.
Conduct audit resolution activities. State
agencies are responsible for reviewing audit reports, addressing audit
findings, and implementing corrective actions to resolve audits of any
MSSOs operating within their respective States. MSSOs must make audit
reports available to the State agencies in all of the States in which
they have program operations.
Make available copies of notices of termination
and disqualification. The State agency conducting the oversight
activities must notify all other administering agencies that have
agreements with the MSSO of termination and disqualification actions.
If a State agency holds an agreement with an MSSO that is disqualified
by another administering agency and placed on the National Disqualified
List, the State agency must terminate the MSSO's agreement, effective
no later than 30 calendar days of the date of the MSSO's
disqualification. This requirement is 45 days in CACFP regulations at
current Sec. 226.6(c)(2)(i). In SFSP, this proposed rule would require
the State agency to terminate the MSSO's agreement, effective no later
than 15 calendar days of the date of the MSSO's disqualification.
FNS also proposes requirements for the cognizant State agency
administering CACFP or SFSP. This rulemaking would require the
cognizant State agency to:
Determine if there will be shared administrative costs
among the States in which the MSSO operates and how the costs will be
allocated. The cognizant agency has the authority to approve cost
levels for cost items that must be allocated. The cognizant State
agency must approve the allocation method that the MSSO uses for shared
costs. The method must allocate the cost based on the benefits
received, not the source of funds available to pay for the cost. If the
MSSO operates CACFP centers, the cognizant agency must also ensure that
administrative costs are capped at 15 percent on an organization-wide
basis. In SFSP, the cognizant agency must ensure that the net cash
resources of an MSSO's nonprofit food service do not exceed the limits
that are described in 7 CFR 225.7(m).
Coordinate monitoring. The cognizant State agency's
monitoring activities must include a full review at the MSSO
headquarters and financial records center. The cognizant State agency
must coordinate the timing of reviews and make copies of monitoring
reports and findings available to all other administering agencies that
have agreements with the MSSO, as described in proposed Sec. Sec.
225.6(n)(2)(iii) and Sec. 226.6(q)(2)(iii).
Ensure that organization-wide audit requirements are met.
Each MSSO must comply with audit requirements, as described under 2 CFR
part 200, subpart D, and USDA implementing regulations 2 CFR parts 400
and 415. Since their operations are often large and complex, MSSOs
should have annual audits. If an MSSO has for-profit status, the
cognizant agency must establish audit thresholds and requirements.
Oversee audit funding and costs. Audit funding is a shared
responsibility. The share of organization-wide audit costs may be based
on a percentage of each State's expenditure of CACFP and SFSP funds and
the MSSO's expenditure of Federal and non-Federal funds during the
audited fiscal year. The cognizant State agency should review audit
costs as part of the overall budget review and make audit reports
available to the other administering agencies that have agreements with
the MSSO.
Ensure compliance with procurement requirements.
Procurement actions involving MSSOs must follow the requirements under
2 CFR part 200, subpart D, and USDA implementing regulations 2 CFR
parts 400 and 415. If the procurement action benefits all States in
which the MSSO operates, the procurement standards of the State that
are the most restrictive apply. If the procurement action only benefits
a single State's program, the procurement standards of that State
agency apply.
Accordingly, this rule proposes to amend 7 CFR 226.2, 226.6(b)(1)
and (2), and 226.6(q) to address State administrative responsibilities
when MSSOs participate in CACFP. Amendments to 7 CFR 225.2,
225.6(c)(5), and 225.6(n) would make similar changes to address State
administrative responsibilities when MSSOs participate in SFSP.
F. Summary of Regulatory Provision Proposals
This rulemaking reflects FNS' commitment to work with State
administrators, program operators, and other stakeholders to develop
strategies to ensure that Child Nutrition Program requirements are
effective, practical, and fair. FNS has proposed important
modifications to the serious deficiency process that, when codified in
the regulations, are designed to strengthen administrative oversight,
improve operational performance, and protect Child Nutrition Programs
from mismanagement, abuse, and fraud. The serious deficiency process
described in this proposed rule includes procedures for corrective
action, termination, disqualification, and due process that emphasize
fairness and consistency for all types of program operators in CACFP
and SFSP. This proposed rule addresses statutory requirements and
policy improvements that would:
Extend the serious deficiency process to unaffiliated
centers in CACFP.
Establish a serious deficiency process in SFSP.
Make improvements to the serious deficiency process by:
[cir] Defining terms that would encourage a clear understanding and
improve implementation of the serious deficiency process;
[cir] Including measures for identifying a serious management
problem and determining the effectiveness of corrective action;
[cir] Offering a path to full correction of a serious management
problem and the removal of the determination of serious deficiency;
[cir] Establishing timelines with an emphasis on correcting serious
management problems quickly; and
[cir] Consolidating all regulatory requirements for oversight and
implementation of the serious deficiency process, including due
process, termination, and disqualification, in a single subchapter, at
7 CFR 225.18 and 226.25.
Direct each SFSP State agency to establish a list of
sponsors, responsible principals, and responsible individuals with
serious management problems.
Require action by the State agency to terminate a CACFP or
SFSP agreement for cause through the serious deficiency process.
Expand the National Disqualified List to include
disqualified SFSP sponsors, responsible principals, and responsible
individuals on the National Disqualified List.
Direct the State agency to exercise its authority to
suspend CACFP participation when a false or fraudulent claim is
alleged.
Require compliance with the Computer Matching Act's
protections for data disclosure and privacy specified
[[Page 13171]]
for records maintained on any person on the National Disqualified List.
Propose requirements to strengthen State agency
administration when a program operator participates in CACFP or SFSP in
more than one State.
Public input and assessment, with an opportunity to examine CACFP
and SFSP operations and consider improvements related to this proposed
rule, are essential elements of the rulemaking process. FNS invites the
public to submit comments to help FNS gain a better understanding of
both the possible benefits and any negative impacts associated with the
proposed regulatory changes. FNS requests specific input on a proposal
to allow an alternative to disqualification for program operators that
are school food authorities. Specific public input is also requested on
the requirement that State agencies exercise their authority to suspend
CACFP participation when a false or fraudulent claim is alleged and to
extend this authority to State agencies administering SFSP. Public
comments on these amendments will be critical as FNS develops the final
rule.
III. Procedural Matters
A. Executive Orders 12866, 13563 and 14094
Executive Orders 12866 and 13563 direct agencies to assess all
costs and benefits of available regulatory alternatives and, if
regulation is necessary, to select regulatory approaches that maximize
net benefits, including potential economic, environmental, public
health and safety effects, distributive impacts, and equity. Executive
Order (E.O.) 13563 emphasizes the importance of quantifying both costs
and benefits, reducing costs, harmonizing rules, and promoting
flexibility. This rulemaking was determined to be not significant under
section 3(f) of E.O. 12866, as amended by E.O. 14094, and therefore no
Regulatory Impact Analysis is required.
B. 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 proposed 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
and local organizations operating the Child and Adult Care Food Program
and Summer Food Service Program, any economic effect will not be
significant.
C. 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 rule, 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 rule. This proposed 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.
D. 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, Special Milk, and School Breakfast Programs are
listed under Nos. 10.555, 10.556, and 10.553, respectively. All are
subject to Executive Order 12372, which requires intergovernmental
consultation with State and local officials. Since these 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.
E. 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 proposed rule does not have federalism
implications. This rulemaking does not impose substantial or direct
compliance costs on State and local governments. Therefore, under
section 6(b) of the Executive Order, a federalism summary is not
required.
F. Executive Order 12988, Civil Justice Reform
This proposed 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.
G. Civil Rights Impact Analysis
FNS has reviewed the proposed rule, in accordance with Departmental
Regulation 4300-004, ``Civil Rights Impact Analysis,'' to identify and
address any major civil rights impacts the proposed rule might have on
participants based on age, race, color, national origin, sex, and
disability. Due to the unavailability of data, FNS is unable to
directly determine whether this proposed rule will have an adverse or
disproportionate impact on protected classes among entities that
administer and participate in Child Nutrition Programs.
The proposed serious deficiency rule includes strategies to ensure
that the serious deficiency process is implemented fairly and evenly
across states and among institutions. By codifying the criteria for
identifying when a finding is a serious management problem, the process
is more standardized. The new serious deficiency process also provides
an opportunity for institutions to correct serious management problems,
a
[[Page 13172]]
significant departure from the current process in which a serious
deficiency is only temporarily deferred and never fully corrected.
Importantly, the proposed rule aligns the ``seriously deficient''
designation with proposed termination rather than determining an
institution is seriously deficient at the beginning of the process and
then deferring that status unless or until there is a repeat finding.
This step, in particular, responds to commenters concerns about a
seriously deficient status and its effect on an institution's
reputation which could, in turn, encourage more participation in CN
programs.
FNS will also develop materials for program operators in formats
for individuals with limited English proficiency and for individuals
with disabilities, that describe the serious deficiency process and
program operators' rights and responsibilities. States are also
required to have contingency plans to ensure meals remain available in
the event a sponsor is terminated.
FNS Civil Rights Division finds that the current mitigation and
outreach strategies outlined in the regulations and this Civil Rights
Impact Analysis (CRIA) provide ample consideration to applicants' and
participants' abilities to participate in the CACFP and SFSP. The
promulgation of this proposed rule will affect CACFP institutions and
facilities and SFSP sponsors. FNS expects that the proposed changes,
e.g., defining key terms, outlining clear steps in the review process,
and providing a path to full correction, will be an overall positive
change for CACFP and SFSP program operators. Finally, FNS is looking
forward to the opportunity to review public comments on the proposed
rule.
H. Executive Order 13175
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 a consultation on May 23, 2023,
FNS anticipates that this rulemaking will have no significant cost and
no major increase in regulatory burden on Tribal organizations.
I. Paperwork Reduction Act
The Paperwork Reduction Act of 1995 (44 U.S.C. chapter 35; see 5
CFR part 1320) requires that OMB approve all collections of information
by a Federal agency from the public before they can be implemented.
Respondents are not required to respond to any collection of
information unless it displays a current valid OMB control number.
In accordance with the Paperwork Reduction Act of 1995, this
proposed rule is revising existing information collection requirements,
which are subject to review and approval by OMB. This rulemaking
proposes new reporting, recordkeeping, and public disclosure
requirements for State agencies and sponsoring organizations that
administer the Child and Adult Care Food Program (CACFP), the Summer
Food Service Program (SFSP), and the National Disqualified List (NDL).
The rule also proposes new regulatory citations for some of the
existing requirements in these collections.
FNS is submitting for public comment the information collection
burdens that will result from adoption of the new reporting,
recordkeeping, and public disclosure requirements and the changes in
regulatory citations for some of the existing requirements which are
proposed in the rulemaking. The establishment of the proposed
collection of information requirements are contingent upon OMB
approval. Since this rulemaking impacts three separate information
collections: OMB Control Number 0584-0280 7 CFR part 225, Summer Food
Service Program; OMB Control Number 0584-0055 Child and Adult Care Food
Program (CACFP), and OMB Control Number 0584-0584 Child and Adult Care
Food Program (CACFP) National Disqualified List. This rulemaking
contains three separate PRA sections to capture the burden impact that
this proposed rule is estimated to have on these existing collections.
Comments on the information collection in this proposed rule must
be received by May 21, 2024.
Comments may be sent to: Program Integrity and Innovation Division,
1320 Braddock Place, Alexandria, VA 22314. Comments will also be
accepted through the Federal eRulemaking Portal. Go to https://www.regulations.gov and follow the online instructions for submitting
comments electronically.
Comments are invited on: (1) Whether the proposed collection of
information is necessary for the proper performance of the functions of
the agency, including whether the information will have practical
utility; (2) 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; (3) ways to enhance the quality,
utility and clarity of the information to be collected; and (4) 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 document will be summarized and included in
the request for OMB approval. All comments will also become a matter of
public record.
Title: 7 CFR part 225, Summer Food Service Program.
Form Number: FNS-843 and FNS-844.
OMB Control Number: 0584-0280.
Expiration Date: 09/30/2025.
Type of Request: Revision.
Abstract: This revision adds new requirements and revises existing
requirements in the currently approved information collection for OMB
Control Number 0584-0280. Below is a summary of the changes in the
proposed rule and the impact that it will have on the reporting,
recordkeeping, and public disclosure requirements for the state/local/
tribal government agencies, non-profit institutions, and camps.
State agencies have a responsibility for the monitoring and
oversight of institutions in the Child and Adult Care Food Program
(CACFP). To maintain program integrity and ensure compliance with
program requirements, FNS established the serious deficiency process to
address mismanagement, abuse, and fraud by institutions and facilities
participating in the program. The serious deficiency process
establishes a structured series of steps to identify serious
deficiencies, take corrective action, and suspend, terminate, and
disqualify institutions and responsible principals and responsible
individuals that undermine the integrity of the program. State agencies
also have a similar responsibility to monitor and provide oversight of
the Summer Food Service Program (SFSP).
Currently, the SFSP does not have a defined process to address
serious management problems threatening the integrity of the program.
SFSP regulations specify that state agencies must consider specific
criteria before approving sites for participation. Regulations also
provide authority for State agencies to terminate sponsor
[[Page 13173]]
participation and establish procedures for sponsors to appeal adverse
actions, but they do not provide authority for FNS or state agencies to
disqualify an individual from participating in SFSP, or in any other
Child Nutrition Program or being placed on the National Disqualified
List. This proposed rule would extend the serious deficiency process to
SFSP to address potential serious management problems threatening the
integrity of the program.
This proposed rule would amend 7 CFR 225.6 and 225.18 to extend the
serious deficiency process to SFSP. State agencies would be required to
implement a serious deficiency process; provide appeal procedures to
sponsors, annually and upon request; specify the types of adverse
actions that cannot be appealed in SFSP; establish a list of sponsors,
responsible principals, and responsible individuals declared seriously
deficient; terminate agreements whenever a program operator's
participation ends; and take action to terminate an agreement for
cause, through the serious deficiency or placement on the National
Disqualified List. This will strengthen management practices and
eliminate gaps that put program integrity at risk.
Reporting
State/Local/Tribal Government Agencies
The changes proposed in this rule will add additional reporting
requirements to the requirements currently approved under OMB Control
Number 0584-0280 for State/Local/Tribal Government Agencies. It will
also change the regulatory cite for one of the existing reporting
requirements in the collection. All of these changes will be considered
program changes since they are due to the proposed rule.
The proposed rule will add additional reporting requirements in 7
CFR 225.6 that apply the Serious Deficiency Process to MSSOs operating
the Program.
USDA expects that 53 state agencies will be required to fulfill the
requirement at 7 CFR 225.6(c)(5) that a state agency must determine if
a sponsoring organization operates in more than one state. USDA expects
each state agency will collect and report information from 3 MSSOs and
that it takes approximately 15 minutes (0.25 hours) to complete this
requirement; which is estimated to add 39.75 burden hours and 159 total
responses to the collection.
USDA estimates that 53 State agencies will be required to fulfill
the new requirement at 7 CFR 225.6(n) that State agencies must
determine if a sponsoring organization is an MSSO, and assume the role
of a Cognizant State agency (CSA) if the MSSOs center of operations is
located within the State. USDA estimates that the 53 State agencies
will be required to make 3 MSSO determinations each year and that it
takes approximately 15 minutes (0.25 hours) to complete this
requirement; which is estimated to add 39.75 annual burden hours and
159 responses to the collection.
USDA expects that 53 State agencies will be required to fulfill the
new requirement at 7 CFR 225.6(n)(1)(i) that State agencies must enter
into a permanent written agreement with the MSSO, as described in
paragraph (b)(4). USDA expects that the 53 State agencies will be
required to make 3 permanent agreements each year and that it takes
approximately 15 minutes (0.25 hours) to complete this requirement;
which is estimated to add 39.75 annual burden hours and 159 responses
to the collection.
USDA estimates that 53 State agencies will be required to fulfill
the new requirement at 7 CFR 225.6(n)(1)(ii) that State agencies must
approve the MSSOs administrative budget. USDA estimates that the 53
State agencies will be required to approve 3 administrative budgets
each year and that it takes approximately 15 minutes (0.25 hours) to
complete this requirement; which is estimated to add 39.75 hours and
159 responses to the collection.
USDA expects that 53 State agencies will be required to fulfill the
new requirement at 7 CFR 225.6(n)(1)(iii) that State agencies must
conduct monitoring of MSSO Program operations within the State, as
described in paragraph (k)(4). USDA expects that the 53 State agencies
will be required to monitor 3 MSSOs each year and that it takes
approximately 15 minutes (0.25 hours) to complete this requirement;
which is estimated to add 39.75 hours and 159 responses to the
collection.
USDA estimates that 53 State agencies will be required to fulfill
the new requirement at 7 CFR 225.6(n)(1)(iii)(C) that State agencies
provide summaries of the MSSO reviews that are conducted to the CSA.
USDA estimates that the 53 State agencies will be required to submit 3
MSSO review summaries to the CSA annually and that it takes
approximately 15 minutes (0.25 hours) to complete this requirement;
which is estimated to add 39.75 annual burden hours and 159 responses
to the collection.
USDA estimates that 53 State agencies will be required to fulfill
the new requirement at 7 CFR 225.6(n)(1)(iv) that State agencies must
conduct audit resolution activities. USDA estimates that the 53 State
agencies will be required to conduct 3 audit resolution activities each
year and that it takes approximately 15 minutes (0.25 hours) to
complete this requirement; which is estimated to add 39.75 annual
burden hours and 159 responses to the collection.
USDA expects that 53 State agencies will be required to fulfill the
new requirement at 7 CFR 225.6(n)(1)(v) that State agencies must notify
all other State agencies that have an agreement with an MSSO that their
agreement has been terminated and have taken disqualification actions
against that MSSO. USDA expects that the 53 State agencies will be
required to make 3 notifications a year and that it takes approximately
15 minutes (0.25 hours) to complete this requirement; which is
estimated to add 39.75 annual burden hours and 159 responses to the
collection.
USDA estimates that 53 State agencies will be required to fulfill
the new requirement at 7 CFR 225.6(n)(2) that State agencies must
determine if an MSSOs center of operations are located within the State
and assume the role of the CSA. USDA estimates that the 53 State
agencies will be required to make 3 MSSO determinations each year and
that it takes approximately 15 minutes (0.25 hours) to complete this
requirement; which is estimated to add 39.75 annual burden hours and
159 responses to the collection.
USDA expects that 53 State agencies will be required to fulfill the
new requirement at 7 CFR 225.6(n)(2)(iii) that the CSA must conduct a
full review at the MSSO headquarters and financial records center,
coordinate the timing of the reviews, and make copies of monitoring
reports and findings available to all other State agencies that have
agreements with the MSSO. USDA expects that the 53 State agencies will
be required to conduct a full review of 3 MSSO headquarters and
financial records centers annually and that it takes approximately 20
hours to complete this requirement; which is estimated to add 3,180
annual burden hours and 159 responses to the collection.
USDA estimates that 53 State agencies will be required to fulfill
the new requirement at 7 CFR 225.6(n)(2)(iv) that, if an MSSO has for-
profit status, the cognizant agency must establish audit thresholds and
requirements. USDA estimates that the 53 State agencies will be
required to establish audit thresholds and requirements for for-profit
MSSOs annually and that it takes approximately 1 hour to complete
[[Page 13174]]
this requirement; which is estimated to add 53 annual burden hours and
responses to the collection.
The proposed rule will add additional requirements in 7 CFR 225.13
to establish fair hearing procedures for the extended serious
deficiency process in SFSP.
USDA expects that 53 state agencies will be required to fulfill the
new requirement at 7 CFR 225.13(a) that state agencies must establish a
procedure to be followed by an applicant appealing for a fair hearing.
USDA expects each state agency will need to establish a procedure for a
fair hearing annually and that it will take approximately 1 hour to
complete this requirement; which is estimated to add 53 burden hours
and responses to this collection.
The proposed rule will add additional reporting requirements in 7
CFR 225.18 that extends the Serious Deficiency Process to SFSP.
USDA estimates that 53 state agencies will be required to fulfill
the new requirement at 7 CFR 225.18(a)(2)(i) and (a)(3) that state
agencies identify serious management problems and define a set of
standards to help measure the severity of a problem to determine what
rises to the level of a serious management problem and how it affects
the sponsor or facility's ability to meet Program requirements. USDA
estimates each state agency will be required to develop a set of
standards to identify serious management problems, taking approximately
1 hour to complete this requirement; which is estimated to add 53
burden hours and responses to this collection.
USDA estimates that 53 state agencies will be required to fulfill
the reporting requirement at 7 CFR 225.18(a)(2)(ii) and (a)(6)(i) that
state agencies notify a sponsor's executive director, chairman of the
board of directors, responsible principals, and responsible individuals
that serious management problems have been identified, must be
addressed, and must be corrected. USDA estimates each state agency will
be required to notify 3 sponsors of the serious management problems and
that it takes approximately 15 minutes (.25 hours) to complete this
requirement; which is estimated to add 39.75 hours and 159 responses to
the collection.
USDA expects that 53 state agencies will be required to fulfill the
new requirement at 7 CFR 225.18(a)(2)(iii) and (c)(2)(ii) that state
agencies must receive and approve a submitted corrective action plan
within 15 days from the date the sponsor received the notice and
monitor the full implementation of the corrective action plan. USDA
expects each state agency will be required to receive and approve 3
corrective action plans and that it takes approximately 15 minutes (.25
hours) to complete this requirement; which is estimated to add 39.75
burden hours and 159 total responses to the collection.
USDA expects that 53 state agencies will be required to fulfill the
requirement at 7 CFR 225.18(a)(2)(iv) and (a)(6)(ii) that state
agencies notify a sponsor's executive director, chairman of the board
of directors, responsible principals, and responsible individuals that
the serious management problem(s) have been corrected and vacated or,
if corrective action has not been taken or fully implemented, that the
state agency proposes to terminate the sponsor's agreement and proposes
to disqualify the sponsor, responsible principals, and responsible
individuals. USDA expects each state agency will be required to notify
3 sponsors of their successful corrective action or proposes
termination and disqualification and that it takes approximately 15
minutes (.25 hours) to complete this requirement; which is estimated to
add 39.75 burden hours and 159 responses to the collection.
USDA estimates that 53 state agencies will be required to fulfill
the requirement at 7 CFR 225.18(a)(2)(v) and (f)(1)(iii)(E) that State
agencies must submit written documentation to the hearing official
prior to the beginning of the hearing, within 30 days after receiving
notice of the action. USDA estimates that each state agency will have
to provide documentation to 3 fair hearings annually and that it takes
approximately 2 hours to complete this requirement; which is estimated
to add 318 annual burden hours and 159 total responses to the
collection.
USDA expects that 53 state agencies will be required to fulfill the
requirement at 7 CFR 225.18(a)(2)(v) and (f)(2) that hearing official
must hold hearing, in addition to a review of written information upon
written request for a fair hearing by the sponsor, responsible
principals, or responsible individuals, to determine whether the State
agency or sponsor followed Program requirements in taking action under
appeal. USDA expects that each state agency will be required to provide
3 fair hearings annually and that it will take approximately 4 hours to
complete this requirement; which is estimated to add 636 burden hours
and 159 total responses to the collection.
USDA estimates that 53 state agencies will be required to fulfill
the requirement at 7 CFR 225.18(a)(2)(vi) and (a)(6)(iii) that state
agencies notify a sponsor's executive director and chairman of the
board of directors that serious management problems have been vacated
and advise the institution that procedures and policies must be
implemented to fully correct the serious management problem if the
sponsor's appeal is upheld. If the sponsor's appeal is denied, the
sponsor must be notified that the program agreement is terminated and
declared seriously deficient. USDA estimates each state agency will be
required to notify 3 sponsors of the fair hearing determination and
that it takes approximately 15 minutes (.25 hours) to complete this
requirement; which is estimated to add 39.75 hours and 159 responses to
the collection.
USDA estimates that 53 state agencies will be required to fulfill
the requirement at 7 CFR 225.18(c)(3) that state agencies must conduct
and prioritize follow-up reviews and more frequent full reviews of
sponsors with serious management problems, including one full review,
at least once every year. USDA estimates each state agency will be
required to review 3 sponsors and that it takes approximately 20 hours
to complete this requirement; which is estimated to add 3,180 hours and
159 responses to the collection.
USDA expects that 53 state agencies will be required to fulfill the
requirement at 7 CFR 225.18(d)(2) that state agencies are required to
develop a contingency plan to ensure that eligible participants
continue to have access to meal service. USDA expects each state agency
will be required to develop 3 contingency plans and that it takes
approximately 2 hours to complete this requirement; which is estimated
to add 318 burden hours and 159 responses to the collection.
USDA estimates that 53 state agencies will be required to fulfill
the requirement at 7 CFR 225.18(e)(2)(iii) that, if all serious
management problems have been corrected and all debts have been repaid,
state agencies may elect to remove a sponsor, responsible principals,
and responsible individuals from the National Disqualified List, and
must submit all requests for early removals to the appropriate Food and
Nutrition Service Regional Office (FNSRO). USDA estimates each state
agency will remove 3 sponsors from the National Disqualified List and
that it takes approximately 15 minutes (0.25 hours) to complete this
requirement; which is estimated to add 39.75 burden hours and 159
responses to the collection.
USDA estimates that 53 State agencies will be required to fulfill
the requirement at 7 CFR 225.18(e)(3)(ii)
[[Page 13175]]
that State agencies enter into written agreements with FNS in order to
participate in a matching program involving a FNS Federal system of
records. USDA estimates that 53 State agencies will enter into a CMA
written agreement annually and that it will take 1 hour to complete
this requirement; which is estimated to add of 53 annual burden hours
and responses to the collection.
USDA expects that 53 State agencies will be required to fulfill the
requirement at 7 CFR 225.18(e)(3)(iii)(B) that State agencies may
request FNS to waive the two-step independent verification and notice
requirement of the CMA. USDA expects that the 53 State agencies will
request a waiver annually and that it will take an hour to complete
this requirement; which is estimated to add 53 annual burden hours and
responses to the collection.
USDA expects that 53 state agencies will be required to fulfill the
requirement at 7 CFR 225.18(g)(2) that state agencies must send a
necessary demand letter for the collection of unearned payments,
including any assessment of interest and refer the claim to the
appropriate State authority for pursuit of the debt payment. USDA
estimates each state agency will send 3 demand letters and that it
takes approximately 15 minutes (0.25 hours) to complete this
requirement; which is estimated to add 39.75 hours and 159 responses to
the collection.
USDA estimates that 53 state agencies will be required to fulfill
the requirement at 7 CFR 225.18(h)(2)(i) that state agencies must
terminate for cause the program agreement no later than 45 days after
the date of the sponsor's disqualification by FNS. This requirement is
listed in the currently approved collection at 7 CFR 225.18(b)(2), but
the proposed rule is changing the regulatory citation to 7 CFR
225.18(h)(2)(i). USDA estimates that each state agency will still be
required to terminate 5 sponsors' agreements and that it will still
take approximately 1 hour to complete this requirement. With the change
in citation, USDA still expects this requirement to have 265 burden
hours and 265 responses so no additional hours or responses will be
added to the collection.
USDA expects that 933.33 local government sponsors will be required
to fulfill the requirement at 7 CFR 225.18(c)(1) that sponsors must
describe and document the action taken to correct each serious
management problem in a corrective action plan and submit it to the
state agency. USDA expects 933.3 local government sponsors will be
required to submit a corrective action plan and that it takes
approximately 15 minutes (.25 hours) to complete this requirement;
which is estimated to add 233.33 hours and 933 responses to the
collection.
Non-Profit Institutions and Camps (Businesses)
USDA expects that 133 sponsoring organizations will be required to
fulfill the requirement at 7 CFR 225.6(c)(5) that sponsoring
organizations that are approved to operate the Program in more than one
State must provide information concerning the sites and the officials
who have administrative and financial responsibility. USDA expects that
133 sponsoring organizations will operate in more than one state and
will collect and report information to FNS annually and that it takes
approximately one hour and 15 minutes (1.25 hours) to complete this
requirement; which is estimated to add 166.25 burden hours and 133
responses to the collection.
USDA estimates that 477 non-profit institutions and camps will be
required to fulfill the requirement at 7 CFR 225.18(c)(1) to describe
and document the actions taken to correct each serious management
problem in a corrective action plan and submit it to the state agency.
USDA estimates each non-profit institutions will be required to submit
a corrective action plan and that it takes approximately 15 minutes
(0.25 hours) to complete this requirement; which is estimated to add
119.25 burden hours and 477 responses to the collection.
Recordkeeping
State/Local/Tribal Government Agencies
USDA estimates that 53 state agencies will be required to fulfill
the requirement at 7 CFR 225.18(b) that a state agency maintain a state
agency list that includes information on each sponsor that are
determined to have a serious management problem and be updated as they
move through the serious deficiency process. As a part of the
recordkeeping requirement, state agencies will be required to maintain
records on the FNS-843 Report of Disqualification from Participation:
Institution and Responsible Principals/Individuals and the FNS-844
Report of Disqualification from Participation--Individually
Disqualified Responsible Principal/Individual or Day Care Home Provider
forms, which must be updated if a sponsor has been declared seriously
deficient as a part of the seriously deficient process. USDA estimates
each state agency will be required to maintain 145 records of sponsors
with serious management problems and that it takes approximately 5
minutes (0.08 hours) to complete this requirement; which is estimated
to add 641.70 burden hours and 7,685 responses to the collection.
Public Disclosure
State Agencies
The proposed rule will add an additional public disclosure
requirement at 7 CFR 225.6(n)(2)(iii) as a part of the new review
process for Multi-State Sponsoring Organizations (MSSOs).
USDA estimates that 53 State agencies will fulfill the requirement
at 7 CFR 225.6(n)(2)(iii) that the Cognizant State Agency (CSA) must
conduct a full review at the MSSO headquarters and financial records
center, must coordinate the timing of the reviews, and make copies of
monitoring reports and findings available to all other State agencies
that have agreements with the MSSO. USDA estimates that the 53 State
agencies will each disclose the findings of 3 MSSO reviews to other
State agencies annually and that it takes 15 minutes (0.25 hours) to
complete this requirement; which is estimated to add 39.75 annual
burden hours and 159 responses to the collection.
As a result of the proposals outlined in this rulemaking, FNS
estimates that the proposals resulting from this rule will have 1,463
respondents, 13,097 total annual responses, and 9,959 total burden
hours. The average burden per response and the annual burden hours are
explained below and summarized in the charts which follow. Based on
these estimates, FNS estimates that this proposed rule will increase
the burden for OMB Control Number 0584-0280 by 12,673 responses and by
9,694 burden hours, to an estimated 404,468 responses and 472,392
burden hours for the entire collection.
Reporting
Respondents (Affected Public): Businesses; and State, Local, and
Tribal Government. The respondent groups include non-profit
institutions and camps, and State agencies.
Estimated Number of Respondents: 1,463.
Estimated Number of Responses per Respondent: 3.59.
Estimated Total Annual Responses: 5,253.
Estimated Time per Response: 1.77.
Estimate Total Annual Burden on Respondents: 9,277.
Recordkeeping
Respondents (Affected Public): State, Local, and Tribal Government.
The
[[Page 13176]]
respondent groups include State agencies.
Estimated Number of Respondents: 53.
Estimated Number of Responses per Respondent: 145.
Estimated Total Annual Responses: 7,685.
Estimated Time per Response: 0.08.
Estimate Total Annual Burden on Respondents: 642.
Public Disclosure
Respondents (Affected Public): State, Local, and Tribal Government.
Estimated Number of Respondents: 53.
Estimated Number of Responses per Respondent: 3.
Estimated Total Annual Responses: 159.
Estimated Time per Response: 0.25.
Estimated Total Annual Burden on Respondents: 40.
Estimated Annual Burden for SFSP
[Reporting]
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Average Currently
Estimated Frequency Average burden Annual approved Program Total
Respondent type Burden activities Section number of of annual per burden burden changes difference
respondents response responses response hours hours in burden
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
State/Local/Tribal Governments......... The SA must determine if 225.6(c)(5).................... 53 3 159 0.25 39.75 0 39.75 39.75
a sponsoring
organization operates in
more than one State.
State/Local/Tribal Governments......... SAs must determine if a 225.6(n)....................... 53 3 159 0.25 39.75 0 39.75 39.75
sponsoring organization
is an MSSO, as described
in paragraphs (b)(1)(xv)
and (b)(2)(iii)(L). SAs
must assume the role of
the CSA, if the MSSOs
center of operations is
located within the
State. Each SA that
approves an MSSO must
follow the requirements
described in paragraph
(i).
