[Title 7 CFR ]
[Code of Federal Regulations (annual edition) - January 1, 2002 Edition]
[From the U.S. Government Printing Office]



[[Page i]]

          

                    7


          Parts 210 to 299

                         Revised as of January 1, 2002

Agriculture





          Containing a codification of documents of general 
          applicability and future effect
          As of January 1, 2002
          With Ancillaries
          Published by:
          Office of the Federal Register
          National Archives and Records
          Administration

A Special Edition of the Federal Register



[[Page ii]]

                                      




                     U.S. GOVERNMENT PRINTING OFFICE
                            WASHINGTON : 2002



  For sale by the Superintendent of Documents, U.S. Government Printing 
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[[Page iii]]




                            Table of Contents



                                                                    Page
  Explanation.................................................       v

  Title 7:
    Subtitle B--Regulations of the Department of Agriculture 
      (Continued):
          Chapter II--Food and Nutrition Service, Department 
          of Agriculture                                             5
  Finding Aids:
      Material Approved for Incorporation by Reference........     953
      Table of CFR Titles and Chapters........................     955
      Alphabetical List of Agencies Appearing in the CFR......     973
      Redesignation Table.....................................     983
      List of CFR Sections Affected...........................     985



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                     ----------------------------

                     Cite this Code:  CFR
                     To cite the regulations in 
                       this volume, use title, 
                       part, and section number. 
                       Thus,  7 CFR 210.1 refers 
                       to title 7, part 210, 
                       section 1.

                     ----------------------------

[[Page v]]



                               EXPLANATION

    The Code of Federal Regulations is a codification of the general and 
permanent rules published in the Federal Register by the Executive 
departments and agencies of the Federal Government. The Code is divided 
into 50 titles which represent broad areas subject to Federal 
regulation. Each title is divided into chapters which usually bear the 
name of the issuing agency. Each chapter is further subdivided into 
parts covering specific regulatory areas.
    Each volume of the Code is revised at least once each calendar year 
and issued on a quarterly basis approximately as follows:

Title 1 through Title 16.................................as of January 1
Title 17 through Title 27..................................as of April 1
Title 28 through Title 41...................................as of July 1
Title 42 through Title 50................................as of October 1

    The appropriate revision date is printed on the cover of each 
volume.

LEGAL STATUS

    The contents of the Federal Register are required to be judicially 
noticed (44 U.S.C. 1507). The Code of Federal Regulations is prima facie 
evidence of the text of the original documents (44 U.S.C. 1510).

HOW TO USE THE CODE OF FEDERAL REGULATIONS

    The Code of Federal Regulations is kept up to date by the individual 
issues of the Federal Register. These two publications must be used 
together to determine the latest version of any given rule.
    To determine whether a Code volume has been amended since its 
revision date (in this case, January 1, 2002), consult the ``List of CFR 
Sections Affected (LSA),'' which is issued monthly, and the ``Cumulative 
List of Parts Affected,'' which appears in the Reader Aids section of 
the daily Federal Register. These two lists will identify the Federal 
Register page number of the latest amendment of any given rule.

EFFECTIVE AND EXPIRATION DATES

    Each volume of the Code contains amendments published in the Federal 
Register since the last revision of that volume of the Code. Source 
citations for the regulations are referred to by volume number and page 
number of the Federal Register and date of publication. Publication 
dates and effective dates are usually not the same and care must be 
exercised by the user in determining the actual effective date. In 
instances where the effective date is beyond the cut-off date for the 
Code a note has been inserted to reflect the future effective date. In 
those instances where a regulation published in the Federal Register 
states a date certain for expiration, an appropriate note will be 
inserted following the text.

OMB CONTROL NUMBERS

    The Paperwork Reduction Act of 1980 (Pub. L. 96-511) requires 
Federal agencies to display an OMB control number with their information 
collection request.

[[Page vi]]

Many agencies have begun publishing numerous OMB control numbers as 
amendments to existing regulations in the CFR. These OMB numbers are 
placed as close as possible to the applicable recordkeeping or reporting 
requirements.

OBSOLETE PROVISIONS

    Provisions that become obsolete before the revision date stated on 
the cover of each volume are not carried. Code users may find the text 
of provisions in effect on a given date in the past by using the 
appropriate numerical list of sections affected. For the period before 
January 1, 1986, consult either the List of CFR Sections Affected, 1949-
1963, 1964-1972, or 1973-1985, published in seven separate volumes. For 
the period beginning January 1, 1986, a ``List of CFR Sections 
Affected'' is published at the end of each CFR volume.

INCORPORATION BY REFERENCE

    What is incorporation by reference? Incorporation by reference was 
established by statute and allows Federal agencies to meet the 
requirement to publish regulations in the Federal Register by referring 
to materials already published elsewhere. For an incorporation to be 
valid, the Director of the Federal Register must approve it. The legal 
effect of incorporation by reference is that the material is treated as 
if it were published in full in the Federal Register (5 U.S.C. 552(a)). 
This material, like any other properly issued regulation, has the force 
of law.
    What is a proper incorporation by reference? The Director of the 
Federal Register will approve an incorporation by reference only when 
the requirements of 1 CFR part 51 are met. Some of the elements on which 
approval is based are:
    (a) The incorporation will substantially reduce the volume of 
material published in the Federal Register.
    (b) The matter incorporated is in fact available to the extent 
necessary to afford fairness and uniformity in the administrative 
process.
    (c) The incorporating document is drafted and submitted for 
publication in accordance with 1 CFR part 51.
    Properly approved incorporations by reference in this volume are 
listed in the Finding Aids at the end of this volume.
    What if the material incorporated by reference cannot be found? If 
you have any problem locating or obtaining a copy of material listed in 
the Finding Aids of this volume as an approved incorporation by 
reference, please contact the agency that issued the regulation 
containing that incorporation. If, after contacting the agency, you find 
the material is not available, please notify the Director of the Federal 
Register, National Archives and Records Administration, Washington DC 
20408, or call (202) 523-4534.

CFR INDEXES AND TABULAR GUIDES

    A subject index to the Code of Federal Regulations is contained in a 
separate volume, revised annually as of January 1, entitled CFR Index 
and Finding Aids. This volume contains the Parallel Table of Statutory 
Authorities and Agency Rules (Table I), and Acts Requiring Publication 
in the Federal Register (Table II). A list of CFR titles, chapters, and 
parts and an alphabetical list of agencies publishing in the CFR are 
also included in this volume.
    An index to the text of ``Title 3--The President'' is carried within 
that volume.
    The Federal Register Index is issued monthly in cumulative form. 
This index is based on a consolidation of the ``Contents'' entries in 
the daily Federal Register.

[[Page vii]]

    A List of CFR Sections Affected (LSA) is published monthly, keyed to 
the revision dates of the 50 CFR titles.

REPUBLICATION OF MATERIAL

    There are no restrictions on the republication of material appearing 
in the Code of Federal Regulations.

INQUIRIES

    For a legal interpretation or explanation of any regulation in this 
volume, contact the issuing agency. The issuing agency's name appears at 
the top of odd-numbered pages.
    For inquiries concerning CFR reference assistance, call 202-523-5227 
or write to the Director, Office of the Federal Register, National 
Archives and Records Administration, Washington, DC 20408 or e-mail 
info@fedreg.nara.gov.

SALES

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ELECTRONIC SERVICES

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CFR Sections Affected), The United States Government Manual, the Federal 
Register, Public Laws, Public Papers, Weekly Compilation of Presidential 
Documents and the Privacy Act Compilation are available in electronic 
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    The Office of the Federal Register also offers a free service on the 
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site for public law numbers, Federal Register finding aids, and related 
information. Connect to NARA's web site at www.nara.gov/fedreg. The NARA 
site also contains links to GPO Access.

                              Raymond A. Mosley,
                                    Director,
                          Office of the Federal Register.

January 1, 2002.



[[Page ix]]



                               THIS TITLE

    Title 7--Agriculture is composed of fifteen volumes. The parts in 
these volumes are arranged in the following order: parts 1-26, 27-52, 
53-209, 210-299, 300-399, 400-699, 700-899, 900-999, 1000-1199, 1200-
1599, 1600-1899, 1900-1939, 1940-1949, 1950-1999, and part 2000 to end. 
The contents of these volumes represent all current regulations codified 
under this title of the CFR as of January 1, 2002.

    The Food and Nutrition Service current regulations in the volume 
containing parts 210-299, include the Child Nutrition Programs and the 
Food Stamp Program. The regulations of the Federal Crop Insurance 
Corporation are found in the volume containing parts 400-699.

    All marketing agreements and orders for fruits, vegetables and nuts 
appear in the one volume containing parts 900-999. All marketing 
agreements and orders for milk appear in the volume containing parts 
1000-1199. Part 900--General Regulations is carried as a note in the 
volume containing parts 1000-1199, as a convenience to the user.

    Redesignation tables appear in the Finding Aids section of the 
volumes containing parts 210-299 and parts 1600-1899.

[[Page x]]





[[Page 1]]



                          TITLE 7--AGRICULTURE




                  (This book contains parts 210 to 299)

  --------------------------------------------------------------------
                                                                    Part

  SUBTITLE B--Regulations of the Department of Agriculture (Continued):

chapter ii--Food and Nutrition Service, Department of 
  Agriculture...............................................         210

[[Page 3]]

  Subtitle B--Regulations of the Department of Agriculture (Continued)

[[Page 5]]



    CHAPTER II--FOOD AND NUTRITION SERVICE, DEPARTMENT OF AGRICULTURE




  --------------------------------------------------------------------


  Editorial Note: Nomenclature changes to chapter II appear at 59 FR 
60062, Nov. 22, 1994; 60 FR 19490, Apr. 19, 1995; and 63 FR 9727, Feb. 
26, 1998.

                 SUBCHAPTER A--CHILD NUTRITION PROGRAMS
Part                                                                Page
210             National School Lunch Program...............           7
215             Special Milk Program for Children...........          68
220             School Breakfast Program....................          84
225             Summer Food Service Program.................         115
226             Child and Adult Care Food Program...........         160
227             Nutrition Education and Training Program....         232
235             State administrative expense funds..........         241
240             Cash in lieu of donated foods...............         253
245             Determining eligibility for free and reduced 
                    price meals and free milk in schools....         259
246             Special Supplemental Nutrition Program for 
                    Women, Infants and Children.............         285
247             Commodity Supplemental Food Program.........         371
248             WIC Farmers' Market Nutrition Program (FMNP)         392
    SUBCHAPTER B--GENERAL REGULATIONS AND POLICIES--FOOD DISTRIBUTION
250             Donation of foods for use in the United 
                    States, its territories and possessions 
                    and areas under its jurisdiction........         414
251             The Emergency Food Assistance Program.......         461
252             National Commodity Processing Program.......         473
253             Administration of the Food Distribution 
                    Program for households on Indian 
                    reservations............................         482
254             Administration of the Food Distribution 
                    Program for Indian households in 
                    Oklahoma................................         511
         SUBCHAPTER C--FOOD STAMP AND FOOD DISTRIBUTION PROGRAM
271             General information and definitions.........         514
272             Requirements for participating State 
                    agencies................................         532
273             Certification of eligible households........         588

[[Page 6]]

274             Issuance and use of coupons.................         765
275             Performance reporting system................         806
276             State agency liabilities and Federal 
                    sanctions...............................         845
277             Payments of certain administrative costs of 
                    State agencies..........................         853
278             Participation of retail food stores, 
                    wholesale food concerns and insured 
                    financial institutions..................         888
279             Administrative and judicial review--food 
                    retailers and food wholesalers..........         913
280             Emergency food assistance for victims of 
                    disasters...............................         918
281             Administration of the Food Stamp Program on 
                    Indian reservations.....................         924
282             Demonstration, research, and evaluation 
                    projects................................         925
283             Appeals of quality control (``QC'') claims..         925
284

Provision of a nutrition assistance program for the Commonwealth of the 
Northern Mariana Islands (CNMI) [Reserved]

285             Provision of a nutrition assistance grant 
                    for the Commonwealth of Puerto Rico.....         944
                    SUBCHAPTER D--GENERAL REGULATIONS
295             Availability of information and records to 
                    the public..............................         948
296-299         [Reserved]

[[Page 7]]





                 SUBCHAPTER A--CHILD NUTRITION PROGRAMS



PART 210--NATIONAL SCHOOL LUNCH PROGRAM--Table of Contents




                           Subpart A--General

Sec.
210.1  General purpose and scope.
210.2  Definitions.
210.3  Administration.

 Subpart B--Reimbursement Process for States and School Food Authorities

210.4  Cash and donated food assistance to States.
210.5  Payment process to States.
210.6  Use of Federal funds.
210.7  Reimbursement for school food authorities.
210.8  Claims for reimbursement.

     Subpart C--Requirements for School Food Authority Participation

210.9  Agreement with State agency.
210.10  What are the nutrition standards and menu planning approaches 
          for lunches and the requirements for afterschool snacks?
210.11  Competitive food services.
210.12  Student, parent and community involvement.
210.13  Facilities management.
210.14  Resource management.
210.15  Reporting and recordkeeping.
210.16  Food service management companies.

         Subpart D--Requirements for State Agency Participation

210.17  Matching Federal funds.
210.18  Administrative reviews.
210.19  Additional responsibilities.
210.20  Reporting and recordkeeping.

   Subpart E--State Agency and School Food Authority Responsibilities

210.21  Procurement.
210.22  Audits.
210.23  Other responsibilities.

                    Subpart F--Additional Provisions

210.24  Withholding payments.
210.25  Suspension, termination and grant closeout procedures.
210.26  Penalties.
210.27  Educational prohibitions.
210.28  Pilot project exemptions.
210.29  Management evaluations.
210.30  Regional office addresses.
210.31  OMB control numbers.

Appendix A to Part 210--Alternate Foods for Meals
Appendix B to Part 210--Categories of Foods of Minimal Nutritional Value
Appendix C to Part 210--Child Nutrition Labeling Program

    Authority: 42 U.S.C. 1751-1760, 1779.

    Source: 53 FR 29147, Aug. 2, 1988, unless otherwise noted.



                           Subpart A--General



Sec. 210.1  General purpose and scope.

    (a) Purpose of the program. Section 2 of the National School Lunch 
Act (42 U.S.C. 1751), states: ``It is declared to be the policy of 
Congress, as a measure of national security, to safeguard the health and 
well-being of the Nation's children and to encourage the domestic 
consumption of nutritious agricultural commodities and other food, by 
assisting the States, through grants-in-aid and other means, in 
providing an adequate supply of food and other facilities for the 
establishment, maintenance, operation, and expansion of nonprofit school 
lunch programs.'' Pursuant to this act, the Department provides States 
with general and special cash assistance and donations of foods acquired 
by the Department to be used to assist schools in serving nutritious 
lunches to children each school day. In furtherance of Program 
objectives, participating schools shall serve lunches that are 
nutritionally adequate, as set forth in these regulations, and shall to 
the extent practicable, ensure that participating children gain a full 
understanding of the relationship between proper eating and good health.
    (b) Scope of the regulations. This part sets forth the requirements 
for participation in the National School Lunch and Commodity School 
Programs. It specifies Program responsibilities of State and local 
officials in the areas of program administration, preparation and 
service of nutritious lunches, payment of funds, use of program funds, 
program monitoring, and reporting and recordkeeping requirements.



Sec. 210.2  Definitions.

    For the purpose of this part:

[[Page 8]]

    Act means the National School Lunch Act, as amended.
    Afterschool care program means a program providing organized child 
care services to enrolled school-age children afterschool hours for the 
purpose of care and supervision of children. Those programs shall be 
distinct from any extracurricular programs organized primarily for 
scholastic, cultural or athletic purposes.
    Attendance factor means a percentage developed no less than once 
each school year which accounts for the difference between enrollment 
and attendance. The attendance factor may be developed by the school 
food authority, subject to State agency approval, or may be developed by 
the State agency. In the absence of a local or State attendance factor, 
the school food authority shall use an attendance factor developed by 
FNS. When taking the attendance factor into consideration, school food 
authorities shall assume that all children eligible for free and reduced 
price lunches attend school at the same rate as the general school 
population.
    Average Daily Participation means the average number of children, by 
eligibility category, participating in the Program each operating day. 
These numbers are obtained by dividing (a) the total number of free 
lunches claimed during a reporting period by the number of operating 
days in the same period; (b) the total number of reduced price lunches 
claimed during a reporting period by the number of operating days in the 
same period; and (c) the total number of paid lunches claimed during a 
reporting period by the number of operating days in the same period.
    Child means--(a) a student of high school grade or under as 
determined by the State educational agency, who is enrolled in an 
educational unit of high school grade or under as described in 
paragraphs (a) and (b) of the definition of ``School,'' including 
students who are mentally or physically disabled as defined by the State 
and who are participating in a school program established for the 
mentally or physically disabled; or (b) a person under 21 chronological 
years of age who is enrolled in an institution or center as described in 
paragraphs (c) and (d) of the definition of ``School;'' or (c) For 
purposes of reimbursement for meal supplements served in afterschool 
care programs, an individual enrolled in an afterschool care program 
operated by an eligible school who is 12 years of age or under, or in 
the case of children of migrant workers and children with disabilities, 
not more than 15 years of age.
    CND means the Child Nutrition Division of the Food and Nutrition 
Service of the Department.
    Commodity School Program means the Program under which participating 
schools operate a nonprofit lunch program in accordance with this part 
and receive donated food assistance in lieu of general cash assistance. 
Schools participating in the Commodity School Program shall also receive 
special cash and donated food assistance in accordance with 
Sec. 210.4(c).
    Days means calendar days unless otherwise specified.
    Department means the United States Department of Agriculture.
    Distributing agency means a State agency which enters into an 
agreement with the Department for the distribution to schools of donated 
foods pursuant to part 250 of this chapter.
    Donated foods means food commodities donated by the Department for 
use in nonprofit lunch programs.
    Fiscal year means a period of 12 calendar months beginning October 1 
of any year and ending with September 30 of the following year.
    FNS means the Food and Nutrition Service, United States Department 
of Agriculture.
    FNSRO means the appropriate Regional Office of the Food and 
Nutrition Service of the Department.
    Food component means one of the four food groups which comprise 
reimbursable meals planned under a food-based menu planning approach. 
The four food components are: meat/meat alternate; grains/breads; 
fruits/vegetables; and milk.
    Food item means one of the five foods offered in lunches under a 
food-based menu planning approach: meat/meat alternate; grains/breads; 
two servings of fruits/vegetables; and milk.
    Food service management company means a commercial enterprise or a 
nonprofit organization which is or may