State/Local/Tribal Governments......... SAs must enter into a 225.6(n)(1)(i)................. 53 3 159 0.25 39.75 0 39.75 39.75
permanent written
agreement with the MSSO,
as described in
paragraph (b)(4).
State/Local/Tribal Governments......... SAs must approve the 225.6(n)(1)(ii)................ 53 3 159 0.25 39.75 0 39.75 39.75
MSSOs administrative
budget.
State/Local/Tribal Governments......... SAs must conduct 225.6(n)(1)(iii)............... 53 3 159 0.25 39.75 0 39.75 39.75
monitoring of MSSO
Program operations
within the State, as
described in paragraph
(k)(4). The SA should
coordinate monitoring
with the CSA to
streamline reviews and
minimize duplication of
the review content. The
SA may base the review
cycle on the number of
facilities operating
within the State.
State/Local/Tribal Governments......... SAs must provide 225.6(n)(1)(iii)(C)............ 53 3 159 0.25 39.75 0 39.75 39.75
summaries of the MSSO
reviews that are
conducted to the CSA. If
the SA chooses to
conduct a full review,
the SA should request
the necessary records
from the CSA.
[[Page 13177]]
State/Local/Tribal Governments......... SAs must conduct audit 225.6(n)(1)(iv)................ 53 3 159 0.25 39.75 0 39.75 39.75
resolution activities.
The SA must review audit
reports, address audit
findings, and implement
corrective actions, as
required under 2 CFR
part 200, subpart D, and
USDA implementing
regulations 2 CFR parts
400 and 415.
State/Local/Tribal Governments......... SAs notify all other 225.6(n)(1)(v)................. 53 3 159 0.25 39.75 0 39.75 39.75
State agencies that have
agreements with the MSSO
of termination and
disqualification
actions, as described in
paragraph (c)(2)(i).
State/Local/Tribal Governments......... If it determines that an 225.6(n)(2).................... 53 3 159 0.25 39.75 0 39.75 39.75
MSSOs center of
operations is located
within the State, the SA
must assume the role of
the CSA.
State/Local/Tribal Governments......... The CSA must conduct a 225.6(n)(2)(iii)............... 53 3 159 20 3,180 0 3,180 3,180
full review at the MSSO
headquarters and
financial records
center. The CSA must
coordinate the timing of
the reviews and make
copies of monitoring
reports and findings
available to all other
State agencies that have
agreements with the MSSO.
State/Local/Tribal Governments......... If an MSSO has for-profit 225.6(n)(2)(iv)................ 53 1 53 1 53 0 53 53
status, the cognizant
agency must establish
audit thresholds and
requirements.
State/Local/Tribal Governments......... SAs must establish a 225.13(a)...................... 53 1 53 1 53 0 53 53
procedure to be followed
by an applicant
appealing for a fair
hearing.
State/Local/Tribal Governments......... SAs must identify serious 225.18(a)(2)(i) and 53 1 53 1 53 0 53 53
management problems and 225.18(a)(3).
define a set of
standards to help
measure the severity of
a problem to determine
what rises to the level
of a serious management
problem and how it
affects the sponsor or
facility's ability to
meet Program
requirements.
[[Page 13178]]
State/Local/Tribal Governments......... SAs must notify a 225.18(a)(2)(ii) and 53 3 159 0.25 39.75 0 39.75 39.75
sponsor's executive 225.18(a)(6)(i).
director and chairman of
the board of directors,
and RPIs, that serious
management problems have
been identified, must be
addressed, and
corrected. The notice
must identify all
aspects of the serious
management problem;
reference specific
regulatory citations,
instructions, or
policies; name all of
the RPIs; describe the
action needed to correct
the serious management
problem; and set a
deadline for completing
the corrective action.
At the same time, the SA
must add the sponsor and
RPIs to the SA list and
provide a copy of the
notice to the
appropriate FNSRO.
State/Local/Tribal Governments......... SAs must receive and 225.18(a)(2)(iii) and 53 3 159 0.25 39.75 0 39.75 39.75
approve the corrective 225.18(c)(2)(ii).
action plan within 15
days from the date the
sponsor received the
notice and monitor the
full implementation of
the corrective action
plan.
State/Local/Tribal Governments......... If corrective action has 225.18(a)(2)(iv) and 53 3 159 0.25 39.75 0 39.75 39.75
been taken to fully 225.18(a)(6)(ii).
correct each serious
management problem, SAs
must notify a sponsor's
executive director and
chairman of the board of
directors, and RPIs,
that the serious
management problem has
been vacated. If
corrective action has
not been taken or fully
implemented, the SA must
notify the sponsor of
its proposed termination
and disqualification.
The notice must inform
the sponsor, responsible
principals, and
responsible individuals
of the right and
procedures for seeking a
fair hearing.
State/Local/Tribal Governments......... SAs must submit written 225.18(a)(2)(v) and 53 3 159 2 318 0 318 318
documentation to the 225.18(f)(1)(iii)(E).
hearing official prior
to the beginning of the
hearing, within 30 days
after receiving the
notice of action.
[[Page 13179]]
State/Local/Tribal Governments......... Hearing official must 225.18(a)(2)(v) and 53 3 159 4 636 0 636 636
hold hearing, in 225.18(f)(2).
addition to a review of
written information upon
written request for a
fair hearing by the
sponsor, responsible
principals, or
responsible individuals,
to determine that the SA
or sponsor followed
Program requirements in
taking action under
appeal. State agencies
must be allowed to
attend, respond to
testimony, and answer
questions posed by the
hearing official.
State/Local/Tribal Governments......... SAs must notify a 225.18(a)(2)(vi) and 53 3 159 0.25 39.75 0 39.75 39.75
sponsor's executive 225.18(a)(6)(iii).
director and chairman of
the board that serious
management problems have
been vacated and advise
the institution that
procedures and policies
must be fully
implemented to correct
the serious management
problem if the sponsor's
appeal is upheld. If the
sponsor's appeal is
denied, the sponsor must
be notified that the
program agreement is
terminated and declared
seriously deficient.
State/Local/Tribal Governments......... SAs must conduct and 225.18(c)(3)................... 53 3 159 20 3180 0 3180 3180
prioritize follow-up
reviews and more
frequent full reviews of
sponsors with serious
management problems,
including one full
review occurring at
least once every year.
State/Local/Tribal Governments......... SAs must develop a 225.18(d)(2)................... 53 3 159 2 318 0 318 318
contingency plan in
place to ensure that
eligible participants
continue to have access
to meal service.
State/Local/Tribal Governments......... If all serious management 225.18(e)(2)(iii).............. 53 3 159 0.25 39.75 0 39.75 39.75
problems have been
corrected and all debts
have been repaid, SAs
may elect to remove a
sponsor and RPIs from
the National
Disqualified List, and
must submit all requests
for early removals to
the appropriate FNSRO.
[[Page 13180]]
State/Local/Tribal Governments......... SAs must enter into 225.18(e)(3)(ii)............... 53 1 53 1 53 0 53 53
written agreements with
FNS, consistent with 5
U.S.C. 552a(o) of the
CMA, in order to
participate in a
matching program
involving a FNS Federal
system of records.
State/Local/Tribal Governments......... SAs may request FNS to 225.18(e)(3)(iii)(B)........... 53 1 53 1 53 0 53 53
waive the two-step
independent verification
and notice requirement
of the CMA.
State/Local/Tribal Governments......... SAs must send a necessary 225.18(g)(2)................... 53 3 159 0.25 39.75 0 39.75 39.75
demand letter for the
collection of unearned
payments, including any
assessment of interest,
as described in Sec.
225.12(b), and refer the
claim to the appropriate
State authority for
pursuit of the debt
payment. SAs must assess
interest on sponsors'
debts established on or
after July 29, 2002,
based on the Current
Value of Funds Rate,
which is published
annually by Treasury in
the Federal Reserve and
is available from the
FNSRO, and notify the
sponsor that interest
will be charged on debts
not paid in full within
30 days of the initial
demand for remittance up
to the date of payment.
State/Local/Tribal Governments......... SAs must terminate for 225.18(h)(2)(i)................ 53 5 265 1 265 265 0 0
cause the Program
agreement upon no later
than 45 days after the
date of the sponsor's
disqualification by FNS.
State/Local/Tribal Governments......... Sponsors must describe 225.18(c)(1)................... 933.3 1 933.3 0.25 233.33 0 233.33 233.33
and document the action
taken to correct each
serious management
problem in a corrective
action plan and submit
it to the SA.
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Total State/Local/Tribal Government Reporting.................................................. 986 4.71 4,643 1.94 8,991.58 265 8,726.58 8,726.58
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
[[Page 13181]]
Businesses (Non-profit Institutions and Sponsoring organizations 225.6(c)(5).................... 133 1 133 1.25 166.25 0 166.25 166.25
Camps). that are approved to
operate the Program in
more than one State must
provide: The number of
affiliated sites it
operates, by State; The
number of unaffiliated
sites it operates; the
names, addresses, and
phone numbers of the
organization's
headquarters and the
officials who have
administrative
responsibility; and the
names, addresses, and
phone numbers of the
financial records center
and the officials who
have financial
responsibility.
Businesses (Non-profit Institutions and Sponsors must describe 225.18(c)(1)................... 477 1 477 0.25 119.25 0 119.25 119.25
Camps). and document the actions
taken to correct each
serious management
problem in a corrective
action plan and submit
it to the SA.
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Total Businesses (Non-profit Institutions and Camps)........................................... 477 1.28 610 0.47 285.5 0 285.5 285.5
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Total Reporting................................................................................ 1,463 3.59 5,253 1.77 9,277.08 265 9,012.08 9,012.08
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
State/Local/Tribal Governments......... SAs must maintain a SA 225.18(b)...................... 53 145 7,685 0.08 641.70 0 641.70 641.70
list and must include
the following
information: (1) Names
and mailing addresses of
each sponsor that is
determined to have a
serious management
problem; (2) Names,
mailing addresses, and
dates of birth of each
responsible principals
and responsible
individuals (RPIs); and
(3) The status of the
sponsor as it progresses
through the stages of
corrective action,
termination, suspension,
and disqualification, as
applicable. (Forms FNS-
843 and FNS-844.).
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Total State/Local/Tribal Government Recordkeeping.............................................. 53 145 7,685 0.08 641.70 0 641.70 641.70
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Total Recordkeeping............................................................................ 53 145 7,685 0.08 641.70 0 641.70 641.70
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
[[Page 13182]]
State/Local/Tribal Governments......... The CSA must conduct a 225.6(n)(2)(iii)............... 53 3 159 0.25 39.75 0 39.75 39.75
full review at the MSSO
headquarters and
financial records
center. The CSA must
coordinate the timing of
reviews and make copies
of monitoring reports
and findings available
to all other State
agencies that have
agreements with the MSSO.
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Total State/Local/Tribal Government Public Disclosure.......................................... 53 3 159 0.25 39.75 0 39.75 39.75
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Total Public Disclosure........................................................................ 53 3 159 0.25 39.75 0 39.75 39.75
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Total Burden................................................................................... 1,463.30 8.95 13,097.3 0.76 9,958.52 265 9,963.52 9,963.52
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Summary of Burden
[OMB #0584-0280]
------------------------------------------------------------------------
------------------------------------------------------------------------
Total No. Respondents...................................... 63,942
Average No. Responses per Respondent....................... 6.33
Total Annual Responses..................................... 404,468.31
Average Hours per Response................................. 1.17
Total Burden Hours......................................... 472,392.25
Current OMB Approved Burden Hours.......................... 462,699
Adjustments................................................ 0
Program Changes............................................ 9,693.52
Total Difference in Burden................................. 9,693.52
------------------------------------------------------------------------
Title: Child and Adult Care Food Program (CACFP).
Form Number: FNS-843 and FNS-844.
OMB Control Number: 0584-0055.
Expiration Date: 08/31/2025.
Type of Request: Revision.
Abstract: This is a revision of requirements in the information
collection under OMB Control Number 0584-0055 that are being impacted
by this rulemaking. USDA proposes to improve the serious deficiency
process in the CACFP. This proposed rule impacts information reporting
at the state/local/tribal government level, reporting at the business
level (sponsoring organizations and facilities), and monitoring
requirements for State agencies. Under this rule, USDA is proposing to
codify into regulations provisions from the Final Rule: Child Nutrition
Program Integrity to clarify provisions of the serious deficiency
process, and to extend the process to unaffiliated centers
participating in the CACFP. Furthermore, FNS published a notice,
Request for Information: The Serious Deficiency Process in the Child
and Adult Care Food Program, 84 FR 22431, May 17, 2019, to gather
information to help FNS understand firsthand the experiences of State
agencies and program operators.
This rulemaking intends to revise the serious deficiency process to
codify provisions from the Final Rule: Child Nutrition Program
Integrity and to respond to comments from State agencies and
participating institutions. The revisions will replace the term
``serious deficiencies'' that apply to program violations with the term
``serious management problems'', as found in the National School Lunch
Act (NSLA). They will also change the point at which a serious
deficiency determination is made. Previously, the discovery of program
violations would immediately lead to a serious deficiency declaration.
The new process will move the serious determination near the end of the
process, where the State agency will propose termination for failing to
correct an institution's serious management problems. Finally, the
rulemaking will create a path to full correction defined by a timeframe
and number of reviews. By incorporating all these program changes, FNS
intends to reduce ambiguity navigating the serious deficiency process,
remove stigma associated with the ``serious deficiency'' term, and
improve program integrity by implementing a simpler process. The burden
related to these proposals is reflected in the burden estimates for OMB
Control Number 0584-0055. All of these changes are program changes.
Reporting
State Agencies
The changes proposed in this rule will impact the existing
reporting requirements currently approved under OMB Control Number
0584-0055 for State agencies.
USDA estimates that 56 State agencies will develop a process to
share information on any institution, facility, responsible principals,
or responsible individuals not approved to administer or participate in
the Program to fulfill the requirement at 7 CFR 226.6(b)(2)(iii)(D)(2).
USDA estimates that 56 State agencies would be required to develop an
information-sharing process and that it takes approximately 1 hour to
complete this requirement; which is estimated to add 56 annual burden
hours and responses to the collection.
USDA expects that 56 State agencies will be required to fulfill the
requirement at 7 CFR 226.6(b)(2)(iii)(L) that State agencies report up-
to-date information on multi-state sponsoring organizations (MSSOs)
operations. USDA expects that 56 state agencies would be required to
update 23 MSSO records per year and that it takes approximately 15
minutes (0.25 hours) to complete this requirement; which is estimated
to add 322 annual burden hours and 1,288 responses to the collection.
The proposed rule will change the citations in 7 CFR part 226 that
will change the Serious Deficiency Process from 7 CFR 226.6 to 226.25.
As a part of these changes, the rule will create separate citations for
applying institutions and for participating institutions. The currently
approved collection combines the burden of applying institutions and
participating institutions into a single citation per burden item. The
following reporting requirements will remove reporting burden
associated with participating
[[Page 13183]]
institutions from the preexisting citations, which will be added back
into the collection with new citations at 7 CFR 226.25. Overall, no new
burden will be added to the collection as a result of these citation
changes.
The proposed rule will change the requirement at 7 CFR
226.6(c)(1)(iii)(A) to 7 CFR 226.6(c)(4). USDA estimates that 56 State
agencies will be required to fulfill the existing requirement that SAs
notify an institution's executive director and chairman of the board of
directors that the institution's application has been determined
seriously deficient. When the notice is issued, the State agency must
add the institution to the State agency list, with the reason for the
serious deficiency determination, and provide a copy of the notice to
the appropriate FNSRO. USDA estimates that 56 State agencies will be
required to submit 5 notices each year and that it takes approximately
15 minutes (0.25 hours) to complete this requirement. The existing
requirement at 7 CFR 226.6(c)(1)(iii)(A) is currently approved with 560
responses and 140 burden hours. USDA estimates that 70 burden hours and
280 responses of these estimates are associated with the participating
institutions, with the rest of the estimates associated with the
applying institutions. USDA estimates that 70 annual burden hours and
280 responses will be subtracted from this existing requirement.
The proposed rule will change the requirement at 7 CFR
226.6(c)(1)(iii)(B) to 7 CFR 226.6(c)(5)(i)(A). USDA expects that 56
State agencies will be required to fulfill the existing requirement
that State Agencies submit a copy of a notice that an institution's
corrective action has been successful to the appropriate FNSRO for new,
renewing, and participating institutions. USDA expects that 56 State
agencies will be required to submit 3.5 notices each year and that it
takes approximately 15 minutes (0.25 hours) to complete this
requirement. The existing requirement at 7 CFR 226.6(c)(1)(iii)(B) is
currently approved with 392 responses and 98 burden hours. USDA
estimates that 49 burden hours and 196 responses of these estimates are
associated with participating institutions, with the rest associated
with the applying institutions. USDA estimates that 49 burden hours and
196 responses will be subtracted from this existing requirement.
The proposed rule will change the requirement at 7 CFR
226.6(c)(1)(iii)(C) to 7 CFR 226.6(c)(6). USDA estimates that 56 State
agencies will be required to fulfill the existing requirement that
State agencies submit a copy of the application denial and proposed
disqualification notice to FNSRO. USDA estimates that 56 State agencies
will be required to submit 1.5 notices each year and that it takes
approximately 15 minutes (0.25 hours) to complete this requirement. The
existing requirement at 7 CFR 226.6(c)(1)(iii)(C) is currently approved
with 168 responses and 42 burden hours. USDA estimates that 84
responses and 21 burden hours of these estimates are associated with
the participating institutions, with the rest associated with the
applying institutions. USDA estimates that 21 burden hours and 84
responses will be subtracted from this existing requirement.
The proposed rule will change the requirement at 7 CFR
226.6(c)(1)(iii)(E) to 7 CFR 226.6(c)(8). USDA expects that 56 State
agencies will be required to fulfill the existing requirement that SAs
submit copies of disqualification notices to the FNSRO for new,
renewing, and participating institutions. USDA expects that 56 State
agencies will be required to submit 1.5 notices each year and that it
takes approximately 15 minutes (0.25 hours) to complete this
requirement. The existing requirement at 7 CFR 226.6(c)(1)(iii)(E) is
currently approved with 168 responses and 42 burden hours. USDA
estimates that 84 responses and 21 burden hours of these estimates are
associated with participating institutions, with the remaining
estimates associated with the applying institutions. USDA estimates
that 21 burden hours and 84 responses will be subtracted from this
existing requirement.
The proposed rule will change the requirement at 7 CFR 226.6(p) for
State agencies to develop and provide the use of a standard form of a
written permanent agreement (which must specify the rights and
responsibilities of both parties) between sponsoring organizations and
day care homes, unaffiliated centers, outside-school-hours-care
centers, at-risk afterschool care centers, emergency shelters, or adult
day care centers for which the State agency has responsibility for
Program operations to 7 CFR 226.6(n)(1). USDA expects that 15 State
agencies will be required to develop and provide a standard form a year
and that it takes approximately 6 hours per response to complete this
requirement. The existing requirement at 7 CFR 226.6(p) has a total of
90 annual burden hours and 15 responses. The proposed rule is changing
the regulatory citation for this requirement but otherwise has no
further impact on the requirement or its burden so no additional burden
hours or responses will be added to this requirement.
The proposed rule will add additional reporting requirements that
apply the Serious Deficiency Process to MSSOs operating the Program.
USDA estimates that 56 State agencies will be required to fulfill
the new requirement at 7 CFR 226.6(q) that State agencies must
determine if a sponsoring organization is an MSSO and assume the role
of a Cognizant State agency (CSA) if the MSSOs center of operations is
located within the State. USDA estimates that the 56 State agencies
will be required to make 23 MSSO determinations each year and that it
takes approximately 15 minutes (0.25 hours) to complete this
requirement; which is estimated to add 322 annual burden hours and
1,288 responses to the collection.
USDA expects that 56 State agencies will be required to fulfill the
new requirement at 7 CFR 226.6(q)(1)(i) that State agencies must enter
into a permanent written agreement with the MSSO. USDA expects that the
56 State agencies will be required to make 23 permanent agreements each
year and that it takes approximately 15 minutes (0.25 hours) to
complete this requirement; which is estimated to add 322 annual burden
hours and 1,288 responses to the collection.
USDA estimates that 56 State agencies will be required to fulfill
the new requirement at 7 CFR 226.6(q)(1)(ii) that State agencies must
approve the MSSOs administrative budget. USDA estimates that the 56
State agencies will be required to approve 23 administrative budgets
each year and that it takes approximately 15 minutes (0.25 hours) to
complete this requirement; which is estimated to add 322 annual burden
hours and 1,288 responses to the collection.
USDA expects that 56 State agencies will be required to fulfill the
new requirement at 7 CFR 226.6(q)(1)(iii) that State agencies must
conduct monitoring of MSSO Program operations within the State. USDA
expects that the 56 State agencies will be required to monitor 23 MSSOs
each year and that it takes approximately 15 minutes (0.25 hours) to
complete this requirement; which is estimated to add 322 annual burden
hours and 1,288 responses to the collection.
USDA estimates that 56 State agencies will be required to fulfill
the new requirement at 7 CFR 226.6(q)(1)(iii)(C) that State agencies
provide summaries of the MSSO reviews that are conducted to the CSA and
if the State agency conducts a full review, the State agency
[[Page 13184]]
should request the necessary records from the CSA. USDA estimates that
the 56 State agencies will be required to submit 23 MSSO review
summaries to the CSA annually and that it takes approximately 15
minutes (0.25 hours) to complete this requirement; which is estimated
to add 322 annual burden hours and 1,288 responses to the collection.
USDA estimates that 56 State agencies will be required to fulfill
the new requirement at 7 CFR 226.6(q)(1)(iv) that State agencies must
conduct audit resolution activities. USDA estimates that the 56 State
agencies will be required to conduct 5 audit resolution activities each
year and that it takes approximately 15 minutes (0.25 hours) to
complete this requirement; which is estimated to add 70 annual burden
hours and 280 responses to the collection.
USDA expects that 56 State agencies will be required to fulfill the
new requirement at 7 CFR 226.6(q)(1)(v) that State agencies must notify
all other State agencies that have an agreement with an MSSO that their
agreement has been terminated and disqualification actions taken
against that MSSO. USDA expects that the 56 State agencies will be
required to make 23 notifications a year and that it takes
approximately 15 minutes (0.25 hours) to complete this requirement;
which is estimated to add 322 annual burden hours and 1,288 responses
to the collection.
USDA estimates that 56 State agencies will be required to fulfill
the new requirement at 7 CFR 226.6(q)(2) that State agencies must
determine if an MSSOs center of operations are located within the State
and assume the role of the CSA. USDA estimates that the 56 State
agencies will be required to make 23 MSSO determinations each year and
that it takes approximately 15 minutes (0.25 hours) to complete this
requirement; which is estimated to add 322 annual burden hours and
1,288 responses to the collection.
USDA expects that 56 State agencies will be required to fulfill the
new requirement at 7 CFR 226.6(q)(2)(iii) that the CSA must conduct a
full review of the MSSOs headquarters and financial records center,
must coordinate the timing of the reviews, and make copies of the
monitoring reports and findings available to all other State agencies
that have agreements with the MSSO. USDA expects that the 56 State
agencies will be required to conduct full reviews of 23 MSSO
headquarters and financial records centers annually and that it takes
approximately 20 hours to complete this requirement; which is estimated
to add 25,760 annual burden hours and 1,288 responses to the
collection.
UDSA estimates that 56 State agencies will be required to fulfill
the new requirement at 7 CFR 226.6(q)(2)(iv) that, if an MSSO has for-
profit status, the cognizant agency must establish audit thresholds and
requirements. USDA estimates that the 56 State agencies will be
required to establish audit thresholds and requirements for 6 for-
profit MSSOs annually and that it takes approximately 1 hour to
complete this requirement; which is estimated to add 336 annual burden
hours and responses to the collection.
The proposed rule will change the requirement at 7 CFR 226.6(r) to
7 CFR 226.6(p), which requires State agencies to provide information on
the importance and benefits of the Special Supplemental Nutrition
Program for Women, Infants, and Children (WIC) and WIC income
eligibility guidelines to participating institutions. USDA estimates
that 56 State agencies will be required to fulfill the requirements
each year and that it takes approximately 15 minutes (0.25 hours) to
complete this requirement. The existing requirement at 7 CFR 226.6(r)
has a total of 14 annual burden hours and 56 responses. The proposed
rule is changing the regulatory citation for this requirement, but
otherwise has no further impact on the requirement or its burden so no
additional burden hours or responses will be added to the collection.
As a part of the Serious Deficiency Process, the proposed rule will
be adding a requirement at 7 CFR 226.25(a)(2)(i) and (a)(3) that State
agencies must identify serious management problems and define a set of
standards to help measure the severity of a problem to determine what
rises to the level of a serious management problem. USDA expects that
56 State agencies will be required to define a set of standards to
identify serious management problems a year and that it takes
approximately 1 hour to complete this requirement; which is estimated
to add 56 burden hours and responses to the collection.
As a part of the changes to 7 CFR 226.6, the proposed rule
subtracts burden from currently approved requirements to create
separate citations for applying institutions and participating
institutions. The burden associated with applying institutions remain
in 7 CFR 226.6 while the burden associated with participating
institutions is subtracted from the old citations and added to new
citations in 7 CFR 226.25. Overall, no new burden will be added to the
collection as a result of the following changes.
USDA estimates that 56 State agencies will be required to fulfill
the changed requirement at 7 CFR 226.25(a)(2)(ii), (a)(5), and
(a)(6)(i) that State agencies notify a participating institution's
executive director and chairman of the board of directors, responsible
principals, and responsible individuals that serious problems have been
identified, must be addressed, and corrected. USDA estimates that 56
State agencies will notify 5 institutions a year and that it takes
approximately 15 minutes (0.25 hours) to complete this requirement. The
proposed requirement at the regulatory citations noted above adds back
a total of 70 burden hours and 280 responses for the participating
institutions which was subtracted from the old citation of 7 CFR
226.6(c)(1)(iii)(A) (originally approved with 560 responses and 140
burden hours for both the applying and participating institutions; it
is now estimated that the applying institutions now have 70 burden
hours and 280 responses). Therefore, USDA estimates that 70 hours and
280 responses will be added back to the collection.
USDA expects that 56 State agencies will be required to fulfill the
changed requirement at 7 CFR 226.25(a)(2)(ii), (a)(5), and
(a)(6)(ii)(A) that State agencies notify a participating institution's
executive director and chairman of the board of directors, responsible
principals, and responsible individuals that the serious management
problem has been vacated, update the State agency list, and provide a
copy of the notice to the appropriate FNSRO. USDA expects that 56 State
agencies will notify 3.5 institutions a year and that it takes
approximately 15 minutes (0.25 hours) to complete this requirement. The
proposed requirement at the regulatory citations noted above adds back
a total of 49 burden hours and 196 responses for the participating
institutions, which was subtracted from the old citation of 7 CFR
226.6(c)(1)(iii)(B) (originally approved with 98 burden hours and 392
responses for both the applying and participating institutions; it is
now estimated that the applying institutions will have 49 burden hours
and 196 responses). Therefore, USDA estimates that 49 hours and 196
responses will be added back to the collection.
USDA estimates that 56 State agencies will be required to fulfill
the changed requirement at 7 CFR 226.25(a)(2)(ii), (a)(5), and
(a)(6)(ii)(B) that State agencies notify a participating institution's
executive director and chairman of the board of directors,
[[Page 13185]]
responsible principals, and responsible individuals that the State
agency proposes to terminate the institution's agreement and disqualify
the institution, the responsible principals and responsible
individuals. USDA estimates that 56 State agencies will notify 1.5
institutions a year and that it takes approximately 15 minutes (0.25
hours) to complete this requirement. The proposed requirement at the
regulatory citations noted above adds back a total of 21 burden hours
and 84 responses for the participating institutions, which was
subtracted from the old citation of 7 CFR 226.6(c)(1)(iii)(C)
(originally approved with 42 burden hours and 168 responses for both
the applying and participating institutions; it is now estimated that
the applying institutions will have 21 burden hours and 84 responses).
Therefore, USDA estimates that 21 hours and 84 responses will be added
back to the collection.
USDA expects that 56 State agencies will be required to fulfill the
changed requirement at 7 CFR 226.25(a)(2)(ii), (a)(5), and
(a)(6)(iii)(A) and (B) that State agencies notify a participating
institution's executive director and chairman of the board of
directors, responsible principals, and responsible individuals of the
appeal determination, and whether the institution's agreement is
terminated, issue a notice of serious deficiency if the institution's
agreement is terminated, update the State agency list, and provide a
copy to the appropriate FNSRO. USDA expects that 56 State agencies will
notify 1.5 institutions a year and that it takes approximately 15
minutes (0.25 hours) to complete this requirement. The proposed
requirement at the regulatory citations noted above adds back a total
of 21 burden hours and 84 responses for the participating institutions,
which was subtracted from the old citation of 7 CFR 226.6(c)(1)(iii)(E)
(originally approved with 42 burden hours and 168 responses for both
the applying and participating institutions; it is now estimated that
the applying institutions will have 21 burden hours and 84 responses).
Therefore, USDA estimates that 21 hours and 84 responses will be added
back to the collection.
The proposed rule will add additional requirements to 7 CFR 226.25
regarding the placement of institutions, day care homes, and
unaffiliated centers that have been determined to have serious
management problems.
USDA estimates that 56 State agencies will be required to fulfill
the requirement at 7 CFR 226.25(b) that State agencies maintain a State
agency list, made available to FNS upon request. USDA estimates that
the 56 State agencies will each make 10,570 updates annually ((6,843
Independent Child Care Centers + 89,853 Family Day Care Homes + 21,692
Unaffiliated Centers)/56 State Agencies) x 5 Steps in the Serious
Deficiency Process = 10,570) and that it takes approximately 15 minutes
(0.25 hours) to complete this requirement; which is estimated to add
147,973.75 annual burden hours and 591,895 responses to this
collection.
The proposed rule will add additional requirements to 7 CFR 226.25
regarding corrective action plans and monitoring requirements of State
agencies.
USDA estimates that 56 State agencies will be required to fulfill
the requirement at 7 CFR 226.25(c)(2)(iv)(C) that State agencies
receive and approve submitted corrective action plans within 90 days
from the date the institution received the notice and that the State
agency monitor the full implementation of the corrective action plan.
USDA estimates that the 56 State agencies will review 3 corrective
action plans a year and that it takes approximately 15 minutes (0.25
hours) to complete this requirement; which is estimated to add 42
annual burden hours and 168 responses to the collection.
USDA expects that 56 State agencies will be required to fulfill the
requirement at 7 CFR 226.25(c)(3)(i) and 226.6(k)(2) that State
agencies conduct and prioritize follow-up reviews and more frequent
full reviews of institutions with serious management problems. USDA
expects that the 56 State agencies will have to conduct reviews of 39
participating institutions a year and that it takes approximately 20
hours to complete this requirement; which is estimated to add 43,680
annual burden hours and 2,184 responses to the collection.
The proposed rule will change the currently approved requirement at
7 CFR 226.6(c)(6)(ii)(G) to 7 CFR 226.25(d)(1). Under this requirement,
State agencies are required to terminate for cause the Program
agreement with a participating institution upon declaration of the
facility or institution of being seriously deficient. USDA estimates
that 56 State agencies will terminate 3 participating institutions each
year and that it takes approximately 15 minutes (0.25 hours) to
complete this requirement. The existing requirement at 7 CFR
226.6(c)(6)(ii)(G) has a total of 42 annual burden hours and 168
responses. The proposed rule is changing the regulatory citation for
this requirement, but otherwise has no further impact on the
requirement or its burden so no additional hours or responses will be
added to the collection as a result of this proposed rule.
The proposed rule will add additional requirements for State
agencies to follow after terminating an agreement with a participating
institution.
USDA estimates that 56 State agencies will be required to fulfill
the new requirement at 7 CFR 226.25(d)(2) that State agencies develop a
contingency plan for the transfer of facilities if a sponsoring
organization is terminated or disqualified to ensure that eligible
participants continue to have access to meals. USDA estimates that the
56 State agencies will develop 3 contingency plans each year and that
it takes approximately 2 hours to complete this requirement; which is
estimated to add 336 annual burden hours and 168 responses to the
collection.
USDA expects that 56 State agencies will be required to fulfill the
new requirement at 7 CFR 226.25(e)(2)(iii) that, if all serious
management problems have been corrected and all debts have been repaid,
State agencies may elect to remove an institution, responsible
principals, and responsible individuals from the National Disqualified
List, and must submit all requests for early removals to the
appropriate FNSRO. USDA expects that the 56 State agencies will remove
up to 3 institutions from the National Disqualified List each year and
that it takes approximately 15 minutes (0.25 hours) to complete this
requirement; which is estimated to add 42 annual burden hours and 168
responses to the collection.
USDA estimates that 56 State agencies will be required to fulfill
the new requirements at 7 CFR 226.25(e)(3)(ii) that State agencies must
enter into written agreements with FNS, in order to participate in a
matching program involving a FNS Federal system of records. USDA
estimates that the 56 State agencies will enter into a CMA written
agreement annually and that it takes approximately 1 hour to complete
this requirement; which is estimated to add 56 annual burden hours and
responses to the collection.
USDA expects that 56 State agencies will be required to fulfill the
new requirements at 7 CFR 226.25(e)(3)(iii)(B) that State agencies may
request FNS to waive the two-step independent verification and notice
requirement of the CMA. USDA expects that the 56 State agencies will
submit a waiver request annually and that it takes approximately 1 hour
to complete this requirement; which is estimated to add 56 annual
burden hours and responses to the collection.
The proposed rule will change the remaining citations belonging to
the
[[Page 13186]]
Serious Deficiency Process in 7 CFR 226.6 to 7 CFR 226.25. As these are
changes only to citations, no new burden will be added to the
collection.
USDA estimates that 56 State agencies will be required to fulfill
the changed requirement at 7 CFR 226.25(f)(1)(i)(A) and (f)(2)(i)(A)
that State agencies initiate action for termination and
disqualification upon determination of an imminent threat to the health
and safety of participants or that the institution knowingly submitted
a false or fraudulent claim, submit a combined notice of suspension,
proposed termination, and proposed disqualification to the institution,
and notify the appropriate FNSRO. USDA estimates that the 56 State
agencies will take action for termination and disqualification against
these participating institutions once a year and that it takes
approximately 15 minutes (0.25 hours) to complete this requirement. The
number of annual burden hours and responses for this requirement
remains unchanged from its older citation at 7 CFR 226.6(c)(5)(i)(A)
and (B), (c)(5)(ii)(A) and (B), (c)(5)(ii)(D) and (c)(6)(ii)(B), so
this requirement still has a total of 14 annual burden hours and 56
responses.
USDA expects that 56 State agencies will be required to fulfill the
changed requirement at 7 CFR 226.25(g) that State agencies annually
submit administrative review (appeals) procedures to all institutions.
USDA expects that the 56 State agencies will submit annual
administrative procedures to 21,840 institutions a year and that it
takes approximately 1 minute (0.02 hours) to complete this reporting
requirement for each record. The number of annual burden hours and
responses from this requirement remains unchanged from its older
citation at 7 CFR 226.6(k)(4)(i), so this requirement still has a total
of 364.73 annual burden hours and 21,840 responses.
USDA estimates that 56 State agencies will be required to fulfill
the changed requirement at 7 CFR 226.25(g)(1) that State agencies must
submit administrative review (appeal) procedures when applicable action
is taken. USDA estimates that the 56 State agencies will submit
procedures 5 times a year and that it takes approximately 15 minutes
(0.25 hours) to complete this requirement. The number of annual burden
hours and responses for this requirement remains unchanged from its
older citation at 7 CFR 226.6(k)(4)(ii), so it still has a total of 70
annual burden hours and 280 responses.
USDA estimates that 56 State agencies will be required to fulfill
the changed requirement at 7 CFR 226.25(g)(1)(iii) that State agencies
notify the institution's executive director and chairman of the board
of directors, responsible principals, and responsible individuals that
action is being taken against them, the basis for the action, and the
procedures to be followed to request an administrative review (appeal)
of the action. USDA estimates that the 56 State agencies will notify 3
participating institutions a year and that it takes approximately 15
minutes (0.25 hours) to complete this requirement. The number of annual
burden hours and responses for this requirement remains unchanged from
its older citation at 7 CFR 226.6(k)(5)(i), so this requirement still
has a total of 42 annual burden hours and 168 responses.
USDA expects that 56 State agencies will be required to fulfill the
changed requirement at 7 CFR 226.25(g)(1)(iv)(E) that State agencies
submit written documentation to a hearing official prior to the
beginning of an administrative hearing, within 30 days after receiving
the notice of action. USDA expects that the 56 State agencies will
submit written documentation to a hearing official 3 times a year and
that it takes approximately 2 hours to complete this requirement. The
number of annual burden hours and responses for this requirement
remains unchanged from its older citation at 7 CFR 226.6(k)(5)(v), so
this requirement still has a total of 336 annual burden hours and 168
responses.
USDA estimates that 56 State agencies will be required to fulfill
the changed requirement at 7 CFR 226.25(g)(2) that State agencies
provide participating institutions advanced notification at least 5
days in advance of the time and place of the hearing. USDA estimates
that the 56 State agencies will notify 3 participating institutions a
year and that it takes approximately 5 minutes (0.08 hours) to complete
this requirement. The number of annual burden hours and responses for
this requirement remains unchanged from its older citation at 7 CFR
226.6(k)(5)(ii), so this requirement still has a total of 14.03 annual
burden hours and 168 responses.
USDA expects that 56 State agencies will be required to fulfill the
changed requirement at 7 CFR 226.25(g)(2) that State agencies
participate in a hearing to determine that the State agency followed
Program requirements in taking action under appeal. USDA estimates that
the 56 State agencies will participate in 3 hearings a year and that it
takes approximately 4 hours to complete this requirement. The number of
annual burden hours and responses for this requirement remains
unchanged from its older citation at 7 CFR 226.6(k)(5)(vi), so this
requirement still has a total of 672 annual burden hours and 168
responses.
USDA estimates that 56 State agencies will be required to fulfill
the changed requirement at 7 CFR 226.25(g)(5)(i) and (ii) that
participating institutions, responsible principals, and responsible
individuals are informed of the decision made by the hearing official
within 60 days of the date the State agency received the appeal
request. USDA estimates that the 56 State agencies will notify 3
participating institutions a year and that it takes approximately 30
minutes (0.5 hours) to complete this requirement. The number of annual
burden hours and responses for this requirement remains unchanged from
its older citation at 7 CFR 226.6(k)(5)(ix) and (k)(9), so it still has
a total of 84 annual burden hours and 168 responses.
USDA expects that 56 State agencies will be required to fulfill the
changed requirement at 7 CFR 226.25(h)(3)(i) that State agencies send a
necessary demand letter for the collection of unearned payments,
including any assessment of interest, and refer the claim to the
appropriate State authority for the pursuit of the debt payment. USDA
estimates that the 56 State agencies will send 39 necessary demand
letters a year and that it takes approximately 1minute (0.02 hours) to
complete this requirement. The number of annual burden hours and
responses for this requirement remains unchanged from its older
citation at 7 CFR 226.14(a), so it still has a total of 36.47 annual
burden hours and 2,184 responses.
Local Government Agencies
The changes proposed in this rule will impact the existing
requirements currently approved under OMB Control Number 0584-0055 for
local government agencies.
USDA estimates that 3 local government agencies will be required to
fulfill the requirement at 7 CFR 226.6(b)(1)(xix) that sponsoring
organizations approved to participate in the Program that operate in
more than one state must provide the State with additional information
about their operations. USDA estimates that 3 local government agencies
will need to report on their operations once a year and that it takes
approximately 15 minutes (0.25 hours) to complete this requirement;
which is estimated to add 45 annual burden minutes (0.75 hours) and 3
responses to the collection.
USDA expects that 3,257 local government agencies will be required
to fulfill the requirement at 226.25(a)(2)(i) and 226.25(a)(3) that
sponsoring
[[Page 13187]]
organizations must identify serious management problems and define a
set of standards to help measure the severity of a problem to determine
what rises to the level of a serious management problem and how it
affects the institution or facility's ability to meet Program
requirements. USDA expects that 3,257 local government agencies will
develop a set of standards annually and that it takes approximately 1
hour to complete this requirement; which is estimated to add 3,257
annual burden hours and responses to the collection.
The proposed rule will change the following citation belonging to
the Serious Deficiency Process in 7 CFR 226.16(l)(3)(i) to
226.25(a)(2)(ii), (a)(5) and (a)(7)(i). As these are changes only to
citations, no new burden will be added to the collection.
USDA estimates that 83 local government agencies will be required
to fulfill the requirement at 7 CFR 226.25(a)(2)(ii), (a)(5) and
(a)(7)(i) that sponsoring organizations notify day care homes or
unaffiliated centers that serious management problems have been
identified, must be addressed, and corrected. USDA estimates that 83
local government agencies will send a notice each year and that it
takes approximately 15 minutes (0.25 hours) to complete this
requirement. The proposed requirement remains unchanged from its
currently approved citation at 7 CFR 226.16(l)(3)(i), with a total of
20.75 annual burden hours and 83 responses.
The proposed rule requirements for the Serious Deficiency Process
in 7 CFR 226.25 that affect local government agencies extend the
Serious Deficiency Process to day care homes and unaffiliated centers
and reflect the added requirements for local government agencies.
USDA expects that 3,257 local education agencies will be required
to fulfill the requirement at 7 CFR 226.25(a)(2)(ii), (a)(5), and
(a)(7)(ii)(A) that sponsoring organizations notify an institution's
executive director, chairman of the board of directors, responsible
principals, and responsible individuals that the serious management
problems have been vacated. USDA expects that the 3,257 local
government agencies will send a notification annually and that it takes
approximately 15 minutes (0.25 hours) to complete this requirement.
Therefore, USDA estimates that a total of 814.25 annual burden hours
and 3,257 responses will be added to the collection.
USDA estimates that 3,257 local education agencies will be required
to fulfill the requirement at 7 CFR (a)(2)(ii), (a)(5), and
(a)(7)(ii)(B) that sponsoring organizations notify an institution's
executive director, chairman of the board of directors, responsible
principals, and responsible individuals that corrective action has not
fully corrected each serious management problem and that the sponsoring
organization proposes to terminate the institution's agreement and
disqualify the institution, responsible principals, and responsible
individuals. USDA estimates that the 3,257 local government agencies
will send a notification annually and that it takes approximately 15
minutes (0.25 hours) to complete this requirement; which is estimated
to add 814.25 annual burden hours and 3,257 responses to the
collection.
USDA expects that 3,257 local education agencies will be required
to fulfill the requirement at 7 CFR 226.25(a)(2)(ii), (a)(5), and
(a)(7)(iii)(A) and (B) that sponsoring organizations notify an
institution's executive director, chairman of the board of directors,
responsible principals, and responsible individuals of the appeal
determination, and, if the appeal is denied, notify them that the
institution's agreement is terminated and declare the institution or
facility seriously deficient. USDA expects that the 3,257 local
government agencies will send a notification annually and that it takes
approximately 15 minutes (0.25 hours) to complete this requirement;
which is estimated to add 814.25 annual burden hours and 3,257
responses to the collection.
USDA estimates that 3,257 local education agencies will be required
to fulfill the requirement at 7 CFR 226.25(c)(1) that the institution,
unaffiliated center, or day care home must submit, in writing, what
corrective actions have been taken to correct each serious management
problem. USDA estimates that the 3,257 local government agencies will
submit a written record of corrective actions taken and that it takes
approximately 15 minutes (0.25 hours) to complete this requirement;
which is estimated to add 814.25 annual burden hours and 3,257
responses to the collection.
USDA expects that 3,257 local education agencies will be required
to fulfill the at 7 CFR 226.25(c)(3)(ii) that sponsoring organizations
conduct follow-up reviews and more frequent full reviews to confirm
that serious management problems are corrected. USDA expects that the
3,257 local government agencies will conduct a follow-up review and
that it takes approximately 20 hours to complete this requirement;
which is estimated to add 65,140 annual burden hours and 3,257
responses to the collection.
USDA estimates that 3,257 local education agencies will be required
to fulfill the requirement at 7 CFR 226.25(d)(1) that sponsoring
organizations terminate for cause the Program agreement upon
declaration of the institution or facility to be seriously deficient.
USDA estimates that the 3,257 local government agencies will terminate
an agreement annually and that it takes approximately 15 minutes (0.25
hours) to complete this requirement; which is estimated to add 814.25
annual burden hours and 3,257 responses to the collection.
The proposed rule will change the following citation belonging to
the Serious Deficiency Process in 7 CFR 226.16(d)(4)(viii) to 7 CFR
226.25(f)(1)(ii)(A) and 7 226.25(f)(2)(ii)(A). As these are changes
only to citations, no new burden will be added to the collection.
USDA estimates that 814 local government agencies will be required
to fulfill the changed requirement at 7 CFR 226.25(f)(1)(ii)(A) and
(f)(2)(ii)(A) that sponsoring organizations initiate action for
termination and disqualification upon determination of an imminent
threat to the health and safety of participants or that the institution
knowingly submitted a false or fraudulent claim and submit a combined
notice of suspension, proposed termination, and proposed
disqualification to the day care home provider or unaffiliated center.
USDA estimates that the 814 local government agencies will take action
for termination and disqualification against these participating
institutions once a year and that it takes approximately 15 minutes
(0.25 hours) to complete this requirement. The number of annual burden
hours and responses from this requirement remains unchanged from its
older citation at 7 CFR 226.16(d)(4)(viii), with a total of 203.5
annual burden hours and 814 responses. As a part of the revised serious
deficiency process, the proposed rule will require State agencies to
develop a contingency plan in place for the transfer of facilities if a
sponsoring organization is terminated or disqualified. The added
requirement, at Sec. 226.25(d)(2), is necessary to ensure that
eligible participants in the program do not lose meal access as a
result of a State agency action against an institution with serious
management problems. The burden for the 56 State agencies is estimated
at 42 (for 0.25 hours and for 168 total annual responses), an increase
of 42 annual
[[Page 13188]]
burden hours from the current collection. The new requirement to
develop a contingency plan is included as a line item in the ICR
associated with the rulemaking.
The proposed rule will also relocate the requirements for
suspension in the event of an imminent threat to health and safety or
the presence of false or fraudulent claims from Sec. 226.25(c)(5) and
(6) to a new home in Sec. 226.25(f)(1)(i)(A) and 226.25(f)(2)(i)(A).
The burden for the 56 State agencies is estimated to remain unchanged
from the previous collection at 14 (for 0.25 hours and for 56 total
annual responses). The burden for institutions, however, is expected to
change due to adjustments accounting for FY2020 CACFP participation
data. The burden for an estimated 728 local government agencies is
expected to increase to 182 (for 0.25 hours and for 728 total annual
responses), an increase of 161.25 hours from the current collection.
Meanwhile, the burden for an estimated 4,154 business-level
institutions is expected to decrease to 1,039 (for 0.25 hours and for
4,154 total annual responses), a decrease of 124 annual burden hours
from the current collection. The moved suspension requirements have
been included as line items in the ICR associated with this rulemaking.
As a part of the proposed rule, requirements regarding the appeals
process will be relocated to Sec. 226.25(g). State agencies will still
need to acknowledge the receipt of a request for a fair hearing, submit
written documentation to the hearing official, provide a fair hearing,
and inform the sponsor, responsible principals, and responsible
individuals of the hearing official's final decision. The burden for
the 56 State agencies will still be 1,106.028 (for 6.5835 hours and for
168 total annual responses). As such, the burden is expected to remain
unchanged from the previous collection. The fair hearing requirements
are listed as line items in the ICR associated with this rulemaking.
Along with the reporting requirements of the serious deficiency
rule, State agencies will be required to maintain a State agency list
that collects information on each institution and facility determined
to have serious management problems; the names, mailing addresses, and
dates of birth for each responsible principal and responsible
individual, as well as the institution or facility's status as it
progresses through the serious deficiency process. The recordkeeping
requirements already existed in the previous collection, but the
proposed rule will be moving the State agency list requirements to
Sec. 226.25(b) to group the requirement with the other provisions of
the serious deficiency process for participating institutions. The
burden for the 56 State agencies is estimated at 1,400 (for 5 hours and
for 280 total annual responses), resulting in no change from the
current collection.
The proposed rule will be offering an opportunity for institutions,
responsible principals, and responsible individuals to be removed from
the National Disqualified List earlier than the seven-year timetable,
at State agency discretion. The disqualified institutions, responsible
principals, and responsible individuals must correct all serious
management problems and repay any outstanding debts due to unearned
payments. Offering this new opportunity will incentivize institutions
and the responsible individuals and principals to correct their serious
management problems after they have been disqualified by allowing them
to exit the National Disqualified List and reapply for participation in
the Program. Under the proposed rule, FNS will be amending the
regulations at Sec. 226.25(e)(2)(iv), to give State agencies the
ability to remove an institution and the responsible principals and
individuals from the National Disqualified List and require the State
agency to submit all early removals to the appropriate FNSRO.
The burden associated with requests for early removals for the 56
State agencies is estimated at 42 (0.25 hours and for 168 total annual
respondents). Overall, the burden is expected to increase the burden to
42 annual burden hours, an increase of 42 hours from the current
collection. The requirement to submit all requests for early removal
from the National Disqualified List is included as a line item in the
ICR associated with this collection.
Similarly, the burden associated with sending a necessary demand
letter for the collection of unearned payments remains the same as the
prior collection. The only difference is that the citation has moved
from Sec. 226.14(a) to Sec. 226.25(h)(3)(i). The burden for the 56
State agencies is estimated 42 (for 0.25 hours and for 168 total annual
responses). Overall, FNS expects that the burden associated with
sending the necessary demand letter remains unchanged from the current
collection. The burden associated with this requirement will be
included as a line item in the ICR associated with this rulemaking.
At the conclusion of the serious deficiency process, the proposed
rule requires that the State agency terminate an institution's
agreement no later than 45 days after the date of the institution's
disqualification by FNS. The termination requirement has moved from
Sec. 226.6 to Sec. 226.25(i)(2)(A). By consolidating this requirement
with other serious deficiency requirements for participating
institutions should improve the readability of the CACFP regulations
for State agencies. FNS estimates that the burden for the 56 State
agencies will remain at 42 (for 0.25 hours and for 168 total annual
responses), unchanged from the current collection.
Other requirements that have changed their citations, such as the
development of a standard form of written permanent agreement and
provide information on Special Supplemental Nutrition Program for
Women, Infants and Children (WIC) to participants, from their previous
citations in the current collection. The development of a standard form
of written permanent agreement has moved from Sec. 226.6(p) to Sec.
226.6(n)(1). The burden for the 56 State agencies is estimated as 90
(for 6 hours and for 15 total annual responses), unchanged from the
current collection. Meanwhile, the requirement to provide WIC
information moved from Sec. 226.5(r) to Sec. 226.6(p) and is
estimated to have a burden of 14 (for 0.25 hours and for 56 total
annual respondents. The estimated burden for the WIC information
requirements is expected to remain unchanged from the current
collection as well. The burden associated with this requirement will be
included as a line item in the ICR associated with this rulemaking. To
address comments from State agencies, the proposed rule will be
amending Sec. 226.6(b)(1)(xix), (b)(2)(iii)(D)(2), (b)(2)(iii)(L), and
(q) to add specific requirements regarding Multi-State Sponsoring
Organizations (MSSOs). Prior to the proposed rule, the application
process for MSSOs was extremely complicated. State agencies asked for
guidance on how to approach MSSOs during the application process, but
the existing FNS guidance was outdated and conflicted with the
regulations in 2 CFR part 200. The new requirements provide a clear
process as to how State agencies will approach MSSOs applying to
participate in the CACFP.
Under the new requirements, sponsoring organizations approved to
operate in more than one state will be required to submit more
information than is required in the application process, State agencies
will be required to develop a process to share that information with
other Child Nutrition Program State agencies, and ensure that
[[Page 13189]]
the information on MSSO operations are up to date. Furthermore, State
agencies will be required to determine if a sponsoring organization
qualifies as an MSSO during their application, enter permanent written
agreements with the MSSO, approve the MSSO administrative budget,
conduct monitoring of the MSSOs program operations, conduct audit
resolution activities, notify other State agencies that have an
agreement with the MSSO after termination and disqualification actions,
and assume the role of a Cognizant State Agency (CSA) if the MSSOs
center of operations is located within the State. Adding the additional
process should provide a clear process for State agencies to follow and
eliminate any ambiguity under the current collection regarding MSSOs.
The burden for the 56 State agencies determining whether an
applying institution operates in more than one state is estimated at
294 (for 0.25 hours and for 1,176 total annual responses. Developing
the required process to share MSSO information is estimated at 56 (for
1 hour and for 56 total annual responses) while ensuring that MSSO
operations are up to date is estimated at 294 (for 0.25 hours and for
1,176 total annual responses). The burden for the 56 State agencies to
review participating MSSOs is estimated at 1,834 (for 1.75 hours and
7,336 total annual responses). FNS expects the overall burden regarding
the new MSSO requirements to increase burden to 2,478 annual burden
hours, an increase of 2,478 hours.
Meanwhile, the burden hours for institutions is expected to
increase to comply with the submission of additional information to the
appropriate State agency. The burden for the estimated 3 local
government agencies is expected at 0.75 (for 0.25 hours and 3 total
annual responses), increasing the burden to 0.75 annual burden hours,
an increase of 0.75 hours. Business-level institutions must also comply
with the new requirement. An estimated 997 business-level institutions
are expected to have an estimated burden at 249 (for 0.25 hours and for
997 total annual responses), increasing the burden to 249 annual burden
hours. The new MSSO requirements have been included as line items in
the ICR associated with this rulemaking.
The proposed rule will be extending the serious deficiency process
to unaffiliated centers. While family day care homes and independent
centers were included in the serious deficiency process, the current
regulations exclude unaffiliated centers from the serious deficiency
process. Excluding unaffiliated centers from the serious deficiency
process created ambiguity between State agencies and unaffiliated
centers as there was no defined process on how to treat unaffiliated
centers in the CACFP. By extending the process to unaffiliated centers,
the proposed rule formalizes the relationship between State agencies
and unaffiliated centers and establishes a process for accountability
for complying with program requirements, protecting the program
integrity of the CACFP. The proposed rule amends regulations at Sec.
226.17(e) and (f), 226.17a(f)(2)(i) and (ii), 226.19(d), and 226.19a(d)
to separate out unaffiliated centers from independent centers and
extend the serious deficiency process to unaffiliated centers.
The burden for an estimated 28,175 business-level institutions is
estimated at 5,423.124 (for 0.25 hours and for 21,692) for unaffiliated
child care centers; 1,710.8665 (for 0.25 hours and for 6,843 total
annual responses) for independent child care centers; 5,423.124 (for
0.25 hours and for 21,692) for unaffiliated afterschool child care
centers; 1,710.8665 (for 0.25 hours and for 6,843 total annual
responses) for independent afterschool child care centers; 5,423.124
(for 0.25 hours and for 21,692) for unaffiliated outside-school-hours
child care centers; and 1,710.8665 (for 0.25 hours and for 6,843 total
annual responses) for independent outside-school-hours child care
centers. FNS expects the burden to increase overall to 21,401.9715
annual burden hours, an increase of 21,401.9715, for these
requirements.
The burden for an estimated 28,535 business-level facilities is
estimated at 5,423.12 (for 0.25 hours and for 21,692 total annual
responses) for unaffiliated child care centers; 1,710.87 (for 0.25
hours and for 6,843 total annual responses) for independent child care
centers; 5,423.12 (for 0.25 hours and for 21,692 total annual
responses) for unaffiliated afterschool child care centers; 1,710.87
(for 0.25 hours and for 6,843 total annual responses) for independent
afterschool child care centers; 5,423.12 (for 0.25 hours and for 21,692
total annual responses) for unaffiliated outside-school-hours child
care centers; and 1,710.87 (for 0.25 hours and for 6,843 total annual
responses) for independent outside-school-hours child care centers. FNS
expects the burden to increase overall to 28,535 annual burden hours,
an increase of 28,535, for these requirements. The requirements for
unaffiliated centers will be included as line items in the ICR
associated with this rulemaking. The current approved burden for OMB
Control # 0584-0055 is 4,213,210.887 hours. This rulemaking is expected
to increase burden by 523,837.943 hours to account for the new
requirements. In addition, the burden is expected to decrease by
446,677 hours due to adjustments accounting for CACFP participation
data collected from FY2022. Taking account of decreases in the number
of sponsoring organizations, facilities, and participating households
in the SFSP, the burden is expected to increase by 77,170.390 hours,
resulting in a revised total burden of 4,290,381.277 hours.
This rulemaking will add clarity to the serious deficiency process
by defining key terms, establish a timeline for full correction, and
establish criteria for determining when the serious deficiency process
must be implemented. In addition, this rulemaking would also define
procedures for termination for cause and disqualification, implement
legal requirements for records maintained on individuals on the
National Disqualified List, and incorporate additional procedures to
account for the participation of multi-State sponsoring organizations.
The proposed rule is intended to improve the integrity of the CACFP.
Institutions
The changes proposed in this rule will introduce new reporting
requirements to the existing requirements currently approved under OMB
Control Number 0584-0055 for business level institutions.
USDA estimates that 1,116 institutions will be required to fulfill
the requirement at 7 CFR 226.6(b)(1)(xix) that institutions approved to
participate in the Program that operate in more than one state must
provide the State with additional information about their operations.
USDA estimates that 1,116 institutions will need to report on their
operations once a year and that it takes approximately 15 minutes (0.25
hours) to complete this requirement; which is estimated to add 279
annual burden hours and 1,116 responses to the collection.
USDA expects that 21,692 institutions will be required to fulfill
the requirement at 7 CFR 226.17(e) that sponsoring organizations must
enter into a permanent written agreement, which specifies the rights
and responsibilities of both parties, with an unaffiliated sponsored
child care center participating in the Program. USDA expects that
21,692 institutions will have to enter into an agreement annually and
that it takes approximately
[[Page 13190]]
15 minutes (0.25 hours) to complete this requirement; which is
estimated to add 5,423.12 hours and 21,692 responses to the collection.
USDA estimates that 6,843 institutions will be required to fulfill
the requirement at 7 CFR 226.17(f) that independent child care centers
must enter into a permanent written agreement, which specifies the
rights and responsibilities of both parties, with the State agency.
USDA estimates that 6,843 institutions will have to enter into an
agreement annually and that it takes approximately 15 minutes (0.25
hours) to complete this requirement; which is estimated to add 1,710.87
annual burden hours and 6,843 responses to the collection.
USDA expects that 21,692 institutions will be required to fulfill
the requirement at 7 CFR 226.17a(f)(2)(i) that sponsoring organizations
must enter into a permanent written agreement, specifying the rights
and responsibilities of both parties, with an unaffiliated sponsored
afterschool child care center participating in the Program. USDA
expects that 21,692 institutions will have to enter into an agreement
annually and that it takes approximately 15 minutes (0.25 hours) to
complete this requirement; which is estimated to add 5,423.12 annual
burden hours and 21,692 responses to the collection.
USDA estimates that 6,843 institutions will be required to fulfill
the requirement at 7 CFR 226.17a(f)(2)(ii) that independent afterschool
child care centers must enter into a permanent written agreement,
specifying the rights and responsibilities of both parties, with the
State agency. USDA estimates that 6,843 institutions will have to enter
into an agreement annually and that it takes approximately 15 minutes
(0.25 hours) to complete this requirement; which is estimated to add
1,710.87 annual burden hours and 6,843 responses to the collection.
USDA expects that 21,692 institutions will be required to fulfill
the requirement at 7 CFR 226.19(d) that sponsoring organizations must
enter into a permanent written agreement, specifying the rights and
responsibilities of both parties, with an unaffiliated sponsored
outside-school-hours child care centers participating in the Program.
USDA expects that 21,692 institutions will have to enter into an
agreement annually and that it takes approximately 15 minutes (0.25
hours) to complete this requirement; which is estimated to add 5,423.12
hours and 21,692 responses to the collection.
USDA estimates that 6,843 institutions will be required to fulfill
the requirement at 7 CFR 226.19a(d) that sponsoring organizations must
enter into a permanent written agreement, specifying the rights and
responsibilities of both parties, with an unaffiliated sponsored adult
day care centers participating in the Program. USDA estimates that
6,843 institutions will have to enter into an agreement annually and
that it takes approximately 15 minutes (0.25 hours) to complete this
requirement; which is estimated to add 1,710.87 annual burden hours and
6,843 responses to the collection.
USDA expects that 18,601 institutions will be required to fulfill
the requirement at 226.25(a)(2)(i) and 226.25(a)(3) that sponsoring
organizations must identify serious management problems and define a
set of standards to help measure the severity of a problem to determine
what rises to the level of a serious management problem and how it
affects the institution or facility's ability to meet Program
requirements. USDA expects that 18,601 institutions will develop a set
of standards annually and that it takes approximately 1 hour to
complete this requirement; which is estimated to add 18,601 annual
burden hours and responses to the collection.
The proposed rule will change the following citation belonging to
the Serious Deficiency Process in 7 CFR 226.16(l)(3)(i) to 7 CFR
226.25(a)(2)(ii), (a)(5) and (a)(7)(i). As these are changes only to
citations, no new burden will be added to the collection.
USDA estimates that 540 institutions will be required to fulfill
the requirement at 7 CFR 226.25(a)(2)(ii), (a)(5) and (a)(7)(i) that
sponsoring organizations notify day care homes or unaffiliated centers
that serious management problems have been identified, must be
addressed, and corrected. USDA estimates that 540 institutions will
send a notice each year and that it takes approximately 15 minutes
(0.25 hours) to complete this requirement. The proposed requirement
remains unchanged from its currently approved citation at 7 CFR
226.16(l)(3)(i), with a total of 135 annual burden hours and 540
responses.
The proposed rule requirements for the Serious Deficiency Process
in 7 CFR 226.25 that affect institutions extend the Serious Deficiency
Process to day care homes and unaffiliated centers, and reflect the
added requirements for institutions.
USDA expects that 18,601 institutions will be required to fulfill
the reporting requirement at 7 CFR 226.25(a)(2)(ii), (a)(5), and
(a)(7)(ii)(A) that sponsoring organizations notify an institution's
executive director, chairman of the board of directors, responsible
principals, and responsible individuals that the serious management
problems have been vacated. USDA expects that the 18,601 institutions
will send a notification annually and that it takes approximately 15
minutes (0.25 hours) to complete this requirement; which is estimated
to add 4,650.25 annual burden hours and 18,601 responses to the
collection.
USDA estimates that 18,601 institutions will be required to fulfill
the requirement at 7 CFR 226.25(a)(2)(ii), (a)(5), and (a)(7)(ii)(B)
that sponsoring organizations notify an institution's executive
director, chairman of the board of directors, responsible principals,
and responsible individuals that the sponsoring organization proposes
to terminate the institution's agreement and disqualify the
institution, responsible principals, and responsible individuals. USDA
estimates that the 18,601 institutions will send a notification
annually and that it takes approximately 15 minutes (0.25 hours) to
complete this requirement; which is estimated to add 4,650.25 annual
burden hours and 18,601 responses to the collection.
USDA estimates that 18,601 institutions will be required to fulfill
the requirements at 7 CFR 226.25(a)(2)(ii), (a)(5), and (a)(7)(iii)(A)
that sponsoring organizations notify an institution's executive
director, chairman of the board of directors, responsible principals,
and responsible individuals of the appeal determination. USDA estimates
that 18,601 institutions will send a notification annually and that it
takes approximately 15 minutes (0.25 hours) to complete this
requirement; which is estimated to add 4,650.25 annual burden hours and
18,601 responses to the collection.
USDA expects that 18,601 institutions will be required to fulfill
the requirement at 7 CFR 226.25(a)(2)(ii), (a)(5), and (a)(7)(iii)(B)
that sponsoring organizations must notify the day care home or
unaffiliated center's executive director, chairman of the board of
directors, responsible principals, and responsible individuals that the
agreement is terminated and declare that the institution or facility is
seriously deficient. USDA expects that the 18,601 institutions will
send a notification annually and that it takes approximately 15 minutes
(0.25 hours) to complete this requirement; which is estimated to add
4,650.25 annual burden hours and 18,601 responses to the collection.
USDA estimates that 18,601 institutions will be required to fulfill
the requirement at 7 CFR 226.25(c)(1) that the institution,
unaffiliated center, or
[[Page 13191]]
day care home must submit, in writing, what corrective actions have
been taken to correct each serious management problem. USDA estimates
that the 18,601 institutions will submit a written record of corrective
actions taken and that it takes approximately 15 minutes (0.25 hours)
to complete this requirement; which is estimated to add 4,650.25 annual
burden hours and 18,601 responses to the collection.