[[Page 9]]

be contracted with by the school food authority to manage any aspect of 
the school food service.
    Free lunch means a lunch served under the Program to a child from a 
household eligible for such benefits under 7 CFR part 245 and for which 
neither the child nor any member of the household pays or is required to 
work.
    Lunch means a meal service that meets the applicable nutrition 
standards and portion sizes in Sec. 210.10 for lunches.
    Menu item means, under Nutrient Standard Menu Planning or Assisted 
Nutrient Standard Menu Planning, any single food or combination of 
foods. All menu items or foods offered as part of the reimbursable meal 
may be considered as contributing towards meeting the nutrition 
standards provided in Sec. 210.10, except for those foods that are 
considered as foods of minimal nutritional value as provided for in 
Sec. 210.11(a)(2) which are not offered as part of a menu item in a 
reimbursable meal. For the purposes of a reimbursable lunch, a minimum 
of three menu items must be offered, one of which must be an entree (a 
combination of foods or a single food item that is offered as the main 
course) and one of which must be fluid milk. Under offer versus serve, a 
student shall select, at a minimum, an entree and one other menu item. 
If more than three menu items are offered, the student may decline up to 
two menu items; however, the entree cannot be declined.
    National School Lunch Program means the Program under which 
participating schools operate a nonprofit lunch program in accordance 
with this part. General and special cash assistance and donated food 
assistance are made available to schools in accordance with this part.
    Net cash resources means all monies, as determined in accordance 
with the State agency's established accounting system, that are 
available to or have accrued to a school food authority's nonprofit 
school food service at any given time, less cash payable. Such monies 
may include, but are not limited to, cash on hand, cash receivable, 
earnings on investments, cash on deposit and the value of stocks, bonds 
or other negotiable securities.
    Nonprofit, when applied to schools or institutions eligible for the 
Program, means exempt from income tax under section 501(c)(3) of the 
Internal Revenue Code of 1954, as amended; or, in the Commonwealth of 
Puerto Rico, certified as nonprofit by the Governor.
    Nonprofit school food service means all food service operations 
conducted by the school food authority principally for the benefit of 
schoolchildren, all of the revenue from which is used solely for the 
operation or improvement of such food services.
    Nutrient Standard Menu Planning/Assisted Nutrient Standard Menu 
Planning means ways to develop lunch menus based on the analysis for 
nutrients in the menu items and foods offered over a school week to 
determine if specific levels for a set of key nutrients and calories 
were met in accordance with Sec. 210.10(i)(5). However, for the purposes 
of Assisted Nutrient Standard Menu Planning, lunch menu planning and 
analysis are completed by other entities and must incorporate the 
production quantities needed to accommodate the specific service 
requirements of a particular school or school food authority in 
accordance with Sec. 210.10(j).
    OIG means the Office of the Inspector General of the Department.
    Point of Service means that point in the food service operation 
where a determination can accurately be made that a reimbursable free, 
reduced price or paid lunch has been served to an eligible child.
    Program means the National School Lunch Program and the Commodity 
School Program.
    Reduced price lunch means a lunch served under the Program: (a) to a 
child from a household eligible for such benefits under 7 CFR part 245; 
(b) for which the price is less than the school food authority 
designated full price of the lunch and which does not exceed the maximum 
allowable reduced price specified under 7 CFR part 245; and (c) for 
which neither the child nor any member of the household is required to 
work.
    Reimbursement means Federal cash assistance including advances paid 
or payable to participating schools for lunches meeting the requirements 
of Sec. 210.10 and served to eligible children.

[[Page 10]]

    Revenue, when applied to nonprofit school food service, means all 
monies received by or accruing to the nonprofit school food service in 
accordance with the State agency's established accounting system 
including, but not limited to, children's payments, earnings on 
investments, other local revenues, State revenues, and Federal cash 
reimbursements.
    School means: (a) An educational unit of high school grade or under, 
recognized as part of the educational system in the State and operating 
under public or nonprofit private ownership in a single building or 
complex of buildings; (b) any public or nonprofit private classes of 
preprimary grade when they are conducted in the aforementioned schools; 
or (c) any public or nonprofit private residential child care 
institution, or distinct part of such institution, which operates 
principally for the care of children, and, if private, is licensed to 
provide residential child care services under the appropriate licensing 
code by the State or a subordinate level of government, except for 
residential summer camps which participate in the Summer Food Service 
Program for Children, Job Corps centers funded by the Department of 
Labor, and private foster homes. The term ``residential child care 
institutions'' includes, but is not limited to: homes for the mentally, 
emotionally or physically impaired, and unmarried mothers and their 
infants; group homes; halfway houses; orphanages; temporary shelters for 
abused children and for runaway children; long-term care facilities for 
chronically ill children; and juvenile detention centers. A long-term 
care facility is a hospital, skilled nursing facility, intermediate care 
facility, or distinct part thereof, which is intended for the care of 
children confined for 30 days or more.
    School food authority means the governing body which is responsible 
for the administration of one or more schools; and has the legal 
authority to operate the Program therein or be otherwise approved by FNS 
to operate the Program.
    School week means the period of time used to determine compliance 
with the nutrition standards and the appropriate calorie and nutrient 
levels in Sec. 210.10. Further, if applicable, school week is the basis 
for conducting Nutrient Standard Menu Planning or Assisted Nutrient 
Standard Menu Planning for lunches as provided in Sec. 210.10(i) and 
Sec. 210.10(j). The period shall be a normal school week of five 
consecutive days; however, to accommodate shortened weeks resulting from 
holidays and other scheduling needs, the period shall be a minimum of 
three consecutive days and a maximum of seven consecutive days. Weeks in 
which school lunches are offered less than three times shall be combined 
with either the previous or the coming week.
    School year means a period of 12 calendar months beginning July 1 of 
any year and ending June 30 of the following year.
    Secretary means the Secretary of Agriculture.
    7 CFR part 3015 means the Uniform Federal Assistance Regulations 
published by the Department to implement OMB Circulars A-21, A-87, A-
102, A-110, and A-122; and Executive Order 12372. (For availability of 
OMB Circulars referenced in this definition, see 5 CFR 1310.3.)
    7 CFR part 3017 means the Department's regulation to implement 
Executive Order 12549, covering governmentwide rules on suspension and 
debarment as well as The Drug Free Workplace Act of 1988.
    7 CFR part 3018 means the Department's Common Rule regarding 
Governmentwide New Restrictions on Lobbying. Part 3018 implements the 
requirements established by section 319 of the 1990 Appropriations Act 
for the Department of Interior and Related Agencies (Pub. L. 101-121).
    7 CFR part 3052 means the Department's regulations implementing OMB 
Circular A-133, ``Audits of State, Local Governments, and Non-Profit 
Organizations.'' (For availability of OMB Circulars referenced in this 
definition, see 5 CFR 1310.3.)
    State means any of the 50 States, District of Columbia, the 
Commonwealth of Puerto Rico, the Virgin Islands, Guam, and, as 
applicable, American Samoa and the Commonwealth of the Northern 
Marianas.

[[Page 11]]

    State agency means (a) the State educational agency; (b) any other 
agency of the State which has been designated by the Governor or other 
appropriate executive or legislative authority of the State and approved 
by the Department to administer the Program in schools, as specified in 
Sec. 210.3(b); or (c) the FNSRO, where the FNSRO administers the Program 
as specified in Sec. 210.3(c).
    State educational agency means, as the State legislature may 
determine, (a) the chief State school officer (such as the State 
Superintendent of Public Instruction, Commissioner of Education, or 
similar officer), or (b) a board of education controlling the State 
department of education.
    Student with disabilities means any child who has a physical or 
mental impairment as defined in Sec. 15b.3 of the Department's 
nondiscrimination regulations (7 CFR part 15b).
    Subsidized lunch (paid lunch) means a lunch served to children who 
are either not eligible for or elect not to receive the free or reduced 
price benefits offered under 7 CFR part 245. The Department subsidizes 
each paid lunch with both general cash assistance and donated foods. 
Although a paid lunch student pays for a large portion of his or her 
lunch, the Department's subsidy accounts for a significant portion of 
the cost of that lunch.
    Yogurt means commercially prepared coagulated milk products obtained 
by the fermentation of specific bacteria, that meet milk fat or milk 
solid requirements and to which flavoring foods or ingredients may be 
added. These products are covered by the Food and Drug Administration's 
Definition and Standard of Identity for yogurt, lowfat yogurt, and 
nonfat yogurt, 21 CFR 131.200, 21 CFR 131.203, and 21 CFR 131.206, 
respectively.

[53 FR 29147, Aug. 2, 1988, as amended at 54 FR 12580, Mar. 28, 1989; 56 
FR 32939, July 17, 1991; 58 FR 42487, Aug. 10, 1993; 60 FR 31207, June 
13, 1995; 62 FR 10189, Mar. 6, 1997; 64 FR 50740, Sept. 20, 1999; 65 FR 
26912, May 9, 2000]



Sec. 210.3  Administration.

    (a) FNS. FNS will act on behalf of the Department in the 
administration of the Program. Within FNS, the CND will be responsible 
for Program administration.
    (b) States. Within the States, the responsibility for the 
administration of the Program in schools, as defined in Sec. 210.2, 
shall be in the State educational agency. If the State educational 
agency is unable to administer the Program in public or private 
nonprofit residential child care institutions or nonprofit private 
schools, then Program administration for such schools may be assumed by 
FNSRO as provided in paragraph (c) of this section, or such other agency 
of the State as has been designated by the Governor or other appropriate 
executive or legislative authority of the State and approved by the 
Department to administer such schools. Each State agency desiring to 
administer the Program shall enter into a written agreement with the 
Department for the administration of the Program in accordance with the 
applicable requirements of this part; part 235; part 245; parts 15, 15a, 
15b, and 3015 of Departmental regulations; and FNS instructions.
    (c) FNSRO. The FNSRO will administer the Program in nonprofit 
private schools or public or nonprofit private residential child care 
institutions if the State agency is prohibited by law from disbursing 
Federal funds paid to such schools. In addition, the FNSRO will continue 
to administer the Program in those States in which nonprofit private 
schools or public or nonprofit private residential child care 
institutions have been under continuous FNS administration since October 
1, 1980, unless the administration of the Program in such schools is 
assumed by the State. The FNSRO will, in each State in which it 
administers the Program, assume all responsibilities of a State agency 
as set forth in this part and part 245 of this chapter as appropriate. 
References in this part to ``State agency'' include FNSRO, as 
applicable, when it is the agency administering the Program.
    (d) School food authorities. The school food authority shall be 
responsible for the administration of the Program in schools. State 
agencies shall ensure that school food authorities administer the 
Program in accordance with the applicable requirements of this part;

[[Page 12]]

part 245; parts 15, 15a, 15b, and 3015 of Departmental regulations; and 
FNS instructions.



 Subpart B--Reimbursement Process for States and School Food Authorities



Sec. 210.4  Cash and donated food assistance to States.

    (a) General. To the extent funds are available, FNS will make cash 
assistance available in accordance with the provisions of this section 
to each State agency for lunches and meal supplements served to children 
under the National School Lunch and Commodity School Programs. To the 
extent donated foods are available, FNS will provide donated food 
assistance to distributing agencies for each lunch served in accordance 
with the provisions of this part and part 250 of this chapter.
    (b) Assistance for the National School Lunch Program. The Secretary 
will make cash and/or donated food assistance available to each State 
agency and distributing agency, as appropriate, administering the 
National School Lunch Program, as follows:
    (1) Cash assistance for lunches: Cash assistance payments are 
composed of a general cash assistance payment, authorized under section 
4 of the Act, and a special cash assistance payment, authorized under 
section 11 of the Act. General cash assistance is provided to each State 
agency for all lunches served to children in accordance with the 
provisions of the National School Lunch Program. Special cash assistance 
is provided to each State agency for lunches served under the National 
School Lunch Program to children determined eligible for free or reduced 
price lunches in accordance with part 245 of this chapter. The total 
general cash assistance paid to each State for any fiscal year shall not 
exceed the lesser of amounts reported to FNS as reimbursed to school 
food authorities in accordance with Sec. 210.5(d)(3) or the total 
calculated by multiplying the number of lunches reported in accordance 
with Sec. 210.5(d)(1) for each month of service during the fiscal year, 
by the applicable national average payment rate prescribed by FNS. The 
total special assistance paid to each State for any fiscal year shall 
not exceed the lesser of amounts reported to FNS as reimbursed to school 
food authorities in accordance with Sec. 210.5(d)(3) or the total 
calculated by multiplying the number of free and reduced price lunches 
reported in accordance with Sec. 210.5(d)(1) for each month of service 
during the fiscal year by the applicable national average payment rate 
prescribed by FNS. In accordance with section 11 of the Act, FNS will 
prescribe annual adjustments to the per meal national average payment 
rate (general cash assistance) and the special assistance national 
average payment rates (special cash assistance) which are effective on 
July 1 of each year. These adjustments, which reflect changes in the 
food away from home series of the Consumer Price Index for all Urban 
Consumers, are annually announced by Notice in July of each year in the 
Federal Register. FNS will also establish maximum per meal rates of 
reimbursement within which a State may vary reimbursement rates to 
school food authorities. These maximum rates of reimbursement are 
established at the same time and announced in the same Notice as the 
national average payment rates.
    (2) Donated food assistance. For each school year, FNS will provide 
distributing agencies with donated foods for lunches served under the 
National School Lunch Program as provided under part 250 of this 
chapter. The per lunch value of donated food assistance is adjusted by 
the Secretary annually to reflect changes as required under section 6 of 
the Act. These adjustments, which reflect changes in the Price Index for 
Foods Used in Schools and Institutions, are effective on July 1 of each 
year and are announced by Notice in the Federal Register in July of each 
year.
    (3) Cash assistance for meal supplements. For those eligible schools 
(as defined in Sec. 210.10(n)(1)) operating afterschool care programs 
and electing to serve meal supplements to enrolled children, funds shall 
be made available to each State agency, each school year in an amount no 
less than the sum of the products obtained by multiplying:

[[Page 13]]

    (i) The number of meal supplements served in the afterschool care 
program within the State to children from families that do not satisfy 
the income standards for free and reduced price school meals by 2.75 
cents;
    (ii) The number of meal supplements served in the afterschool care 
program within the State to children from families that satisfy the 
income standard for free school meals by 30 cents;
    (iii) The number of meal supplements served in the afterschool care 
program within the State to children from families that satisfy the 
income standard for reduced price school meals by 15 cents.
    (4) The rates in paragraph (b)(3) are the base rates established in 
August 1981 for the CACFP. FNS shall prescribe annual adjustments to 
these rates in the same Notice as the National Average Payment Rates for 
lunches. These adjustments shall ensure that the reimbursement rates for 
meal supplements served under this part are the same as those 
implemented for meal supplements in the CACFP.
    (c) Assistance for the Commodity School Program. FNS will make 
special cash assistance available to each State agency for lunches 
served in commodity schools in the same manner as special cash 
assistance is provided in the National School Lunch Program. Payment of 
such amounts to State agencies is subject to the reporting requirements 
contained in Sec. 210.5(d). FNS will provide donated food assistance in 
accordance with part 250 of this chapter. Of the total value of donated 
food assistance to which it is entitled, the school food authority may 
elect to receive cash payments of up to 5 cents per lunch served in its 
commodity school(s) for donated foods processing and handling expenses. 
Such expenses include any expenses incurred by or on behalf of a 
commodity school for processing or other aspects of the preparation, 
delivery, and storage of donated foods. The school food authority may 
have all or part of these cash payments retained by the State agency for 
use on its behalf for processing and handling expenses by the State 
agency or it may authorize the State agency to transfer to the 
distributing agency all or any part of these payments for use on its 
behalf for these expenses. Payment of such amounts to State agencies is 
subject to the reporting requirements contained in Sec. 210.5(d). The 
total value of donated food assistance is calculated on a school year 
basis by adding:
    (1) The applicable national average payment rate (general cash 
assistance) prescribed by the Secretary for the period of July 1 through 
June 30 multiplied by the total number of lunches served during the 
school year under the Commodity School Program; and
    (2) The national per lunch average value of donated foods prescribed 
by the Secretary for the period of July 1 through June 30 multiplied by 
the total number of lunches served during the school year under the 
Commodity School Program.

[53 FR 29147, Aug. 2, 1988, as amended at 58 FR 42487, Aug. 10, 1993; 60 
FR 31207, June 13, 1995; 65 FR 26912, May 9, 2000]



Sec. 210.5  Payment process to States.

    (a) Grant award. FNS will specify the terms and conditions of the 
State agency's grant in a grant award document and will generally make 
payments available by means of a Letter of Credit issued in favor of the 
State agency. The State agency shall obtain funds for reimbursement to 
participating school food authorities through procedures established by 
FNS in accordance with 7 CFR part 3015. State agencies shall limit 
requests for funds to such times and amounts as will permit prompt 
payment of claims or authorized advances. The State agency shall 
disburse funds received from such requests without delay for the purpose 
for which drawn. FNS may, at its option, reimburse a State agency by 
Treasury Check. FNS will pay by Treasury Check with funds available in 
settlement of a valid claim if payment for that claim cannot be made 
within the grant closeout period specified in paragraph (d) of this 
section.
    (b) Cash-in-lieu of donated foods. All Federal funds to be paid to 
any State in place of donated foods will be made available as provided 
in part 240 of this chapter.
    (c) Recovery of funds. FNS will recover any Federal funds made 
available to the State agency under this part

[[Page 14]]

which are in excess of obligations reported at the end of each fiscal 
year in accordance with the reconciliation procedures specified in 
paragraph (d) of this section. Such recoveries shall be reflected by a 
related adjustment in the State agency's Letter of Credit.
    (d) Substantiation and reconciliation process. Each State agency 
shall maintain Program records as necessary to support the reimbursement 
payments made to school food authorities under Sec. 210.7 and Sec. 210.8 
and the reports submitted to FNS under this paragraph. The State agency 
shall ensure such records are retained for a period of 3 years or as 
otherwise specified in Sec. 210.23(c).
    (1) Monthly report. Each State agency shall submit a final Report of 
School Program Operations (FNS-10) to FNS for each month. The final 
reports shall be limited to claims submitted in accordance with 
Sec. 210.8 of this part. For the month of October, the final report 
shall include the total number of children approved for free lunches, 
the total number of children approved for reduced price lunches, and the 
total number of children enrolled in participating public schools, 
private schools, and residential child care institutions, respectively, 
as of the last day of operation in October. The final reports shall be 
postmarked and/or submitted no later than 90 days following the last day 
of the month covered by the report. States shall not receive Program 
funds for any month for which the final report is not submitted within 
this time limit unless FNS grants an exception. Upward adjustments to a 
State's report shall not be made after 90 days from the month covered by 
the report unless authorized by FNS. Downward adjustments to a State's 
report shall always be made regardless of when it is determined that 
such adjustments are necessary. FNS authorization is not required for 
downward adjustments. Any adjustments to a State's report shall be 
reported to FNS in accordance with procedures established by FNS.
    (2) Quarterly report. Each State agency shall also submit to FNS a 
quarterly Financial Status Report (SF-269) on the use of Program funds. 
Such reports shall be postmarked and/or submitted no later than 30 days 
after the end of each fiscal year quarter.
    (3) End of year report. Each State agency shall submit a final 
Financial Status Report (SF-269) for each fiscal year. This final fiscal 
year grant closeout report shall be postmarked and/or submitted to FNS 
within 120 days after the end of each fiscal year or part thereof that 
the State agency administered the Program. Obligations shall be reported 
only for the fiscal year in which they occur. FNS will not be 
responsible for reimbursing Program obligations reported later than 120 
days after the close of the fiscal year in which they were incurred. 
Grant closeout procedures are to be carried out in accordance with 7 CFR 
part 3015.

[53 FR 29147, Aug. 2, 1988, as amended at 54 FR 12580, Mar. 28, 1989; 56 
FR 32939, July 17, 1991]



Sec. 210.6  Use of Federal funds.

    General. State agencies shall use Federal funds made available under 
the Program to reimburse or make advance payments to school food 
authorities in connection with lunches and meal supplements served in 
accordance with the provisions of this part; except that, with the 
approval of FNS, any State agency may reserve an amount up to one 
percent of the funds earned in any fiscal year under this part for use 
in carrying out special developmental projects. Advance payments to 
school food authorities may be made at such times and in such amounts as 
are necessary to meet the current fiscal obligations. All Federal funds 
paid to any State in place of donated foods shall be used as provided in 
part 240 of this chapter.

[53 FR 29147, Aug. 2, 1988, as amended at 58 FR 42487, Aug. 10, 1993]



Sec. 210.7  Reimbursement for school food authorities.

    (a) General. Reimbursement payments to finance nonprofit school food 
service operations shall be made only to school food authorities 
operating under a written agreement with the State agency. Subject to 
the provisions of Sec. 210.8(c), such payments may be made for lunches 
and meal supplements served in accordance with provisions of this part 
and part 245 in the calendar month preceding the calendar

[[Page 15]]

month in which the agreement is executed. These reimbursement payments 
include general cash assistance for all lunches served to children under 
the National School Lunch Program and special cash assistance payments 
for free or reduced price lunches served to children determined eligible 
for such benefits under the National School Lunch and Commodity School 
Programs. Reimbursement payments shall also be made for meal supplements 
served to eligible children in afterschool care programs in accordance 
with the rates established in Sec. 210.4(b)(3). Approval shall be in 
accordance with part 245 of this chapter.
    (b) Assignment of rates. At the beginning of each school year, State 
agencies shall establish the per meal rates of reimbursement for school 
food authorities participating in the Program. These rates of 
reimbursement may be assigned at levels based on financial need; except 
that, the rates are not to exceed the maximum rates of reimbursement 
established by the Secretary under Sec. 210.4(b) and are to permit 
reimbursement for the total number of lunches in the State from funds 
available under Sec. 210.4. Within each school food authority, the State 
agency shall assign the same rate of reimbursement from general cash 
assistance funds for all lunches served to children under the Program. 
Assigned rates of reimbursement may be changed at any time by the State 
agency, provided that notice of any change is given to the school food 
authority. The total general and special cash assistance reimbursement 
paid to any school food authority for lunches served to children during 
the school year are not to exceed the sum of the products obtained by 
multiplying the total reported number of lunches, by type, served to 
eligible children during the school year by the applicable maximum per 
lunch reimbursements prescribed for the school year for each type of 
lunch.
    (c) Reimbursement limitations. To be entitled to reimbursement under 
this part, each school food authority shall ensure that Claims for 
Reimbursement are limited to the number of free, reduced price and paid 
lunches and meal supplements that are served to children eligible for 
free, reduced price and paid lunches and meal supplements, respectively, 
for each day of operation.
    (1) Lunch count system. To ensure that the Claim for Reimbursement 
accurately reflects the number of lunches and meal supplements served to 
eligible children, the school food authority shall, at a minimum:
    (i) Correctly approve each child's eligibility for free and reduced 
price lunches and meal supplements based on the requirements prescribed 
under 7 CFR part 245;
    (ii) Maintain a system to issue benefits and to update the 
eligibility of children approved for free or reduced price lunches and 
meal supplements. The system shall:
    (A) Accurately reflect eligibility status as well as changes in 
eligibility made after the initial approval process due to verification 
findings, transfers, reported changes in income or household size, etc.; 
and
    (B) Make the appropriate changes in eligibility after the initial 
approval process on a timely basis so that the mechanism the school food 
authority uses to identify currently eligible children provides a 
current and accurate representation of eligible children. Changes in 
eligibility which result in increased benefit levels shall be made as 
soon as possible but no later than 3 operating days of the date the 
school food authority makes the final decision on a child's eligibility 
status. Changes in eligibility which result in decreased benefit levels 
shall be made as soon as possible but no later than 10 operating days of 
the date the school food authority makes the final decision on the 
child's eligibility status.
    (iii) Base Claims for Reimbursement on lunch counts, taken daily at 
the point of service, which correctly identify the number of free, 
reduced price and paid lunches served to eligible children;
    (iv) Correctly record, consolidate and report those lunch and 
supplement counts on the Claim for Reimbursement; and
    (v) Ensure that Claims for Reimbursement do not request payment for 
any excess lunches produced, as prohibited in Sec. 210.10(a)(2), or non-
Program lunches (i.e., a la carte or adult

[[Page 16]]

lunches) or for more than one meal supplement per child per day.
    (2) Point of service alternatives.
    (i) State agencies may authorize alternatives to the point of 
service lunch counts provided that such alternatives result in accurate, 
reliable counts of the number of free, reduced price and paid lunches 
served, respectively, for each serving day. State agencies are 
encouraged to issue guidance which clearly identifies acceptable point 
of service alternatives and instructions for proper implementation. 
School food authorities may select one of the State agency approved 
alternatives without prior approval.
    (ii) In addition, on a case-by-case basis, State agencies may 
authorize school food authorities to use other alternatives to the point 
of service lunch count; provided that such alternatives result in an 
accurate and reliable lunch count system. Any request to use an 
alternative lunch counting method which has not been previously 
authorized under paragraph (2)(i) is to be submitted in writing to the 
State agency for approval. Such request shall provide detail sufficient 
for the State agency to assess whether the proposed alternative would 
provide an accurate and reliable count of the number of lunches, by 
type, served each day to eligible children. The details of each approved 
alternative shall be maintained on file at the State agency for review 
by FNS.
    (d) The State agency shall reimburse the school food authority for 
meal supplements served in eligible schools (as defined in 
Sec. 210.10(n)(1)) operating afterschool care programs under the NSLP in 
accordance with the rates established in Sec. 210.4(b).

[53 FR 29147, Aug. 2, 1988, as amended at 54 FR 12581, Mar. 28, 1989; 56 
FR 32939, July 17, 1991; 58 FR 42487, Aug. 10, 1993; 60 FR 31207, June 
13, 1995; 65 FR 26912, May 9, 2000]



Sec. 210.8  Claims for reimbursement.

    (a) Internal controls. The school food authority shall establish 
internal controls which ensure the accuracy of lunch counts prior to the 
submission of the monthly Claim for Reimbursement. At a minimum, these 
internal controls shall include: an on-site review of the lunch counting 
and claiming system employed by each school within the jurisdiction of 
the school food authority; comparisons of daily free, reduced price and 
paid lunch counts against data which will assist in the identification 
of lunch counts in excess of the number of free, reduced price and paid 
lunches served each day to children eligible for such lunches; and a 
system for following up on those lunch counts which suggest the 
likelihood of lunch counting problems.
    (1) On-site reviews. Every school year, each school food authority 
with more than one school shall perform no less than one on-site review 
of the lunch counting and claiming system employed by each school under 
its jurisdiction. The on-site review shall take place prior to February 
1 of each school year. Further, if the review discloses problems with a 
school's meal counting or claiming procedures, the school food authority 
shall: ensure that the school implements corrective action; and, within 
45 days of the review, conducts a follow-up on-site review to determine 
that the corrective action resolved the problems. Each on-site review 
shall ensure that the school's claim is based on the counting system 
authorized by the State agency under Sec. 210.7(c) of this part and that 
the counting system, as implemented, yields the actual number of 
reimbursable free, reduced price and paid lunches, respectively, served 
for each day of operation.
    (2) School food authority claims review process. Prior to the 
submission of a monthly Claim for Reimbursement, each school food 
authority shall review the lunch count data for each school under its 
jurisdiction to ensure the accuracy of the monthly Claim for 
Reimbursement. The objective of this review is to ensure that monthly 
claims include only the number of free, reduced price and paid lunches 
served on any day of operation to children currently eligible for such 
lunches.
    (i) Any school food authority that was found by its most recent 
administrative review conducted in accordance with Sec. 210.18, to have 
no meal counting and claiming violations may:
    (A) Develop internal control procedures that ensure accurate meal 
counts. The school food authority shall submit any internal controls 
developed

[[Page 17]]

in accordance with this paragraph to the State agency for approval and, 
in the absence of specific disapproval from the State agency, shall 
implement such internal controls. The State agency shall establish 
procedures to promptly notify school food authorities of any 
modifications needed to their proposed internal controls or of denial of 
unacceptable submissions. If the State agency disapproves the proposed 
internal controls of any school food authority, it reserves the right to 
require the school food authority to comply with the provisions of 
paragraph (a)(3) of this section; or
    (B) Comply with the requirements of paragraph (a)(3) of this 
section.
    (ii) Any school food authority that was identified in the most 
recent administrative review conducted in accordance with Sec. 210.18, 
or in any other oversight activity, as having meal counting and claiming 
violations shall comply with the requirements in paragraph (a)(3) of 
this section.
    (3) Edit checks. (i) The following procedure shall be followed for 
school food authorities identified in paragraph (a)(2)(ii) of this 
section, by other school food authorities at State agency option, or, at 
their own option, by school food authorities identified in paragraph 
(a)(2)(i) of this section: the school food authority shall compare each 
school's daily counts of free, reduced price and paid lunches against 
the product of the number of children in that school currently eligible 
for free, reduced price and paid lunches, respectively, times an 
attendance factor.
    (ii) School food authorities that are identified in subsequent 
administrative reviews conducted in accordance with Sec. 210.18 as not 
having meal counting and claiming violations and that are correctly 
complying with the procedures in paragraph (a)(3)(i) of this section 
have the option of developing internal controls in accordance with 
paragraph (a)(2)(i) of this section.
    (4) Follow-up activity. The school food authority shall promptly 
follow-up through phone contact, on-site visits or other means when the 
internal controls used by schools in accordance with paragraph (a)(2)(i) 
of this section or the claims review process used by schools in 
accordance with paragraphs (a)(2)(ii) and (a)(3) of this section suggest 
the likelihood of lunch count problems. When problems or errors are 
identified, the lunch counts shall be corrected prior to submission of 
the monthly Claim for Reimbursement. Improvements to the lunch count 
system shall also be made to ensure that the lunch counting system 
consistently results in lunch counts of the actual number of 
reimbursable free, reduced price and paid lunches served for each day of 
operation.
    (5) Recordkeeping. School food authorities shall maintain on file, 
each month's Claim for Reimbursement and all data used in the claims 
review process, by school. Records shall be retained as specified in 
Sec. 210.23(c) of this part. School food authorities shall make this 
information available to the Department and the State agency upon 
request.
    (b) Monthly claims. To be entitled to reimbursement under this part, 
each school food authority shall submit to the State agency, a monthly 
Claim for Reimbursement, as described in paragraph (c) of this section.
    (1) Submission timeframes. A final Claim for Reimbursement shall be 
postmarked or submitted to the State agency not later than 60 days 
following the last day of the full month covered by the claim. State 
agencies may establish shorter deadlines at their discretion. Claims not 
postmarked and/or submitted within 60 days shall not be paid with 
Program funds unless otherwise authorized by FNS.
    (2) State agency claims review process. The State agency shall 
review each school food authority's Claim for Reimbursement, on a 
monthly basis, in an effort to ensure that monthly claims are limited to 
the number of free and reduced price lunches served, by type, to 
eligible children.
    (i) The State agency shall, at a minimum, compare the number of free 
and reduced price lunches claimed to the number of children approved for 
free and reduced price lunches enrolled in the school food authority for 
the month of October times the days of operation times the attendance 
factor employed by the school food authority in accordance with 
paragraph (a)(3) of this section or the internal controls

[[Page 18]]

used by schools in accordance with paragraph (a)(2)(i) of this section. 
At its discretion, the State agency may conduct this comparison against 
data which reflects the number of children approved for free and reduced 
price lunches for a more current month(s) as collected pursuant to 
paragraph (c)(2) of this section.
    (ii) In lieu of conducting the claims review specified in paragraph 
(b)(2)(i) of this section, the State agency may conduct alternative 
analyses for those Claims for Reimbursement submitted by residential 
child care institutions. Such alternatives analyses shall meet the 
objective of ensuring that the monthly Claims for Reimbursement are 
limited to the numbers of free and reduced price lunches served, by 
type, to eligible children.
    (3) Follow-up activity. The State agency shall promptly follow-up 
through phone contact, on-site visits, or other means when the claims 
review process suggests the likelihood of lunch count problems.
    (4) Corrective action. The State agency shall promptly take 
corrective action with respect to any Claim for Reimbursement which 
includes more than the number of lunches served, by type, to eligible 
children. In taking corrective action, State agencies may make 
adjustments on claims filed within the 60-day deadline if such 
adjustments are completed within 90 days of the last day of the claim 
month and are reflected in the final Report of School Program Operations 
(FNS-10) for the claim month required under Sec. 210.5(d) of this part. 
Upward adjustments in Program funds claimed which are not reflected in 
the final FNS-10 for the claim month shall not be made unless authorized 
by FNS. Except that, upward adjustments for the current and prior fiscal 
years resulting from any review or audit may be made, at the discretion 
of the State agency. Downward adjustments in amounts claimed shall 
always be made, without FNS authorization, regardless of when it is 
determined that such adjustments are necessary.
    (c) Content of claim. The Claim for Reimbursement shall include data 
in sufficient detail to justify the reimbursement claimed and to enable 
the State agency to provide the Report of School Program Operations 
required under Sec. 210.5(d) of this part. Such data shall include, at a 
minimum, the number of free, reduced price and paid lunches and meal 
supplements served to eligible children. The claim shall be signed by a 
school food authority official.
    (1) Consolidated claim. The State agency may authorize a school food 
authority to submit a consolidated Claim for Reimbursement for all 
schools under its jurisdiction, provided that, the data on each school's 
operations required in this section are maintained on file at the local 
office of the school food authority and the claim separates consolidated 
data for commodity schools from data for other schools. Unless otherwise 
approved by FNS, the Claim for Reimbursement for any month shall include 
only lunches and meal supplements served in that month except if the 
first or last month of Program operations for any school year contains 
10 operating days or less, such month may be combined with the Claim for 
Reimbursement for the appropriate adjacent month. However, Claims for 
Reimbursement may not combine operations occurring in two fiscal years. 
If a single State agency administers any combination of the Child 
Nutrition Programs, a school food authority shall be able to use a 
common claim form with respect to claims for reimbursement for meals 
served under those programs.
    (2) October data. For the month of October, the State agency shall 
also obtain, either through the Claim for Reimbursement or other means, 
the total number of children approved for free lunches and meal 
supplements, the total number of children approved for reduced price 
lunches and meal supplements, and the total number of children enrolled 
in the school food authority as of the last day of operation in October. 
The school food authority shall submit this data to the State agency no 
later than December 31 of each year. State agencies may establish 
shorter deadlines at their discretion. In addition, the State agency may 
require school food authorities to provide this data for a more current 
month if for use in the State agency

[[Page 19]]

claims review process under paragraph (c)(2) of this section.
    (d) Advance funds. The State agency may advance funds available for 
the Program to a school food authority in an amount equal to the amount 
of reimbursement estimated to be needed for one month's operation. 
Following the receipt of claims, the State agency shall make 
adjustments, as necessary, to ensure that the total amount of payments 
received by the school food authority for the fiscal year does not 
exceed an amount equal to the number of lunches and meal supplements by 
reimbursement type served to children times the respective payment rates 
assigned by the State in accordance with Sec. 210.7(b). The State agency 
shall recover advances of funds to any school food authority failing to 
comply with the 60-day claim submission requirements in paragraph (b) of 
this section.

[53 FR 29147, Aug. 2, 1988, as amended at 54 FR 12581, Mar. 28, 1989; 56 
FR 32940, July 17, 1991; 58 FR 42487, Aug. 10, 1993; 60 FR 31207, June 
13, 1995; 64 FR 50740, Sept. 20, 1999]



     Subpart C--Requirements for School Food Authority Participation



Sec. 210.9  Agreement with State agency.