USDA expects that 18,601 institutions will be required to fulfill
the requirement at 7 CFR 226.25(c)(3)(ii) that sponsoring organizations
must conduct reviews to confirm that the serious management problems
are corrected. USDA expects that the 18,601 institutions will conduct a
follow-up review and that it takes approximately 20 hours to complete
this requirement; which is estimated to add 372,020 annual burden hours
and 18,601 to the collection.
USDA estimates that 18,601 institutions will be required to fulfill
the requirement at 7 CFR 226.25(d)(1) that sponsoring organizations
terminate for cause the Program agreement upon declaration of the
institution or facility to be seriously deficient. USDA estimates that
the 18,601 institutions will terminate an agreement annually and that
it takes approximately 15 minutes (0.25 hours) to complete this
requirement; which is estimated to add 4,650.25 annual burden hours and
18,601 responses to the collection.
The proposed rule will change the following citation belonging to
the Serious Deficiency Process in 7 CFR 226.16(d)(4)(viii) to 7 CFR
226.25(f)(1)(ii)(A) and (f)(2)(ii)(A). As these are changes only to
citations, no new burden will be added to the collection.
USDA estimates that 4,650 local government agencies will be
required to fulfill the changed requirement at 7 CFR
226.25(f)(1)(ii)(A) and 226.25(f)(2)(ii)(A) that sponsoring
organizations initiate action for termination and disqualification upon
determination of an imminent threat to the health and safety of
participants or that the institution knowingly submitted a false or
fraudulent claim. USDA estimates that the 4,650 local government
agencies will take action for termination and disqualification against
these participating institutions once a year and that it takes
approximately 15 minutes (0.25 hours) to complete this requirement. The
number of annual burden hours and responses for this requirement
remains unchanged from its older citation at 7 CFR 226.16(d)(4)(viii),
with a total of 1,162.50 annual burden hours and 4,650 responses.
Facilities
The changes proposed in this rule will introduce new reporting
requirements to the existing requirements that are currently approved
under OMB Control Number 0584-0055 for business level facilities.
USDA expects that 21,692 facilities will be required to fulfill the
requirement at 7 CFR 226.17(e) that sponsoring organizations must enter
into a permanent written agreement, specifying the rights and
responsibilities of both parties, with an unaffiliated sponsored child
care center participating in the Program. USDA expects that 21,692
facilities will have to enter into an agreement annually and that it
takes approximately 15 minutes (0.25 hours) to complete this
requirement' which is estimated to add 5,423.12 hours and 21,692
responses to the collection.
USDA estimates that 6,843 facilities will be required to fulfill
the requirement at 7 CFR 226.17(f) that independent child care centers
must enter into a permanent written agreement, specifying the rights
and responsibilities of both parties, with the State agency. USDA
estimates that 6,843 facilities will have to enter into an agreement
annually and that it takes approximately 15 minutes (0.25 hours) to
complete this requirement; which is estimated to add 1,710.87 annual
burden hours and 6,843 responses to the collection.
USDA expects that 21,692 facilities will be required to fulfill the
requirement at 7 CFR 226.17a(f)(2)(i) that sponsoring organizations
must enter into a permanent written agreement, specifying the rights
and responsibilities of both parties, with an unaffiliated sponsored
afterschool child care center participating in the Program. USDA
expects that 21,692 facilities will have to enter into an agreement
annually and that it takes approximately 15 minutes (0.25 hours) to
complete this requirement; which is estimated to add 5,423.12 annual
burden hours and 21,692 responses to the collection.
USDA estimates that 6,843 facilities will be required to fulfill
the requirement at 7 CFR 226.17a(f)(2)(ii) that independent afterschool
child care centers must enter into a permanent written agreement,
specifying the rights and responsibilities of both parties, with the
State agency. USDA estimates that 6,843 facilities will have to enter
into an agreement annually and that it takes approximately 15 minutes
(0.25 hours) to complete this requirement; which is estimated to add
1,710.87 annual burden hours and 6,843 responses to the collection.
USDA expects that 21,692 facilities will be required to fulfill the
requirement at 7 CFR 226.19(d) that sponsoring organizations must enter
into a permanent written agreement, specifying the rights and
responsibilities of both parties, with an unaffiliated sponsored
outside-school-hours child care center participating in the Program.
USDA expects that 21,692 facilities will have to enter into an
agreement annually and that it takes approximately 15 minutes (0.25
hours) to complete this requirement; which is estimated to add 5,423.12
hours and 21,692 responses to the collection.
USDA estimates that 6,843 facilities will be required to fulfill
the requirement at 7 CFR 226.19a(d) that sponsoring organizations must
enter into a permanent written agreement, specifying the rights and
responsibilities of both parties, with an unaffiliated sponsored adult
day care center participating in the Program. USDA estimates that 6,843
facilities will have to enter into an agreement annually and that it
takes approximately 15 minutes (0.25 hours) to complete this
requirement; which is estimated to add 1,710.87 annual burden hours and
6,843 responses to the collection.
Recordkeeping
State Agencies
The proposed rule will change the recordkeeping requirement at 7
CFR 226.6 to 7 CFR 226.25(b), which requires State agencies to collect
and maintain on file CACFP agreements (Federal/State and State/
Institutions), records received from applicant and participating
institutions, National Disqualified Lists/State Agency Lists, and
documentation of any administrative review (appeals), Program
assistance, activities, results, and corrective actions.
USDA estimates that 56 State agencies will fulfill the requirement
at 7 CFR 226.25(b). As a part of the requirement, USDA estimates that
the 56 State agencies will maintain 5 sets of records and that it takes
approximately 5 hours to complete this recordkeeping requirement for
each record. The FNS-843 Report of Disqualification from Participation:
Institution and Responsible Principals/Individuals and the FNS-844
Report of Disqualification from Participation--Individually
Disqualified Responsible Principal/Individual or Day Care Home Provider
forms are included among the records associated with this requirement.
The
[[Page 13192]]
proposed requirement does not change from the existing requirement at 7
CFR 226.6 in the currently approved collection, so this requirement
still has a total of 1,400 annual burden hours and 280 responses.
USDA expects that 56 State agencies will fulfill the requirement at
7 CFR 226.25(c) that State agencies must collect and maintain on file
corrective action plans submitted by institutions, unaffiliated
centers, or day care homes, in writing, which must discuss what
corrective actions have been taken to correct each serious management
problem. USDA expects that the 56 State agencies will each keep 3
records for submitted corrective action plans annually and that it
takes 1 hour and 30 minutes (1.5 hours) to complete this requirement;
which is estimated to add 252 annual burden hours and 168 responses to
the collection.
Public Disclosure
State Agencies
The proposed rule will add an additional public disclosure
requirement at 7 CFR 226.6(q)(2)(iii) as a part of the new review
process for Multi-State Sponsoring Organizations (MSSOs).
USDA estimates that 56 State agencies will fulfill the requirement
at 7 CFR 226.6(q)(2)(iii) that the Cognizant State Agency (CSA) must
conduct a full review at the MSSO headquarters and financial records
center, must coordinate the timing of the reviews and make copies of
monitoring reports and findings available to all other State agencies
that have agreements with the MSSO. USDA estimates that the 56 State
agencies will each disclose the findings of 23 MSSO reviews to other
State agencies annually and that it takes 15 minutes (0.25 hours) to
complete this requirement; which is estimated to add 322 annual burden
hours and 1,288 responses to the collection.
FNS estimates that the burden estimates for the proposals outlined
in this rulemaking, will have 79,040 respondents, 985,507 total annual
responses, and 760,711 total burden hours. Therefore, FNS estimates
that as a result of this proposed rulemaking, OMB Control Number 0584-
0055 will have 3,852,077 respondents, 17,165,505 responses and
4,968,899 burden hours, an increase of approximately 57,128
respondents, 952,412 responses, and 755,688 burden hours. The average
burden per response and the annual burden hours are explained below and
summarized in the charts which follow.
Reporting
Respondents (Affected Public): Businesses; and State, Local, and
Tribal Government. The respondent groups identified includes
institutions, facilities, State agencies, and Local government
agencies.
Estimated Number of Respondents: 78,984.
Estimated Number of Responses per Respondent: 12.455.
Estimated Total Annual Responses: 983,771.
Estimated Time per Response: 0.77.
Estimate Total Annual Burden on Respondents: 758,737.
Recordkeeping
Respondents (Affected Public): State, Local, and Tribal Government.
The respondent groups identified include State agencies.
Estimated Number of Respondents: 56.
Estimated Number of Responses per Respondent: 8.
Estimated Total Annual Responses: 448.
Estimated Time per Response: 3.69.
Estimate Total Annual Burden on Respondents: 1,652.
Public Disclosure
Respondents (Affected Public): State, Local, and Tribal Government.
The respondent groups identified include State agencies.
Estimated Number of Respondents: 56.
Estimated Number of Responses per Respondent: 23.
Estimated Total Annual Responses: 1,288.
Estimated Time per Response: 0.250.
Estimated Total Annual Burden on Respondents: 322.
[[Page 13193]]
Estimated Annual Burden for CACFP
[Reporting]
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Annual
burden
Estimated Frequency Average Average hours Total
Respondent type Burden activities Section number of of annual burden Annual current Program difference
respondents response responses per burden hours approved changes in burden
response burden
hours
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
State Agencies............... SAs must develop a 226.6(b)(2)(iii)(D)(2)........ 56 1.000 56.000 1.000 56.000 0.000 56.000 56.000
process to share
information on any
institution, facility,
or RPIs not approved to
administer or
participate in the
programs as described
under paragraph
(b)(2)(iii)(A)(1) of
this section. The SA
must work closely with
any other Child
Nutrition Program SA
within the State to
ensure information is
shared for program
purposes and on a timely
basis. The process must
be approved by FNS.
State Agencies............... SA must ensure that the 226.6(b)(2)(iii)(L)........... 56 23.000 1,288.000 0.250 322.000 0.000 322.000 322.000
MSSOs operations, as
described in paragraph
(b)(1)(xviii), are up-to-
date. If the MSSO has
facilities not
previously reported to
the SA, as described in
paragraph (b)(1)(xviii),
the MSSO must update the
information.
State Agencies............... SAs must notify an 226.6(c)(4)................... 56 5.000 280.000 0.250 70.000 140.000 -70.000 -70.000
institution's executive
director and chairman of
the board of directors
that the institution has
been determined to be
seriously deficient. At
the same time the notice
is issued, the SAs must
add the institution to
the SA list, along with
the basis for the
serious deficiency
determination, and
provide a copy of the
notice to the
appropriate FNS Regional
Office (FNSRO).
State Agencies............... SAs must submit a copy of 226.6(c)(5)(i)(A)............. 56 3.500 196.000 0.250 49.000 98.000 -49.000 -49.000
successful corrective
action (temporary
deferment or serious
deficiency
determination) notices
to FNSRO for new,
renewing, and
participating
institutions.
State Agencies............... SAs must submit a copy of 226.6(c)(6)................... 56 1.500 84.000 0.250 21.000 42.000 -21.000 -21.000
application denial and
proposed
disqualification notice
to FNSRO.
State Agencies............... SAs must submit copies of 226.6(c)(8)................... 56 1.500 84.000 0.250 21.000 42.000 -21.000 -21.000
disqualification notices
to the FNSRO for new,
renewing, and
participating
institutions.
State Agencies............... SAs must develop and 226.6(n)(1)................... 15 1.000 15.000 6.000 90.000 90.000 0.000 0.000
provide for the use of a
standard form of written
permanent agreement
between each sponsoring
organization and day
care home or
unaffiliated centers,
outside-school-hours-
care centers, at-risk
afterschool care
centers, emergency
shelters, or adult day
care centers for which
it has the
responsibility for
Program operations. The
agreement must specify
the rights and
responsibilities of both
parties.
State Agencies............... SAs must determine if a 226.6(q)...................... 56 23.000 1,288.000 0.250 322.000 0.000 322.000 322.000
sponsoring organization
is an MSSO, as described
in paragraphs (b)(1)(xv)
and (b)(2)(iii)(L). SAs
must assume the role of
the CSA, if the MSSOs
center of operations is
located within the
State. Each SA that
approves an MSSO must
follow the requirements
described in paragraph
(i).
State Agencies............... SAs must enter into a 226.6(q)(1)(i)................ 56 23.000 1,288.000 0.250 322.000 0.000 322.000 322.000
permanent written
agreement with the MSSO,
as described in
paragraph (b)(4).
State Agencies............... SAs must approve the 226.6(q)(1)(ii)............... 56 23.000 1,288.000 0.250 322.000 0.000 322.000 322.000
MSSOs administrative
budget.
[[Page 13194]]
State Agencies............... SAs must conduct 226.6(q)(1)(iii).............. 56 23.000 1,288.000 0.250 322.000 0.000 322.000 322.000
monitoring of MSSO
Program operations
within the State, as
described in paragraph
(k)(4). The SA should
coordinate monitoring
with the CSA to
streamline reviews and
minimize duplication of
the review content. The
SA may base the review
cycle on the number of
facilities operating
within the State.
State Agencies............... SAs must provide 226.6(q)(1)(iii)(C)........... 56 23.000 1,288.000 0.250 322.000 0.000 322.000 322.000
summaries of the MSSO
reviews that are
conducted to the CSA. If
the SA chooses to
conduct a full review,
the SA should request
the necessary records
from the CSA.
State Agencies............... SAs must conduct audit 226.6(q)(1)(iv)............... 56 5.000 280.000 0.250 70.000 0.000 70.000 70.000
resolution activities.
The SA must review audit
reports, address audit
findings, and implement
corrective actions, as
required under 2 CFR
part 200, subpart D, and
USDA implementing
regulations 2 CFR parts
400 and 415.
State Agencies............... SAs must notify all other 226.6(q)(1)(v)................ 56 23.000 1,288.000 0.250 322.000 0.000 322.000 322.000
State agencies that have
agreements with the MSSO
of termination and
disqualification
actions, as described in
paragraph (c)(2)(i).
State Agencies............... If it determines that an 226.6(q)(2)................... 56 23.000 1,288.000 0.250 322.000 0.000 322.000 322.000
MSSOs center of
operations is located
within the State, the SA
must assume the role of
the CSA.
State Agencies............... The CSA must conduct a 226.6(q)(2)(iii).............. 56 23.000 1,288.000 20.000 25,760.000 0.000 25,760.000 25,760.000
full review at the MSSO
headquarters and
financial records
center. The CSA must
coordinate the timing of
the reviews and make
copies of monitoring
reports and findings
available to all other
State agencies that have
agreements with the
MSSO.
State Agencies............... If an MSSO has for-profit 226.6(q)(2)(iv)............... 56 6.000 336.000 1.000 336.000 0.000 336.000 336.000
status, the cognizant
agency must establish
audit thresholds and
requirements.
State Agencies............... SAs must provide 226.6(p)...................... 56 1.000 56.000 0.250 14.000 14.000 0.000 0.000
information on the
importance and benefits
of the Special
Supplemental Nutrition
Program for Women,
Infants, and Children
(WIC) and WIC income
eligibility guidelines
to participating
institutions.
State Agencies............... SAs must identify serious 226.25(a)(2)(i) and 56 1.000 56.000 1.000 56.000 0.000 56.000 56.000
management problems and 226.25(a)(3).
define a set of
standards to help
measure the severity of
a problem to determine
what rises to the level
of a serious management
problem and how it
affects the institution
or facility's ability to
meet Program
requirements.
[[Page 13195]]
State Agencies............... SAs must notify an 226.25(a)(2)(ii), 56 5.000 280.000 0.250 70.000 0.000 70.000 70.000
institution's executive 226.25(a)(5), and
director and chairman of 226.25(a)(6)(i).
the board of directors,
and RPIs, that serious
management problems have
been identified, must be
addressed, and
corrected. The notice
must identify all
aspects of the serious
management problem;
reference specific
regulatory citations,
instruction, or
policies; name all of
the RPIs; describe the
action needed to correct
the serious management
problem; and set a
deadline for completing
the corrective action.
At the same time, the SA
must add the institution
and RPIs to the SA list
and provide a copy of
the notice to the
appropriate FNSRO.
State Agencies............... If corrective action has 226.25(a)(2)(ii), 56 3.500 196.000 0.250 49.000 0.000 49.000 49.000
been taken to fully 226.25(a)(5), and
correct each serious 226.25(a)(6)(ii)(A).
management problem, SAs
must notify an
institution's executive
director and chairman of
the board of directors,
and RPIs, that the
serious management
problem has been
vacated. At the same
time, the SA must update
the SA list and provide
a copy of the notice to
the appropriate FNSRO.
State Agencies............... If corrective action has 226.25(a)(2)(ii), 56 1.500 84.000 0.250 21.000 0.000 21.000 21.000
not fully corrected each 226.25(a)(5), and
serious management 226.25(a)(6)(ii)(B).
problem, SAs must notify
an institution's
executive director and
chairman of the board of
directors, and RPIs,
that the SA proposes to
terminate the
institution's agreement
and disqualify the
institution and RPIs. SA
must notify the
institution of the
procedures for seeking a
fair hearing in
accordance with
paragraph f of the
proposed termination and
proposed
disqualifications. At
the same time, the SA
must update the SA list
and provide a copy of
the notice to the
appropriate FNSRO.
State Agencies............... If appeal is upheld, SAs 226.25(a)(2)(ii), 56 1.500 84.000 0.250 21.000 0.000 21.000 21.000
must notify the 226.25(a)(5), and
institution and facility 226.25(a)(6)(iii)(A) and (B).
that confirms the
serious management
problem is vacated and
advise the institution
and facility that
procedures and policies
must be implemented to
fully correct the
serious management
problem. If the fair
hearing is denied, SAs
must notify the
institution's executive
director and chairman of
the board of directors,
and RPIs, that the
agreement is terminated
and declare the
institution or facility
seriously deficient. SAs
must issue a serious
deficiency notice that
informs the institution,
facility, and RPIs of
their disqualification
from Program
participation. At the
same time, the SA must
update the SA list and
provide a copy of the
notice to the
appropriate FNSRO.
State Agencies............... The State agency must 226.25(b)..................... 56 10,570 591,895.000 0.250 147,973.750 0.000 147,973.750 147,973.750
maintain a State agency
list, made available to
FNS upon request, and
must include the
following information:
Names and mailing
addresses of each
institution, day care
home or unaffiliated
center that is
determined to have a
serious management
problem; Names, mailing
addresses, and dates of
birth of each
responsible principal
and responsible
individual; The status
of the institution, day
care home or
unaffiliated center, as
it progresses through
the stages of corrective
action, termination,
suspension, and
disqualification, full
correction, as
applicable. Within 10
days of receiving a
notice of termination
and disqualification
from a sponsoring
organization, the State
agency must provide FNS
with the information as
described in paragraph
(b)(1)(A) and (B) of
this section.
[[Page 13196]]
State Agencies............... SAs must receive and 226.25(c)(2)(iv)(C)........... 56 3.000 168.000 0.250 42.000 0.000 42.000 42.000
approve the corrective
action plan within 90
days from the date the
institution received the
notice and monitor the
full implementation of
the corrective action
plan.
State Agencies............... SAs must conduct and 226.25(c)(3)(i) and 56 39.000 2,184.000 20.000 43,680.000 0.000 43,680.000 43,680.000
prioritize follow-up 226.6(k)(2).
reviews and more
frequent full reviews of
institutions with
serious management
problems, as described
in 7 CFR
226.6(k)(6)(ii). An
institution must have at
least two full reviews
occurring once every 2
years and at least 24
months apart that reveal
no new or repeat serious
management problems to
achieve full correction.
State Agencies............... SAs must terminate for 226.25(d)(1).................. 56 3.000 168.000 0.250 42.000 42.000 0.000 0.000
cause the Program
agreement upon
declaration of the
institution or facility
to be seriously
deficient.
State Agencies............... SAs must develop a 226.25(d)(2).................. 56 3.000 168.000 2.000 336.000 0.000 336.000 336.000
contingency plan in
place for the transfer
of facilities if a
sponsoring organization
is terminated or
disqualified to ensure
that eligible
participants continue to
have access to meal
service.
State Agencies............... If all serious management 226.25(e)(2)(iii)............. 56 3.000 168.000 0.250 42.000 0.000 42.000 42.000
problems have been
corrected and all debts
have been repaid, SAs
may elect to remove an
institution and RPIs
from the National
Disqualified List, and
must submit all requests
for early removals to
the appropriate FNSRO.
State Agencies............... SAs must enter into 226.25(e)(3)(ii).............. 56 1.000 56.000 1.000 56.000 0.000 56.000 56.000
written agreements with
FNS, consistent with 5
U.S.C. 552a(o) of the
CMA, in order to
participate in a
matching program
involving a FNS Federal
system of records.
State Agencies............... SAs may request FNS to 226.25(e)(3)(iii)(B).......... 56 1 56 1 56 0 56 56
waive the two-step
independent verification
and notice requirement
of the CMA.
[[Page 13197]]
State Agencies............... If the SA or sponsoring 226.25(f)(1)(i)(A) & 56 1.000 56.000 0.250 14.000 14.000 0.000 0.000
organization determines 226.25(f)(2)(i)(A).
that there is an
imminent threat to the
health or safety of
participants, or that
there is a threat to
public health or safety,
the appropriate State or
local licensing and
health authorities must
immediately be notified
and take action that is
consistent with the
recommendations and
requirements of those
authorities. The SA or
sponsoring organization
must initiate action for
termination and
disqualification. The SA
must notify the
institution's executive
director and chairman of
the board of directors
that the institution's
participation has been
suspended and that the
SA proposes to terminate
the institution's
agreement and to
disqualify the
institution and the
RPIs. The notice must
identify the RPIs and
must be sent to those
persons as well. If the
SA determines that an
institution has
knowingly submitted a
false or fraudulent
claim, the SA must
initiate action to
suspend the
institution's
participation and must
initiate action to
terminate the
institution's agreement
and initiate action to
disqualify the
institution and the
RPIs. The SA must notify
the institution's
executive director and
chairman of the board of
directors that the SA
proposes to suspend the
institution's
participation. At the
same time this notice is
sent, the SA must add
the institution and the
RPIs to the State agency
list, along with the
basis for the suspension
and provide a copy of
the notice to the
appropriate FNSRO.
State Agencies............... SAs must annually submit 226.25(g)..................... 56 390.000 21,840.000 0.017 364.728 364.728 0.000 0.000
administrative review
(appeal) procedures to
all institutions.
State Agencies............... Each SA must submit 226.25(g)(1)(i)............... 56 5.000 280.000 0.250 70.000 70.000 0.000 0.000
administrative review
(appeal) procedures when
applicable action is
taken.
State Agencies............... SAs must notify the 226.25(g)(1)(iii)............. 56 3.000 168.000 0.250 42.000 42.000 0.000 0.000
institution's executive
director and chairman of
the board of directors,
and the responsible
principals and
responsible individuals,
of the action being
taken or proposed, the
basis for the action,
and the procedures under
which the institution
and the responsible
principals or
responsible individuals
may request an
administrative review
(appeal) of the action.
State Agencies............... SAs must submit written 226.25(g)(1)(iv)(E)........... 56 3.000 168.000 2.000 336.000 336.000 0.000 0.000
documentation to the
hearing official prior
to the beginning of the
hearing, within 30 days
after receiving the
notice of action.
State Agencies............... If a hearing is 226.25(g)(2).................. 56 3.000 168.000 0.084 14.03 14.030 0.000 0.000
requested, the sponsor,
the responsible
principals, and
responsible individuals
must be provided with at
least 5 days advance
notice of the time and
place of the hearing.
State Agencies............... Hearing official must 226.25(g)(2).................. 56 3.000 168.000 4.000 672.000 672.000 0.000 0.000
hold hearing to
determine that the SA
followed Program
requirements in taking
action under appeal.
State Agencies............... Hearing official must 226.25(g)(5)(i) and (ii)...... 56 3.000 168.000 0.500 84.000 84.000 0.000 0.000
inform the SA, sponsor,
responsible principals,
and responsible
individuals of the
decision within 60 days
of the date the SA
received the appeal
request.
[[Page 13198]]
State Agencies............... SAs must send a necessary 226.25(h)(3)(i)).............. 56 39.000 2,184.000 0.017 36.473 36.473 0.000 0.000
demand letter for the
collection of unearned
payments, including any
assessment of interest,
as described in Sec.
226.14(a), and refer the
claim to the appropriate
State authority for
pursuit of the debt
payment. SAs must assess
interest on
institutions' debts
established on or after
July 29, 2002, based on
the Current Value of
Funds Rate, which is
published annually by
Treasury in the Federal
Reserve and is available
from the FNSRO, and
notify the institution
that interest will be
charged on debts not
paid in full within 30
days of the initial
demand for remittance up
to the date of payment.
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
State Agencies Total................................................................ 56 11,316.821 633,742.000 0.35 223,140.98 2,101.23 221,039.750 221,039.750
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Local Government Agencies.... Sponsoring organizations 226.6(b)(1)(xix).............. 3 1.000 3.000 0.250 0.750 0.000 0.750 0.750
approved to participate
in the Program in more
than one State must
provide: the number of
affiliated centers it
sponsors, by State; the
number of unaffiliated
centers it sponsors, by
State; the number of day
care homes it sponsors,
by State; the names,
addresses, and phone
numbers of the
organization's
headquarters and the
official(s) who have
administrative
responsibility; the
names, addresses, and
phone numbers of the
financial records center
and the official(s) who
has financial
responsibility; and the
organization's decision
on whether to use
program funds for
administrative expenses.
Local Government Agencies.... Sponsoring organizations 226.25(a)(2)(i) and 3,257 1.000 3,257.000 1.000 3,257.000 0.000 3,257.000 3,257.000
must identify serious 226.25(a)(3).
management problems and
define a set of
standards to help
measure the severity of
a problem to determine
what rises to the level
of a serious management
problem and how it
affects the institution
or facility's ability to
meet Program
requirements.
Local Government Agencies.... Sponsoring organizations 226.25(a)(2)(ii), 83 1.000 83.000 0.250 20.750 20.750 0.000 0.000
must notify the day care 226.25(a)(5), and
home or unaffiliated 226.25(a)(7)(i).
center that serious
management problems have
been identified, must be
addressed, and
corrected. The notice
must identify all
aspects of the serious
management problem;
reference specific
regulatory citations,
instruction, or
policies; name all of
the RPIs; describe the
action needed to correct
the serious management
problem; and set a
deadline for completing
the corrective action.
Local Government Agencies.... If corrective action has 226.25(a)(2)(ii), 3,257 1.000 3,257.000 0.250 814.250 0.000 814.250 814.250
been taken to fully 226.25(a)(5), and
correct each serious 226.25(a)(7)(ii)(A).
management problem,
sponsoring organizations
must notify an
institution's executive
director and chairman of
the board of directors,
and RPIs, that the
serious management
problem has been
vacated.
[[Page 13199]]
Local Government Agencies.... If corrective action has 226.25(a)(2)(ii), 3,257 1.000 3,257.000 0.250 814.250 0.000 814.250 814.250
not fully corrected each 226.25(a)(5), and
serious management 226.25(a)(7)(ii)(B).
problem, sponsoring
organizations must
notify an institution's
executive director and
chairman of the board of
directors, and RPIs,
that the sponsoring
organizations proposes
to terminate the
institution's agreement
and disqualify the
institution and RPIs. SA
must notify the
institution of the
procedures for seeking a
fair hearing in
accordance with
paragraph g of the
proposed termination and
proposed
disqualifications.
Local Government Agencies.... If appeal is upheld, 226.25(a)(2)(ii), 3,257 1.000 3,257.000 0.250 814.250 0.000 814.250 814.250
sponsoring organizations 226.25(a)(5), and
must notify the 226.25(a)(7)(iii)(A) and (B).
institution and facility
that confirms the
serious management
problem is vacated and
advise the institution
and facility that
procedures and policies
must be implemented to
fully correct the
serious management
problem. If the fair
hearing is denied,
sponsoring organizations
must notify the
institution's executive
director and chairman of
the board of directors,
and RPIs, that the
agreement is terminated
and declare the
institution or facility
seriously deficient.
Sponsoring organizations
must issue a serious
deficiency notice that
informs the institution,
facility, and RPIs of
their disqualification
from Program
participation.
Local Government Agencies.... In response to the notice 226.25(c)(1).................. 3,257 1.000 3,257.000 0.250 814.250 0.000 814.250 814.250
of serious management
problems, the
institution,
unaffiliated center, or
day care home must
submit, in writing, what
corrective actions it
has taken to correct
each serious management
system. The corrective
action plan must address
the root cause of each
serious management
problem, describe and
document the action
taken to correct serious
management problems, and
describe the action's
outcome.
Local Government Agencies.... Sponsoring organizations 226.25(c)(3)(ii).............. 3,257 1.000 3,257.000 20.000 65,140.000 0.000 65,140.000 65,140.000
must conduct reviews, as
described in Sec.
226.16(d)(4) to confirm
that the serious
management problem(s) is
corrected. A follow-up
review must be conducted
to confirm that the
serious management
problem is corrected.
Full reviews occurring 3
times a year, as
described in Sec.
226.16(d)(4). Full
correction is achieved
when three consecutive
reviews indicate no new
serious management
problems or no new
repeat serious
management problem(s).
Local Government Agencies.... Sponsoring organizations 226.25(d)(1).................. 3,257 1.000 3,257.000 0.250 814.250 0.000 814.250 814.250
must terminate for cause
the Program agreement
upon declaration of the
institution or facility
to be seriously
deficient.
[[Page 13200]]
Local Government Agencies.... If the sponsoring 226.25(f)(1)(ii)(A) & 814 1.000 814.000 0.250 203.500 203.500 0.000 0.000
organization determines 226.25(f)(2)(ii)(A).
that there is an
imminent threat to the
health or safety of
participants, or that
there is a threat to
public health or safety,
the appropriate State or
local licensing and
health authorities must
immediately be notified
and take action that is
consistent with the
recommendations and
requirements of those
authorities. The
sponsoring organization
must initiate action for
termination and
disqualification. The
sponsoring organization
must submit a combined
notice of suspension,
proposed termination,
and proposed
disqualification to the
day care home provider
or unaffiliated center
and the RPIs. The notice
must identify the RPIs
and must be sent to
those persons as well.
If the sponsoring
organization determines
that a day care home or
unaffiliated center has
knowingly submitted a
false or fraudulent
claim, the sponsoring
organization must
initiate action to
suspend the day care
home or unaffiliated
center's participation
and must initiate action
to terminate the day
care home or
unaffiliated center's
agreement and initiate
action to disqualify the
institution and the
RPIs. The SA must submit
a combined notice of
suspension, proposed
termination, and
proposed
disqualification to the
day care home provider
or unaffiliated center
and the RPIs. At the
same time this notice is
sent, the SA must add
the day care home or
unaffiliated center and
the RPIs to the State
agency list, along with
the basis for the
suspension and provide a
copy of the notice to
the appropriate FNSRO.
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Local Government Agencies Total..................................................... 3,257 7.276 23,699.00 3.067 72,693.250 224.250 72,469.000 72,469.000
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
State/Local/Tribal Governments Total................................................ 3,313 198.443 657,441.000 0.450 295,834.23 2,325.48 293,508.750 293,508.750
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Institutions................. Sponsoring organizations 226.6(b)(1)(xix).............. 1,116 1.000 1,116.000 0.250 279.000 0.000 279.000 279.000
approved to participate
in the Program in more
than one State must
provide: the number of
affiliated centers it
sponsors, by State; the
number of unaffiliated
centers it sponsors, by
State; the number of day
care homes it sponsors,
by State; the names,
addresses, and phone
numbers of the
organization's
headquarters and the
official(s) who have
administrative
responsibility; the
names, addresses, and
phone numbers of the
financial records center
and the official(s) who
has financial
responsibility; and the
organization's decision
on whether to use
program funds for
administrative expenses.
[[Page 13201]]
Institutions................. Unaffiliated sponsored 226.17(e)..................... 21,692 1.000 21,692.496 0.250 5,423.124 0.000 5,423.124 5,423.124
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. The
sponsoring organization
may terminate this
agreement for cause as
described in Sec.
226.25(a).
Institutions................. Independent child care 226.17(f)..................... 6,843 1.000 6,843.466 0.250 1,710.867 0.000 1,710.867 1,710.867
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. The SA may
terminate this agreement
for cause as described
in Sec. 226.25(a).