    (a) Application. An official of a school food authority shall make 
written application to the State agency for any school in which it 
desires to operate the Program. Applications shall provide the State 
agency with sufficient information to determine eligibility. The school 
food authority shall also submit for approval a Free and Reduced Price 
Policy Statement in accordance with part 245 of this chapter.
    (b) Agreement. Each school food authority approved to participate in 
the program shall enter into a written agreement with the State agency 
that may be amended as necessary. Nothing in the preceding sentence 
shall be construed to limit the ability of the State agency to suspend 
or terminate the agreement in accordance with Sec. 210.25. If a single 
State agency administers any combination of the Child Nutrition 
Programs, that State agency shall provide each school food authority 
with a single agreement with respect to the operation of those programs. 
The agreement shall contain a statement to the effect that the ``School 
Food Authority and participating schools under its jurisdiction, shall 
comply with all provisions of 7 CFR parts 210 and 245.'' This agreement 
shall provide that each school food authority shall, with respect to 
participating schools under its jurisdiction:
    (1) Maintain a nonprofit school food service and observe the 
limitations on the use of nonprofit school food service revenues set 
forth in Sec. 210.14(a) and the limitations on any competitive school 
food service as set forth in Sec. 210.11(b);
    (2) Limit its net cash resources to an amount that does not exceed 3 
months average expenditures for its nonprofit school food service or 
such other amount as may be approved in accordance with Sec. 210.19(a);
    (3) Maintain a financial management system as prescribed under 
Sec. 210.14(c);
    (4) Comply with the requirements of the Department's regulations 
regarding financial management (7 CFR part 3015);
    (5) Serve lunches, during the lunch period, which meet the minimum 
requirements prescribed in Sec. 210.10;
    (6) Price the lunch as a unit;
    (7) Serve lunches free or at a reduced price to all children who are 
determined by the school food authority to be eligible for such meals 
under 7 CFR part 245;
    (8) Claim reimbursement at the assigned rates only for reimbursable 
free, reduced price and paid lunches served to eligible children in 
accordance with 7 CFR part 210. Agree that the school food authority 
official signing the claim shall be responsible for reviewing and 
analyzing meal counts to ensure accuracy as specified in Sec. 210.8 
governing claims for reimbursement. Acknowledge that failure to submit 
accurate claims will result in the recovery of an overclaim and may 
result in the withholding of payments, suspension or termination of the 
program as specified in Sec. 210.25. Acknowledge that if failure to 
submit accurate claims reflects embezzlement, willful misapplication of 
funds, theft, or fraudulent activity, the penalties specified in 
Sec. 210.26 shall apply;
    (9) Count the number of free, reduced price and paid reimbursable 
meals

[[Page 20]]

served to eligible children at the point of service, or through another 
counting system if approved by the State agency;
    (10) Submit Claims for Reimbursement in accordance with Sec. 210.8;
    (11) Comply with the requirements of the Department's regulations 
regarding nondiscrimination (7 CFR parts 15, 15a, 15b);
    (12) Make no discrimination against any child because of his or her 
eligibility for free or reduced price meals in accordance with the 
approved Free and Reduced Price Policy Statement;
    (13) Enter into an agreement to receive donated foods as required by 
7 CFR part 250;
    (14) Maintain, in the storage, preparation and service of food, 
proper sanitation and health standards in conformance with all 
applicable State and local laws and regulations;
    (15) Accept and use, in as large quantities as may be efficiently 
utilized in its nonprofit school food service, such foods as may be 
offered as a donation by the Department;
    (16) Maintain necessary facilities for storing, preparing and 
serving food;
    (17) Upon request, make all accounts and records pertaining to its 
school food service available to the State agency and to FNS, for audit 
or review, at a reasonable time and place. Such records shall be 
retained for a period of 3 years after the date of the final Claim for 
Reimbursement for the fiscal year to which they pertain, except that if 
audit findings have not been resolved, the records shall be retained 
beyond the 3 year period as long as required for resolution of the 
issues raised by the audit;
    (18) Maintain files of currently approved and denied free and 
reduced price applications, respectively, and the names of children 
approved for free lunches based on documentation certifying that the 
child is included in a household approved to receive benefits under the 
Food Stamp Program, Food Distribution Program for Households on Indian 
Reservations (FDPIR) or Temporary Assistance for Needy Families 
(TANF).If the applications and/or documentation are maintained at the 
school food authority level, they shall be readily retrievable by 
school;
    (19) Retain the individual applications for free and reduced price 
lunches and meal supplements submitted by families for a period of 3 
years after the end of the fiscal year to which they pertain or as 
otherwise specified under paragraph (b)(17) of this section.
    (20) No later than March 1, 1997, and no later than December 31 of 
each year thereafter, provide the State agency with a list of all 
elementary schools under its jurisdiction in which 50 percent or more of 
enrolled children have been determined eligible for free or reduced 
price meals as of the last operating day the preceding October. The 
State agency may designate a month other than October for the collection 
of this information, in which case the list must be provided to the 
State agency within 60 calendar days following the end of the month 
designated by the State agency. In addition, each school food authority 
shall provide, when available for the schools under its jurisdiction, 
and upon the request of a sponsoring organization of day care homes of 
the Child and Adult Care Food Program, information on the boundaries of 
the attendance areas for the elementary schools identified as having 50 
percent or more of enrolled children certified eligible for free or 
reduced price meals.
    (c) Afterschool care requirements. Those school food authorities 
with eligible schools (as defined in Sec. 210.10(n)(1)) that elect to 
serve meal supplements during afterschool care programs, shall agree to:
    (1) Serve meal supplements which meet the minimum requirements 
prescribed in Sec. 210.10;
    (2) Price the meal supplement as a unit;
    (3) Serve meal supplements free or at a reduced price to all 
children who are determined by the school food authority to be eligible 
for free or reduced price school meals under 7 CFR part 245;
    (4) If charging for meals, the charge for a reduced price meal 
supplement shall not exceed 15 cents;
    (5) Claim reimbursement at the assigned rates only for meal 
supplements served in accordance with the agreement;

[[Page 21]]

    (6) Claim reimbursement for no more than one meal supplement per 
child per day;
    (7) Review each afterschool care program two times a year; the first 
review shall be made during the first four weeks that the school is in 
operation each school year, except that an afterschool care program 
operating year round shall be reviewed during the first four weeks of 
its initial year of operation, once more during its first year of 
operation, and twice each school year thereafter; and
    (8) Comply with all requirements of this part, except that, claims 
for reimbursement need not be based on ``point of service'' meal 
supplement counts (as required by Sec. 210.9(b)(9)).

[53 FR 29147, Aug. 2, 1988, as amended at 54 FR 12581, Mar. 28, 1989; 56 
FR 32941, July 17, 1991; 58 FR 42488, Aug. 10, 1993; 60 FR 31208, June 
13, 1995; 62 FR 901, Jan. 7, 1997; 63 FR 9104, Feb. 24, 1998; 64 FR 
50740, Sept. 20, 1999; 64 FR 72471, Dec. 28, 1999; 65 FR 26912, May 9, 
2000]



Sec. 210.10  What are the nutrition standards and menu planning approaches for lunches and the requirements for afterschool snacks?

    (a) What are the general requirements?
    (1) General nutrition requirements. Schools must provide nutritious 
and well-balanced meals to all the children they serve.
    (i) Requirements for lunch. For children age 2 or older, schools 
must offer lunches that meet, at a minimum, the nutrition standards in 
paragraph (b) of this section. Compliance with the nutrition standards 
and the appropriate nutrient and calorie levels is determined by 
averaging lunches planned to be offered over a school week. Under any 
menu planning approach, schools must plan and produce at least enough 
food to meet the appropriate calorie and nutrient levels for the ages/
grades of the children in the school (see paragraphs (c), (d), (i)(1) or 
(l) of this section, depending on the menu planning approach used). 
Also, if schools use one of the food-based menu planning approaches, 
they must plan and produce at least enough food to offer each child the 
minimum quantities under the meal pattern (see paragraph (k) of this 
section). Schools offering lunches to infants must meet the meal pattern 
requirements in paragraph (o) of this section.
    (ii) Requirements for afterschool snacks. Schools offering 
afterschool snacks in afterschool care programs must meet the meal 
pattern requirements in paragraph (n) of this section. Schools must plan 
and produce enough food to offer each child the minimum quantities under 
the meal pattern in paragraph (n) of this section. The component 
requirements for meal supplements served under the Child and Adult Care 
Food Program authorized under part 226 of this chapter also apply to 
afterschool snacks served in accordance with paragraph (n) of this 
section.
    (2) Unit pricing. Schools must price each meal as a unit. Schools 
need to consider participation trends in an effort to provide one 
reimbursable lunch and, if applicable, one reimbursable afterschool 
snack for each child every day. If there are leftover meals, schools may 
offer them to the students but cannot get reimbursement for them.
    (3) Production and menu records. Schools must keep production and 
menu records for the meals they produce. These records must show how the 
meals contribute to the required food components, food items or menu 
items every day. In addition, for lunches, these records must show how 
the lunches contribute to the nutrition standards in paragraph (b) of 
this section and the appropriate calorie and nutrient levels for the 
ages/grades of the children in the school (see paragraphs (c), (d), or 
(i)(1) or (l) of this section, depending on the menu planning approach 
used) over the school week. If applicable, schools or school food 
authorities must maintain nutritional analysis records to demonstrate 
that lunches meet, when averaged over each school week:
    (i) The nutrition standards provided in paragraph (b) of this 
section; and
    (ii) The nutrient and calorie levels for children for each age or 
grade group in accordance with paragraphs (c) or (i)(1) of this section 
or developed under paragraph (l) of this section.
    (b) What are the specific nutrition standards for lunches? Children 
age 2 and above must be offered lunches that meet the following 
nutrition standards for their age/grade group:

[[Page 22]]

    (1) Provision of one-third of the Recommended Dietary Allowances 
(RDAs) for protein, calcium, iron, vitamin A and vitamin C in the 
appropriate levels for the ages/grades (see paragraphs (c), (d), (i)(1) 
or (l) of this section, depending on the menu planning approach used);
    (2) Provision of the lunchtime energy allowances (calories) in the 
appropriate levels (see paragraphs (c), (d),(i)(1) or (l) of this 
section, depending on the menu planning approach used);
    (3) These applicable recommendations from the 1995 Dietary 
Guidelines for Americans:
    (i) Eat a variety of foods;
    (ii) Limit total fat to 30 percent of total calories;
    (iii) Limit saturated fat to less than 10 percent of total calories;
    (iv) Choose a diet low in cholesterol;
    (v) Choose a diet with plenty of grain products, vegetables, and 
fruits; and
    (vi) Choose a diet moderate in salt and sodium.
    (4) These measures of compliance with the applicable recommendations 
of the 1995 Dietary Guidelines for Americans:
    (i) Limit the percent of calories from total fat to 30 percent of 
the actual number of calories offered;
    (ii) Limit the percent of calories from saturated fat to less than 
10 percent of the actual number of calories offered;
    (iii) Reduce sodium and cholesterol levels; and
    (iv) Increase the level of dietary fiber.
    (5) School food authorities have several ways to plan menus. The 
minimum levels of nutrients and calories that lunches must offer depends 
on the menu planning approach used and the ages/grades served. The menu 
planning approaches are:
    (i) Nutrient standard menu planning (see paragraphs (c) and (i) of 
this section);
    (ii) Assisted nutrient standard menu planning (see paragraphs (c) 
and (j) of this section);
    (iii) Traditional food-based menu planning (see paragraphs (d)(1) 
and (k) of this section);
    (iv) Enhanced food-based menu planning (see paragraphs (d)(2) and 
(k) of this section); or
    (v) Alternate menu planning (see paragraph (l) of this section).
    (c) What are the levels for nutrients and calories for lunches 
planned under the nutrient standard or assisted nutrient standard menu 
planning approaches?
    (1) Required levels. The required levels are:
    [GRAPHIC] [TIFF OMITTED] TR09MY00.000
    
(2) Optional levels. Optional levels are:

[[Page 23]]

[GRAPHIC] [TIFF OMITTED] TR09MY00.001

    (3) Customized levels. Schools may also develop a set of nutrient 
and calorie levels for a school week. These levels are customized for 
the age groups of the children in the particular school or school food 
authority.
    (d) What are the nutrient and calorie levels for lunches planned 
under the food-based menu planning approaches?
    (1) Traditional approach. For the traditional food-based menu 
planning approach, the required levels are:
[GRAPHIC] [TIFF OMITTED] TN17MY00.000

(2) Enhanced approach. For the enhanced food-based menu planning 
approach, the required levels are:

[[Page 24]]

[GRAPHIC] [TIFF OMITTED] TR09MY00.003

    (e) Must schools offer choices at lunch? FNS encourages schools to 
offer children a selection of foods and menu items at lunch. Choices 
provide variety and encourage consumption. Schools may offer choices of 
reimbursable lunches or foods within a reimbursable lunch. Children who 
are eligible for free or reduced price lunches must be allowed to take 
any reimbursable lunch or any choices offered as part of a reimbursable 
lunch. Schools may establish different unit prices for each lunch 
offered provided that the benefits made available to children eligible 
for free or reduced price lunches are not affected.
    (f) What are the requirements for lunch periods?
    (1) Timing. Schools must offer lunches meeting the requirements of 
this section during the period the school has designated as the lunch 
period. Schools must offer lunches between 10:00 a.m. and 2:00 p.m. 
Schools may request an exemption from these times only from FNS.
    (2) Lunch periods for young children. With State agency approval, 
schools are encouraged to serve children ages one through five over two 
service periods. Schools may divide the quantities and/or the menu 
items, foods, or food items offered each time any way they wish.
    (3) Adequate lunch periods. FNS encourages schools to provide 
sufficient lunch periods that are long enough to give all students 
enough time to be served and to eat their lunches.
    (g) What exceptions and variations are allowed in meals?
    (1) Exceptions for medical or special dietary needs. Schools must 
make substitutions in lunches and afterschool snacks for students who 
are considered to have a disability under 7 CFR part 15b and whose 
disability restricts their diet. Schools may also make substitutions for 
students who do not have a disability but who cannot consume the regular 
lunch or afterschool snack because of medical or other special dietary 
needs. Substitutions must be made on a case by case basis only when 
supported by a statement of the need for substitutions that includes 
recommended alternate foods, unless otherwise exempted by FNS. Such 
statement must, in the case of a student with a disability, be signed by 
a physician or, in the case of a student who is not disabled, by a 
recognized medical authority.
    (2) Variations for ethnic, religious, or economic reasons. Schools 
should consider ethnic and religious preferences when planning and 
preparing meals. Variations on an experimental or continuing basis in 
the food components for the food-based menu planning approaches in 
paragraphs (k) or (n) of this section may be allowed by FNS. Any 
variations must be nutritionally

[[Page 25]]

sound and needed to meet ethnic, religious, or economic needs.
    (3) Exceptions for natural disasters. If there is a natural disaster 
or other catastrophe, FNS may temporarily allow schools to serve meals 
for reimbursement that do not meet the requirements in this section.
    (h) What must schools do about nutrition disclosure? To the extent 
that school food authorities identify foods in a menu, or on the serving 
line or through other available means of communicating with program 
participants, school food authorities must identify products or dishes 
containing more than 30 parts fully hydrated alternate protein products 
(as specified in appendix A of this part) to less than 70 parts beef, 
pork, poultry or seafood on an uncooked basis, in a manner which does 
not characterize the product or dish solely as beef, pork, poultry or 
seafood. Additionally, FNS encourages schools to inform the students, 
parents, and the public about efforts they are making to meet the 
nutrition standards (see paragraph (b) of this section) for school 
lunches.
    (i) What are the requirements for lunches under the nutrient 
standard menu planning approach?
    (1) Nutrient levels.
    (i) Adjusting nutrient levels for young children. Schools with 
children who are age 2 must at least meet the nutrition standards in 
paragraph (b) of this section and the preschool nutrient and calorie 
levels in paragraph (c)(1) of this section over a school week. Schools 
may also use the preschool nutrient and calorie levels in paragraph 
(c)(2) of this section or may calculate nutrient and calorie levels for 
two year olds. FNS has a method for calculating these levels in guidance 
materials for menu planning.
    (ii) Minimum levels for nutrients. Lunches must at least offer the 
nutrient and calorie levels for the required grade groups in the table 
in paragraph (c)(1) of this section. Schools may also offer lunches 
meeting the nutrient and calorie levels for the age groups in paragraph 
(c)(2) of this section. If only one grade or age group is outside either 
of these established levels, schools may follow the levels for the 
majority of the children. Schools may also customize the nutrient and 
calorie levels for the children they serve. FNS has a method for 
calculating these levels in guidance materials for menu planning.
    (2) Reimbursable lunches.
    (i) Contents of a reimbursable lunch. A reimbursable lunch must 
include at least three menu items. One of those menu items must be an 
entree, and one must be fluid milk as a beverage. An entree is a 
combination of foods or is a single food item offered as the main 
course. All menu items or foods offered in a reimbursable lunch 
contribute to the nutrition standards in paragraph (b) of this section 
and to the levels of nutrients and calories that must be met in 
paragraphs (c) or (i)(1) of this section. Unless offered as part of a 
menu item in a reimbursable lunch, foods of minimal nutritional value 
(see appendix B to part 210) are not included in the nutrient analysis. 
Reimbursable lunches planned under the nutrient standard menu planning 
approach must meet the nutrition standards in paragraph (b) of this 
section and the appropriate nutrient and calorie levels in either 
paragraph (c) or paragraph (i)(1) of this section.
    (ii) Offer versus serve. Schools must offer at least three menu 
items for lunches. Senior high (as defined by the State educational 
agency) school students must select at least two menu items and are 
allowed to decline a maximum of two menu items. The student must always 
take the entree. The price of a reimbursable lunch does not change if 
the student does not take a menu item or requests smaller portions. At 
the discretion of the school food authority, students below the senior 
high level may also participate in offer versus serve.
    (3) Doing the analysis. Schools using nutrient standard menu 
planning must conduct the analysis on all menu items and foods offered 
in a reimbursable lunch. The analysis is conducted over a school week. 
Unless offered as part of a menu item in a reimbursable lunch, foods of 
minimal nutritional value (see appendix B to part 210) are not included 
in the nutrient analysis.
    (4) Software elements.
    (i) The Child Nutrition Database. The nutrient analysis is based on 
the Child Nutrition Database. This database is