Institutions................. Unaffiliated sponsored 226.17a(f)(2)(i).............. 21,692 1.000 21,692.496 0.250 5,423.124 0.000 5,423.124 5,423.124
afterschool 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 applicable
provisions set forth in
this section. The
sponsoring organization
may terminate this
agreement for cause as
described in Sec.
226.25(a).
Institutions................. Independent afterschool 226.17a(f)(2)(ii)............. 6,843 1.000 6,843 0.250 1,710.867 0.000 1,710.867 1,710.867
child care centers must
enter into a written
permanent agreement with
the SA. 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. The SA may
terminate this agreement
for cause as described
in Sec. 226.25(a).
Institutions................. Unaffiliated sponsored 226.19(d)..................... 21,692 1.000 21,692 0.250 5,423.124 0.000 5,423.124 5,423.124
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. The
sponsoring organization
may terminate this
agreement for cause as
described in Sec.
226.25(a).
Institutions................. Unaffiliated sponsored 226.19a(d).................... 6,843 1.000 6,843 0.250 1,710.867 0.000 1,710.867 1,710.867
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) of this section. The
sponsoring organization
may terminate this
agreement for cause as
described in Sec.
226.25(a).
Institutions................. Sponsoring organizations 226.25(a)(2)(i) and 18,601 1.000 18,601.000 1.000 18,601.000 0.000 18,601.000 18,601.000
must identify serious 226.25(a)(3).
management problems and
define a set of
standards to help
measure the severity of
a problem to determine
what rises to the level
of a serious management
problem and how it
affects the institution
or facility's ability to
meet Program
requirements.
[[Page 13202]]
Institutions................. Sponsoring organizations 226.25(a)(2)(ii), 540 1.000 540.000 0.250 135.000 135.000 0.000 0.000
must notify a day care 226.25(a)(5), and
home or unaffiliated 226.25(a)(7)(i).
center that serious
management problems have
been identified, must be
addressed, and
corrected. The notice
must identify all
aspects of the serious
management problem;
reference specific
regulatory citations,
instruction, or
policies; name all of
the RPIs; describe the
action needed to correct
the serious management
problem; and set a
deadline for completing
the corrective action.
Institutions................. If corrective action has 226.25(a)(2)(ii), 18,601 1.000 18,601.000 0.250 4,650.250 0.000 4,650.250 4,650.250
been taken to fully 226.25(a)(5), and
correct each serious 226.25(a)(7)(ii)(A).
management problem,
sponsoring organizations
must notify the day care
home or unaffiliated
center that the serious
management problem has
been vacated.
Institutions................. If corrective action has 226.25(a)(2)(ii), 18,601 1.000 18,601.000 0.250 4,650.250 0.000 4,650.250 4,650.250
not fully corrected each 226.25(a)(5), and
serious management 226.25(a)(7)(ii)(B).
problem, sponsoring
organizations must
notify the day care home
or unaffiliated center
that the sponsoring
organizations proposes
to terminate the
institution's agreement
and disqualify the
institution and RPIs. SA
must notify the
institution of the
procedures for seeking a
fair hearing in
accordance with
paragraph g of the
proposed termination and
proposed
disqualifications.
Institutions................. If appeal is upheld, 226.25(a)(2)(ii), 18,601 1.000 18,601.000 0.250 4,650.250 0.000 4,650.250 4,650.250
sponsoring organizations 226.25(a)(5), and
must notify the day care 226.25(a)(7)(iii)(A).
home or unaffiliated
center that confirms the
serious management
problem is vacated and
advise the institution
and facility that
procedures and policies
must be implemented to
fully correct the
serious management
problem.
Institutions................. If the fair hearing is 226.25(a)(2)(ii), 18,601 1.000 18,601.000 0.250 4,650.250 0.000 4,650.250 4,650.250
denied, sponsoring 226.25(a)(5), and
organizations must 226.25(a)(7)(iii)(B).
notify the day care home
or unaffiliated center
that the agreement is
terminated and declare
the institution or
facility seriously
deficient. Sponsoring
organizations must issue
a serious deficiency
notice that informs the
institution, facility,
and RPIs of their
disqualification from
Program participation.
Institutions................. In response to the notice 226.25(c)(1).................. 18,601 1.000 18,601.000 0.250 4,650.250 0.000 4,650.250 4,650.250
of serious management
problems, the
institution,
unaffiliated center, or
day care home must
submit, in writing, what
corrective actions it
has taken to correct
each serious management
system. The corrective
action plan must address
the root cause of each
serious management
problem, describe and
document the action
taken to correct serious
management problems, and
describe the action's
outcome.
[[Page 13203]]
Institutions................. Sponsoring organizations 226.25(c)(3)(ii).............. 18,601 1.000 18,601.000 20.000 372,020.000 0.000 372,020.000 372,020.000
must conduct reviews
that assess whether the
facility has corrected
the serious management
problems, as described
in Sec. 226.16(d)(4).
Follow-up reviews must
be conducted to confirm
that the serious
management problem is
corrected. A day care
home or unaffiliated
center must be reviewed
at the same frequency as
described in Sec.
226.16(d)(4). Full
correction is achieved
when three consecutive
reviews indicate no new
serious management
problems or no repeat of
a serious management
problem.
Institutions................. Sponsoring organizations 226.25(d)(1).................. 18,601 1.000 18,601.000 0.250 4,650.250 0.000 4,650.250 4,650.250
must terminate for cause
the Program agreement
upon declaration of the
institution or facility
to be seriously
deficient.
Institutions................. If the sponsoring 226.25(f)(1)(ii)(A) & 4,650 1.000 4,650.000 0.250 1,162.500 1,162.500 0.000 0.000
organization determines 226.25(f)(2)(ii)(A).
that there is an
imminent threat to the
health or safety of
participants, or that
there is a threat to
public health or safety,
the appropriate State or
local licensing and
health authorities must
immediately be notified
and take action that is
consistent with the
recommendations and
requirements of those
authorities. The
sponsoring organization
must initiate action for
termination and
disqualification. The
sponsoring organization
must notify the day care
home provider or
unaffiliated center's
principals that the day
care home or
unaffiliated center's
participation has been
suspended and that the
SA proposes to terminate
the day care home or
unaffiliated center's
agreement and to
disqualify the day care
home or unaffiliated
center and the RPIs. The
notice must identify the
RPIs and must be sent to
those persons as well.
If the sponsoring
organization determines
that an day care home or
unaffiliated center has
knowingly submitted a
false or fraudulent
claim, the sponsoring
organization must
initiate action to
suspend the day care
home or unaffiliated
center's participation
and must initiate action
to terminate the day
care home or
unaffiliated center's
agreement and initiate
action to disqualify the
institution and the
RPIs. The SA must notify
the day care home
provider or unaffiliated
center's principals that
the sponsoring
organization proposes to
suspend the day care
home or unaffiliated
center's participation.
At the same time this
notice is sent, the SA
must add the day care
home or unaffiliated
center and the RPIs to
the State agency list,
along with the basis for
the suspension and
provide a copy of the
notice to the
appropriate FNSRO.
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Institutions Total.................................................................. 41,136 5.107 240,721.886 1.83 441,500.97 1,297.500 440,203.47 440,203.47
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Facilities................... Unaffiliated sponsored 226.17(e)..................... 21,692 1.000 21,692 0.250 5,423.124 0.000 5,423.124 5,423.124
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. The
sponsoring organization
may terminate this
agreement for cause as
described in Sec.
226.25(a).
[[Page 13204]]
Facilities................... Independent child care 226.17(f)..................... 6,843 1.000 6,843 0.250 1,710.867 0.000 1,710.867 1,710.867
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. The SA may
terminate this agreement
for cause as described
in Sec. 226.25(a).
Facilities................... Unaffiliated sponsored 226.17a(f)(2)(i).............. 21,692 1.000 21,692 0.250 5,423.124 0.000 5,423.124 5,423.124
afterschool 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 applicable
provisions set forth in
this section. The
sponsoring organization
may terminate this
agreement for cause as
described in Sec.
226.25(a).
Facilities................... Independent afterschool 226.17a(f)(2)(ii)............. 6,843 1.000 6,843 0.250 1,710.867 0.000 1,710.867 1,710.867
child care centers must
enter into a written
permanent agreement with
the SA. 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. The SA may
terminate this agreement
for cause as described
in Sec. 226.25(a).
Facilities................... Unaffiliated sponsored 226.19(d)..................... 21,692 1.000 21,692 0.250 5,423.124 0.000 5,423.124 5,423.124
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. The
sponsoring organization
may terminate this
agreement for cause as
described in Sec.
226.25(a).
Facilities................... Unaffiliated sponsored 226.19a(d).................... 6,843 1.000 6,843 0.250 1,710.867 0.000 1,710.867 1,710.867
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) of this section. The
sponsoring organization
may terminate this
agreement for cause as
described in Sec.
226.25(a).
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Facilities Total.................................................................... 28,535 3.000 85,607.886 0.250 21,401.97 0.000 21,401.97 21,401.972
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Business Total...................................................................... 75,671 4.312 326,329.772 1.42 462,902.94 1,297.500 461,605.44 461,605.44
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Reporting Total..................................................................... 78,984 12.455 983,770.772 0.77 758,737.17 3,622.98 755,114.19 755,114.19
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
[[Page 13205]]
State Agencies............... SAs must collect and 226.25(b)/FNS-843 & FNS-844... 56 5.000 280.000 5.000 1,400.000 1,400.000 0.000 0.000
maintain on file CACFP
agreements (Federal/
State and State/
Institutions), records
received from applicant
and participating
institutions, National
Disqualified List/State
Agency Lists, and
documentation of
administrative review
(appeals) and Program
assistance activities,
results, and corrective
actions.
State Agencies............... SAs must collect and 226.25(c)..................... 56 3.000 168.000 1.500 252.000 0.000 252.000 252.000
maintain on file
corrective action plans
submitted by
institutions,
unaffiliated centers, or
day care homes, in
writing, what corrective
actions have been taken
to correct each serious
management problem.
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
State Agencies Total................................................................ 56 8.000 448.000 3.688 1,652.000 1,400.000 252.000 252.000
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
State/Local/Tribal Governments Total................................................ 56 8.000 448.000 3.688 1,652.000 1,400.000 252.000 252.000
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Recordkeeping Total................................................................. 56 8.000 448.000 3.688 1,652.000 1,400.000 252.000 252.000
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
State Agencies............... The CSA must conduct a 226.6(q)(2)(iii).............. 56 23.000 1,288.000 0.250 322.000 0.000 322.000 322.000
full review at the MSSO
headquarters and
financial records
center. The CSA must
coordinate the timing of
the reviews and make
copies of monitoring
reports and findings
available to all other
State agencies that have
agreements with the
MSSO.
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
State Agencies Total................................................................ 56 23.000 1,288.000 0.250 322.000 0.000 322.000 322.000
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
State/Local/Tribal Governments Total................................................ 56 23.000 1,288.000 0.250 322.000 0.000 322.000 322.000
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Public Disclosure Total............................................................. 56 23.000 1,288.000 0.250 322.000 0.000 322.000 322.000
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Total Burden........................................................................ 79,040 12.468 985,507.772 0.772 760,711.172 5,022.981 755,688.190 755,688.190
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
[[Page 13206]]
Summary of Burden
[OMB #0584-0055]
------------------------------------------------------------------------
------------------------------------------------------------------------
Total No. Respondents...................................... 3,852,077
Average No. Responses per Respondent....................... 4.456
Total Annual Responses..................................... 17,165,505
Average Hours per Response................................. 0.289
Total Burden Hours......................................... 4,968,899
Current OMB Approved Burden Hours.......................... 4,213,211
Adjustments................................................ 0
Program Changes............................................ 755,688
Total Difference in Burden................................. 755,688
------------------------------------------------------------------------
Title: Child and Adult Care Food Program (CACFP) National
Disqualified List.
Form Number: FNS-843 & FNS-844.
OMB Control Number: 0584-0584.
Expiration Date: 09/30/2026.
Type of Request: Revision.
Abstract: This is a revision of requirements in the information
collection under OMB Control Number 0584-0584 that are being impacted
by this rulemaking. USDA proposes to extend the serious deficiency
process to the SFSP. As such, this proposed rule impacts reporting
requirements for State agencies. No new recordkeeping requirements will
be added to this collection, as the recordkeeping burden associated
with the FNS-843 and FNS-844 forms are being captured under
requirements in the information collections under OMB Control Numbers
0584-0280 and 0584-0055.
This rulemaking will protect program integrity by extending the
serious deficiency process to the SFSP. By extending the rulemaking,
State agencies will create, update, and maintain data that will be
reported to the National Disqualified List, ensuring that sponsors and
responsible principals and individuals declared seriously deficient and
disqualified from participation are prevented from re-entering the
program under sponsors or participating in another program.
The burden for complying with the proposed reporting requirements
at 225.18(e)(2)(i)), for the 53 SFSP State agencies, is estimated at
239 hours annually (for 106 FNS-843 responses per State agency, 371
FNS-844 responses per State agency, and 30 minutes (0.5 hours) each to
complete the necessary forms). Overall, the burden associated with
meeting the proposed reporting requirements are expected to increase
burden hours, responses, and respondents, from 784 hours to an
estimated 1,023 hours, from 1,568 responses to an estimated 2,045
responses annually, and from 56 respondents to an estimated 109
respondents, due to the proposed rule. The increase of 239 hours, 477
responses, and 53 respondents is due to a program change by
incorporating the SFSP into the National Disqualified List. The average
burden per response and the annual burden hours for reporting are
explained below and summarized in the charts which follow.
Reporting
Respondents (Affected Public): State, Local, and Tribal Government.
The respondent group identified include State agencies which handle the
SFSP.
Estimated Number of Respondents: 53.
Estimated Number of Responses per Respondent: 9.
Estimated Total Annual Responses: 477.
Estimated Time per Response: 0.50.
Estimate Total Annual Burden on Respondents: 239.
National Disqualified List (NDL) ICR
[OMB Control Number 0584-0584]
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Current
Estimated Frequency Average Average Annual OMB Total
Respondent type Burden activities Section Forms number of of annual burden burden approved Program difference
respondents response responses per hours burden changes in burden
response hours
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
State Agency....................... The State agency 225.18(e)(2)(i)....... FNS-843 *........ 53 2 106 0.50 53 0 53 53
creates updates, and
maintains a list of
sponsoring
organizations who
have been terminated
or otherwise
disqualified from
SFSP participation.
FNS-844 *........ 53 7 371 0.50 185.5 0 185.5 185.5
State agency Level Reporting Totals ...................... ...................... ................. 53 9 477 0.50 238.5 0 238.5 238.5
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Summary of Burden
[OMB Control Number 0584-0584]
------------------------------------------------------------------------
------------------------------------------------------------------------
Total No. Respondents...................................... 109
Average No. Responses per Respondent....................... 18.76
Total Annual Responses..................................... 2,045
Average Hours per Response................................. 0.50
Total Burden Hours......................................... 1,023
Current OMB Approved Burden Hours.......................... 784
Adjustments................................................ 0
Program Changes............................................ 239
Total Difference in Burden................................. 239
------------------------------------------------------------------------
J. E-Government Act Compliance
FNS is committed to complying with the E-Government Act of 2002, to
promote the use of the internet and other information technologies to
provide increased opportunities for citizen access to Government
information and services, and for other purposes.
List of Subjects
7 CFR Part 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,
[[Page 13207]]
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.
For the reasons stated in the preamble, Food and Nutrition Services
proposes to amend 7 CFR parts 210, 215, 220, 225, and 226 as set forth
below:
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. In Sec. 210.2, add in alphabetical order the definition for ``Good
standing'' to read as follows:
Sec. 210.2 Definitions.
* * * * *
Good standing means a school food authority or school that meets
its program responsibilities, is current with its financial
obligations, and, if applicable, has fully implemented all corrective
actions within the required period of time.
* * * * *
0
3. In Sec. 210.9, add paragraph (d) to read as follows:
Sec. 210.9 Agreement with State agency.
* * * * *
(d) Terminations or disqualifications. (1) The State agency is
prohibited from approving any school food authority or school to
administer or participate in the Program if the school food authority,
school, responsible principals, or responsible individuals:
(i) Have been terminated for cause from any program authorized
under this part or parts 215, 220, 225, and 226 of this chapter; and
(ii) Are currently included on a National Disqualified List
described in Sec. 225.18(e)(2) and Sec. 226.25(e)(2).
(2) State agencies must ensure that school food authorities,
schools, responsible principals, or responsible individuals described
in paragraph (d)(1) of this section do not administer or participate in
the Program until the State agency, in consultation with FNS,
determines that each deficiency has been corrected, or until 7 years
have elapsed since disqualification. However, the school food
authority, school, responsible principals, or responsible individuals
will remain ineligible until all debts owed to the Program have been
repaid.
(3) If school food authorities or schools currently administering
or participating in the Program meet the criteria described in
paragraph (d)(1) of this section, the State agency must terminate the
Program agreement in accordance with the procedures set forth in Sec.
210.25.
PART 215--SPECIAL MILK PROGRAM FOR CHILDREN
0
4. The authority citation for part 215 continues to read as follows:
Authority: 42 U.S.C. 1772 and 1779.
0
5. In Sec. 215.2, add in alphabetical order the definition for ``Good
standing'' to read as follows:
Sec. 215.2 Definitions.
* * * * *
Good standing means a school food authority or school that meets
its program responsibilities, is current with its financial
obligations, and, if applicable, has fully implemented all corrective
actions within the required period of time.
* * * * *
0
6. In Sec. 215.7, add paragraph (g) to read as follows:
Sec. 215.7 Requirements for participation.
* * * * *
(g) Terminations or disqualifications. (1) The State agency is
prohibited from approving any school food authority or school to
administer or participate in the Program if the school food authority,
school, responsible principals, or responsible individuals:
(i) Have been terminated for cause from any program authorized
under this part or parts 210, 220, 225, and 226 of this chapter; and
(ii) Are currently included on a National Disqualified List
described in Sec. 225.18(e)(2) and Sec. 226.25(e)(2).
(2) State agencies must ensure that school food authorities,
schools, responsible principals, or responsible individuals described
in paragraph (g)(1) of this section do not administer or participate in
the Program until the State agency, in consultation with FNS,
determines that each deficiency has been corrected, or until 7 years
have elapsed since disqualification. However, the school food
authority, school, responsible principals, or responsible individuals
will remain ineligible until all debts owed to the Program have been
repaid.
(3) If school food authorities or schools currently administering
or participating in the Program meet the criteria described in
paragraph (g)(1) of this section, the State agency must terminate the
Program agreement in accordance with the procedures set forth in Sec.
215.16.
PART 220--SCHOOL BREAKFAST PROGRAM
0
7. The authority citation for part 220 continues to read as follows:
Authority: 42 U.S.C. 1773, 1779, unless otherwise noted.
0
8. In Sec. 220.2, add in alphabetical order the definition for ``Good
standing'' to read as follows:
Sec. 220.2 Definitions.
* * * * *
Good standing means a school food authority or school that meets
its program responsibilities, is current with its financial
obligations, and, if applicable, has fully implemented all corrective
actions within the required period of time.
* * * * *
0
9. In Sec. 220.7, add paragraph (i) to read as follows:
Sec. 220.7 Requirements for participation.
* * * * *
(i) Terminations or disqualifications. (1) The State agency is
prohibited from approving any school food authority or school to
administer or participate in the Program if the school food authority,
school, responsible principals, or responsible individuals:
(i) Have been terminated for cause from any program authorized
under this part or parts 210, 215, 225, and 226 of this chapter; and
(ii) Are currently included on a National Disqualified List
described in Sec. 225.18(e)(2) and Sec. 226.25(e)(2).
(2) State agencies must ensure that school food authorities,
schools, responsible principals, or responsible individuals described
in paragraph (i)(1) of this section do not administer or participate in
the Program until the State agency, in consultation with FNS,
determines that each deficiency has
[[Page 13208]]
been corrected, or until 7 years have elapsed since disqualification.
However, the school food authority, school, responsible principals, or
responsible individuals will remain ineligible until all debts owed to
the Program have been repaid.
(3) If school food authorities or schools currently administering
or participating in the Program meet the criteria described in
paragraph (i)(1) of this section, the State agency must terminate the
Program agreement in accordance with the procedures set forth in Sec.
220.19.
PART 225--SUMMER FOOD SERVICE PROGRAM
0
10. The authority citation for 7 CFR 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
11. In Sec. 225.2, add in alphabetical order the definitions for
``Cognizant Regional office'', ``Cognizant State agency'',
``Contingency plan'', ``Corrective action'', ``Disqualified'', ``Fair
hearing'', ``Finding'', ``Fiscal action'', ``Full correction'',
``Hearing official'', ``Lack of business integrity'', ``Legal basis'',
``Multi-State sponsoring organization (MSSO)'', ``National Disqualified
List (NDL)'', ``Notice'', ``Principal'', ``Program operator'',
``Responsible individual'', ``Responsible principal'', ``Review
cycle'', ``Seriously deficient'', ``Serious management problem'',
``State agency list'', and ``Termination for cause'' to read as
follows:
Sec. 225.2 Definitions
* * * * *
Cognizant Regional office means the FNSRO which acts on behalf of
the Department in the administration of the Program and is responsible
for determining which State agency has cognizance when a multi-State
sponsoring organization operates the Program.
Cognizant State agency (CSA) means the agency which is responsible
for the administration of the Program in the State where a multi-State
sponsoring organization's headquarters is located.
* * * * *
Contingency plan means the State agency's written process for the
transfer of sponsored site service area that will help ensure that
Program meals for children will continue to be available without
interruption if a sponsor's agreement is terminated.
* * * * *
Corrective action means implementation of a solution, written in a
corrective action plan, to address the root cause and prevent the
recurrence of a serious management problem.
* * * * *
Disqualified means the status of a sponsor, responsible principal,
or responsible individual who is ineligible for participation in the
Program.
* * * * *
Fair hearing means due process provided upon request to:
(1) A sponsor that has been given notice by the State agency of an
action that will affect participation or reimbursement under the
Program;
(2) A principal or individual responsible for a sponsor's serious
management problems and issued a notice of proposed termination and
proposed disqualification from Program participation; or
(3) a sponsor that has been given notice of proposed termination.
* * * * *
Finding means a violation of a regulatory requirement identified
during a review.
Fiscal action means the recovery of an overpayment or claim for
reimbursement that is not properly payable through direct assessment of
future claims, offset of future claims, disallowance of overclaims,
submission of a revised claim for reimbursement, disallowance of funds
for failure to take corrective action to meet Program requirements.
* * * * *
Full correction means the status achieved after a corrective action
plan is accepted and approved, all corrective actions are fully
implemented, and no new or repeat serious management problems are
identified in subsequent reviews, as described Sec. 225.18(c)(3).
* * * * *
Hearing official means an individual who is responsible for
conducting an impartial and fair hearing--as requested by a sponsor,
responsible principal, or responsible individual responding to a
proposal for termination--and rendering a decision.
* * * * *
Lack of business integrity means the conviction or concealment of a
conviction for fraud, antitrust violations, embezzlement, theft,
forgery, bribery, falsification or destruction of records, making false
statements, receiving stolen property, making false claims, obstruction
of justice.
Legal basis means the lawful authority established in statute or
regulation.
* * * * *
Multi-State sponsoring organization (MSSO) means a sponsor that
sponsors sites in more than one State.
National Disqualified List (NDL) means a system of records,
maintained by the Department, of sponsors, responsible principals, and
responsible individuals disqualified from participation in the Program.
* * * * *
Notice means a letter sent by certified mail, return receipt (or
the equivalent private delivery service), by facsimile, or by email,
that describes an action proposed or taken by a State agency or FNS
with regard to a sponsor's Program reimbursement or participation.
* * * * *
Principal means any individual who holds a management position
within, or is an officer of, a sponsor or a sponsored site, including
all members of the sponsor's board of directors or the sponsored site's
board of directors.
* * * * *
Program operator means any entity that participates in one or more
child nutrition programs.
* * * * *
Responsible individual means any individual employed by, or under
contract with a sponsor or an individual, including uncompensated
individuals, who the State agency or FNS determines to be responsible
for a sponsor's serious management problems.
Responsible principal means any principal, as described in this
section, who the State agency or FNS determines to be responsible for a
sponsor's serious management problems.
* * * * *
Review cycle means the frequency and number of required reviews of
sponsors and sites.
* * * * *
Seriously deficient means the status of a sponsor after it is
determined that full correction has not been achieved and termination
for cause is the only appropriate course of action.
Serious management problem means the finding(s) that relate to a
sponsor's inability to meet the Program's performance standards or that
affect the integrity of a claim for reimbursement or the quality of
meals served at a site.
* * * * *
State agency list means an actual paper or electronic list, or the
retrievable paper records, maintained by the State agency, that
includes information on sponsors through the serious deficiency process
in that State. The list must be made available to FNS upon request, and
must include information specified in Sec. 225.18(b).
* * * * *
Termination for cause means the termination of a Program agreement
due
[[Page 13209]]
to considerations related to a sponsor's performance of Program
responsibilities under the agreement between the State agency and
sponsor.
* * * * *
0
12. In Sec. 225.6:
0
a. Revise paragraph (b)(9);
0
b. Add paragraph (b)(13);
0
c. In paragraph (c)(2), remove the words ``significant operational''
and add in their place the words ``serious management'';
0
d. Add paragraph (c)(5);
0
e. In paragraph (e), remove the words ``significant operational'' and
add in their place the words ``serious management'', wherever they
appear; and
0
f. Add paragraph (n).
The revisions and additions read as follows:
Sec. 225.6 State agency responsibilities.
* * * * *
(b) * * *
(9) The State agency must not approve the application of any
applicant sponsor identifiable through its organization or principals
as a sponsor which has been determined to be seriously deficient as
described in Sec. 225.18(d). However, the State agency may approve the
application of a sponsor, not on the NDL, which has been previously
disapproved if the applicant demonstrates to the satisfaction of the
State agency that it has taken appropriate corrective actions to
prevent recurrence of serious management problems.
* * * * *
(13) Terminations or disqualifications. (i) The State agency is
prohibited from approving any sponsor or site to administer or
participate in the Program if the sponsor, site, responsible
principals, or responsible individuals:
(A) Have been terminated for cause from any Program authorized
under this part or parts 210, 215, 220, or 226 of this chapter; and
(B) Are currently included on a National Disqualified List
described in Sec. 225.18(e)(2).
(ii) State agencies must ensure that sponsors, sites, responsible
principals, or responsible individuals described in paragraph
(b)(13)(i) of this section do not administer or participate in the
Program until the State agency, in consultation with FNS, determines
that each serious management problem has been corrected, or until 7
years have elapsed since disqualification. However, a sponsor, site,
responsible principals, or responsible individuals will remain
ineligible until all debts owed to the Program have been repaid.
(iii) If sponsors or sites currently administering or participating
in the Program meet the criteria described in paragraph (b)(13)(i) of
this section, the State agency must terminate the Program agreement in
accordance with the procedures set forth in Sec. 225.18(d).
(c) * * *
(5) Information about MSSO operations. The State agency must also
determine if the sponsor operates in more than one State. Each sponsor
that is approved to operate the Program in more than one State must
provide:
(i) The number of affiliated sites it operates, by State;
(ii) The number of unaffiliated sites it operates;
(iii) The names, addresses, and phone numbers of the organization's
headquarters and the officials who have administrative responsibility;
and
(iv) The names, addresses, and phone numbers of the financial
records center and the officials who have financial responsibility.
* * * * *
(n) Oversight of MSSOs. An MSSO may include a sponsor that
administers the Program in more than one State, a franchise operating
multiple facilities in more than one State, or a for-profit
organization whose parent corporation operates multiple affiliated
centers in more than one State. Each State agency must determine if a
sponsoring organization is an MSSO, as described in paragraph (c)(5) in
this section. The State agency must assume the role of the CSA, if the
MSSO's center of operations is located within the State. Each State
agency that approves an MSSO must follow the requirements described in
paragraph (n)(1) of this section. The CSA must follow the requirements
described in paragraph (n)(2) of this section.
(1) State agency responsibilities. If a State agency determines
that an MSSO operates the Program within the State, it must:
(i) Enter into a permanent written agreement with the MSSO, as
described in paragraph (n)(1) of this section.
(ii) Approve the MSSO's administrative budget (in consultation with
the CSA, as appropriate).
(A) The State agency must approve budget line items that are
directly attributable to operations within the State.
(B) The State agency must approve its portion of costs that are
shared among other State agencies and costs that attribute directly to
program operations within the State.
(C) The State agency must notify the CSA if it has determined that
the ratio of administrative to operating costs is high or that the net
cash resources of an MSSO's nonprofit food service exceed the limits
that are described in Sec. 225.7(m)
(iii) Conduct monitoring of MSSO Program operations within the
State, as described in paragraph (k)(4) of this section. The State
agency should coordinate monitoring with the CSA to streamline reviews
and minimize duplication of the review content. The State agency may
base the review cycle on the number of facilities operating within the
State.
(A) The State agency may use information from the CSA's technical
assistance activities to assess compliance in areas where the scope of
review overlaps during the same review cycle. The State agency may
choose to conduct a review of implementation of additional State agency
requirements, financial records to support State-specific
administrative costs, and other areas of compliance that the CSA would
not have reviewed.
(B) The State agency may also choose to conduct a full review at
the MSSO's headquarters and financial records center. If the State
agency chooses to conduct a full review, the State agency should
request the necessary records from the CSA.
(C) The State agency must provide summaries of the MSSO reviews
that are conducted to the CSA. The summaries must include the
prescribed corrective actions and follow-up efforts.
(iv) Conduct audit resolution activities. The State agency must
review audit reports, address audit findings, and implement corrective
actions, as required under 2 CFR part 200, subpart D, and USDA
implementing regulations 2 CFR parts 400 and 415.
(v) Notify all other State agencies that have agreements with the
MSSO of termination and disqualification actions, as described in
paragraph (c)(2)(i) of this section.
(2) CSA responsibilities. If it determines that an MSSO's center of
operations is located within the State, the State agency must assume
the role of the CSA, which must:
(i) Comply with the requirements for a State agency that has
approved an MSSO to provide Program operations within the State, as
described in this paragraph (n)(1).
(ii) Determine if there will be shared administrative costs among
the States in which the MSSO operates and how the costs will be
allocated. The CSA has the authority to approve cost levels for cost
items that must be allocated. The CSA must approve the allocation
method that the MSSO uses for shared costs. The
[[Page 13210]]
method must allocate the cost based on the benefits received, not the
source of funds available to pay for the cost. If the MSSO administers
the Program in centers, the CSA must also ensure that administrative
costs do not exceed 15 percent on an organization-wide basis.
(iii) Coordinate monitoring. The CSA must conduct a full review at
the MSSO headquarters and financial records center. The CSA must
coordinate the timing of its reviews. The CSA must make copies of
monitoring reports and findings available to all other State agencies
that have agreements with the MSSO.
(iv) Ensure that organization-wide audit requirements are met. Each
MSSO must comply with audit requirements, as described under 2 CFR part
200, subpart D, and USDA implementing regulations 2 CFR parts 400 and
415. Since their operations are often large and complex, MSSOs should
have annual audits. If an MSSO has for-profit status, the cognizant
agency must establish audit thresholds and requirements.
(v) Oversee audit funding and costs. The share of organization-wide
audit costs may be based on a percentage of each State's expenditure of
CACFP funds and the MSSO's expenditure of Federal and non-Federal funds
during the audited fiscal year. The CSA should review audit costs as
part of the overall budget review and make audit reports available to
the other State agencies that have agreements with the MSSO.
(vi) Ensure compliance with procurement requirements. Procurement
actions involving MSSOs must follow the requirements under 2 CFR part
200, subpart D, and USDA implementing regulations 2 CFR parts 400 and
415. If the procurement action benefits all States in which the MSSO
operates, the procurement standards of the State that are the most
restrictive apply. If the procurement action only benefits a single
State's Program, the procurement standards of that State agency apply.
* * * * *
Sec. 225.7 [Amended]
0
13. In Sec. 225.7:
0
a. In paragraph (e)(4)(ii), remove the words ``significant
operational'' and add in their place the words ``serious management'';
and
0
b. In paragraph (k), remove the citation ``Sec. 225.11'' and add in
its place the citations ``Sec. Sec. 225.11 and 225.18''.
0
14. In Sec. 225.11, revise paragraph (c) introductory text to read as
follows:
Sec. 225.11 Corrective action procedures.