[[Page 26]]

part of the software used to do a nutrient analysis. Software companies 
or others developing systems for schools may contact FNS for more 
information about the database.
    (ii) Software evaluation. FNS or an FNS designee evaluates any 
nutrient analysis software before it may be used in schools. FNS or its 
designee determines if the software, as submitted, meets the minimum 
requirements. The approval of software does not mean that FNS or USDA 
endorses it. The software must be able to do all functions after the 
basic data is entered. The required functions include weighted averages 
and the optional combined analysis of the lunch and breakfast programs.
    (5) Nutrient analysis procedures.
    (i) Weighted averages. Schools must include all menu items and foods 
offered in reimbursable lunches in the nutrient analysis. Menu items and 
foods are included based on the portion sizes and projected serving 
amounts. They are also weighted based on their proportionate 
contribution to the lunches offered. This means that menu items or foods 
more frequently offered are weighted more heavily than those not offered 
as frequently. Schools calculate weighting as indicated by FNS guidance 
and by the guidance provided by the software. Through September 30, 
2003, schools are not required to conduct a weighted analysis.
    (ii) Analyzed nutrients. The analysis includes all menu items and 
foods offered over a school week. The analysis must determine the levels 
of: Calories, protein, vitamin A, vitamin C, iron, calcium, total fat, 
saturated fat, sodium, cholesterol and dietary fiber.
    (iii) Combining the analysis of the lunch and breakfast programs. At 
their option, schools may combine the analysis of lunches offered under 
this part and breakfasts offered under part 220 of this Chapter. The 
analysis is done proportionately to the levels of participation in each 
program based on FNS guidance.
    (6) Comparing the results of the nutrient analysis. Once the 
procedures in paragraph (i)(5) of this section are completed, schools 
must compare the results of the analysis to the appropriate nutrient and 
calorie levels, by age/grade groups, in paragraph (c) of this section or 
those developed under paragraph (i)(1) of this section. This comparison 
determines the school week's average. Schools must also make comparisons 
to the nutrition standards in paragraph (b) of this section to determine 
how well they are meeting the nutrition standards over the school week.
    (7) Adjustments to the menus. Once schools know the results of the 
nutrient analysis based on the procedures in paragraphs (i)(5) and 
(i)(6) of this section, they must adjust future menu cycles to reflect 
production and how often the menu items and foods are offered. Schools 
may need to reanalyze menus when the students' selections change and, 
consequently, production levels change. Schools may need to change the 
menu items and foods offered given the students' selections and may need 
to modify the recipes and other specifications to make sure that the 
nutrition standards in paragraph (b) and either paragraphs (c) or (i)(1) 
of this section are met.
    (8) Standardized recipes. If a school follows the nutrient standard 
menu planning approach, it must develop and follow standardized recipes. 
A standardized recipe is a recipe that was tested to provide an 
established yield and quantity using the same ingredients for both 
measurement and preparation methods. Any standardized recipes developed 
by USDA/FNS are in the Child Nutrition Database. If a school has its own 
recipes, they must be standardized and analyzed to determine the levels 
of calories, nutrients, and dietary components listed in paragraph 
(i)(5)(ii) of this section. Schools must add any local recipes to their 
local database as outlined in FNS guidance.
    (9) Processed foods. The Child Nutrition Database includes a number 
of processed foods. Schools may use purchased processed foods and menu 
items that are not in the Child Nutrition Database. Schools or the State 
agency must add any locally purchased processed foods and menu items to 
their local database as outlined in FNS guidance. Schools or the State 
agency must obtain the levels of calories, nutrients, and dietary 
components listed in paragraph (i)(5)(ii) of this section.

[[Page 27]]

    (10) Menu substitutions. Schools may need to substitute foods or 
menu items in a menu that was already analyzed. If the substitution(s) 
occurs more than two weeks before the planned menu is served, the school 
must reanalyze the revised menu. If the substitution(s) occurs two weeks 
or less before the planned menu is served, the school does not need to 
do a reanalysis. However, schools should always try to substitute 
similar foods.
    (11) Meeting the nutrition standards. The school's analysis shows 
whether their menus are meeting the nutrition standards in paragraph (b) 
of this section and the appropriate levels of nutrients and calories in 
paragraph (c) of this section or customized levels developed under 
paragraph (i)(1) of this section. If the analysis shows that the menu(s) 
are not meeting these standards, the school needs to take action to make 
sure that the lunches meet the nutrition standards and the calorie, 
nutrient, and dietary component levels. Actions may include technical 
assistance and training and may be taken by the State agency, the school 
food authority or by the school as needed.
    (12) Other Child Nutrition Programs and nutrient standard menu 
planning. School food authorities that operate the Summer Food Service 
Program (part 225 of this chapter) and/or the Child and Adult Care Food 
Program (part 226 of this chapter) may, with State agency approval, 
prepare lunches for these programs using the nutrient standard menu 
planning approach for children age two and over. FNS has guidance on the 
levels of nutrients and calories for adult lunches under the Child and 
Adult Care Food Program. However, afterschool snacks continue to use the 
appropriate program's meal pattern.
    (j) What are the requirements for lunches under the assisted 
nutrient standard menu planning approach? (1) Definition of assisted 
nutrient standard menu planning. Some school food authorities may not be 
able to do all of the procedures necessary for nutrient standard menu 
planning. The assisted nutrient standard menu planning approach provides 
schools with menu cycles developed and analyzed by other sources. These 
sources include the State agency, other school food authorities, 
consultants, or food service management companies.
    (2) Elements of assisted nutrient standard menu planning. School 
food authorities using menu cycles developed under assisted nutrient 
standard menu planning must follow the procedures in paragraphs (i)(1) 
through (i)(10) of this section. The menu cycles must also incorporate 
local food preferences and accommodate local food service operations. 
The menus cycles must meet the nutrition standards in paragraph (b) of 
this section and meet the nutrient and calorie levels for nutrient 
standard menu planning in paragraph (c) or paragraph (i)(1) of this 
section. The supplier of the assisted nutrient standard menu planning 
approach must also develop and provide recipes, food product 
specifications, and preparation techniques. All of these components 
support the nutrient analysis results of the menus cycles used by the 
receiving school food authorities.
    (3) State agency approval. Prior to its use, the State agency must 
approve the initial menu cycle, recipes and other specifications of the 
assisted nutrient standard menu planning approach. The State agency 
needs to ensure that all the steps required for nutrient analysis were 
followed. School food authorities may also ask the State agency for 
assistance with implementation of their assisted nutrient standard menu 
planning approach.
    (4) Required adjustments. After the initial service of the menu 
cycle developed under the assisted nutrient standard menu planning 
approach, the nutrient analysis must be reassessed and appropriate 
adjustments made as discussed in paragraph (i)(7) of this section.
    (5) Final responsibility for meeting the nutrition standards. The 
school food authority using the assisted nutrient standard menu planning 
approach retains responsibility for meeting the nutrition standards in 
paragraph (b) of this section and the calorie and nutrient levels in 
paragraph (c) or paragraph (i)(1) of this section.
    (6) Adjustments to the menus. If the nutrient analysis shows that 
the lunches offered are not meeting the nutrition

[[Page 28]]

standards in paragraph (b) of this section and the calorie and nutrient 
levels in paragraph (c) or paragraph (i)(1) of this section, the State 
agency, school food authority or school must take action to make sure 
the lunches offered meet these requirements. Actions needed include 
technical assistance and training.
    (7) Other Child Nutrition Programs and assisted nutrient standard 
menu planning. School food authorities that operate the Summer Food 
Service Program (part 225 of this chapter) and/or the Child and Adult 
Care Food Program (part 226 of this chapter) may, with State agency 
approval, prepare lunches for these programs using the assisted nutrient 
standard menu planning approach for children age two and over. FNS has 
guidance on the levels of nutrients and calories for adult lunches under 
the Child and Adult Care Food Program. However, afterschool snacks 
continue to use the appropriate program's meal pattern.
    (k) What are the requirements for lunches under the food-based menu 
planning approaches? There are two menu planning approaches based on 
meal patterns, not nutrient analysis. These approaches are the 
traditional food-based menu planning approach and the enhanced food-
based menu planning approach. Schools using one of these approaches 
offer food components in at least the minimum quantities required for 
the various grade groups.
    (1) Quantities for the traditional food-based menu planning 
approach--(i) Minimum quantities. At a minimum, schools must offer five 
food items in the quantities in the following table:
[GRAPHIC] [TIFF OMITTED] TR09MY00.004

    (ii) Use of Group IV quantities. Schools that are able to provide 
quantities of food to children solely on the basis of their ages or 
grade level should do so.

[[Page 29]]

Schools that cannot serve children on the basis of age or grade level 
must provide all school age children Group IV portions as specified in 
the table in paragraph (k)(1)(i) of this section. Schools serving 
children on the basis of age or grade level must plan and produce 
sufficient quantities of food to provide Groups I-IV no less than the 
amounts specified for those children in the table in paragraph (k)(1)(i) 
of this section, and sufficient quantities of food to provide Group V no 
less than the specified amounts for Group IV. FNS recommends that 
schools plan and produce sufficient quantities of food to provide Group 
V children the larger amounts specified in the table in paragraph 
(k)(1)(i) of this section. Schools that provide increased portion sizes 
for Group V may comply with children's requests for smaller portion 
sizes of the food items; however, schools must plan and produce 
sufficient quantities of food to at least provide the serving sizes 
required for Group IV. Schools must ensure that lunches are served with 
the objective of providing the per lunch minimums for each age and grade 
level as specified in the table in paragraph (k)(1)(i) of this section.
    (2) Quantities for the enhanced food-based menu planning approach. 
Schools must at least offer five food items in the quantities in the 
following table:
[GRAPHIC] [TIFF OMITTED] TR09MY00.005

    (3) Requirements for the meat/meat alternate component. The quantity 
of the meat/meat alternate component must be the edible portion as 
served. If the portion size of a food item for this component is 
excessive, the school must reduce that portion and supplement it with 
another meat/meat alternate to meet the full requirement. This component 
must be served in a main dish or in a main dish and only one other food 
item. Schools without daily choices in

[[Page 30]]

this component should not serve any one meat alternate or form of meat 
(for example, ground, diced, pieces) more than three times in the same 
week.
    (i) Enriched macaroni. Enriched macaroni with fortified protein as 
defined in appendix A to this part may be used to meet part of the meat/
meat alternate requirement when used as specified in appendix A to this 
part. An enriched macaroni product with fortified protein as defined in 
appendix A to this part may be used to meet part of the meat/meat 
alternate component or the grains/breads component but not as both food 
components in the same lunch.
    (ii) Nuts and seeds. Nuts and seeds and their butters are allowed as 
meat alternates in accordance with program guidance. Acorns, chestnuts, 
and coconuts must not be used because of their low protein and iron 
content. Nut and seed meals or flours may be used only as allowed under 
appendix A to this part. Nuts or seeds may be used to meet no more than 
one-half of the meat/meat alternate component with another meat/meat 
alternate to meet the full requirement.
    (iii) Yogurt. Yogurt may be used to meet all or part of the meat/
meat alternate requirement. Yogurt may be either plain or flavored, 
unsweetened or sweetened. Noncommercial and/or nonstandardized yogurt 
products, such as frozen yogurt, homemade yogurt, yogurt flavored 
products, yogurt bars, yogurt covered fruit and/or nuts or similar 
products are not creditable. Four ounces (weight) or \1/2\ cup (volume) 
of yogurt equals one ounce of the meat/meat alternate requirement.
    (4) Requirements for the vegetable/fruit component.
    (i) General. Full strength vegetable or fruit juice may be used to 
meet no more than one-half of the vegetable/fruit requirement. Cooked 
dry beans or peas may be counted as either a vegetable or as a meat 
alternate but not as both in the same meal.
    (ii) Minimum quantities for the enhanced food-based menu planning. 
Under the enhanced food-based menu planning approach, children in 
kindergarten through grade six are offered vegetables/fruits in minimum 
daily servings plus an additional one-half cup in any combination over a 
five day period.
    (5) Requirements for the grains/breads component.
    (i) Enriched or whole grains. All grains/breads must be enriched or 
whole grain or made with enriched or whole grain meal or flour.
    (ii) Daily and weekly servings. The requirement for the grain/bread 
component is based on minimum daily servings plus total servings over a 
five day period. Schools serving lunch 6 or 7 days per week should 
increase the weekly quantity by approximately 20 percent (\1/5\th) for 
each additional day. When schools operate less than 5 days per week, 
they may decrease the weekly quantity by approximately 20 percent (\1/
5\th) for each day less than five. The servings for biscuits, rolls, 
muffins, and other grain/bread varieties are specified in the Food 
Buying Guide for Child Nutrition Programs (PA 1331), an FNS publication.
    (iii) Minimums under the traditional food-based menu planning 
approach. Schools must offer at least one-half serving of the grain/
bread component to children in Group I and at least one serving to 
children in Groups II-V daily. Schools which serve lunch at least 5 days 
a week shall serve a total of at least five servings of grains/breads to 
children in Group I and eight servings per week to children in Groups 
II-V.
    (iv) Desserts under the enhanced food-based menu planning approach. 
Under the enhanced food-based menu planning approach, schools may count 
up to one grain-based dessert per day for children in grades K-12 
towards meeting the grains/breads component.
    (6) Offer versus serve. Schools must offer all five required food 
items. Senior high (as defined by the State educational agency) school 
students may decline up to two of the five food items. At the school 
food authority's option, students below senior high may decline one or 
two of the five food items. The price of a reimbursable lunch does not 
change if the student does not take a menu item or requests smaller 
portions.
    (7) Meal pattern exceptions for outlying areas. Schools in American 
Samoa, Puerto Rico and the Virgin Islands

[[Page 31]]

may serve a starchy vegetable such as yams, plantains, or sweet potatoes 
to meet the grain/bread requirement.
    (l) What are the requirements for lunches planned using an alternate 
menu planning approach?
    (1) Definition. Alternate menu planning approaches are those adopted 
or developed by school food authorities or State agencies that differ 
from the standard approaches established in paragraphs (i) through (k) 
of this section. There are two types of alternate approaches. First, 
there are specific modifications provided in paragraph (l)(2) of this 
section. Second, there are major changes to the standard menu planning 
approaches or new menu planning approaches developed by school food 
authorities or State agencies (see paragraph (l)(3) of this section).
    (2) Use of modifications. There are three modifications available to 
schools using one of the food-based menu planning approaches for 
lunches. State agencies may or may not require prior approval or may 
establish guidelines for using these modifications.
    (i) Modification to the meat/meat alternate component. The required 
minimum quantities of the meat/meat alternate component in the food-
based menu planning approaches may be offered as a weekly total with a 
one ounce (or its equivalent for certain meat alternates) minimum daily 
serving size. This modification does not apply if the minimum serving of 
meat/meat alternate is less than one ounce.
    (ii) Modification to age/grade groups under the traditional food-
based menu planning approach. Schools using the traditional food-based 
menu planning approach may:
    (A) For children in grades K-6, use the portion sizes in Group IV in 
the table in paragraph (k)(1) of this section and follow the nutrient 
levels for children in grades K-6 in paragraphs (c)(1) and (d)(2) of 
this section; and/or
    (B) For children in grades 7-12, use the portion sizes in Group IV 
in the table in paragraph (k)(1) of this section and follow the nutrient 
levels for children in grades 7-12 in paragraphs (c)(1) and (d)(2) of 
this section.
    (iii) Modification for the majority of children. Under the 
traditional or enhanced food-based menu planning approaches, if only one 
age or grade is outside the established levels, schools may follow the 
levels for the majority of children for both quantities (see paragraph 
(k)) and the nutrition standards in paragraphs (b) and (d) of this 
section.
    (3) Use and approval of major changes or new alternate approaches. 
Within the guidelines established for developing alternate menu planning 
approaches, school food authorities or State agencies may modify one of 
the established menu planning approaches in paragraphs (i) through (k) 
of this section or may develop their own menu planning approach. The 
alternate menu planning approach must be available in writing for review 
and monitoring purposes. No formal plan is required; guidance material, 
a handbook or protocol is sufficient. As appropriate, the material must 
address how the guidelines in paragraph (l)(4) of this section are met. 
A State agency that develops an alternate approach that is exempt from 
FNS approval under paragraph (l)(3)(iii) of this section must notify FNS 
in writing when implementing the alternate approach.
    (i) Approval of local level approaches. Any school food authority-
developed menu planning approach must have prior State agency review and 
approval.
    (ii) Approval of State agency approaches. Unless exempt under 
paragraph (l)(3)(iii) of this section, any State agency-developed menu 
planning approach must have prior FNS approval.
    (iii) State agency approaches not subject to approval. A State 
agency-developed menu planning approach does not need FNS approval if:
    (A) Five or more school food authorities in the State use it; and
    (B) The State agency maintains on-going oversight of the operation 
and evaluation of the approach and makes any needed adjustments to its 
policies and procedures to ensure that the appropriate guidelines of 
paragraph (l)(4) of this section are met.
    (4) Elements for major changes or new approaches. Any alternate menu 
planning approach must:
    (i) Offer fluid milk, as provided in paragraph (m) of this section;

[[Page 32]]

    (ii) Include offer versus serve for senior high students. Alternate 
menu planning approaches should follow the offer versus serve procedures 
in paragraphs (i)(2)(ii) and (k)(6) of this section, as appropriate. If 
these requirements are not followed, the plan must indicate:
    (A) The affected age/grade groups;
    (B) The number and type of items (and, if applicable, the quantities 
for the items) that constitute a reimbursable lunch under offer versus 
serve;
    (C) How such procedures will reduce plate waste; and
    (D) How a reasonable level of calories and nutrients for the lunch 
as taken is provided;
    (iii) Meet the Recommended Dietary Allowances and lunchtime energy 
allowances (nutrient levels) and indicate the age/grade groups served 
and how the nutrient levels are met for those age/grade groups;
    (iv) Follow the requirements for competitive foods in Sec. 210.11 
and appendix B to this part;
    (v) Follow the requirements for counting food items and products 
towards the meal patterns. These requirements are found in paragraphs 
(k)(3) through (k)(5) and paragraph (m) of this section, in appendices A 
through C to this part, and in instructions and guidance issued by FNS. 
This only applies if the alternate approach is a food-based menu 
planning approach;
    (vi) Identify a reimbursable lunch at the point of service;
    (A) To the extent possible, the procedures provided in paragraph 
(i)(2)(i) of this section for the nutrient standard or assisted nutrient 
standard menu planning approaches or for food-based menu planning 
approaches provided in paragraph (k) of this section must be followed. 
Any instructions or guidance issued by FNS that further defines the 
elements of a reimbursable lunch must be followed when using the 
existing regulatory provisions.
    (B) Any alternate approach that deviates from the provisions in 
paragraph (i)(2)(i) or paragraph (k) of this section must indicate what 
constitutes a reimbursable lunch, including the number and type of items 
(and, if applicable, the quantities for the items) which comprise the 
lunch, and how a reimbursable lunch is to be identified at the point of 
service;
    (vii) Explain how the alternate menu planning approach can be 
monitored under the applicable provisions of Sec. 210.18 and 
Sec. 210.19, including a description of the records that will be 
maintained to document compliance with the program's administrative and 
nutrition requirements. However, if the procedures under Sec. 210.19 
cannot be used to monitor the alternate approach, a description of 
procedures which will enable the State agency to assess compliance with 
the nutrition standards in paragraphs (b)(1) through (b)(4) of this 
section must be included; and
    (viii) Follow the requirements for weighted analysis and for 
approved software for nutrient standard menu planning approaches as 
required by paragraphs (i)(4) and (i)(5) of this section unless a State 
agency-developed approach meets the criteria in paragraph (l)(3)(iii) of 
this section. Through September 30, 2003, schools are not required to 
conduct a weighted analysis.
    (m) What are the requirements for offering milk?
    (1) Types of milk. (i) Under all menu planning approaches for 
lunches, schools must offer students fluid milk. The types of milk 
offered must be consistent with the types of milk consumed in the 
previous year. However, if a particular type of milk constituted less 
than one percent (1%) of the total amount of milk consumed in the 
previous year, a school does not need to offer this type of milk. This 
does not preclude schools from offering additional types of milk.
    (ii) All milk served in the Program must be pasteurized fluid milk 
which meets State and local standards for such milk. However, infants 
under 1 year of age must be served breast milk or iron-fortified infant 
formula. All milk must have vitamins A and D at levels specified by the 
Food and Drug Administration and must be consistent with State and local 
standards for such milk.
    (2) Inadequate milk supply. If a school cannot get a supply of milk, 
it can still participate in the Program under the following conditions:

[[Page 33]]

    (i) If emergency conditions temporarily prevent a school that 
normally has a supply of fluid milk from obtaining delivery of such 
milk, the State agency may allow the school to serve meals during the 
emergency period with an alternate form of milk or without milk.
    (ii) If a school is unable to obtain a supply of any type of fluid 
milk on a continuing basis, the State agency may approve the service of 
meals without fluid milk if the school uses an equivalent amount of 
canned milk or dry milk in the preparation of the meals. In Alaska, 
Hawaii, American Samoa, Guam, Puerto Rico, and the Virgin Islands, if a 
sufficient supply of fluid milk cannot be obtained, ``milk'' includes 
reconstituted or recombined milk, or as otherwise allowed by FNS through 
a written exception.
    (n) Supplemental food. Eligible schools operating afterschool care 
programs may be reimbursed for one meal supplement served to an eligible 
child (as defined in Sec. 210.2) per day.
    (1) Eligible schools mean schools that:
    (i) Operate school lunch programs under the National School Lunch 
Act;
    (ii) Sponsor afterschool care programs as defined in Sec. 210.2; and
    (iii) Were participating in the Child and Adult Care Food Program as 
of May 15, 1989.
    (2) Meal supplements shall contain two different components from the 
following four:
    (i) A serving of fluid milk as a beverage, or on cereal, or used in 
part for each purpose;
    (ii) A serving of meat or meat alternate. Nuts and seeds and their 
butters listed in program guidance are nutritionally comparable to meat 
or other meat alternates based on available nutritional data. Acorns, 
chestnuts, and coconuts are excluded and shall not be used as meat 
alternates due to their low protein content. Nut or seed meals or flours 
shall not be used as a meat alternate except as defined under appendix 
A: Alternate Foods for Meals of this part;
    (iii) A serving of vegetable(s) or fruit(s) or full-strength 
vegetable or fruit juice, or an equivalent quantity of any combination 
of these foods. Juice may not be served when milk is served as the only 
other component;
    (iv) A serving of whole-grain or enriched bread; or an equivalent 
serving of cornbread, biscuits, rolls, muffins, etc., made with whole-
grain or enriched meal or flour; or a serving of cooked whole-grain or 
enriched pasta or noodle products such as macaroni, or cereal grains 
such as rice, bulgur, or corn grits; or an equivalent quantity of any 
combination of these foods.
    (3) Infant supplements shall contain the following:
    (i) Birth through 3 months: 4-6 fluid ounces of breast milk or iron 
fortified infant formula.
    (ii) 4 through 7 months: 4-6 fluid ounces of breast milk or iron 
fortified infant formula.
    (iii) 8 through 11 months: 2-4 fluid ounces of breast milk or iron 
fortified infant formula or full strength fruit juice; 0-\1/2\ slice of 
crusty bread or 0-2 cracker type products made from whole-grain or 
enriched meal or flour that are suitable for an infant for use as a 
finger food when appropriate. To improve the nutrition of participating 
children over one year of age, additional foods may be served with the 
meal supplements as desired.
    (4) The minimum amounts of food components to be served as meal 
supplements as set forth in paragraphs (n)(2) and (n)(3) of this section 
are as follows. Select two different components from the four listed. 
(Juice may not be served when milk is served as the only other 
component.)

                                       Meal Supplement Chart for Children
----------------------------------------------------------------------------------------------------------------
   Snack (supplement) for children        Children 1 and 2        Children 3 through 5    Children 6 through 12
----------------------------------------------------------------------------------------------------------------
  (Select two different components
        from the four listed)
 
Milk, fluid.........................  \1/2\ cup...............  \1/2\ cup..............  1 cup.
Meat or meat alternate \4\..........  \1/2\ ounce.............  \1/2\ ounce............  1 ounce.
Juice or fruit or vegetable.........  \1/2\ cup...............  \1/2\ cup..............  \3/4\ cup.
Bread and/or cereal: Enriched or      \1/2\ slice.............  \1/2\ slice............  1 slice.
 whole grain bread or.
Cereal: Cold dry or.................  \1/4\ cup \1\...........  \1/3\ cup \2\..........  \3/4\ cup \3\.

[[Page 34]]

 
Hot cooked..........................  \1/4\ cup...............  \1/4\ cup..............  \1/2\ cup.
----------------------------------------------------------------------------------------------------------------
\1\ \1/4\ cup (volume) or \1/3\ ounce (weight), whichever is less.
\2\ \1/3\ cup (volume) or \1/2\ ounce (weight), whichever is less.
\3\ \3/4\ cup (volume) or 1 ounce (weight), whichever is less.
\4\ Yogurt may be used as meat/meat alternate. You may serve 4 ounces (weight) or \1/2\ cup (volume) of plain,
  or sweetened and flavored yogurt to fulfill the equivalent of 1 ounce of the meat/meat alternate component.
  For younger children, 2 ounces (weight) or \1/4\ cup (volume) may fulfill the equivalent of \1/2\ ounce of the
  meat/meat alternate requirement.
Caution: Children under five years of age are at the highest risk of choking. USDA recommends that nuts and/or
  seeds be served to them ground or finely chopped in a prepared food.


[[Page 35]]


                                                                 Supplements for Infants
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                           Birth through 3 months                    4 through 7 months                     8 through 11 months
--------------------------------------------------------------------------------------------------------------------------------------------------------
Supplement (snack)...............  4-6 fl. oz. breast milk 2, 3 or         4-6 fl. oz. breast milk 2, 3 or         2-4 fl. oz breast milk 2, 3, formula
                                    formula \1\                             formula \1\                             1, or fruit juice \4\;
                                   ......................................  ......................................  0-\1/2\ bread \5\ or
                                   ......................................  ......................................  0-2 crackers \5\.
--------------------------------------------------------------------------------------------------------------------------------------------------------
\1\ Infant formula shall be iron-fortified.
\2\ It is recommended that breast milk be served in place of formula from birth through 11 months.
\3\ For some breastfed infants who regularly consume less than the minimum amount of breast milk per feeding, a serving of less than the minimum amount
  of breast milk may be offered with additional breast milk offered if the infant is still hungry.
\4\ Fruit juice shall be full-strength.
\5\ Bread and bread alternates shall be made from whole-grain or enriched meal or flour. A serving of this component shall be optional.


[[Page 36]]

    (o) What are the requirements for the infant lunch pattern?
    (1) Definitions. (i) Infant cereal means any iron-fortified dry 
cereal especially formulated and generally recognized as cereal for 
infants which is routinely mixed with breast milk or iron-fortified 
infant formula prior to consumption.
    (ii) Infant formula means any iron-fortified formula intended for 
dietary use solely as a food for normal, healthy infants. Formulas 
specifically formulated for infants with inborn errors of metabolism or 
digestive or absorptive problems are not included in this definition. 
Infant formula, when served, must be in liquid state at recommended 
dilution.
    (2) Requirements for lunches for infants under the age of one. 
Infants under 1 year of age must be served an infant lunch as specified 
in this paragraph (o). Foods served in the infant lunch pattern must be 
of a texture and consistency appropriate for the particular age group 
served. Foods must be served to the infant during a span of time 
consistent with the infant's eating habits. For infants 4 through 7 
months of age, solid foods are optional and should be introduced only 
when the infant is developmentally ready. Whenever possible, the school 
should consult with the infant's parents in making the decision to 
introduce solid foods. Solid foods should be introduced one at a time on 
a gradual basis with the intent of ensuring health and nutritional well-
being. For infants 8 through 11 months of age, the total amount of food 
in the meal patterns in paragraph (o)(2)(iii) of this section must be 
provided to qualify for reimbursement. Additional foods may be served to 
infants 4 months of age and older with the intent of improving their 
overall nutrition. Breast milk, provided by the infant's mother, may be 
served in place of infant formula from birth through 11 months of age. 
Either breast milk or iron-fortified infant formula must be served for 
the entire first year. For some breastfed infants who regularly consume 
less than the minimum amount of breast milk per feeding, a serving of 
less than the minimum amount of breast milk may be offered with 
additional ounces offered if the infant is still hungry. The infant 
lunch pattern must have at least each of the following components in the 
amounts indicated for the appropriate age group:
    (i) Birth through 3 months--4 to 6 fluid ounces of breast milk or 
iron-fortified infant formula.
    (ii) 4 through 7 months:
    (A) 4 to 8 fluid ounces of breast milk or iron-fortified infant 
formula;
    (B) 0 to 3 tablespoons of iron-fortified dry infant cereal 
(optional); and
    (C) 0 to 3 tablespoons of fruit or vegetable of appropriate 
consistency or a combination of both (optional).
    (iii) 8 through 11 months:
    (A) 6 to 8 fluid ounces of breast milk or iron-fortified infant 
formula;
    (B) 2 to 4 tablespoons of iron-fortified dry infant cereal and/or 1 
to 4 tablespoons of meat, fish, poultry, egg yolk, or cooked dry beans 
or peas, or \1/2\ to 2 ounces (weight) of cheese or 1 to 4 ounces 
(weight or volume) of cottage cheese, cheese food or cheese spread of 
appropriate consistency; and
    (C) 1 to 4 tablespoons of fruit or vegetable of appropriate 
consistency or a combination of both.

[[Page 37]]

[GRAPHIC] [TIFF OMITTED] TR09MY00.006


[60 FR 31208, June 13, 1995, 60 FR 57146, Nov. 14, 1995, as amended at; 
62 FR 10189, Mar. 6, 1997; 64 FR 61773, Nov. 15, 1999; 65 FR 26913, May 
9, 2000; 65 FR 31371, May 17, 2000; 65 FR 36317, June 8, 2000]

    Editorial Note: At 66 FR 65597, Dec. 20, 2001, in Sec. 210.10, the 
table after paragraph (o)(2) was amended by removing the word 
``tablespoons'' before the words ``of cottage cheese'' in column 4 and 
adding the word ``ounces'' in its place. However in the 2001 revision of 
title 7, parts 210 through 299, that table is a photograph, thus the 
amendment could not be incorporated



Sec. 210.11  Competitive food services.

    (a) Definitions. For the purpose of this section:
    (1) Competitive foods means any foods sold in competition with the 
Program to children in food service areas during the lunch periods.
    (2) Food of minimal nutritional value means: (i) In the case of 
artificially sweetened foods, a food which provides less than five 
percent of the Reference Daily Intakes (RDI) for each of eight specified 
nutrients per serving; and (ii) in the case of all other foods, a food 
which provides less than five percent of the RDI for each of eight 
specified nutrients per 100 calories and less than five percent of the 
RDI for each of eight specified nutrients per serving. The eight 
nutrients to be assessed for this purpose are--protein, vitamin A, 
vitamin C, niacin, riboflavin, thiamine, calcium, and iron. All 
categories of food of minimal nutritional value and petitioning 
requirements for changing the categories are listed in appendix B of 
this part.
    (b) General. State agencies and school food authorities shall 
establish such rules or regulations as are necessary to control the sale 
of foods in competition with lunches served under the Program. Such 
rules or regulations shall prohibit the sale of foods of minimal 
nutritional value, as listed in appendix B of this part, in the food 
service areas during the lunch periods. The sale of other competitive 
foods may, at the discretion of the State agency and school food 
authority, be allowed in the food service area during the lunch period 
only if all income from the sale

[[Page 38]]

of such foods accrues to the benefit of the nonprofit school food 
service or the school or student organizations approved by the school. 
State agencies and school food authorities may impose additional 
restrictions on the sale of and income from all foods sold at any time 
throughout schools participating in the Program.

[53 FR 29147, Aug. 2, 1988, as amended at 59 FR 23614, May 6, 1994]



Sec. 210.12  Student, parent and community involvement.

    (a) General. School food authorities shall promote activities to 
involve students and parents in the Program. Such activities may include 
menu planning, enhancement of the eating environment, Program promotion, 
and related student-community support activities. School food 
authorities are encouraged to use the school food service program to 
teach students about good nutrition practices and to involve the school 
faculty and the general community in activities to enhance the Program.
    (b) Food service management companies. School food authorities 
contracting with a food service management company shall comply with the 
provisions of Sec. 210.16(a) regarding the establishment of an advisory 
board of parents, teachers and students.
    (c) Residential child care institutions. Residential child care 
institutions shall comply with the provisions of this section, to the 
extent possible.



Sec. 210.13  Facilities management.

    (a) Health standards. The school food authority shall ensure that 
food storage, preparation and service is in accordance with the 
sanitation and health standards established under State and local law 
and regulations.
    (b) Food safety inspections.--(1) In general. Except as provided in 
paragraph (b)(2) of this section, schools shall, at least once during 
each school year, obtain a food safety inspection conducted by a State 
or local governmental agency responsible for food safety inspections.
    (2) Exception. Paragraph (b)(1) of this section shall not apply to a 
school if a food safety inspection of the school is required by a State 
or local governmental agency responsible for food safety inspections.
    (c) Storage. The school food authority shall ensure that the 
necessary facilities for storage, preparation and service of food are 
maintained. Facilities for the handling, storage, and distribution of 
purchased and donated foods shall be such as to properly safeguard 
against theft, spoilage and other loss.

[54 FR 29147, Aug. 2, 1988, as amended at 64 FR 50740, Sept. 20, 1999]



Sec. 210.14  Resource management.

    (a) Nonprofit school food service. School food authorities shall 
maintain a nonprofit school food service. Revenues received by the 
nonprofit school food service are to be used only for the operation or 
improvement of such food service, except that, such revenues shall not 
be used to purchase land or buildings, unless otherwise approved by FNS, 
or to construct buildings. Expenditures of nonprofit school food service 
revenues shall be in accordance with the financial management system 
established by the State agency under Sec. 210.19(a) of this part. 
School food authorities may use facilities, equipment, and personnel 
supported with nonprofit school food revenues to support a nonprofit 
nutrition program for the elderly, including a program funded under the 
Older Americans Act of 1965 (42 U.S.C. 3001 et seq.).
    (b) Net cash resources. The school food authority shall limit its 
net cash resources to an amount that does not exceed 3 months average 
expenditures for its nonprofit school food service or such other amount 
as may be approved by the State agency in accordance with 
Sec. 210.19(a).
    (c) Financial assurances. The school food authority shall meet the 
requirements of the State agency for compliance with Sec. 210.19(a) 
including any separation of records of nonprofit school food service 
from records of any other food service which may be operated by the 
school food authority as provided in paragraph (a) of this section.
    (d) Use of donated foods. The school food authority shall enter into 
an agreement with the distributing agency to receive donated foods as 
required by part 250 of this chapter. In addition, the school food 
authority shall accept

[[Page 39]]

and use, in as large quantities as may be efficiently utilized in its 
nonprofit school food service, such foods as may be offered as a 
donation by the Department.

[53 FR 29147, Aug. 2, 1988, as amended at 60 FR 31215, June 13, 1995]



Sec. 210.15  Reporting and recordkeeping.

    (a) Reporting summary. Participating school food authorities are 
required to submit forms and reports to the State agency or the 
distributing agency, as appropriate, to demonstrate compliance with 
Program requirements. These reports include, but are not limited to:
    (1) A Claim for Reimbursement and, for the month of October and as 
otherwise specified by the State agency, supporting data as specified in 
accordance with Sec. 210.8 of this part;
    (2) An application and agreement for Program operations between the 
school food authority and the State agency, and a Free and Reduced Price 
Policy Statement as required under Sec. 210.9;
    (3) A written response to reviews pertaining to corrective action 
taken for Program deficiencies;
    (4) A commodity school's preference whether to receive part of its 
donated food allocation in cash for processing and handling of donated 
foods as required under Sec. 210.19(b);
    (5) A written response to audit findings pertaining to the school 
food authority's operation as required under Sec. 210.22; and
    (6) Information on civil rights complaints, if any, and their 
resolution as required under Sec. 210.23.
    (b) Recordkeeping summary. In order to participate in the Program, a 
school food authority shall maintain records to demonstrate compliance 
with Program requirements. These records include but are not limited to:
    (1) Documentation of participation data by school in support of the 
Claim for Reimbursement and data used in the claims review process, as 
required under Sec. 210.8(a), (b), and (c) of this part;
    (2) Production and menu records and, if appropriate, nutrition 
analysis records as required under Sec. 210.10, whichever is applicable.
    (3) Participation records to demonstrate positive action toward 
providing one lunch per child per day as required under 
Sec. 210.10(a)(2), whichever is applicable;
    (4) Currently approved and denied applications for free and reduced 
price lunches and a description of the verification activities, 
including verified applications, and any accompanying source 
documentation in accordance with 7 CFR 245.6a of this Title.