* * * * *
(c) Denial of applications and termination of sponsors. Except as
specified in Sec. 225.6(b)(9), the State agency shall not enter into
an agreement with any applicant sponsor identifiable through its
corporate organization, officers, employees, or otherwise, as an
institution which participated in any Federal child nutrition program
and was seriously deficient in its operation of any such program. The
State agency shall terminate the Program agreement with any sponsor
which is determined to be seriously deficient. However, the State
agency shall afford a sponsor reasonable opportunity to correct serious
management problems before terminating the sponsor and declaring them
seriously deficient. State agencies may approve the application of a
sponsor in accordance with Sec. 225.6(b)(9). Uncorrected serious
management problems which are grounds for disapproval of applications
and for termination include, but are not limited to, any of the
following:
* * * * *
0
15. Revise Sec. 225.13 to read as follows:
Sec. 225.13 Fair hearing procedures.
(a) Each State agency must establish a procedure to be followed by
an applicant appealing:
(1) A denial of an application for participation (except if the
applicant has failed to complete a corrective action plan from the
previous year);
(2) A denial of a sponsor's request for an advance payment;
(3) A denial of a sponsor's claim for reimbursement (except for
late submission under Sec. 225.9(d)(6));
(4) A State agency's refusal to forward to FNS an exception request
by the sponsor for payment of a late claim or a request for an upward
adjustment to a claim;
(5) A claim against a sponsor for remittance of a payment;
(6) The termination of the sponsor or a site;
(7) The termination of a sponsor's agreement;
(8) A denial of a sponsor's application for a site;
(9) A denial of a food service management company's application for
registration, if applicable;
(10) The revocation of a food service management company's
registration, if applicable; or
(11) Any other action of the State agency affecting a sponsor's
participation or its claim for reimbursement.
(b) If after a fair hearing, an entity or individual is denied
participation based on the National Disqualified List, their right to
appeal the application denial is solely granted to contest the accuracy
of the information on the National Disqualified List or the match to
the National Disqualified List.
(c) Appeals must not be allowed on decisions made by FNS with
respect to late claims or upward adjustments under Sec. 225.9(d)(6).
(d) When a sponsor or a food service management company requests a
fair hearing, the State agency must follow the procedures described in
Sec. 225.18(f).
Sec. Sec. 225.18 through 225.20 [Redesignated as Sec. Sec. 225.19
through 225.21]
0
16. Redesignate Sec. Sec. 225.18 through 225.20 as Sec. Sec. 225.19
through 225.21, respectively.
0
17. Add new section Sec. 225.18 to read as follows:
Sec. 225.18 Administrative actions to address serious management
problems.
(a) Serious management problems. (1) General. State agencies must
follow the procedures outlined in this section to address any serious
management problems. The State agency must provide the sponsor an
opportunity for corrective action and due process.
(2) Six steps. The serious deficiency process includes a standard
set of procedures that State agencies follow to address serious
management problems in the operation of the Program. These procedures
apply to serious management problems in new or experienced sponsors.
The State agency must:
(i) Identify serious management problems.
(ii) Issue a notice of serious management problems.
(iii) Receive and assess corrective action.
(iv) Issue a notice of successful corrective action or a notice of
proposed termination with appeal rights.
(v) Provide a fair hearing, if requested.
(vi) Issue a notice of successful appeal if the fair hearing
vacates the proposed termination, or issue a notice of termination,
serious deficiency, and disqualification, if the fair hearing upholds
the proposed termination or the timeframe for requesting a fair hearing
has passed.
(3) Identifying serious management problems. State agencies must
consider the type and magnitude of the finding(s) to determine whether
it rises to the level of a serious management problem. State agencies
should define a set of standards to identify serious management
problems. At a minimum, to identify serious management problems, State
agencies and must consider:
[[Page 13211]]
(i) The severity of the problem. Is the finding minor or
substantial? Is the finding systemic or isolated?
(ii) The degree of responsibility. Is the finding best described as
an inadvertent error or is there evidence of negligence or conscious
indifference to regulatory requirements, or even deception? Is the
finding at the site level or the sponsor level? If it is at the sponsor
level, has the State agency taken appropriate steps to resolve it
through monitoring, training, and technical assistance? If it is at the
site level, has the sponsor taken the appropriate steps to resolve it
through monitoring, training, and technical assistance?
(iii) The history of participation in the Program. Is this the
first instance or is there a history of frequently recurring Program
findings or serious management problems at the same sponsor?
(iv) The nature of requirements that relate to the finding. Is the
action a clear finding of Program requirements or a simple mistake? Are
new policies incorporated correctly?
(v) The degree to which the problem impacts Program integrity. Does
the finding undermine the intent of the Program? Is the finding
administrative or does it impact viability, capability or
accountability? Is the finding at the sponsor level or the site level?
If it is at the sponsor level, has the State agency taken appropriate
steps to resolve it through monitoring, training, and technical
assistance? If it is at the site level, has the sponsor taken the
appropriate steps to resolve it through monitoring, training, and
technical assistance?
(4) Good standing. If a State agency identifies a serious
management problem, the institution, day care home or unaffiliated
center is considered to be not in good standing. At a minimum, the
following criteria need to be met to return to good standing.
(i) Outstanding debts are paid;
(ii) All corrective actions are fully implemented; and
(iii) Meets its Program responsibilities.
(5) Notifications. The State agency must provide a written notice
of action through each step of the serious deficiency process.
(i) Each type of notice must include a basis and an explanation of
any action that is proposed and any action that is taken.
(ii) The notice must be delivered via certified mail, return
receipt, or an equivalent private delivery service, facsimile, or
email.
(iii) The notice is considered to be received on the date it is
delivered, sent by facsimile, or sent by email.
(iv) If the notice is undeliverable, it is considered to be
received 5 days after it is sent to the addressee's last known mailing
address, facsimile number, or email address.
(6) Serious management problems notification procedures for
sponsors. If the State agency determines that the sponsor has serious
management problems, the sponsor must use the following procedures. The
State agency must notify the sponsor of all findings, including those
that do not rise to a serious management problem, and they must be
corrected.
(i) First notification--notice of serious management problems. The
State agency must notify the sponsor's executive director, chair of the
board of directors that the sponsor has serious management problems and
provide an opportunity to take corrective action. The notice must also
be sent to all other responsible principal, other responsible
individual. At the same time the notice is issued, the State agency
must add the sponsor to the State agency list, as described in
paragraph (b) of this section and provide a copy of the notice to the
FNSRO. This notice documents that a serious management problem must be
addressed and corrected. Prompt action must be taken to minimize the
time that elapses between the identification of a serious management
problem and the issuance of the notice. For each serious management
problem, the notice must:
(A) Specify the serious management problem;
(B) Cite the specific regulatory requirements, instructions, or
policies as the basis for the serious management problems;
(C) Identify the responsible principals and responsible
individuals;
(D) Specify the actions that must be taken to correct the serious
management problem. The notice may specify different corrective actions
and time periods for completing the corrective action for the
institution and the responsible principal and the responsible
individual;
(E) Set time allotted for implementing the corrective action. The
corrective action must include milestones and a definite completion
date that will be monitored. Although paragraph (c)(2) of this section
sets maximum timeframes, shorter timeframes for corrective action may
be established.
(F) Specify that failure to fully implement corrective actions for
each serious management problem within the allotted time will result in
the State agency's proposed termination of the sponsor's agreement and
the proposed disqualification of the sponsor and the responsible
principals and responsible individuals;
(G) Clearly state that, if the sponsor voluntarily terminates its
agreement with the State agency after having been notified of serious
management problems it will still result in the sponsor's agreement
being terminated for cause and the placement of the sponsor and its
responsible principals and responsible individuals on the National
Disqualified List;
(H) Submission of the date of birth for any individual named as a
responsible principal or responsible individual in the notice of
serious management problems is a condition of corrective action for the
sponsor and/or responsible principal or responsible individual.
(I) The serious management problems are not subject to a fair
hearing.
(ii) Second notification--notice of successful corrective action or
notice of proposed termination, proposed disqualification. (A) Notice
of successful corrective action. If corrective action has been
implemented to correct each serious management problem within the time
allotted and to the State agency's satisfaction, the State agency must:
(1) Notify the executive director, chair of the board of directors,
owner, responsible principals, and responsible individuals, that
corrective actions are fully implemented.
(2) If corrective action is complete for the sponsor, but not for
all of the responsible principals and responsible individuals (or vice
versa), the State agency must continue with actions, in accordance with
paragraph (a)(6)(ii)(B) of this section against the remaining parties.
(3) At the same time the notice is issued, the State agency must
also update the State agency list, as described in paragraph (b) of
this section and provide a copy of the notice to the appropriate FNSRO.
(4) Ensure the sponsor continues to implement procedures and
policies to fully correct the serious management problems, as described
in paragraph (c)(3) of this section.
(B) Notice of proposed termination and proposed disqualification.
If corrective action has not been taken or fully implemented for each
serious management problem within the time allotted and to the State
agency's satisfaction, or repeat serious management problems occur
before full correction is achieved (as described in paragraph (c)(3) of
this section), the State agency must:
[[Page 13212]]
(1) Notify the executive director, chair of the board of directors,
owner, responsible principals, and responsible individuals, that the
State agency proposes to terminate the sponsor's agreement and proposes
to disqualify the sponsor, responsible principals and responsible
individuals and explain the sponsor's opportunity for seeking a fair
hearing as described in paragraph (g) of this section.
(2) At the same time the notice is issued, the State agency must
also update the State agency list, as described in paragraph (b) of
this section and provide a copy of the notice the appropriate FNSRO.
(3) The notice must specify:
(i) That the State agency is proposing to terminate the sponsor's
agreement and proposing to disqualify the sponsor and the responsible
principals and the responsible individuals;
(ii) The basis for the proposal to terminate;
(iii) That, if the sponsor voluntarily terminates its agreement
with the State agency after receiving the notice of proposed
termination, it will still result in the sponsor's agreement being
terminated for cause and the placement of the institution and its
responsible principals and responsible individuals on the National
Disqualified List;
(iv) The procedures for seeking a fair hearing (in accordance with
paragraph (g) of this section) of the proposed termination and proposed
disqualifications; and
(v) That, unless participation has been suspended, the sponsor may
continue to participate and receive Program reimbursement for eligible
meals served and allowable administrative costs incurred until the fair
hearing is complete.
(iii) Third notification--Notice to vacate the proposed termination
of the sponsor's agreement or notice of serious deficiency, termination
of the agreement, and disqualifications--
(A) Notice to vacate the proposed termination of a sponsor's
agreement. If the fair hearing vacates the proposed termination, the
State agency must notify the sponsor and must:
(1) Notify the sponsor's executive director and chair of the board
of directors that the proposed termination of the sponsor's agreement
has been vacated.
(2) Update the State agency list at the time the notice is issued;
(3) Provide a copy of the notice to the appropriate FNSRO.
(B) Notice of serious deficiency, termination of the sponsor's
agreement and disqualifications. When the time for requesting a fair
hearing expires or when the hearing official upholds the State agency's
proposed termination and disqualifications, the State agency must:
(1) Notify the institution's executive director and chair of the
board of directors, and the responsible principals and responsible
individuals, that the sponsor's agreement is terminated and that the
sponsor and the responsible principals and responsible individuals are
disqualified and placed on the National Disqualified List;
(2) Update the State agency list at the time notice is issued; and
(3) Provide a copy of the notice and the mailing address and date
of birth for each responsible principal and responsible individual to
the appropriate FNSRO.
(b) Placement on the State agency list. (1) The State agency must
maintain a State agency list, made available to FNS upon request, and
must include the following information:
(i) Names and mailing addresses of each sponsor that is determined
to have a serious management problem;
(ii) Names, mailing addresses, and dates of birth of each
responsible principal and responsible individual;
(iii) The status of the sponsor as it progresses through the stages
of corrective action, termination, and disqualification, full
correction, as applicable.
(2) Within 10 days of receiving a notice of termination and
disqualification from a sponsoring organization, the State agency must
provide FNS with the information as described in paragraphs (b)(1)(i)
and (ii) of this section.
(c) Correcting serious management problems. In response to the
notice of serious management problems, the sponsor must submit, in
writing, what corrective actions it has taken to correct each serious
management problem.
(1) Corrective action plans. An acceptable corrective action plan
must demonstrate that the serious management problem is resolved. The
plan must address the root cause of each serious management problem,
describe and document the action taken to correct serious management
problems, and describe the action's outcome. The corrective action plan
must include the following:
(i) What is the serious management problem and the action taken to
address it?
(ii) Who addressed the serious management problem? List personnel
responsible for this task.
(iii) When was the action taken to address the serious management
problem? Provide a timeline for implementing the action (i.e., daily,
weekly, monthly, or annually, and when did implementation of the plan
begin)?
(iv) Where is documentation of the corrective action plan filed?
(v) How were staff and providers informed of the new policies and
procedures?
(2) Corrective action timeframes. Corrective action must be taken
within the allotted time to ensures that serious management problems
are quickly addressed and fully corrected. The time allotted to correct
the serious management problem must be appropriate for the type of
serious management problem. The allotted time begins on the date the
first notification is received, as described in paragraph (a)(6)(i) of
this section. The serious management problems must be corrected as soon
as possible and:
(i) Up to 10 days from the date the sponsor receives the first
notification.
(ii) More than 10 days only if the State agency determines that
corrective action will require the long-term revision of management
systems or processes, such as, but not limited to, the purchase and
implementation of new claims payment software or a major reorganization
of Program management duties that will require action by the board of
directors.
(A) The State agency may permit more than 10 days to complete the
corrective action.
(B) The sponsor's corrective action plan must include milestones
and a definite completion date.
(C) The State agency must receive and approve the corrective action
plan within 15 days from the date the sponsor received the notice.
(D) The State agency must monitor full implementation of the
corrective action plan.
(iii) Up to 5 days for a sponsor that:
(A) Engaged in an unlawful practice,
(B) Submitted a false or fraudulent claim to the State agency,
(C) Submitted other false or fraudulent information to the State
agency,
(D) Was convicted of a crime, or
(E) Concealed a criminal background.
(3) Achieving full correction of serious management problems. The
path to full correction requires the sponsor to demonstrate that it has
the ability to operate the Program with no serious management problems,
as described in paragraph (a) of this section. The State agency must
prioritize follow-up reviews and more frequent full reviews of sponsors
with serious management problems, as described in Sec.
225.7(e)(4)(ii). A follow-up review must be conducted to confirm that
the serious management problem is corrected. Full reviews must be
[[Page 13213]]
conducted at least once every year. Full correction of a sponsor's
serious management problems is achieved when:
(i) At least two full reviews reveal no new or repeat serious
management problems;
(ii) The first and last full reviews are at least 12 months apart
and reveal no new or repeat serious management problems; and
(iii) All reviews, including any follow-up reviews, between the
first and last full review reveal no new or repeat serious management
problems.
(iv) Once full correction is achieved, a serious management problem
that recurs again, is not considered repeat and therefore, would not
lead to an immediate proposal of termination. Any new or recurrence of
a serious management problem would require the State agency to issue a
new notice of serious management problems, as described in paragraph
(a)(6) of this section.
(d) Termination--(1) Termination for cause. If the State agency
determines that the sponsor is unable to properly perform its
responsibilities under its Program agreement and fails to take
successful corrective action, the Program agreement must be terminated
for cause. The State agency and sponsoring organization must declare
the sponsor to be seriously deficient at the point of termination,
which would be followed by disqualification. The State agency shall not
terminate for convenience to avoid implementing the serious deficiency
process.
(2) Contingency plan. The State agency must have a contingency plan
in place for the transfer of sites if a sponsor is terminated or
disqualified to ensure that eligible children continue to have access
to meal services.
(e) Disqualification--(1) Reciprocal disqualification. A State
agency may not enter into an agreement with any sponsor, if they have
been terminated for cause from any child nutrition program and placed
on a National Disqualified List. Any existing agreements with the
sponsor must also be terminated and the sponsor and all responsible
principals and responsible individuals must also be terminated and
disqualified.
(i) No individual on the National Disqualified List may serve as a
principal at any sponsor.
(ii) The State agency must not approve the application of a new or
experienced sponsor if any of the sponsor's principals is on the
National Disqualified List.
(iii) A sponsor is prohibited from submitting an application on
behalf of a site if any of the site's principals are on the National
Disqualified List.
(iv) A sponsor is prohibited from submitting an application on
behalf of a site if the site is on the National Disqualified List.
(v) The State agency must not approve an application described in
paragraphs (e)(1)(iii) and (iv) of this section.
(vi) Once included on the National Disqualified List, a sponsor,
responsible principal, or responsible individual will remain on the
list until such time as the State agency determines that either the
serious management problem that led to its placement on the list has
been corrected or until 7 years have elapsed since its agreement was
terminated for cause, whichever is longer. Any debt owed under the
Program must be repaid.
(2) National Disqualified List. FNS will maintain the National
Disqualified List and make it available to all State agencies and all
sponsors. This computer matching program uses a Computer Matching Act
system of records of information on institutions and individuals who
are disqualified from participation in SFSP and CACFP.
(i) Placement on the National Disqualified List. The State agency
must provide the following information to FNS for each sponsor,
responsible principle, and responsible individual:
(A) Name and address of the sponsor (including city, State, and zip
code);
(B) Any known aliases;
(C) Termination date;
(D) Amount of debt owed, if any;
(E) Reason, and if other is checked, an explanation;
(F) Date of birth of the responsible principal and responsible
individual; and
(G) Position within the institution or facility of the responsible
principal and responsible individual.
(ii) Removal from the National Disqualified List. A sponsor,
responsible principal and responsible individual that has been
disqualified from the Program due to uncorrected serious management
problems will remain on the National Disqualified List until the State
agency and FNS have determined that the serious management problems are
corrected, or for 7 years, whichever is longer. Any debt under the
Program must be repaid. After a sponsor, responsible principal or
responsible individual has been removed from the National Disqualified
List, they will be considered to be in good standing, and eligible to
apply for the Program.
(iii) Early removal of sponsors, principals, and individuals from
the list. The State agency must review and approve a sponsor or
responsible principal and responsible individual's request for removal
from the National Disqualified List. If the State agency approves the
request, and ensures that any debt associated has been paid, it may
submit the information to the FNSRO, where it will be reviewed for
completeness. The FNSRO will also ensure that the State agency's
request is within Program requirements and that the documentation
supports the early removal. Once reviewed, the FNSRO will submit the
request to the FNS National Office for removal. The effective date of
National Disqualified List removal will be the date on which the FNS
National Office processes the removal request. The FNSRO will be
notified once the removal has been completed and inform the State
agency.
(3) Computer Matching Act (CMA). The Computer Matching and Privacy
Protection Act addresses the use of information from computer matching
programs that involve a Federal System of Records. Address: compliance,
matching agreement, and independent verification.
(i) Each State agency participating in a computer matching program
must comply with the provisions of the Computer Matching Act if it uses
an FNS system of records in order to:
(A) Establish eligibility for a Federal benefit program;
(B) Verify eligibility for a Federal benefit program;
(C) Verify compliance with either statutory or regulatory
requirements of a Federal benefit program; or
(D) Recover payments or delinquent debts owed under a Federal
benefit program.
(ii) State agencies must enter into written agreements with USDA/
FNS, consistent with 5 U.S.C. 552a(o) of the Computer Matching Act, in
order to participate in a matching program involving a USDA/FNS Federal
system of records. The agreement must include the State agency's
independent verification requirements.
(iii) State agencies are prohibited from taking any adverse action
to terminate, deny, suspend, or reduce benefits to an applicant or
recipient based on information produced by a Federal computer matching
program that is subject to the requirements of the Computer Matching
Act, unless:
(A) The information has been independently verified by the State
agency; and
(B) FNS has waived the two-step independent verification and notice
requirement.
(iv) A State agency that receives a request for verification from
another State agency or from FNS must provide
[[Page 13214]]
the necessary verification. The State agency must respond within 20
calendar days of receiving the request.
(v) A State agency may use the record of a certified notice to
independently verify the accuracy of a computer match.
(f) Fair hearing--(1) Right to a fair hearing. (i) The sponsor must
be advised in writing of the grounds upon which the State agency based
the action and its right to a fair hearing. The State agency must offer
a fair hearing in the notice to the sponsor for any of the actions
described in Sec. 225.13(a). A fair hearing for any other action is
not required.
(ii) The notice of due process must inform the sponsor of:
(A) The action that is taken or proposed to be taken;
(B) The legal basis for the action;
(C) The right to appeal the action; and
(D) The procedures and deadlines for requesting an appeal of the
action.
(iii) If a fair hearing is requested:
(A) The State agency must continue to pay any valid claims for
reimbursement of eligible meals served and allowable administrative
expenses incurred until the hearing official issues a decision.
(B) Any information upon which the State agency based its action
must be available to the appellants for inspection from the date of
receipt of the hearing request.
(C) Appellants may request a fair hearing in person or by
submitting written documentation to the hearing official.
(D) Appellants may represent themselves, retain legal counsel, or
be represented by another person.
(E) All parties must submit written documentation to the hearing
official prior to the beginning of the hearing, within 30 days after
receiving the notice of action.
(F) Appellants must be permitted to contact the hearing official
directly.
(2) Fair hearing procedures. A hearing must be held by the fair
hearing official in addition to, or in lieu of, a review of written
information only if the sponsor or the responsible principals and
responsible individuals request a hearing in the written request for a
fair hearing. If the sponsor's representative or the responsible
principals or responsible individuals or their representatives, fails
to appear at a scheduled hearing, they waive the right to a personal
appearance before the hearing official, unless the hearing official
agrees to reschedule the hearing. A representative of the State agency
must be allowed to attend the hearing to respond to the testimony of
the sponsor and the responsible principals and responsible individuals
and to answer questions posed by the hearing official. If a hearing is
requested, the sponsor, the responsible principals, and responsible
individuals, and the State agency must be provided with at least 5 days
advance notice of the time and place of the hearing.
(i) The purpose of the hearing is to determine that the State
agency, sponsor, responsible principals, or responsible individuals,
followed Program requirements.
(ii) The hearing official's decisions should be limited to that
purpose.
(iii) The purpose is not to determine whether to uphold the
legality of Federal or State Program requirements.
(iv) The request for a fair hearing must be submitted in writing no
later than 10 calendar days after the date the notice of action is
received. The State agency must acknowledge the request for a fair
hearing within 5 calendar days of its receipt of the request. The State
agency must provide a copy of the written request for a fair hearing,
including the date of receipt of the request to FNS within 10 calendar
days of its receipt of the request.
(3) Hearing officials. The individual who is appointed to conduct
the fair hearing, including any State agency employee or contractor,
must be independent and impartial. The sponsor, responsible principals,
and responsible individuals must be permitted to contact the hearing
official directly if they so desire. The State agency must ensure that
the hearing official:
(i) Has no involvement in the action under appeal;
(ii) Does not occupy a position that may potentially be subject to
undue influence from any party that is responsible for the action under
appeal;
(iii) Does not occupy a position that may exercise undue influence
on any party that is responsible for the action under appeal;
(iv) Has no personal interest in the outcome of the fair hearing;
(v) Has no financial interest in the outcome of the fair hearing.
(4) Basis for decision. The hearing official must render a decision
that is based on:
(i) The determination that the State agency, sponsor, responsible
principals, or responsible individuals, followed Program requirements;
(ii) The information provided by the State agency, sponsor,
responsible principals, and responsible individuals; and
(iii) The Program requirements established in Federal and State
laws, regulations, policies, and procedures.
(5) Final decision. The hearing official's decision is the final
action in the appeal process.
(i) Within 10 days of the State agency's receipt of the request for
a fair hearing, the fair hearing official must inform the State agency,
the sponsor's executive director and chairman of the board of
directors, and the responsible principals and responsible individuals,
of the fair hearing's outcome.
(ii) The hearing official must render a decision within 30 days of
the date the State agency received the appeal request.
(iii) The hearing official must inform the State agency, sponsor,
responsible principals, and responsible individuals of the decision
within this 30-day period.
(iv) This timeframe is a requirement and cannot be used to justify
overturning the State agency action if a decision is not made within
the 30-day period.
(v) The hearing official's decision is final.
(vi) The decision is not subject to appeal.
(6) Effect of State agency action. The State agency's action must
remain in effect during the fair hearing. The effect of this
requirement on particular State agency actions is as follows:
(i) Overpayment demand. During the period of the fair hearing, the
State agency is prohibited from taking action to collect or offset the
overpayment. However, the State agency must assess interest beginning
with the initial demand for remittance of the overpayment and
continuing through the period of administrative review unless the
administrative review official overturns the State agency's action.
(ii) Recovery of advances. During the fair hearing, the State
agency must continue its efforts to recover advances in excess of the
claim for reimbursement for the applicable period. The recovery may be
through a demand for full repayment or an adjustment of subsequent
payments.
(g) Payments--(1) Payment of valid claims. If a fair hearing is
requested, the State agency must continue to pay any valid claims for
reimbursement of eligible meals served and allowable administrative
expenses incurred un the hearing official issues a decision.
(2) Debts owed to the Program. The State agency is responsible for
the collection of unearned payments, including any assessment of
interest, as described in Sec. 225.12(b).
(i) After the State agency has sent the necessary demand letter for
debt collection, State agency staff must refer the claim to the
appropriate State
[[Page 13215]]
authority for pursuit of the debt payment.
(ii) FNS defers to the State's laws and procedures to establish a
repayment plan to recover funds as quickly as possible.
(iii) It is the responsibility of the State agency to notify the
sponsor that interest will be charged. Interest must be assessed on
sponsors' debts established on or after July 29, 2002. Interest will
continue to accrue on debts not paid in full within 30 days of the
initial demand for remittance up to the date of payment, including
during an extended payment plan and each month while on the National
Disqualified List.
(iv) State agencies are required to assess interest using one
uniform rate. The appropriate rate to use is the Current Value of Funds
Rate, which is published annually by Treasury in the Federal Register
and is available from the FNSRO.
(h) FNS determination of serious management problems--(1) General.
FNS may determine independently that a sponsor has one or more serious
management problems, as described in paragraph (a) of this section. FNS
will follow procedures outlined in this section to address any finding
that prevents a sponsor from meeting the Program's performance
standards, affects the integrity of a claim for reimbursement, or
affects the integrity of the meals served in a day care home or
unaffiliated center.
(2) Required State agency action--(i) Termination of agreements. If
the State agency holds an agreement with a sponsor that FNS determines
to be seriously deficient and subsequently disqualifies, the State
agency must terminate the sponsor's agreement effective no later than
45 days after the date of the sponsor's disqualification by FNS. As
noted in paragraph (f) of this section, the termination of an agreement
for this reason is not subject to a fair hearing. At the same time the
notice of termination is issued, the State agency must add the sponsor
to the State agency list and provide a copy of the notice to the
appropriate FNSRO.
(ii) Disqualified responsible principal and individuals. If the
State agency holds an agreement with a sponsor whose principal FNS
determines to be seriously deficient and subsequently disqualifies, the
State agency must initiate action to terminate and disqualify the
sponsor in accordance with the procedures in paragraph (a)(6)(ii)(B) of
this section. The State agency must initiate these actions no later
than 45 days after the date of the principal's disqualification by FNS.
PART 226--CHILD AND ADULT CARE FOOD PROGRAM
0
18. 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
19. In Sec. 226.2:
0
a. Remove the definitions for ``Administrative review'' and
``Administrative review official'';
0
b. Add in alphabetical order the definitions for ``Cognizant Regional
office'', ``Cognizant State agency'', ``Contingency plan'', and
``Corrective action'';
0
c. Revise the definition for ``Disqualified'';
0
d. Add in alphabetical order the definitions for ``Fair hearing'',
``Finding'', ``Fiscal action'', ``Full correction'', ``Good standing'',
``Hearing official'', ``Lack of business integrity'', ``Legal basis'',
and ``Multi-State sponsoring organization (MSSO)'';
0
e. Revises the definitions for ``National Disqualified List'' and
``Notice'';
0
f. Add the definitions for ``Program operator'', ``Responsible
individual'' and ``Responsible principal'';
0
g. Remove the definition for ``Responsible principal or responsible
individual'';
0
h. Add the definitions for ``Review cycle'' and ``Serious management
problem''; and
0
i. Revise the definitions for ``Seriously deficient'', ``State agency
list'', ``Termination for cause''.
The revisions and additions read as follows:
Sec. 226.2 Definitions
* * * * *
Cognizant Regional office means the FNSRO which acts on behalf of
the Department in the administration of the Program and is responsible
for determining which State agency has cognizance when a multi-State
sponsoring organization operates the Program.
Cognizant State agency means the agency which is responsible for
the administration of the Program in the State where a multi-State
sponsoring organization's headquarters is located.
Contingency plan means the State agency's written process for the
transfer of sponsored centers and day care homes that will help ensure
that Program meals for children and adult participants will continue to
be available without interruption if a sponsoring organization's
agreement is terminated.
Corrective action means implementation of a solution, written in a
corrective action plan, to address the root cause and prevent the
recurrence of a serious management problem.
* * * * *
Disqualified means the status of an institution, facility,
responsible principal, or responsible individual who is ineligible for
participation in the Program.
* * * * *
Fair hearing means due process provided upon request to:
(1) An institution that has been given notice by the State agency
of an action that will affect participation or reimbursement under the
Program;
(2) A principal or individual responsible for an institution's
serious management problem and issued a notice of proposed termination
and proposed disqualification from Program participation; or
(3) An individual responsible for a day care home or unaffiliated
center's serious management problem and issued a notice of proposed
disqualification from Program participation.
* * * * *
Finding means a violation of a regulatory requirement identified
during a review.
Fiscal action means the recovery of an overpayment or claim for
reimbursement that is not properly payable through direct assessment of
future claims, offset of future claims, disallowance of overclaims,
submission of a revised claim for reimbursement, or disallowance of
funds for failure to take corrective action to meet Program
requirements.
* * * * *
Full correction means the status achieved after a corrective action
plan is accepted and approved, all corrective actions are fully
implemented, and no new or repeat serious management problem is
identified in subsequent reviews, as described in Sec. 226.25(c).
* * * * *
Good standing means the status of a program operator that meets its
Program responsibilities, is current with its financial obligations,
and if applicable, has fully implemented all corrective actions within
the required period of time.
* * * * *
Hearing official means an individual who is responsible for
conducting an impartial and fair hearing--as requested by an
institution, responsible principal, or responsible individual
responding to
[[Page 13216]]
a proposal for termination--and rendering a decision.
* * * * *
Lack of business integrity means the conviction or concealment of a
conviction for fraud, antitrust violations, embezzlement, theft,
forgery, bribery, falsification or destruction of records, making false
statements, receiving stolen property, making false claims, or
obstruction of justice.
Legal basis means the lawful authority established in statute or
regulation.
* * * * *
Multi-State sponsoring organization (MSSO) means an organization
that sponsors facilities in more than one State.
National Disqualified List (NDL) means a system of records,
maintained by the Department, of institutions, responsible principals,
and responsible individuals disqualified from participation in the
Program.
* * * * *
Notice means a letter sent by certified mail, return receipt (or
the equivalent private delivery service), by facsimile, or by email,
that describes an action proposed or taken by a State agency or FNS
with regard to an institution's Program reimbursement or participation.
Notice also means a letter sent by certified mail, return receipt (or
the equivalent private delivery service), by facsimile, or by email,
that describes an action proposed or taken by a sponsoring organization
with regard to a day care home or unaffiliated center's participation.
* * * * *
Program operator means any entity that participates in one or more
Child Nutrition Programs.
* * * * *
Responsible individual means any individual employed by, or under
contract with an institution or facility, or any other individual,
including uncompensated individuals, who the State agency or FNS
determines to be responsible for an institution or facility's serious
management problem.
Responsible principal means any principal, as described in this
section, who the State agency or FNS determined to be responsible for
an institution's serious management problem.
Review cycle means the frequency and number of required reviews of
institutions and facilities.
* * * * *
Serious management problem means the finding(s) that relates to an
institution's inability to meet the Program's performance standards or
that affects the integrity of a claim for reimbursement or the quality
of meals served in a day care home or center.
Seriously deficient means the status of an institution or facility
after it is determined that full corrective action will not be achieved
and termination for cause is the only appropriate course of action.
* * * * *
State agency list means an actual paper or electronic list, or the
retrievable paper records, maintained by the State agency, that
includes information on institutions and day care home providers or
unaffiliated centers through the serious deficiency process in that
State. The list must be made available to FNS upon request and must
include information specified in Sec. 226.25(b).