[53 FR 29147, Aug. 2, 1988, as amended at 54 FR 12582, Mar. 28, 1989; 56 
FR 32941, July 17, 1991; 60 FR 31215, June 13, 1995; 65 FR 26912, 26922, 
May 9, 2000]



Sec. 210.16  Food service management companies.

    (a) General. Any school food authority (including a State agency 
acting in the capacity of a school food authority) may contract with a 
food service management company to manage its food service operation in 
one or more of its schools. However, no school or school food authority 
may contract with a food service management company to operate an a la 
carte food service unless the company agrees to offer free, reduced 
price and paid reimbursable lunches to all eligible children. Any school 
food authority that employs a food service management company in the 
operation of its nonprofit school food service shall:
    (1) Adhere to the procurement standards specified in Sec. 210.21 
when contracting with the food service management company;
    (2) Ensure that the food service operation is in conformance with 
the school food authority's agreement under the Program;
    (3) Monitor the food service operation through periodic on-site 
visits;
    (4) Retain control of the quality, extent, and general nature of its 
food service, and the prices to be charged the children for meals;
    (5) Retain signature authority on the State agency-school food 
authority agreement, free and reduced price policy statement and claims;
    (6) Ensure that all federally donated foods received by the school 
food authority and made available to the food service management company 
accrue only to the benefit of the school food

[[Page 40]]

authority's nonprofit school food service and are fully utilized 
therein;
    (7) Maintain applicable health certification and assure that all 
State and local regulations are being met by a food service management 
company preparing or serving meals at a school food authority facility; 
and
    (8) Establish an advisory board composed of parents, teachers, and 
students to assist in menu planning.
    (b) Invitation to bid. In addition to adhering to the procurement 
standards under Sec. 210.21, school food authorities contracting with 
food service management companies shall ensure that:
    (1) The invitation to bid or request for proposal contains a 21-day 
cycle menu developed in accordance with the provisions of Sec. 210.10, 
to be used as a standard for the purpose of basing bids or estimating 
average cost per meal. If a school food authority has no capability to 
prepare a cycle menu, it may, with State agency approval, request that a 
21-day cycle menu developed in accordance with the provisions of 
Sec. 210.10, be developed and submitted by each food service management 
company which intends to submit a bid or proposal to the school food 
authority. The food service management company must adhere to the cycle 
for the first 21 days of meal service. Changes thereafter may be made 
with the approval of the school food authority.
    (2) Any invitation to bid or request for proposal indicate that 
nonperformance subjects the food service management company to specified 
sanctions in instances where the food service management company 
violates or breaches contract terms. The school food authority shall 
indicate these sanctions in accordance with the procurement provisions 
stated in Sec. 210.21.
    (c) Contracts. Contracts that permit all income and expenses to 
accrue to the food service management company and ``cost-plus-a-
percentage-of-cost'' and ``cost-plus-a-percentage-of-income'' contracts 
are prohibited. Contracts that provide for fixed fees such as those that 
provide for management fees established on a per meal basis are allowed. 
Contractual agreements with food service management companies shall 
include provisions which ensure that the requirements of this section 
are met. Such agreements shall also include the following:
    (1) The food service management company shall maintain such records 
as the school food authority will need to support its Claim for 
Reimbursement under this part, and shall, at a minimum, report claim 
information to the school food authority promptly at the end of each 
month. Such records shall be made available to the school food 
authority, upon request, and shall be retained in accordance with 
Sec. 210.23(c).
    (2) The food service management company shall have State or local 
health certification for any facility outside the school in which it 
proposes to prepare meals and the food service management company shall 
maintain this health certification for the duration of the contract.
    (3) No payment is to be made for meals that are spoiled or 
unwholesome at time of delivery, do not meet detailed specifications as 
developed by the school food authority for each food component specified 
in Sec. 210.10, or do not otherwise meet the requirements of the 
contract. Specifications shall cover items such a grade, purchase units, 
style, condition, weight, ingredients, formulations, and delivery time.
    (d) Duration of contract. The contract between a school food 
authority and food service management company shall be a of a duration 
of no longer than 1 year; and options for the yearly renewal of a 
contract signed after February 16, 1988, may not exceed 4 additional 
years. All contracts shall include a termination clause whereby either 
party may cancel for cause with 60-day notification.

[53 FR 29147, Aug. 2, 1988, as amended at 60 FR 31215, June 13, 1995; 65 
FR 26912, May 9, 2000]



         Subpart D--Requirements for State Agency Participation



Sec. 210.17  Matching Federal funds.

    (a) State revenue matching. For each school year, the amount of 
State revenues appropriated or used specifically by the State for 
program purposes shall not be less than 30 percent of the funds received 
by such State under section 4 of the National School Lunch

[[Page 41]]

Act during the school year beginning July 1, 1980; provided that, the 
State revenues derived from the operation of such programs and State 
revenues expended for salaries and administrative expenses of such 
programs at the State level are not considered in this computation. 
However, if the per capita income of any State is less than the per 
capita income of the United States, the matching requirements so 
computed shall be decreased by the percentage by which the State per 
capita income is below the per capita income of the United States.
    (b) Private school exemption. No State in which the State agency is 
prohibited by law from disbursing State appropriated funds to nonpublic 
schools shall be required to match general cash assistance funds 
expended for meals served in such schools, or to disburse to such 
schools any of the State revenues required to meet the requirements of 
paragraph (a) of this section. Furthermore, the requirements of this 
section do not apply to schools in which the Program is administered by 
a FNSRO.
    (c) Territorial waiver. American Samoa and the Commonwealth of the 
Northern Mariana Islands shall be exempted from the matching 
requirements of paragraph (a) of this section if their respective 
matching requirements are under $100,000.
    (d) Applicable revenues. The following State revenues, appropriated 
or used specifically for program purposes which are expended for any 
school year shall be eligible for meeting the applicable percentage of 
the matching requirements prescribed in paragraph (a) of this section 
for that school year:
    (1) State revenues disbursed by the State agency to school food 
authorities for program purposes, including revenue disbursed to 
nonprofit private schools where the State administers the program in 
such schools;
    (2) State revenues made available to school food authorities and 
transferred by the school food authorities to the nonprofit school food 
service accounts or otherwise expended by the school food authorities in 
connection with the nonprofit school food service program; and
    (3) State revenues used to finance the costs (other than State 
salaries or other State level administrative costs) of the nonprofit 
school food service program, i.e.:
    (i) Local program supervision;
    (ii) Operating the program in participating schools; and
    (iii) The intrastate distribution of foods donated under part 250 of 
this chapter to schools participating in the program.
    (e) Distribution of matching revenues. All State revenues made 
available under paragraph (a) of this section are to be disbursed to 
school food authorities participating in the Program, except as provided 
for under paragraph (b) of this section. Distribution of matching 
revenues may be made with respect to a class of school food authorities 
as well as with respect to individual school food authorities.
    (f) Failure to match. If, in any school year, a State fails to meet 
the State revenue matching requirement, as prescribed in paragraph (a) 
of this section, the general cash assistance funds utilized by the State 
during that school year shall be subject to recall by and repayment to 
FNS.
    (g) Reports. Within 120 days after the end of each school year, each 
State agency shall submit an Annual Report of Revenues (FNS-13) to FNS. 
This report identifies the State revenues to be counted toward the State 
revenue matching requirements specified in paragraph (a) of this 
section.
    (h) Accounting system. The State agency shall establish or cause to 
be established a system whereby all expended State revenues counted in 
meeting the matching requirements prescribed in paragraph (a) of this 
section are properly documented and accounted for.



Sec. 210.18  Administrative reviews.

    (a) Implementation dates. For the school year beginning July 1, 
1992, each State agency shall conduct administrative reviews as 
prescribed under this section. However, FNS will approve a State 
agency's written request if FNS determines that the State agency has 
demonstrated good cause to delay implementation of the provisions 
specified under this section to January 1,

[[Page 42]]

1993. At State agency discretion, State agencies may begin 
implementation of the provisions of this section on August 16, 1991. FNS 
review responsibilities are specified under Sec. 210.29 of this part.
    (b) Definitions. The following definitions are provided in order to 
clarify State agency administrative review requirements:
    (1) Administrative reviews means the initial comprehensive on-site 
evaluation of all school food authorities participating in the Program 
in accordance with the provisions of this section. The term 
``administrative review'' is used to reflect a review of both critical 
and general areas in accordance with paragraphs (g) and (h) of this 
section, and includes other areas of Program operations determined by 
the State agency to be important to Program performance.
    (2) Critical areas means the following two performance standards 
described in detail in paragraph (g) of this section which serve as 
measures of compliance with Program regulations:
    (i) Performance Standard 1--Certification/Counting/Claiming--All 
free, reduced price and paid lunches claimed for reimbursement are 
served only to children eligible for free, reduced price and paid 
lunches, respectively; and counted, recorded, consolidated and reported 
through a system which consistently yields correct claims.
    (ii) Performance Standard 2--Meal Elements. Lunches claimed for 
reimbursement within the school food authority contain meal elements 
(food items/components, menu items or other items, as applicable) as 
required under Sec. 210.10.
    (3) Documented corrective action means written notification required 
of the school food authority to certify that the corrective action 
required for each violation has been completed and to notify the State 
agency of the dates of completion. Documented corrective action may be 
provided at the time of the review or may be submitted to the State 
agency within specified timeframes.
    (4) Follow-up reviews means any visit(s) to the school food 
authority subsequent to the administrative review to ensure corrective 
actions are taken.
    (5) General areas means the areas of review specified in paragraph 
(h) of this section.
    (6) Large school food authority means, in any State:
    (i) All school food authorities that participate in the Program and 
have enrollments of 40,000 children or more each; or
    (ii) If there are less than two school food authorities with 
enrollments of 40,000 or more, the two largest school food authorities 
that participate in the Program and have enrollments of 2,000 children 
or more each.
    (7) Participation factor means the percentages of children approved 
by the school for free lunches, reduced price lunches, and paid lunches, 
respectively, who are participating in the Program. The free 
participation factor is derived by dividing the number of free lunches 
claimed for any given period by the product of the number of children 
approved for free lunches for the same period times the operating days 
in that period. A similar computation is used to determine the reduced 
price and paid participation factors. The number of children approved 
for paid lunches is derived by subtracting the number of children 
approved for free and reduced price lunches for any given period from 
the total number of children enrolled in the reviewed school for the 
same period of time, if available. If such enrollment figures are not 
available, the most recent total number of children enrolled shall be 
used. If school food authority participation factors are unavailable or 
unreliable, State-wide data shall be employed.
    (8) Review period means the period of time covered by the 
administrative review or follow-up review. The review period is 
specified in paragraph (f)(2) of this section.
    (9) Review threshold means the degree of error in a critical area of 
review which, if exceeded during an administrative review or follow-up 
review of a school food authority, may trigger a follow-up review of 
that school food authority.
    (10) Small school food authority means, in any State, a school food 
authority that participates in the Program and is

[[Page 43]]

not a large school food authority, as defined in this section.
    (c) Timing of reviews. The first year of the first 5-year review 
cycle began on July 1, 1992, or as otherwise authorized under paragraph 
(a) of this section and shall end on June 30, 1994. For each State 
agency, the first 5-year review cycle shall end on June 30, 1998. 
Administrative reviews and follow-up reviews shall be conducted as 
follows:
    (1) Administrative reviews. At a minimum, State agencies shall 
conduct administrative reviews of all school food authorities at least 
once during each 5-year review cycle; provided that each school food 
authority is reviewed at least once every 6 years. The on-site portion 
of the administrative review shall be completed during the school year 
in which the review was begun.
    (2) Expanded review cycle. State agencies are encouraged to conduct 
administrative reviews of large school food authorities and of any 
school food authorities which may benefit from a more frequent interval 
than the minimum 5-year cycle required in paragraph (c)(1) of this 
section.
    (3) Exceptions. FNS may, on an individual school food authority 
basis, approve written requests for 1-year extensions to the 6-year 
review interval specified in paragraph (c)(1) of this section if FNS 
determines this requirement conflicts with efficient State agency 
management of the Program.
    (4) Follow-up reviews. The State agency is encouraged to conduct 
first follow-up reviews in the same school year as the administrative 
review; but in no event shall first follow-up reviews be conducted later 
than December 31 of the school year following the administrative review. 
Subsequent follow-up reviews shall be scheduled in accordance with 
paragraph (i)(5) of this section.
    (d) Scheduling school food authorities. The State agency shall use 
its own criteria to schedule school food authorities for administrative 
reviews; provided that the requirements of paragraph (c) of this section 
are met. State agencies are encouraged to take into consideration the 
findings of the claims review process required under Sec. 210.8(b)(2) of 
this part in the selection of school food authorities.
    (1) Schedule of reviews. To ensure no unintended overlap occurs, the 
State agency shall inform FNS of the anticipated schedule of school food 
authority reviews upon request.
    (2) Reporting follow-up review activity. At such time as the State 
agency determines that a follow-up review is needed, the State agency 
shall notify FNS of the names of those large school food authorities 
exceeding any one of the critical area review thresholds specified in 
paragraph (i) of this section.
    (3) Exceptions. In any school year in which FNS or OIG conducts a 
review or investigation of a school food authority in accordance with 
Sec. 210.19(a)(5) of this part, the State agency shall, unless otherwise 
authorized by FNS, delay conduct of a scheduled administrative review 
until the following school year. The State agency shall document any 
exception authorized under this paragraph.
    (e) Number of schools to review. The State agency is encouraged to 
review all schools meeting the school selection criteria specified in 
paragraph (e)(1) of this section. At a minimum, the State agency shall 
review the number of schools specified in paragraph (e)(1) of this 
section and shall select the schools to be reviewed on the basis of the 
school selection criteria specified in paragraph (e)(2) of this section.
    (1) Minimum number of schools. Except for residential child care 
institutions, the State agency shall review all schools with a free 
average daily participation of 100 or more and a free participation 
factor of 100 percent or more. In no event shall the State agency review 
less than the minimum number of schools illustrated in table A:

                                 Table A
------------------------------------------------------------------------
                                                         Minimum no. of
     No. of schools in the school food authority         schools to be
                                                            reviewed
------------------------------------------------------------------------
  1 to 5.............................................                  1
  6 to 10............................................                  2
 11 to 20............................................                  3
 21 to 40............................................                  4
 41 to 60............................................                  6
 61 to 80............................................                  8
 81 to 100...........................................                 10
101 or more..........................................            \1\ 12
------------------------------------------------------------------------
\1\ Twelve plus 5 percent of the number of schools over 100. Fractions
  shall be rounded to the nearest whole number.


[[Page 44]]

    (2) School selection criteria.
    (i) Selection of additional schools to meet the minimum number of 
schools required under paragraph (e)(1) of this section, shall be based 
on the following criteria:
    (A) Elementary schools with a free average daily participation of 
100 or more and a free participation factor of 97 percent or more;
    (B) Secondary schools with a free average daily participation of 100 
or more and a free participation factor of 77 percent or more; and
    (C) Combination schools with a free average daily participation of 
100 or more and a free participation factor of 87 percent or more. A 
combination school means a school with a mixture of elementary and 
secondary grades.
    (ii) When the number of schools selected on the basis of the 
criteria established in paragraph (A) through paragraph (C) of this 
paragraph are not sufficient to meet the minimum number of schools 
required under paragraph (e)(1) of this section, the schools selected 
for review shall be selected on the basis of State agency criteria which 
may include low participation schools, recommendations from a food 
service director based on findings from the on-site visits or the claims 
review process required under Sec. 210.8(a) of this part; or any school 
in which the daily lunch counts appear questionable, e.g., identical or 
very similar claiming patterns, and/or large changes in free lunch 
counts.
    (3) Pervasive problems. If the State agency review finds pervasive 
problems in a school food authority, FNS may authorize the State agency 
to cease review activities prior to reviewing the required number of 
schools under paragraph (e)(1) of this section. Where FNS authorizes the 
State agency to cease review activity, FNS may either conduct the review 
activity itself or refer the school food authority to OIG.
    (f) Scope of review. During the course of an administrative review, 
each State agency shall monitor compliance with the critical and general 
areas identified in paragraphs (g) and (h) of this section.
    (1) Review form. State agencies shall use the administrative review 
form prescribed by FNS for the critical areas of review specified in 
paragraph (g) of this section. State agencies may use their own 
administrative review form for the general areas of review specified in 
paragraph (h) of this section.
    (2) Review period.
    (i) The review period for administrative reviews and follow-up 
reviews shall cover, at a minimum, the most recent month for which a 
Claim for Reimbursement was submitted; provided that such Claim for 
Reimbursement covers at least 10 operating days.
    (ii) Subject to FNS approval, the State agency may conduct a review 
early in the school year, prior to the submission of a Claim for 
Reimbursement. In such cases, the review period shall be the prior month 
of operation in the current school year, provided that such month 
includes at least 10 operating days.
    (3) Audit findings. To prevent duplication of effort, the State 
agency may use any recent and currently applicable findings from 
Federally-required audit activity or from any State-imposed audit 
requirements. Such findings may be used only insofar as they pertain to 
the reviewed school(s) or the overall operation of the school food 
authority and they are relevant to the review period. The State agency 
shall document the source and the date of the audit.
    (g) Critical areas of review. The performance standards listed in 
this paragraph are deemed critical since compliance in these areas is 
directly linked to the service of a reimbursable lunch.
    (1) Performance Standard 1 (All free, reduced price and paid lunches 
claimed for reimbursement are served only to children eligible for free, 
reduced price and paid lunches, respectively; and are counted, recorded, 
consolidated and reported through a system which consistently yields 
correct claims.) The State agency shall determine that the free and 
reduced price eligibility determinations are correct. In addition, the 
State agency shall determine that for each day of operation for the 
review period, the number of free, reduced price and paid lunches 
claimed for each reviewed school is not more than the number of lunches 
served to children eligible for free, reduced price and paid lunches, 
respectively, in those schools for the review