* * * * *
Termination for cause means the termination of a Program agreement
due to considerations related to an institution or a facility'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
20. In Sec. 226.6:
0
a. In paragraph (b)(1), revise the second sentence;
0
b. In paragraph (b)(1)(xii), remove the word ``principals'' and adding
in its place the words ``responsible principals or responsible
individuals'' wherever it appears;
0
c. Revise paragraphs (b)(1)(xiii) and (b)(1)(xiv)(A) and (B);
0
d. Add paragraphs (b)(1)(xv)(A) and (b)(1)(xix) ;
0
e. In paragraph (b)(2), remove the word ``principals'' and adding in
its place the words ``responsible principals or responsible
individuals'' wherever it appears;
0
f. In paragraph (b)(2)(ii)(F), remove the word ``and'';
0
g. In paragraph (b)(2)(ii)(G), remove ``.'' and adding in its place ``;
and'';
0
h. Add paragraph (b)(2)(ii)(H);
0
i. Revise paragraph (b)(2)(iii)(D);
0
j. In paragraph (b)(2)(iii)(F), add a new second sentence;
0
k. Add paragraph (b)(2)(iii)(L);
0
l. In paragraph (b)(3)(i), revise the last two sentences;
0
m. Revise paragraphs (b)(4)(ii) and (iii) and (c);
0
n. Remove paragraphs (k) and (l) and redesignate paragraphs (m) through
(q) as paragraphs (k) through (o), respectively;
0
o. Revise newly redesignated paragraph (k)(2);
0
p. In newly redesignated paragraph (k)(3)(x), remove the words
``paragraph (m)(5)'' and add in their place the words ``paragraph
(k)(5)'';
0
q. In newly redesignated paragraph (k)(3)(xi) remove the word ``and'';
0
r. In newly redesignated paragraph (k)(3)(xii) remove ``.'' and add in
its place ``; and'';
0
s. Add paragraph (k)(3)(xiii);
0
t. In newly redesignated paragraph (k)(4) remove the words ``paragraph
(m)(6)'' and add in their place the words ``paragraph (k)(6)'';
0
u. In newly redesignated paragraph (k)(5) remove the words ``paragraph
(m)'' and add in their place the words ``paragraph (k)'';
0
v. Revise newly redesignated paragraph (m);
0
w. In newly designated paragraph (n), remove the citation ``Sec.
226.16(l)'' and add in its place the citation ``Sec. 226.25'';
0
x. Redesignate paragraph (r) as paragraph (p) and add new paragraph
(q).
The additions and revisions read as follows:
Sec. 226.6 State agency administrative responsibilities.
* * * * *
(b) * * *
(1) * * * The State agency must also determine if the sponsoring
organization operates in more than one State. * * *
* * * * *
(xiii) Ineligibility for other publicly funded programs--(A)
General. Ineligibility for other publicly funded programs. A State
agency is prohibited from approving an institution or facility's
application if, the institution, facility, responsible principals, or
responsible individuals:
(1) Have been declared ineligible for any other publicly funded
program by reason of violating that program's requirements, during the
past 7 years. 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.
(2) Were terminated for cause from any program authorized under
this part or parts 210, 215, 220, or 225 of this chapter and are
currently listed on a
[[Page 13217]]
National Disqualified List, per paragraph (b)(1)(xiii) of this
section;. State agencies must develop a process to share information on
any institution, facility, responsible principal, or responsible
individual not approved to administer or participate in the programs as
described under paragraph (b)(2)(iii)(A)(1) of this section. The State
agency must work closely with any other Child Nutrition Program State
agency within the State to ensure information is shared for program
purposes and on a timely basis. The process must be approved by FNS.
(B) Certification. Institutions must submit:
(1) A statement listing the publicly funded programs in which the
institution, and its responsible principals and responsible individuals
have participated in the past 7 years; and
(2) A certification that, during the past 7 years, neither the
institution nor any of its responsible principals or responsible
individuals have been declared ineligible to participate in any other
publicly funded program by reason of violating that program's
requirements; or
(3) In lieu of the certification, documentation that the
institution or the responsible principals or responsible individuals
previously declared ineligible was later fully reinstated in, or
determined eligible for, the program, including the payment of any
debts owed.
(C) Follow-up. If the State agency has reason to believe that the
institution, facility, its responsible principals or responsible
individuals were determined ineligible to participate in another
publicly funded program by reason of violating that program's
requirements, 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.
(xiv) Information on criminal convictions. (A) A State agency is
prohibited from approving an institution's application if the
institution or any of its principals has been convicted of any activity
that occurred during the past 7 years and that indicated a lack of
business integrity, as described in Sec. 226.2, any other activity
indicating a lack of business integrity as defined by the State agency;
and
(B) Institutions must submit a certification that neither the
institution nor any of its principals has been convicted of any
activity that occurred during the past seven years and that indicated a
lack of business integrity, as described in Sec. 226.2, or any other
activity indicating a lack of business integrity as defined by the
State agency;
(xv) * * *
(A) Each principal who fills a position that the State agency
designates as responsible must submit signed certifications
acknowledging Program responsibility.
(B) [Reserved] * * * * *
(xix) Information about MSSO operations. Sponsoring organizations
approved to participate in the Program in more than one State must
provide:
(A) The number of affiliated centers it sponsors, by State;
(B) The number of unaffiliated centers it sponsors, by State;
(C) The number of day care homes it sponsors, by State;
(D) The names, addresses, and phone numbers of the organization's
headquarters and the officials who have administrative responsibility;
(E) The names, addresses, and phone numbers of the financial
records center and the officials who have financial responsibility; and
(F) The organization's decision on whether to use program funds for
administrative expenses.
* * * * *
(2) * * *
(ii) * * *
(H) Information about MSSO operations, as described in paragraph
(b)(1)(xix) of this section, is up-to-date.
(iii) * * *
(D) Ineligibility for other publicly funded programs. A State
agency is prohibited from approving a renewing institution or
facility's application if, the institution, facility, responsible
principals, or responsible individuals:
(1) Have been declared ineligible for any other publicly funded
program by reason of violating that program's requirements, during the
past 7 years. 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.
(2) Were terminated for cause from any program authorized under
this part or parts 210, 215, 220, or 225 of this chapter and are
currently listed on a National Disqualified List, per paragraph
(b)(1)(xiii) of this section. State agencies must develop a process to
share information on any institution, facility, responsible principal,
or responsible individual not approved to administer or participate in
the programs as described under paragraph (b)(2)(iii)(A)(1) of this
section. The State agency must work closely with any other Child
Nutrition Program State agency within the State to ensure information
is shared for program purposes and on a timely basis. The process must
be approved by FNS.
* * * * *
(F) Submission of names and addresses. * * * The State agency must
also ensure that the signed certifications acknowledging Program
responsibility, as described in paragraph (b)(1)(xv)(A) of this section
are up-to-date. * * *
* * * * *
(L) Multi-state sponsoring organizations. The State agency must
ensure that the MSSO's operations, as described in paragraph
(b)(1)(xix) of this section, are up-to-date. If the MSSO has facilities
not previously reported to the State agency, as described in paragraph
(b)(1)(xix) of this section, the MSSO must update the information.
* * * * *
(3) * * *
(i) * * * Any disapproved applicant institution must be notified of
the reasons for its disapproval and its right to appeal. 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 Sec. 226.25(g).
* * * * *
(4) * * *
(ii) 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
[[Page 13218]]
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.
(iii) 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.
(A) The State agency must terminate the agreement for cause as
described in Sec. 226.25(d)(1).
(B) 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.
(C) 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.
(D) The State agency, institution, or facility cannot terminate for
convenience to avoid actions related to serious management problems.
Termination procedures as a result of the serious deficiency process
can be found in Sec. 226.25.
(c) Denial of a new institution's application. (1) Denial of
applications that do not meet minimum requirements. The State agency
must deny the application, if a new institution's application does not
meet all of the requirements in paragraph (b) of this section and in
Sec. Sec. 226.15(b) and 226.16(b).
(2) Denial of applications by ineligible applicants. The State
agency must deny the application and must initiate action to disqualify
the new institution and the responsible principals, including the
person who signs the application, and responsible individuals if the
State agency determines that the institution has:
(i) Submitted false information on its application, including but
not limited to a determination that the institution has concealed a
conviction for any activity that occurred during the past seven years
and that indicates a lack of business integrity; or
(ii) Any other action affecting the institution's ability to
administer the Program in accordance with Program requirements.
(3) Denial and disqualification notification procedures. If the
State agency initiates action to deny and disqualify the new
institution, the State agency must use the procedures described in
paragraph (c)(4) of this section to provide the institution and the
responsible principals and responsible individuals with notice for the
basis of denial and an opportunity to take corrective action.
(4) Notice of proposed denial and proposed disqualification. If the
State agency initiates action to deny the institution's application,
the State agency must notify the institution's executive director and
chairman of the board of directors. The notice must identify the
responsible principals, including the person who signed the
application, and responsible individuals and must be sent to those
persons as well. The State agency may specify in the notice different
corrective actions and time periods for completing the corrective
action for the institution and the responsible principals and
responsible individuals. At the same time the notice is issued, the
State agency must add the institution to the State agency list, along
with the basis for denial, and provide a copy of the notice to the
appropriate FNSRO. The notice must also specify:
(i) The basis of denial;
(ii) The corrective actions required to be taken;
(iii) The time allotted for corrective actions;
(v) That failure to complete the corrective actions within the
allotted time will result in denial of the institution's application
and the disqualification of the institution and the responsible
principals and responsible individuals;
(vi) That the State agency will not pay any claims for
reimbursement for eligible meals served or allowable administrative
expenses incurred until the State agency has approved the institution's
application and the institution has signed a Program agreement; and
(vii) That the institution's withdrawal of its application, after
having been notified of its proposed denial and proposed
disqualification, will still result in the institution's application
being denied and placement of the institution and its responsible
principals and responsible individuals on the National Disqualified
List by the State agency; and
(viii) That, if the State agency does not possess the date of birth
for any individual named as a ``responsible principal'' or
``responsible individual'' in the notice of proposed denial and
proposed disqualification, the submission of that person's date of
birth is a condition of corrective action.
(5) Successful corrective action. (i) If corrective action has been
completed within the allotted time and to the State agency's
satisfaction, the State agency must:
(A) Notify the institution's executive director and chairman of the
board of directors, and the responsible principals and responsible
individuals, that the corrective actions are complete; and
(B) Offer the new institution the opportunity to resubmit its
application. If the new institution resubmits its application, the
State agency must complete its review of the application within 30 days
after receiving a complete and correct application.
(ii) If corrective action is complete for the institution but not
for all of the responsible principals and responsible individuals, the
State agency must:
(A) Continue with the actions, as described in paragraph (c)(4) of
this section, against the remaining parties;
(B) At the same time the notice is issued, the State agency must
also update the State agency list to indicate that the corrective
actions are complete and provide a copy of the notice to the
appropriate FNSRO.
(iii) If the State agency initially approves the institution's
application and the State agency and institution have a signed
permanent agreement, the State agency must follow procedures, as
described in Sec. 226.25, for any serious management problems that
occur.
(iv) If the institution is still in the process of applying and the
State agency initially determined that the institution's corrective
action is complete, but later the same problem occurs, the State agency
must move immediately to issue a notice of intent to deny the
application and disqualify the institution, as described in paragraph
(c)(6) of this section.
(6) Application denial and proposed disqualification. If timely
corrective action is not completed, the State agency must notify the
institution's executive director and chair of the board of directors,
and the responsible principals and responsible individuals, that the
institution's application has been denied. At the same time the notice
is issued, the State agency must also update the State agency list and
provide a copy of the notice to the
[[Page 13219]]
appropriate FNSRO. The notice must also specify:
(i) That the institution's application has been denied and the
State agency is proposing to disqualify the institution and the
responsible principals and responsible individuals;
(ii) The basis for denial; and
(iii) The procedures for seeking a fair hearing, as described in
Sec. 226.25(g), of the application denial and proposed
disqualifications.
(7) Program payments. The State agency is prohibited from paying
any claims for reimbursement from a new institution for eligible meals
served or allowable administrative expenses incurred until the State
agency has approved its application and the institution and State
agency have signed a Program agreement.
(8) Disqualification. When the time for requesting a fair hearing
expires or when the hearing official upholds the State agency's denial
and proposed disqualifications, the State agency must notify the
institution's executive director and chair of the board of directors,
and the responsible principals and responsible individuals that the
institution and the responsible principal and responsible individuals
have been disqualified. At the same time the notice is issued, the
State agency must also update the State agency list and provide a copy
of the notice and the mailing address and date of birth for each
responsible principal and responsible individual to the appropriate
FNSRO.
* * * * *
(k) * * *
(2) Review priorities. In choosing institutions for review, as
described in paragraph (k)(6) of this section, the State agency must
target for more frequent review of institutions whose prior review
included serious management problems.
(3) * * *
(xiii) If a sponsoring organization of day care homes or
unaffiliated centers, implementation of the serious deficiency and
termination procedures for day care homes and unaffiliated centers and,
if these procedures have been delegated to sponsoring organizations, as
described in paragraph Sec. 226.25(g) of this section, the fair
hearing procedures for day care homes or unaffiliated centers.
* * * * *
(m) Child care standards compliance. The State agency shall, when
conducting reviews of child care centers, and day care homes approved
by the State agency under paragraph (d)(3) of this section, determine
compliance with the child care standards used to establish eligibility,
and the institution shall ensure that all findings are corrected and
the State shall ensure that the institution has corrected all findings.
If findings are not corrected within the specified timeframe for
corrective action, the State agency must follow procedures for
termination, described in Sec. 226.25(d). However, if the health or
safety of the children is imminently threatened, the State agency or
sponsoring organization must follow the procedures, described in Sec.
226.25(f). The State agency may deny reimbursement for meals served to
attending children in excess of authorized capacity.
* * * * *
(q) Oversight of MSSOs. An MSSO may include a sponsoring
organization that administers the Program in more than one State, a
franchise operating multiple facilities in more than one State, or a
for-profit organization whose parent corporation operates multiple
affiliated centers in more than one State. Each State agency must
determine if a sponsoring organization is an MSSO, as described in
paragraphs (b)(1)(xix) and (b)(2)(iii)(L). The State agency must assume
the role of the CSA, if the MSSO's center of operations is located
within the State. Each State agency that approves an MSSO must follow
the requirements described in paragraph (q)(1) of this section. The CSA
must follow the requirements described in paragraph (q)(2) of this
section.
(1) If the State agency determines that an MSSO provides operates
the Program within the State,
(i) Enter into a permanent written agreement with the MSSO, as
described in paragraph (b)(4) of this section.
(ii) Approve the MSSO's administrative budget (in consultation with
the CSA, as appropriate).
(A) The State agency must approve budget line items that are
directly attributable to operations within the State.
(B) The State agency must approve its portion of costs that are
shared among other State agencies and costs that attribute directly to
program operations within the State.
(C) The State agency must notify the CSA if any of the MSSO's
administrative costs exceed the 15 percent limit, as described in
paragraph (f)(1)(iv) of this section.
(iii) Conduct monitoring of MSSO Program operations within the
State, as described in paragraph (k)(4) of this section. The State
agency should coordinate monitoring with the CSA to streamline reviews
and minimize duplication of the review content. The State agency may
base the review cycle on the number of facilities operating within the
State.
(A) The State agency may use information from the CSA's technical
assistance activities to assess compliance in areas where the scope of
review overlaps during the same review cycle. The State agency may
choose to conduct a review of implementation of additional State agency
requirements, financial records to support State-specific
administrative costs, and other areas of compliance that the CSA would
not have reviewed.
(B) The State agency may also choose to conduct a full review at
the MSSO's headquarters and financial records center. If the State
agency chooses to conduct a full review, the State agency should
request the necessary records from the CSA.
(C) The State agency must provide summaries of the MSSO reviews
that are conducted to the CSA. The summaries must include the
prescribed corrective actions and follow-up efforts.
(iv) Conduct audit resolution activities. The State agency must
review audit reports, address audit findings, and implement corrective
actions, as required under 2 CFR part 200, subpart D, and USDA
implementing regulations 2 CFR parts 400 and 415.
(v) Notify all other State agencies that have agreements with the
MSSO of termination and disqualification actions, as described in
paragraph (c)(2)(i) of this section.
(2) CSA responsibilities. If it determines that an MSSO's center of
operations is located within the State, the State agency must assume
the role of the CSA, which must:
(i) Comply with the requirements for a State agency that has
approved an MSSO to provide Program operations within the State, as
described in paragraph (q)(1).
(ii) Determine if there will be shared administrative costs among
the States in which the MSSO operates and how the costs will be
allocated. The CSA has the authority to approve cost levels for cost
items that must be allocated. The CSA must approve the allocation
method that the MSSO uses for shared costs. The method must allocate
the cost based on the benefits received, not the source of funds
available to pay for the cost. If the MSSO administers the Program in
centers, the CSA must also ensure that administrative costs do not
exceed 15 percent on an organization-wide basis.
(iii) Coordinate monitoring. The CSA must conduct a full review at
the MSSO headquarters and financial records center. The CSA must
coordinate the timing of reviews. The CSA must make
[[Page 13220]]
copies of monitoring reports and findings available to all other State
agencies that have agreements with the MSSO.
(iv) Ensure that organization-wide audit requirements are met. Each
MSSO must comply with audit requirements, as described under 2 CFR part
200, subpart D, and USDA implementing regulations 2 CFR parts 400 and
415. Since their operations are often large and complex, MSSOs should
have annual audits. If an MSSO has for-profit status, the cognizant
agency must establish audit thresholds and requirements.
(v) Oversee audit funding and costs. The share of organization-wide
audit costs may be based on a percentage of each State's expenditure of
CACFP funds and the MSSO's expenditure of Federal and non-Federal funds
during the audited fiscal year. The CSA should review audit costs as
part of the overall budget review and make audit reports available to
the other State agencies that have agreements with the MSSO.
(vi) Ensure compliance with procurement requirements. Procurement
actions involving MSSOs must follow the requirements under 2 CFR part
200, subpart D, and USDA implementing regulations 2 CFR parts 400 and
415. If the procurement action benefits all States in which the MSSO
operates, the procurement standards of the State that are the most
restrictive apply. If the procurement action only benefits a single
State's Program, the procurement standards of that State agency apply.
Sec. 226.7 [Amended]
0
21. In Sec. 226.7, in paragraph (c), remove the word ``deficiencies''
and add in its place the words ``management problems''.
0
22. In Sec. 226.10, revise paragraph (b)(2) to read as follows:
Sec. 226.10 Program payment procedures.
* * * * *
(b) * * *
(2) If the State agency has audit or monitoring evidence of
extensive serious management problems or other reasons to believe that
an institution will not be able to submit a valid claim for
reimbursement, advance payments must be withheld until the claim is
received or the corrective actions are complete.
* * * * *
Sec. 226.12 [Amended]
0
23. In Sec. 226.12, in paragraph (b)(3) remove the citation ``Sec.
226.6(k)'' and add in its place the citation ``Sec. 226.25(g)''.
Sec. 226.14 [Amended]
0
24. In Sec. 226.14, in paragraph (a), remove the words ``an
administrative review'' and ``the administrative review'' and add in
their place the words ``fair hearing'' and remove the words ``Sec.
226.6(k). Minimum'' and add in their place the words ``Sec. 226.25(g).
Minimum''.
Sec. 226.15 [Amended]
0
25. In Sec. 226.15, in paragraph (b), remove the citation ``Sec.
226.6(b)(1)(viii)'' and add in its place the citation ``Sec.
226.6(b)(1)(xvi)''.
0
26. In Sec. 226.16:
0
a. Revise paragraphs (b)(3) and (6), the first sentence of (d)(4)(iv),
and (d)(4)(v);
0
b. Remove paragraph (l) and redesignate paragraph (m) as paragraph (l).
The revisions read as follows:
Sec. 226.16 Sponsoring organization provisions.
(b) * * *
(3) Timely information concerning the eligibility status of each
facility, such as licensing or approval actions;
* * * * *
(6) A copy of the sponsoring organization's procedures, if the
State agency has made the sponsoring organization responsible for the
fair hearing of a proposed termination of a day care home or an
unaffiliated center, as described in Sec. 226.25(g);
* * * * *
(d) * * *
(4) * * *
(iv) Averaging of required reviews. If a sponsoring organization
conducts one unannounced review of a day care home or an unaffiliated
center in a year and finds no serious management problems, as described
in Sec. 226.25, the sponsoring organization may choose not to conduct
a third review of the facility that year, and may make its second
review announced, provided that the sponsoring organization conducts an
average of three reviews of all of its facilities that year, and that
it conducts an average of two unannounced reviews of all of its
facilities that year. * * *
(v) Follow-up reviews. If, in conducting a review of a day care
home or an unaffiliated center, a sponsoring organization detects a
serious management problem, the next review of that day care home or
unaffiliated center must be unannounced. Serious management problems
are those described in Sec. 226.25(a)(3) regardless of the type of
facility.
* * * * *
0
27. In Sec. 226.17, add a new sentence at the end of paragraphs (e)
and (f) to read as follows:
Sec. 226.17 Child care center provisions.
* * * * *
(e) * * * The sponsoring organization may terminate this agreement
for cause as described in Sec. 226.25(a).
(f) * * * The State agency may terminate this agreement for cause
as described in Sec. 226.25(a).
0
28. In Sec. 226.17a, add a new sentence at the end of paragraphs
(f)(2)(i) and (ii) to read as follows:
Sec. 226.17a At-risk afterschool center provisions.
* * * * *
(f) * * *
(2) * * *
(i) * * * The sponsoring organization may terminate this agreement
for cause as described in Sec. 226.25(a).
(ii) * * * The State agency may terminate this agreement for cause
as described in Sec. 226.25(a).
* * * * *
Sec. 226.18 [Amended]
0
29. In Sec. 226.18:
0
a. In paragraph (b) introductory text, remove the citation ``Sec.
226.16(l)'' and add in its place the citation ``Sec. 226.25''; and
0
b. In paragraph (b)(16):
0
i. Remove the words ``an administrative review'' and add in their place
the words ``a fair hearing''; and
0
ii. Remove the citation ``Sec. 226.16(l)(2)'' and add in its place the
citation ``Sec. 226.25''.
0
30. In Sec. 226.19, add a new sentence at the end of paragraph (d) to
read as follows:
Sec. 226.19 Outside-school-hours care center provisions.
(d) * * * The sponsoring organization may terminate this agreement
for cause as described in Sec. 226.25(a).
* * * * *
0
31. In Sec. 226.19a, add a new sentence at the end of paragraph (d) to
read as follows:
Sec. 226.19a Outside-school-hours care center provisions.
(d) * * * The sponsoring organization may terminate this agreement
for cause as described in Sec. 226.25(a).
* * * * *
Sec. Sec. 226.25 through 226.27 [Redesignated as Sec. Sec. 226.26
through 226.28]
0
32. Sec. Sec. 226.25 through 226.27 are redesignated as Sec. Sec.
226.26 through 226.28, respectively.
0
33. Add new Sec. 226.25 to read as follows:
[[Page 13221]]
Sec. 226.25 Administrative actions to address serious management
problems
(a) Serious management problems--(1) General. State agencies and
sponsoring organizations must follow the procedures outlined in this
section to address any serious management problems. The State agency
must provide the institution an opportunity for corrective action and
due process. The sponsoring organization must provide the day care home
or unaffiliated center an opportunity for corrective action and due
process.
(2) Six steps. The serious deficiency process includes a standard
set of procedures that State agencies and sponsoring organizations
follow to address serious management problems in the operation of the
Program. These procedures apply to serious management problems in new
institutions with a signed permanent agreement, participating
institutions, day care homes, and unaffiliated centers. The State
agency or sponsoring organization must:
(i) Identify serious management problems.
(ii) Issue a notice of serious management problems.
(iii) Receive and assess corrective action(s).
(iv) Issue a notice of successful corrective action or a notice of
proposed termination with appeal rights.
(v) Provide a fair hearing, if requested.
(vi) Issue a notice of successful appeal if the fair hearing
vacates the proposed termination, or issue a notice of termination,
serious deficiency, and disqualification, if the fair hearing upholds
the proposed termination or the timeframe for requesting a fair hearing
has passed.
(3) Identifying serious management problems. State agencies must
consider the type and magnitude of the finding(s) to determine whether
it rises to the level of a serious management problem. State agencies
should define a set of standards to identify serious management
problems. At a minimum, to identify serious management problems, State
agencies and must consider:
(i) The severity of the problem. Is the finding minor or
substantial? Is the finding systemic or isolated?
(ii) The degree of responsibility. Is the finding best described as
an inadvertent error or is there evidence of negligence or conscious
indifference to regulatory requirements, or even deception? Is the
finding at the facility level or the institution level? If it is at the
institution level, has the State agency taken appropriate steps to
resolve it through monitoring, training, and technical assistance? If
it is at the facility level, has the sponsoring organization taken the
appropriate steps to resolve it through monitoring, training, and
technical assistance?
(iii) The history of participation in the Program. Is this the
first instance or is there a history of frequently recurring Program
findings or serious management problems at the same institution, day
care home or unaffiliated center?
(iv) The nature of requirements that relate to the finding. Is the
action a clear finding of Program requirements or a simple mistake? Are
new policies incorporated correctly?
(v) The degree to which the problem impacts Program integrity. Does
the finding undermine the intent of the Program? Is the finding
administrative or does it impact viability, capability or
accountability? Is the finding at the facility level or the institution
level? If it is at the institution level, has the State agency taken
appropriate steps to resolve it through monitoring, training, and
technical assistance? If it is at the facility level, has the
sponsoring organization taken the appropriate steps to resolve it
through monitoring, training, and technical assistance?
(4) Good standing. If a State agency identifies a serious
management problem, the institution, day care home or unaffiliated
center is considered to be not in good standing. At a minimum, the
following criteria need to be met to return to good standing.
(i) Outstanding debts are paid;
(ii) All corrective actions are fully implemented; and
(iii) Meets its Program responsibilities.
(5) Notifications. The State agency and sponsoring organization
must provide written notice of action through each step of the serious
deficiency process.
(i) Each type of notice must include a basis and an explanation of
any action that is proposed and any action that is taken.
(ii) The notice must be delivered via certified mail, return
receipt, or an equivalent private delivery service, facsimile, or
email.
(iii) The notice is considered to be received on the date it is
delivered, sent by facsimile, or sent by email.
(iv) If the notice is undeliverable, it is considered to be
received 5 days after it is sent to the addressee's last known mailing
address, facsimile number, or email address.
(6) Serious management problems notification procedures for
institutions. If the State agency determines that institution has
serious management problems, the sponsoring organization must use the
following procedures. The State agency must notify the institution of
all findings, even those that do not rise to a serious management
problem, and they must be corrected.
(i) First notification--notice of serious management problem. The
State agency must notify the institution's executive director, chair of
the board of directors that the institution has serious management
problems and provide an opportunity to take corrective action. The
notice must also be sent to all other responsible principal and other
responsible individual. At the same time the notice is issued, the
State agency must add the institution to the State agency list, as
described in paragraph (b) of this section and provide a copy of the
notice to the FNSRO. This notice documents that a serious management
problem must be addressed and corrected. Prompt action must be taken to
minimize the time that elapses between the identification of a serious
management problem and the issuance of the notice. For each serious
management problem, the notice must:
(A) Specify each serious management problem;
(B) Cite the specific regulatory requirements, instructions, or
policies as the basis for the serious management problems;
(C) Identify the responsible principals and responsible
individuals;
(D) Specify the actions that must be taken to correct each serious
management problem. The notice may specify different corrective actions
and time periods for completing the corrective actions for the
institution and the responsible principal and the responsible
individual;
(E) Set time allotted for implementing the corrective action. The
corrective action must include milestones and a definite completion
date that will be monitored. Although paragraph (c)(2) of this section
sets maximum timeframes, shorter timeframes for corrective action may
be established.
(F) Specify that failure to fully implement corrective actions for
each serious management problem within the allotted time will result in
the State agency's proposed termination of the institution's agreement
and the proposed disqualification of the institution and the
responsible principals and responsible individuals;
(G) Clearly state that, if the institution voluntarily terminates
its agreement with the State agency after having been notified of
serious management problems it will still result in the institution's
agreement being terminated for cause and the placement of the
[[Page 13222]]
institution and its responsible principals and responsible individuals
on the National Disqualified List;
(H) Clearly state that submission of the date of birth for any
individual named as a responsible principal or responsible individual
in the notice of serious management problems is a condition of
corrective action for the institution and/or responsible principal or
responsible individual.
(I) Clearly state that the serious management problems are not
subject to a fair hearing.
(ii) Second notification--notice of successful corrective action or
notice of proposed termination, proposed disqualification--(A) Notice
of successful corrective action. If corrective action has been
implemented to correct each serious management problem within the time
allotted and to the State agency's satisfaction, the State agency must:
(1) Notify the executive director, chair of the board of directors,
owner, responsible principals, and responsible individuals, that the
corrective actions are fully implemented;
(2) If corrective action is complete for the institution, but not
for all of the responsible principals and responsible individuals, the
State agency must continue with actions, as described in paragraph
(a)(6)(ii)(B) of this section, against the remaining parties.
(3) At the same time the notice is issued, the State agency must
also update the State agency list, as described in paragraph (b) of
this section and provide a copy of the notice the appropriate FNSRO.
(4) Ensure the institution continues to implement procedures and
policies to fully correct the serious management problems and achieve
full correction, as described in paragraph (c)(3) of this section.
(B) Notice of proposed termination and proposed disqualification.
If corrective action has not been taken or fully implemented for each
serious management problem within the time allotted and to the State
agency's satisfaction, or repeat serious management problems occur
before full correction is achieved, the State agency must:
(1) Notify the executive director, chair of the board of directors,
owner, responsible principals, and responsible individuals, that the
State agency proposes to terminate the institution's agreement and
proposes to disqualify the institution, responsible principals and
responsible individuals and explain the institution's opportunity for
seeking a fair hearing;
(2) At the same time the notice is issued, the State agency must
also update the State agency list, and provide a copy of the notice the
appropriate FNSRO.
(3) The notice must specify:
(i) That the State agency is proposing to terminate the
institution's agreement and proposing to disqualify the institution and
the responsible principals and the responsible individuals;
(ii) The basis for the proposal to terminate;
(iii) That, if the institution voluntarily terminates its agreement
with the State agency after receiving the notice of proposed
termination, it will still result in the institution's agreement being
terminated for cause and the placement of the institution and its
responsible principals and responsible individuals on the National
Disqualified List;
(iv) The procedures for seeking a fair hearing (in accordance with
paragraph (g) of this section) of the proposed termination and proposed
disqualifications; and
(v) That, unless participation has been suspended, the institution
may continue to participate and receive Program reimbursement for
eligible meals served and allowable administrative costs incurred until
the fair hearing is complete.
(iii) Third notification--Notice to vacate the proposed termination
of the institution's agreement or notice of serious deficiency,
termination of the agreement, and disqualifications--(A) Notice to
vacate the proposed termination of an institution's agreement. If the
fair hearing vacates the proposed termination, the State agency must
notify the institution and must:
(1) Notify the institution's executive director and chairman of the
board of directors that the proposed termination of the institution's
agreement has been vacated.
(2) Update the State agency list at the time the notice is issued;
(3) Provide a copy of the notice to the appropriate FNSRO.
(B) Notice of serious deficiency, termination of the institution's
agreement and disqualifications. When the time for requesting a fair
hearing expires or when the hearing official upholds the State agency's
proposed termination and disqualifications, the State agency must:
(1) Notify the institution's executive director and chairman of the
board of directors, and the responsible principals and responsible
individuals, that the institution's agreement is terminated and that
the institution and the responsible principals and responsible
individuals are disqualified and placed on the National Disqualified
List;
(2) Update the State agency list at the time notice is issued; and
(3) Provide a copy of the notice and the mailing address and date
of birth for each responsible principal and responsible individual to
the appropriate FNSRO.
(7) Serious management problem(s) notification procedures for day
care homes and unaffiliated centers. If the sponsoring organization
determines that a day care home or unaffiliated center has serious
management problems, the sponsoring organization must use the following
procedures. The sponsoring organization must notify the day care home
and unaffiliated centers of all findings, even those that do not rise
to a serious management problem and they must be corrected.
(i) First notification--notice of serious management problem. The
sponsoring organization must notify the day care home or unaffiliated
center that it has serious management problems and offer it an
opportunity to take corrective action. At the same time the notice is
issued, the sponsoring organization must provide a copy of the notice
to the State agency. Prompt action must be taken to minimize the time
that elapses between the identification of serious management
problem(s) and the issuance of the notice. For each serious management
problem, the notice must:
(A) Specify the serious management problem;
(B) Cite the specific regulatory requirements, instructions, or
policies as the basis for each serious management problem.
(C) Specify the actions that must be taken to correct the serious
management problem(s). The notice may specify different corrective
actions and time periods for completing the corrective action(s) for
the day care home or unaffiliated center;
(D) Set time allotted for implementing the corrective action. The
corrective action must include milestones and a definite completion
date that will be monitored. Although paragraph (c)(2) of this section
sets maximum timeframes, shorter timeframes for corrective action may
be established.
(E) Specify that failure to fully implement corrective actions for
each serious management problem within the allotted time will result in
the sponsoring organization's proposed termination of the Program
agreement and the proposed disqualification of the day care home and
provider or unaffiliated center and its principals;
(F) Clearly state that, if the day care home or unaffiliated center
voluntarily
[[Page 13223]]
terminates its agreement with the State agency after having been
notified of serious management problems, it will still result in the
day care home or unaffiliated center's agreement being terminated for
cause and the placement of the day care home and provider or
unaffiliated center and its principals on the National Disqualified
List;
(G) Clearly state that the serious management problems are not
subject to a fair hearing.
(ii) Second notification--notice of successful corrective action or
notice of proposed termination, proposed disqualification. (A) Notice
of successful corrective action. If corrective action has been
implemented to correct each serious management problem within the time
allotted and to the sponsoring organization's satisfaction, the
sponsoring organization must:
(1) Notify the day care home or unaffiliated center, that the
corrective actions are fully implemented;
(2) At the same time the notice is issued, the sponsoring
organization must provide a copy of the notice to the State agency.
(3) Ensure the day care home and unaffiliated center continues to
implement procedures and policies to fully correct the serious
management problems, as described in paragraph (c)(3) of this section.
(B) Notice of proposed termination and proposed disqualification.
If corrective action has not been taken or fully implemented for each
serious management problem within the time allotted and to the
sponsoring organization's satisfaction, or repeat serious management
problems occur before full correction is achieved, the State agency
must:
(1) Notify the day care home or unaffiliated center, that the
sponsoring organization proposes to terminate the agreement and
proposes to disqualify the day care home or unaffiliated center and
explain the day care home or unaffiliated center's opportunity for
seeking a fair hearing.
(2) At the same time the notice is issued, the sponsoring
organization must also provide a copy of the notice to the State
agency.
(3) The notice must also specify:
(i) The basis for the proposal to terminate;
(ii) That, if the day care home or unaffiliated center voluntarily
terminates its agreement with the sponsoring organization after
receiving the notice of proposed termination, it will still result in
the day care home or unaffiliated center's agreement being terminated
for cause and the placement of the day care home provider or
unaffiliated center and its principals on the National Disqualified
List;
(iii) The procedures for seeking a fair hearing of the proposed
termination and proposed disqualifications; and
(iv) That, unless participation has been suspended, the day care
home or unaffiliated center may continue to participate and receive
Program reimbursement for eligible meals served until the fair hearing
is complete.
(iii) Third notification--Notice to vacate the proposed termination
of the facility's agreement, or notice of serious deficiency,
termination of the agreement, and disqualifications--(A) Notice to
vacate the proposed termination of a day care home or unaffiliated
center's agreement. If the fair hearing vacates the proposed
termination, the State agency must notify the institution and must:
(1) Notify the institution's executive director and chairman of the
board of directors that the proposed termination of the institution's
agreement has been vacated.
(2) Provide a copy of the notice to the State agency.
(B) Notice of serious deficiency, termination of the day care home
or unaffiliated center's agreement and disqualifications. When the time
for requesting a fair hearing expires or when the hearing official
upholds the sponsoring organization's proposed termination and proposed
disqualifications, the sponsoring organization must immediately
terminate the day care home or unaffiliated center's agreement and
disqualify the day care home or unaffiliated center and its principals:
(1) Notify the day care home or unaffiliated center that its
agreement is terminated and that the day care home or unaffiliated
center and its principals are placed on the National Disqualified List;
and
(2) Provide a copy of the notice to the State agency.
(b) Placement on the State agency list. (1) The State agency must
maintain a State agency list, made available to FNS upon request, and
must include the following information:
(i) Names and mailing addresses of each institution, day care home
or unaffiliated center that is determined to have a serious management
problem;
(ii) Names, mailing addresses, and dates of birth of each
responsible principal and responsible individual;
(iii) The status of the institution, day care home or unaffiliated
center, as it progresses through the stages of corrective action,
termination, suspension, and disqualification, full correction, as
applicable.
(2) Within 10 days of receiving a notice of termination and
disqualification from a sponsoring organization, the State agency must
provide FNS with the information as described in paragraphs (b)(1)(i)
and (ii) of this section.
(c) Correcting serious management problems. In response to the
notice of serious management problems, the institution, unaffiliated
center or day care home must submit, in writing, what corrective
actions it has taken to correct each serious management problem.
(1) Corrective action plans. An acceptable corrective action plan
must demonstrate that the serious management problem is resolved. The
plan must address the root cause of each serious management problem,
describe and document the action taken to correct serious management
problems, and describe the action's outcome. The corrective action plan
must include the following:
(i) What is the serious management problem and the action taken to
address it?
(ii) Who addressed the serious management problem?
(iii) When was the action taken to address the serious management
problem? Provide a timeline for implementing the action (i.e., daily,
weekly, monthly, or annually, and when did implementation of the plan
begin)?
(iv) Where is documentation of the corrective action plan filed?
(v) How were staff and providers informed of the new policies and
procedures?
(2) Corrective action timeframes. Corrective action must be taken
within the allotted time that ensures that serious management problems
are quickly addressed and fully corrected. The time allotted to correct
the serious management problem must be appropriate for the type of
serious management problem and the type of institution or facility
where the serious management problem is found. The allotted time begins
on the date the first notification is received, as described in
paragraphs (a)(7)(i) and (a)(8)(i) of this section.
(i) For day care homes and unaffiliated centers, the serious
management problems must be corrected as soon as possible or up to 30
days from the date a day care home or unaffiliated center receives the
notice.
(ii) For institutions, the serious management problems must be
corrected as soon as possible or up to 90 days from the date a day care
home or unaffiliated center receives the first notification.
[[Page 13224]]
(iii) More than 90 days only if the State agency determines that
corrective action will require the long-term revision of management
systems or processes, such as, but not limited to, the purchase and
implementation of new claims payment software or a major reorganization
of Program management duties that will require action by the board of
directors.
(A) The State agency may permit more than 90 days to complete the
corrective action.
(B) The institution's corrective action plan must include
milestones and a definite completion date.
(C) The State agency must receive and approve the corrective action
plan within 90 days from the date the institution received the notice.
(D) The State agency must monitor full implementation of the
corrective action plan.
(iv) Up to 30 days for a false claim or unlawful practice. The
State agency is prohibited from allowing more than 30 days for
corrective action if it determines that an institution:
(A) Engaged in an unlawful practice,
(B) Submitted a false or fraudulent claim to the State agency,
(C) Submitted other false or fraudulent information to the State
agency,
(D) Was convicted of a crime, or
(E) Concealed a criminal background.
(3) Achieving full correction of serious management problems. The
path to full correction requires demonstrating the ability to operate
the Program with no serious management problems, as described in
paragraph (a) of this section.
(i) Full correction of an institution's serious management
problems. The State agency must prioritize follow-up reviews and more
frequent full reviews of institutions with serious management problems,
as described in Sec. 226.6(k)(6)(ii). A follow-up review must be
conducted to confirm that the serious management problem is corrected.
Full reviews must be conducted at least once every 2 years. Full
correction of an institution's serious management problems is achieved
when:
(A) At least two full reviews reveal no new or repeat serious
management problems;
(B) The first and last full reviews are at least 24 months apart
and reveal no new or repeat serious management problems; and
(C) All reviews, including any follow-up reviews, between the first
and last full review reveal no new or repeat serious management
problems.
(ii) Full correction of a day care home or unaffiliated center's
serious management problems. Sponsoring organization's must conduct
reviews, as described in Sec. 226.16(d)(4) to confirm that the serious
management problem is corrected. A follow-up review must be conducted
to confirm that the serious management problem is corrected. Full
correction of a day care home or unaffiliated center's serious
management problems is achieved when:
(A) At least three full reviews, reveal no new or repeat serious
management problems.
(B) All reviews, including any follow-up reviews, between the first
and last full review reveal no new or repeat serious management
problems.
(iii) Once full correction is achieved, a serious management
problem that recurs again, is not considered repeat and therefore,
would not lead to immediate proposal to terminate. Any new or
recurrence of a serious management problem after the initial full
correction is achieved would require the State agency or sponsoring
organization to issue a new notice of serious management problem, as
described in paragraph (a) of this section.
(iv) The recurrence of a serious management problem before full
correction is achieved would lead directly to proposed termination.
(d) Termination--(1) Termination for cause. If the State agency or
sponsoring organization determines that the institution or facility is
unable to properly perform its responsibilities under its Program
agreement and fails to take successful corrective action, the Program
agreement must be terminated for cause. The State agency and sponsoring
organization would declare the institution or facility to be seriously
deficient at the point of termination, which would be followed by
disqualification. The State agency, institution, or facility shall not
terminate for convenience to avoid implementing the serious deficiency
process. Termination not related to performance can be found in Sec.
226.6(b)(4).
(2) Contingency plan. A State agency must have a contingency plan
in place for the transfer of facilities if a sponsoring organization is
terminated or disqualified to ensure that eligible participants
continue to have access to meal services.
(e) Disqualification--(1) Reciprocal disqualification. A State
agency may not enter into an agreement with any institution,
responsible principal, or responsible individual, if they have been
terminated for cause from any Child Nutrition Program and placed on a
National Disqualified List, as described in Sec. 226.6(b)(1)(xiii).
Any existing agreements with an institution, responsible individual, or
responsible principal must also be terminated and disqualified.
(i) No individual on the National Disqualified List may serve as a
principal in any institution or facility or as a day care home
provider.
(ii) The State agency must not approve the application of a new or
renewing institution if any of the institution's principals is on the
National Disqualified List.
(iii) A sponsoring organization is prohibited from submitting an
application on behalf of a sponsored facility if any of the facility's
principals are on the National Disqualified List.
(iv) A sponsoring organization is prohibited from submitting an
application on behalf of a sponsored facility if the facility is on the
National Disqualified List.
(v) The State agency must not approve an application described in
paragraphs (e)(1)(iii) and (iv) of this section.
(vi) Once included on the National Disqualified List, an
institution, unaffiliated center, or day care home, responsible
principal, or responsible individual will remain on the list until the
State agency determines that either the serious management problem that
led to placement on the National Disqualified List has been corrected
or 7 years have elapsed since disqualification from the Program,
whichever is longer. Any debt owed under the Program must be repaid.
(2) National Disqualified List. FNS will maintain the National
Disqualified List and make it available to all State agencies and all
sponsoring organizations. This computer matching program uses a
Computer Matching Act system of records of information on institutions
and individuals who are disqualified from participation in CACFP.
(i) Placement on the National Disqualified List. The State agency
must provide the following information to FNS for each institution,
facility, responsible principal, and responsible individual:
(A) Name and address of the institution, including city, State, and
zip code;
(B) Any known aliases;
(C) Termination date;
(D) Amount of debt owed, if any;
(E) Reason, and if other is checked, an explanation, for the;
(F) Date of birth of the responsible principal and responsible
individual; and
[[Page 13225]]
(G) Position within the institution or facility of the responsible
principal and responsible individual.
(ii) Removal from the National Disqualified List. An institution,
responsible principal and responsible individual disqualified from the
Program due to uncorrected serious management problems will remain on
the National Disqualified List until the State agency and FNS have
determined that the serious management problems are corrected, or for 7
years, whichever is longer. Any debts owed under the Program must be
repaid. After an institution, responsible principal or responsible
individual has been removed from the National Disqualified List, they
will be considered to be in good standing, and eligible to apply for
the Program.
(iii) Early removal of institutions, principals, and individuals
from the list. The State agency must review and approve a request for
removal from the National Disqualified List. If the State agency
approves the request, and ensures that any debt associated has been
paid, it may submit the information to the FNSRO, where it will be
reviewed for completeness. The FNSRO will also ensure that the State
agency's request is within Program requirements and that the
documentation supports the early removal. Once reviewed, the FNSRO will
submit the request to the FNSRO for removal. The effective date of
removal will be the date on which the FNS National Office processes the
removal request. The FNSRO will be notified once the removal has been
completed and inform the State agency.
(3) Computer Matching Act (CMA). The Computer Matching and Privacy
Protection Act addresses the use of information from computer matching
programs that involve a Federal System of Records. Address: compliance,
matching agreement, and independent verification
(i) Each State agency participating in a computer matching program
must comply with the provisions of the Computer Matching Act if it uses
an FNS system of records in order to:
(A) Establish eligibility for a Federal benefit program;
(B) Verify eligibility for a Federal benefit program;
(C) Verify compliance with either statutory or regulatory
requirements of a Federal benefit program; or
(D) Recover payments or delinquent debts owed under a Federal
benefit program.
(ii) State agencies must enter into written agreements with FNS,
consistent with 5 U.S.C. 552a(o) of the Computer Matching Act, in order
to participate in a matching program involving a FNS Federal system of
records. The agreement must include the State agency's independent
verification requirements.
(iii) State agencies are prohibited from taking any adverse action
to terminate, deny, suspend, or reduce benefits to an applicant or
recipient based on information produced by a Federal computer matching
program that is subject to the requirements of the Computer Matching
Act, unless:
(A) The information has been independently verified by the State
agency; and
(B) FNS has waived the two-step independent verification and notice
requirement.
(iv) A State agency that receives a request for verification from
another State agency or from FNS must provide the necessary
verification. The State agency must respond within 20 calendar days of
receiving the request.
(v) A State agency may use the record of a certified notice to
independently verify the accuracy of a computer match.
(f) Suspension--(1) Public health or safety. If State or local
health or licensing officials have cited an institution, day care home
or unaffiliated center for serious health or safety violations, Program
participation must be immediately suspended prior to any formal action
to revoke the institution, day care home or unaffiliated center's
licensure or approval. If the State agency or sponsoring organization
determines that there is an imminent threat to the health or safety of
participants, or that there is a threat to public health or safety, the
appropriate State or local licensing and health authorities must
immediately be notified and take action that is consistent with the
recommendations and requirements of those authorities. The State agency
or sponsoring organization must initiate action for termination and
disqualification.
(i) Notification procedures for institutions engaging in activities
that threaten public health or safety or pose an imminent threat to the
health or safety of participants:
(A) Notice of suspension, proposed termination, and proposed
disqualification. The State agency must notify the institution's
executive director and chairman of the board of directors that the
institution's participation (including Program payments) has been
suspended and that the State agency proposes to terminate the
institution's agreement and to disqualify the institution and the
responsible principals and responsible individuals. The notice must
also identify the responsible principals and responsible individuals
and must be sent to those persons as well. At the same time this notice
is sent, the State agency must add the institution and the responsible
principals and responsible individuals to the State agency list, along
with the basis for the suspension and provide a copy of the notice to
the appropriate FNSRO. The notice must also specify:
(1) That the State agency is suspending the institution's
participation (including Program payments), proposing to terminate the
institution's agreement, and proposing to disqualify the institution
and the responsible principals and responsible individuals;
(2) The basis for the suspension;
(3) That, if the institution voluntary terminates its agreement
with the State agency after having been notified of the proposed
termination, the institution and the responsible principals and
responsible individuals will be disqualified;
(4) The procedures for seeking a fair hearing (consistent with
paragraph (g) of this section) of the suspension, proposed termination,
and proposed disqualifications; and
(5) That, if the suspension review official overturns the
suspension, the institution may claim reimbursement for eligible meals
served and allowable administrative costs incurred during the
suspension period.
(B) Notice of agreement termination, serious deficiency and
disqualifications. When time for requesting a fair hearing expires or
when the hearing official upholds the State agency's proposed
termination and disqualifications, the State agency must:
(1) Notify the institution's executive director and chairman of the
board of directors, and the responsible principals and responsible
individuals, that the institution's agreement has been terminated and
that the institution and the responsible principals and responsible
individuals have been disqualified;
(2) Update the State agency list at the time such notice is issued;
and
(3) Provide a copy of the notice and the mailing address and date
of birth for each responsible principal and responsible individual to
the appropriate FNSRO.
(ii) Notification procedures for day care homes and unaffiliated
centers engaging in activities that threaten public health or safety or
pose an imminent threat to the health or safety of participants:
[[Page 13226]]
(A) Notice of suspension, proposed termination, and proposed
disqualification. The sponsoring organization must notify the day care
home provider or the unaffiliated center's principals that the day care
home or unaffiliated center's participation (including Program
payments) has been suspended and that the sponsoring organization
proposes to terminate the day care home or unaffiliated center's
agreement and to disqualify the day care home or unaffiliated and its
principals. The notice must also identify the principals. At the same
time this notice is sent, the sponsoring organization must also provide
a copy of the notice to the State agency. The notice must also specify:
(1) That the sponsoring organization is suspending the day care
home or unaffiliated center's participation (including Program
payments), proposing to terminate the institution's agreement, and
proposing to disqualify the day care home or unaffiliated center and
its principals;
(2) The basis for the suspension;
(3) That, if the day care home or unaffiliated center voluntary
terminates its agreement with the State agency after having been
notified of the proposed termination, the day care home or unaffiliated
center and its principals will be disqualified;
(4) The procedures for seeking a fair hearing (consistent with
paragraph (g) of this section) of the suspension, proposed termination,
and proposed disqualifications; and
(5) That, if the suspension review official overturns the
suspension, the day care home or unaffiliated center may claim
reimbursement for eligible meals served and allowable administrative
costs incurred during the suspension period.
(B) Notice of agreement termination, serious deficiency and
disqualifications. When time for requesting a fair hearing expires or
when the hearing official upholds the sponsoring organization's
proposed termination and disqualifications, the sponsoring organization
must:
(1) Notify the day care home provider or unaffiliated center and
its principals, that the day care home or unaffiliated center's
agreement has been terminated and that the day care home or
unaffiliated center and its principals have been disqualified; and
(2) Provide a copy of the notice to the State agency.
(2) Submission of a false or fraudulent claim for reimbursement. If
the State agency determines that an institution has knowingly submitted
a false or fraudulent claim, the State agency must initiate action to
suspend the institution's participation and must initiate action to
terminate the institution's agreement and initiate action to disqualify
the institution and the responsible principals and responsible
individuals. The following procedures must be used to issue a notice of
proposed suspension of participation at the same time it issues a
notice of proposed termination, which must include the following
information:
(i) Notice of proposed suspension of participation. The State
agency must notify the institution's executive director and chairman of
the board of directors that the State agency proposes to suspend the
institution's participation, including Program payments. At the same
time this notice is sent, the State agency must add the institution and
the responsible principals and responsible individuals to the State
agency list, along with the basis for the suspension and provide a copy
of the notice to the appropriate FNSRO. The notice must also specify:
(A) That the State agency is proposing to suspend the institution's
participation;
(B) The basis for the suspension;
(C) That, if the institution voluntarily terminates its agreement
with the State agency after having been notified of the proposed
termination, the institution and the responsible principals and
responsible individuals will be disqualified;
(D) The procedures for seeking a fair hearing (consistent with
paragraph (g) of this section) of the suspension, proposed termination,
and proposed disqualifications;
(E) The effective date of the suspension (which may be no earlier
than 10 days after the institution receives the suspension notice);
(F) The name, address and telephone number of the suspension review
official who will conduct the suspension review; and
(G) That if the institution intends to request a suspension review,
it must submit the request a written documentation opposing the
proposed suspension to the suspension review official within 10 days of
the institution's receipt of the notice.
(ii) Maximum time for suspension. Under no circumstances may the
suspension of participation remain in effect for more than 120 days
following the suspension review decision.
(iii) Notice of suspension, proposed termination, and proposed
disqualification. The State agency must notify the institution's
executive director and chairman of the board of directors that the
institution's participation (including Program payments) has been
suspended and that the State agency proposes to terminate the
institution's agreement and to disqualify the institution and the
responsible principals and responsible individuals. The notice must
also identify the responsible principals and responsible individuals
and must be sent to those persons as well. At the same time this notice
is sent, the State agency must add the institution and the responsible
principals and responsible individuals to the State agency list, along
with the basis for the suspension and provide a copy of the notice to
the appropriate FNSRO. The notice must also specify:
(A) That the State agency is suspending the institution's
participation (including Program payments), proposing to terminate the
institution's agreement, and proposing to disqualify the institution
and the responsible principals and responsible individuals;
(B) The basis for the suspension;
(C) That, if the institution voluntary terminates its agreement
with the State agency after having been notified of the proposed
termination, the institution and the responsible principals and
responsible individuals will be disqualified;
(D) The procedures for seeking a fair hearing of the suspension,
proposed termination, and proposed disqualifications as described in
paragraph (g) of this section; and
(E) That, if the suspension review official overturns the
suspension, the institution may claim reimbursement for eligible meals
served and allowable administrative costs incurred during the
suspension period.
(iv) Notice of agreement termination, serious deficiency and
disqualifications. When time for requesting a fair hearing expires or
when the hearing official upholds the State agency's proposed
termination and disqualifications, the State agency must:
(A) Notify the institution's executive director and chairman of the
board of directors, and the responsible principals and responsible
individuals, that the institution's agreement has been terminated and
that the institution and the responsible principals and responsible
individuals have been disqualified;
(B) Update the State agency list at the time such notice is issued;
and
(C) Provide a copy of the notice and the mailing address and date
of birth for each responsible principal and responsible individual to
the appropriate FNSRO.
[[Page 13227]]
(g) Fair hearing--(1) Right to a fair hearing. (i) The institution
must be advised in writing of the grounds upon which the State agency
based the action and its right to a fair hearing. The State agency must
offer a fair hearing in the notice to the institution of any of the
following actions:
(A) Denial of a new institution's application for participation
(see Sec. 226.6(b)(1) on the State agency review of a new
institution's application; and Sec. 226.6(c)(1), on the State agency's
denial of new institution's application);
(B) Denial of an application submitted by a sponsoring organization
on behalf of a facility;
(C) Proposed termination of an institution's agreement (see
paragraph (a)(6)(ii)(B) of this section, dealing with proposed
termination of agreements and paragraph (f) of this section dealing
with proposed termination of agreements for suspended institutions);
(D) Suspension of an institution's participation (see paragraph (f)
of this section, dealing with suspension for health or safety reasons
or submission of a false or fraudulent claim);
(E) Denial of an institution's application for start-up or
expansion payments (Sec. 226.7(h));
(F) Denial of a request for an advance payment (see Sec.
226.10(b));
(G) Recovery of all or part of an advance in excess of the claim
for application period. The recovery may be through a demand for full
repayment or an adjustment of subsequent payments (see Sec.
226.10(b)(3)); or
(H) Denial of all or part of an institution's claim for
reimbursement (except for denial based on a late submission under Sec.
226.10(e)) (see Sec. Sec. 226.10(f) and 226.14(a));
(I) Decision by the State agency to not forward to FNS an exception
request by an institution for payment of a late claim, or a request for
an upward adjustment to a claim (Sec. 226.10(e));
(J) Demand for the remittance of an overpayment (see Sec.
226.14(a)); and
(K) Any other action of the State agency affecting an institution's
participation of its claim for reimbursement.
(ii) The facility must be advised in writing of the grounds upon
which the sponsoring organization based the action and its right to a
fair hearing. The State agency or sponsoring organization must offer a
fair hearing for proposed termination or suspension. A fair hearing for
any other action is not required.
(iii) The notice of due process must inform the institution or
facility of:
(A) The action that is taken or proposed to be taken;
(B) The legal basis for the action;
(C) The right to appeal the action; and
(D) The procedures and deadlines for requesting an appeal of the
action.
(iv) If a fair hearing is requested:
(A) The State agency must continue to pay any valid claims for
reimbursement of eligible meals served and allowable administrative
expenses incurred until the hearing official issues a decision.
(B) Any information upon which the State agency or sponsoring
organization based its action must be available to the appellants for
inspection from the date of receipt of the hearing request.
(C) Appellants may request a fair hearing in person or by
submitting written documentation to the hearing official.
(D) Appellants may represent themselves, retain legal counsel, or
be represented by another person.
(E) All parties must submit written documentation to the hearing
official prior to the beginning of the hearing, within 30 days after
receiving the notice of action.
(F) Appellants must be permitted to contact the hearing official
directly.
(2) Fair hearing procedures. A hearing must be held by the fair
hearing official in addition to, or in lieu of, a review of written
information only if the institution, facility or the responsible
principals and responsible individuals request a hearing in the written
request for a fair hearing. If the institution's representative,
facility's representative, or the responsible principals or responsible
individuals or their representative, fail to appear at a scheduled
hearing, they waive the right to a personal appearance before the
hearing official, unless the hearing official agrees to reschedule the
hearing. A representative of the State agency must be allowed to attend
the hearing to respond to the testimony of the institution and the
responsible principals and responsible individuals and to answer
questions posed by the hearing official. If a hearing is requested, the
institution, the responsible principals, and responsible individuals,
and the State agency must be provided with at least 10 calendar days
advance notice of the time and place of the hearing.
(i) The purpose of the hearing is to determine that the State
agency or sponsoring organization followed Program requirements.
(ii) The hearing official's decisions should be limited to that
purpose.
(iii) The purpose is not to determine whether to uphold the
legality of Federal or State Program requirements.
(iv) The request for a fair hearing must be submitted in writing no
later than 15 calendar days after the date the notice of action is
received. The State agency or sponsoring organization must acknowledge
the request for a fair hearing within 10 calendar days of its receipt
of the request. The State agency must provide a copy of the written
request for a fair hearing, including the date of receipt of the
request to FNS within 10 calendar days of its receipt of the request.
(3) Hearing officials. The individual who is appointed to conduct
the fair hearing, including any State agency or sponsoring organization
employee or contractor, must be independent and impartial. The
institution, facility, responsible principals and responsible
individuals must be permitted to contact the hearing official directly
if they so desire. The State agency or sponsoring organization must
ensure that the hearing official:
(i) Has no involvement in the action under appeal;
(ii) Does not occupy a position that may potentially be subject to
undue influence from any party that is responsible for the action under
appeal;
(iii) Does not occupy a position that may exercise undue influence
on any party that is responsible for the action under appeal;
(iv) Has no personal interest in the outcome of the fair hearing;
(v) Has no financial interest in the outcome of the fair hearing.
(4) Basis for decision. The hearing official must render a decision
that is based on:
(i) The determination that the State agency or sponsoring
organization followed Program requirements;
(ii) The information provided by the State agency, institution,
responsible principals, and responsible individual; and
(iii) The Program requirements established in Federal and State
laws, regulations, policies, and procedures.
(5) Final decision. The hearing official's decision is the final
action in the appeal process.
(i) Within 60 calendar days of the State agency's receipt of the
request for a fair hearing, the fair hearing official must inform the
State agency, the institution's executive director and chair of the
board of directors, and the responsible principals and responsible
individuals, of the fair hearing's outcome.
(ii) The hearing official must inform the sponsoring organization
and the facility of the outcome within the period of time specified in
the State agency or sponsoring organization's fair hearing procedures.
This timeframe is an administrative requirement for the State
[[Page 13228]]
agency or sponsoring organization, and may not be used as a basis for
overturning a termination if a decision is not made within the
specified timeframe.
(iii) The hearing official must render a decision within 60
calendar days of the date the State agency received the appeal request.
(iv) The hearing official must inform the State agency,
institution, responsible principals, and responsible individuals of the
decision within this 60-day period.
(v) This timeframe is a requirement and cannot be used to justify
overturning the State agency or sponsoring organization's action if a
decision is not made within the 60-day period.
(vi) 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 (h)(4) of this
section.
(vii) The hearing official's decision is final.
(viii) The decision is not subject to appeal.
(6) Provision of fair hearing procedures. The State agency or
sponsoring organization's fairing hearing procedures must be provided:
(i) Annually to all institutions, day care homes and unaffiliated
centers;
(ii) To an institution, to each responsible principal and
responsible individual, to a day care home or unaffiliated center when
the State agency or sponsoring organization takes any action subject to
a fair hearing; and
(iii) Any other time upon request.
(7) Effect of State agency action. The State agency's action must
remain in effect during the fair hearing. The effect of this
requirement on particular State agency actions is as follows:
(i) Overpayment demand. During the period of the fair hearing, the
State agency is prohibited from taking action to collect or offset the
overpayment. However, the State agency must assess interest beginning
with the initial demand for remittance of the overpayment and
continuing through the period of administrative review unless the
administrative review official overturns the State agency's action.
(ii) Recovery of advances. During the fair hearing, the State
agency must continue its efforts to recover advances in excess of the
claim for reimbursement for the applicable period. The recovery may be
through a demand for full repayment or an adjustment of subsequent
payments.
(h) Payments--(1) Payment of valid claims. If the State agency
holds an agreement with an institution that is proposed to be
terminated, the State agency must continue to pay any valid unpaid
claims for reimbursement for eligible meals served and allowable
administrative expenses incurred until the agreement is terminated, as
described in paragraphs (a)(6)(ii) and (iii) of this section, including
the period of any fair hearing, unless participation has been
suspended.
(2) Suspension of payments. The State agency is prohibited from
paying any claims for reimbursement submitted by a suspended
institution.
(i) If the suspended institution prevails in the fair hearing of
the proposed termination, the State agency must pay any claims for
reimbursement for eligible meals served and allowable administrative
costs incurred during the suspension period.
(ii) If the institution suspended for the submission of false or
fraudulent claims is a sponsoring organization, the State agency must
ensure that sponsored facilities continue to receive reimbursement for
eligible meals served during the suspension period. If the suspended
institution prevails in the fair hearing of the proposed termination,
the State agency must pay any valid unpaid claims for reimbursement for
eligible meals served and allowable administrative costs incurred
during the suspension period.
(3) Debts owed to the Program. The State agency is responsible for
the collection of unearned payments, including any assessment of
interest, as described in Sec. 226.14(a).
(i) After the State agency has sent the necessary demand letter for
debt collection, State agency staff must refer the claim to the
appropriate State authority for pursuit of the debt payment.
(ii) FNS defers to the State's laws and procedures to establish a
repayment plan to recover funds as quickly as possible.
(iii) It is the responsibility of the State agency to notify the
institution that interest will be charged. Interest must be assessed on
institutions' debts established on or after July 29, 2002. Interest
will continue to accrue on debts not paid in full within 30 days of the
initial demand for remittance up to the date of payment, including
during an extended payment plan and each month while on the National
Disqualified List.
(iv) State agencies are required to assess interest using one
uniform rate. The appropriate rate to use is the Current Value of Funds
Rate, which is published annually by Treasury in the Federal Register
and is available from the FNSRO.
(4) State liability for payment. (i) A State agency that fails to
meet the 60-day timeframe set forth in paragraph (g)(5)(i) 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.
(i) FNS determination of serious management problems. (1) General.
FNS may determine independently that an institution has one or more
serious management problems, as described in paragraph (a) of this
section. FNS will follow procedures outlined in this section to address
any finding that prevents an institution from meeting the Program's
performance standards, affects the integrity of a claim for
reimbursement, or affects the integrity of the meals served in a day
care home or unaffiliated center.
(2) Required State agency action--(i) Termination of agreements. If
the State agency holds an agreement with an institution that FNS
determines to be seriously deficient and subsequently disqualifies, the
State agency must terminate the institution's agreement effective no
later than 45 days after the date of the institution's disqualification
by FNS. As noted in paragraph (g) of this section, the termination of
an agreement for this reason is not subject to a fair hearing. At the
same time the notice of termination is issued, the State agency must
add the institution to the State agency list and provide a copy of the
notice to the appropriate FNSRO.
(ii) Disqualified responsible principal and individuals. If the
State agency holds an agreement with an institution whose principal FNS
determines to be seriously deficient and subsequently disqualifies, the
State agency must initiate action to terminate and disqualify the
institution in accordance with the procedures in paragraph
(a)(6)(ii)(B) of this section. The State agency must initiate these
actions no
[[Page 13229]]
later than 45 days after the date of the principal's disqualification
by FNS.
* * * * *
Cynthia Long,
Administrator, Food and Nutrition Service.
[FR Doc. 2024-02108 Filed 2-20-24; 8:45 am]
BILLING CODE 3410-30-P