[[Page 45]]

period. The State agency shall also determine that a lunch counting 
system is being used which accurately counts, records, consolidates and 
reports the reimbursable lunches served, by type.
    (i) For each school reviewed, the State agency shall:
    (A) Determine the number of children eligible for free, reduced 
price and paid lunches, by type, for the review period. To make this 
determination:
    (1) The State agency shall:
    (i) Review all approved free and reduced price applications for 
children in the reviewed schools back to the beginning of the school 
year to determine whether each child's application is complete and 
correctly approved in accordance with all applicable provisions of 7 CFR 
part 245; or
    (ii) Review all approved free and reduced price applications 
effective for the review period for children in the reviewed schools; or
    (iii) Review all approved free and reduced price applications 
effective on the day(s) the review is conducted for children in the 
reviewed schools.
    (2) In lieu of reviewing all of the free and reduced price 
applications as required under paragraph (g)(1)(i)(A)(1) of this 
section, the State agency may review a statistically valid sample of 
those applications. If the State agency chooses to review a 
statistically valid sample of applications, the State agency shall 
ensure that the sample size is large enough so that there is a 95 
percent chance that the actual error rate for all applications is not 
less than 2 percentage points less than the error rate found in the 
sample (i.e., the lower bound of the one-sided 95 percent confidence 
interval is no more than 2 percentage points less than the point 
estimate). In addition, the State agency shall determine the need for 
follow-up reviews and base fiscal action upon the error rate found in 
the sample.
    (3) Evaluate whether the previous year's eligibility determinations 
are used after 30 operating days following the first day of school, or 
as otherwise established by the State agency; provided that the State 
agency-developed timeframe does not exceed the 30 operating day limit.
    (4) In the case where children are determined eligible for free 
lunches based on documentation from the local food stamp, Food 
Distribution Program on Indian Reservations (FDPIR) or Temporary 
Assistance for Needy Families (TANF) office which certifies that the 
children are currently members of households receiving benefits under 
the Food Stamp Program, FDPIR or TANF, determine that the certification 
from the Food Stamp Program, FDPIR or TANF is official; all the 
information required under Sec. 245.6 of this part is complete; and such 
children were enrolled in the school under review during the review 
period.
    (B) Evaluate the system for issuing benefits and updating 
eligibility status by validating the mechanism(s) the reviewed school 
uses to provide benefits to eligible children, e.g., master list. The 
State agency shall determine whether the system is adequate and, within 
the timeframes established in Sec. 210.7(c)(1)(ii)(B), reflects changes 
due to verification findings, transfers, reported changes in household 
size or income, or from a household's decision to decline school lunch 
benefits or any notification from the household that it is no longer 
certified to receive food stamp, Food Distribution Program for 
Households on Indian Reservations (FDPIR) or Temporary Assistance for 
Needy Families (TANF) benefits.
    (C) Determine whether the lunch counting system yields correct 
claims. At a minimum, the State agency shall determine whether:
    (1) The daily lunch counts, by type, for the review period are more 
than the product of the number of children determined by the school/
school food authority to be eligible for free, reduced price, and paid 
lunches for the review period times an attendance factor. If the lunch 
count, for any type, appears questionable or significantly exceeds the 
product of the number of eligibles, for that type, times an attendance 
factor, documentation showing good cause must be available for review by 
the State agency.
    (2) Each type of food service line provides accurate point of 
service lunch counts, by type, and those lunch counts are correctly 
counted and recorded. If an alternative counting system is employed (in 
accordance with Sec. 210.7(c)(2)), the State agency shall ensure that it

[[Page 46]]

provides accurate counts of reimbursable lunches, by type, and is 
correctly implemented as approved by the State agency.
    (3) All lunches are correctly counted, recorded, consolidated and 
reported for the day they are served.
    (ii) For each school food authority reviewed, the State agency shall 
review lunch count records to ensure that the lunch counts submitted by 
each reviewed school are correctly consolidated, recorded, and reported 
by the school food authority on the Claim for Reimbursement.
    (2) Performance Standard 2 (Lunches claimed for reimbursement within 
the school food authority contain meal elements (food items/components, 
menu items or other items, as applicable) as required under Sec. 210.10. 
For each school reviewed, the State agency must:
    (i) For the day of the review, observe the serving line(s) to 
determine whether all required meal elements (food items/components, 
menu items or other items, as applicable) as required under Sec. 210.10 
are offered.
    (ii) For the day of the review, observe a significant number of the 
Program lunches counted at the point of service for each type of serving 
line, to determine whether those lunches contain the required number of 
meal elements (food items/components, menu items or other items, as 
applicable) as required under Sec. 210.10.
    (iii) Review menu records for the review period to determine whether 
all required meal elements (food items/components, menu items or other 
items, as applicable) as required under Sec. 210.10 have been offered.
    (h) General areas of review. The general areas listed in this 
paragraph reflect major Program requirements. The general areas of 
review shall include, but are not limited to, the following areas:
    (1) Free and reduced price process. In the course of the review of 
each school food authority, the State agency shall:
    (i) Review the implementation of the free and reduced price policy 
statement to ensure it is implemented as approved.
    (ii) Evaluate whether the required minimum number of applications 
are verified with respect to the selection method used.
    (iii) Determine that applications for verification are selected 
through random or focused sampling in accordance with the provisions of 
Sec. 245.6a of this title and FNS Instructions, and that no 
discrimination exists in the selection process.
    (iv) Establish that verification is completed by December 15. If the 
administrative review occurs prior to the December 15 deadline, the 
State agency shall evaluate the verification activities that have 
occurred to date and assess whether these activities represent a good 
faith effort that will result in compliance with the requirements of 
Sec. 245.6a of this title.
    (v) Confirm that the verification process is complete for each 
application verified by or on behalf of the reviewed schools. 
Verification is considered complete either when a child's eligibility 
for the level of benefits for which he or she was approved is confirmed, 
changed to a higher level of benefit, or a letter of adverse action has 
been sent.
    (vi) Ensure that verification records are maintained as required by 
Sec. 245.6a(c) of this title.
    (vii) Determine that, for each reviewed school, the lunch count 
system does not overtly identify children eligible for free and reduced 
price lunches.
    (viii) Review a representative sample of denied applications to 
evaluate whether the determining official correctly denied applicants 
for free and reduced price lunches.
    (2) Food quantities. For each school reviewed, the State agency must 
observe a significant number of Program lunches counted at the point of 
service for each type of serving line to determine whether those lunches 
appear to provide meal elements (food items/components, menu items or 
other items, as applicable) in the quantities required under 
Sec. 210.10. If visual observation suggests that quantities are 
insufficient, the State agency shall require the reviewed schools to 
provide documentation demonstrating that the required amounts of food 
were available for service for each day of the review period.

[[Page 47]]

    (3) Civil rights. The State agency shall examine the school food 
authority's compliance with the civil rights provisions specified in 
Sec. 210.23(b) of this part.
    (4) Monitoring responsibilities. The State agency shall ensure that 
the school food authority conducts on-site reviews in accordance with 
Sec. 210.8(a)(1) of this part and monitors claims in accordance with 
Sec. 210.8(a)(2) and (a)(3) of this part.
    (5) Reporting and recordkeeping. The State agency shall determine 
that the school food authority submits reports and maintains records as 
required under 7 CFR parts 210 and 245.
    (i) Follow-up reviews. All school food authorities found to have a 
critical area violation in excess of any one of the review thresholds 
specified in this paragraph are subject to follow-up reviews. State 
agencies shall notify FNS of the names of large school food authorities 
exceeding critical area review thresholds in accordance with paragraph 
(d)(2) of this section. The State agency shall conduct a first follow-up 
review of any large school food authority found on an administrative 
review to have critical area violations in excess of any one of the 
review thresholds. State agencies shall also conduct a first follow-up 
review of at least 25 percent of the small school food authorities found 
on a review to have critical area violations in excess of any one of the 
review thresholds. State agencies shall conduct additional follow-up 
reviews of any school food authority which has a critical area violation 
exceeding a review threshold on the first follow-up or any subsequent 
follow-up review regardless of whether such review is conducted by FNS 
or the State agency.
    (1) Selection of small school food authorities. In determining which 
small school food authorities to include in the follow-up review sample, 
State agencies shall select those school food authorities which have the 
most serious problems, including, but not limited to, systemic 
accountability problems, large overclaims, significant lunch pattern 
violations, etc.
    (2) Selection of schools.
    (i) If the critical area violation(s) responsible for follow-up 
review activity are limited to school food authority level problems 
(e.g. centralized application processing or centralized kitchen), the 
State agency may limit the follow-up review to the school food authority 
level.
    (ii) If the critical area violation(s) responsible for follow-up 
review activity were identified in the review of a school(s), then State 
agencies shall review at least the minimum number of schools required 
under paragraph (e)(1) of this section. State agencies shall meet the 
minimum number of schools requirement by selecting those schools found, 
on a previous review, to have significant critical area violations. If 
any additional schools must be selected to meet the minimum required 
number, the State agency shall select from those schools which meet 
State agency-developed criteria identified under paragraph (e)(2)(ii) of 
this section.
    (3) Review thresholds. The review thresholds apply only to the 
critical areas of review and are designed to limit follow-up reviews to 
those school food authorities with serious problems. The provisions of 
paragraph (i) of this section apply when:
    (i) For Performance Standard 1--
    (A) A number of the reviewed schools in a school food authority, as 
specified in Table B, have an inadequate system for certification, 
issuing benefits or updating eligibility status; or for counting, 
recording, consolidating or reporting lunches, by type; or
    (B) The school food authority has an inadequate system for 
consolidating lunch counts, by type, or for reporting claims; or, if 
applicable, for certification, issuing benefits or updating eligibility 
status.
    (C) At the school and school food authority level, a system for 
certification, issuing benefits or updating eligibility status is 
inadequate if 10 percent or more (but not less than 100 lunches) of the 
free and reduced price lunches claimed for the review period (for any 
school reviewed) are claimed incorrectly due to errors of certification, 
benefit issuance or updating of eligibility status.

[[Page 48]]



                                 Table B
------------------------------------------------------------------------
                                                              Number of
                                                               schools
                Number of schools reviewed                    violating
                                                             performance
                                                             standard 1
------------------------------------------------------------------------
1 to 5....................................................            1
6 to 10...................................................            2
11 to 20..................................................            3
21 to 30..................................................            4
31 to 40..................................................            5
41 to 50..................................................            6
51 to 60..................................................            7
61 to 70..................................................            8
71 to 80..................................................            9
81 to 90..................................................           10
91 to 100.................................................           11
101 or more...............................................           11*
------------------------------------------------------------------------
* 11 plus the number identified above for the appropriate increment.

    (ii) For Performance Standard 2--10 percent or more of the total 
number of Program lunches observed in a school food authority are 
missing one or more of the required meal elements (food items/
components, menu items or other items, as applicable) as required under 
Sec. 210.10.
    (4) Scope of follow-up reviews. On any follow-up review, the State 
agency is encouraged to review all of the critical and general areas of 
review specified in paragraph (g) and (h) of this section for those 
schools which were not reviewed during the administrative review. At a 
minimum, the State agency shall:
    (i) For each school selected for review (or for the school food 
authority, as applicable,) review the critical areas for which the 
review thresholds were exceeded by the school food authority on a 
previous review;
    (ii) Determine whether the school food authority has satisfactorily 
completed the corrective actions in accordance with paragraph (k) of 
this section required for both critical and general areas within the 
timeframes established by the State agency;
    (iii) Evaluate whether these corrective actions resolved the 
problem(s); and
    (iv) If the State agency did not evaluate the certification, count 
and milk/meal service procedures for the School Breakfast Program (7 CFR 
part 220) and/or the Special Milk Program for Children (7 CFR part 215) 
or offering meal supplements in after hour care programs (7 CFR part 
210) in those schools selected for the administrative review and 
participating in those Programs, the State agency shall do so for those 
schools selected for the first follow-up review.
    (5) Critical area violations identified in a follow-up review. 
Critical area violations identified on a follow-up review shall be 
addressed as follows:
    (i) If, during a follow-up review, the State agency determines, that 
corrective actions have not been satisfactorily completed in accordance 
with the documented corrective action, the State agency shall: require 
the school food authority to resolve the problems and to submit 
documented corrective action to the State agency ; take fiscal action 
for critical area violations as specified in paragraph (m) of this 
section; and withhold Program payments in accordance with paragraph (l) 
of this section, until such time as a follow-up review, requested by the 
school food authority, indicates the problem has been corrected. If the 
State agency determines that the corrective actions have been completed 
as specified in the documented corrective action, but those corrective 
actions do not effectively resolve the problem, the State agency shall 
follow the requirements for new critical area violations specified in 
paragraphs (i)(5)(ii) and (iii) of this section.
    (ii) If new critical area violations are observed that exceed a 
review threshold, the State agency shall: Require the school food 
authority to resolve the problems and to submit documented corrective 
action to the State agency; take fiscal action as specified in paragraph 
(m) of this section; and conduct a follow-up review within 6 operating 
months of the first follow-up review.
    (iii) If new critical area violations are observed which do not 
exceed review thresholds, the State agency shall: Require the school 
food authority to resolve the problem and to submit documented 
corrective action to the State agency within specified timeframes; and 
take fiscal action in accordance with paragraph (m) of this section. If 
adequate documented corrective action is not received within those 
timeframes, the State agency shall withhold Program payments in 
accordance with paragraph (l) of this section, until such time as 
adequate

[[Page 49]]

documented corrective action is received.
    (6) General area violations identified in a follow-up review. 
General area violations identified in a follow-up review shall be 
addressed as follows:
    (i) If, during a follow-up review, the State agency determines that 
corrective actions have not been taken in accordance with the documented 
corrective action, the State agency shall withhold Program payments in 
accordance with paragraph (l) of this section, until such time as the 
State agency receives adequate documented corrective action.
    (ii) If the State agency determines that the corrective actions 
taken did not effectively resolve the problem, or if new general area 
violations are observed on a follow-up review, the State agency shall 
require the school food authority to resolve the problem and to submit 
documented corrective action to the State agency within specified 
timeframes. If adequate documented corrective action is not received 
within those timeframes, the State agency shall withhold Program 
payments in accordance with paragraph (l) of this section, until such 
time as adequate documented corrective action is received.
    (7) Exceptions. FNS may, on an individual school food authority 
basis, approve written requests for exceptions to the follow-up review 
requirement specified in paragraph (i)(1) of this section if FNS 
determines that the requirement conflicts with efficient State agency 
management of the program.
    (j) Exit conference and notification. The State agency shall hold an 
exit conference at the close of the administrative review and of any 
subsequent follow-up review to discuss the violations observed, the 
extent of the violations and a preliminary assessment of the actions 
needed to correct the violations. The State agency shall discuss an 
appropriate deadline(s) for completion of corrective action, provided 
that the deadline(s) results in the completion of corrective action on a 
timely basis. After every review, the State agency shall provide written 
notification of the review findings to the school food authority's 
Superintendent (or equivalent in a non-public school food authority) or 
authorized representative. The written notification shall include the 
review findings, the needed corrective actions, the deadlines for 
completion of the corrective action, and the potential fiscal action. As 
a part of the denial of all or a part of a Claim for Reimbursement or 
withholding payment in accordance with the provisions of this section, 
the State agency shall provide the school food authority a written 
notice which details the grounds on which the denial of all or a part of 
the Claim for Reimbursement or withholding payment is based. This 
notice, which shall be sent by certified mail, return receipt requested, 
shall also include a statement indicating that the school food authority 
may appeal the denial of all or a part of a Claim for Reimbursement or 
withholding payment and the entity (i.e., FNS or State agency) to which 
the appeal should be directed. The State agency shall notify the school 
food authority, in writing, of the appeal procedures as specified in 
Sec. 210.18(q) for appeals of State agency findings, and for appeals of 
FNS findings, provide a copy of Sec. 210.29(d)(3) of the regulations.
    (k) Corrective action. Corrective action is required for any 
violation under either the critical or general areas of the review. 
Corrective action shall be applied to all schools in the school food 
authority, as appropriate, to ensure that previously deficient practices 
and procedures are revised system-wide.
    Corrective actions may include training, technical assistance, 
recalculation of data to ensure the correctness of any claim that the 
school food authority is preparing at the time of the review, or other 
actions. Fiscal action shall be taken in accordance with paragraph (m) 
of this section.
    (1) Extensions of the timeframes. If extraordinary circumstances 
arise where a school food authority is unable to complete the required 
corrective action within the timeframes specified by the State agency, 
the State agency may extend the timeframes upon written request of the 
school food authority.
    (2) Documented corrective action. Documented corrective action is 
required

[[Page 50]]

for any degree of violation of general or critical areas identified in 
an administrative review or on any follow-up review. Documented 
corrective action may be provided at the time of the review; however, it 
shall be postmarked or submitted to the State agency no later than 30 
days from the deadline for completion of each required corrective 
action, as specified under paragraph (j) of this section or as otherwise 
extended by the State agency under paragraph (k)(1) of this section. The 
State agency shall maintain any documented corrective action on file for 
review by FNS.
    (l) Withholding payment. At a minimum, the State agency shall 
withhold Program payments to a school food authority as follows:
    (1) Cause. (i) The State agency shall withhold all Program payments 
to a school food authority if documented corrective action for critical 
area violation(s) which exceed the review threshold(s) is not provided 
within the deadlines specified in paragraph (k)(2) of this section; and/
or
    (ii) The State agency shall withhold all Program payments to a 
school food authority if, in the event that a follow-up review is not 
conducted, the State agency finds that corrective action for a critical 
area violation which exceeded the review threshold was not completed 
within the deadlines specified in paragraph (j) of this section or as 
otherwise extended by the State agency under paragraph (k)(1) of this 
section; and/or
    (iii) The State agency shall withhold all Program payments to a 
school food authority if, on a follow-up review, the State agency finds 
a critical area violation which exceeded the review threshold on a 
previous review and continues to exceed the review threshold on a 
follow-up review.
    (iv) The State agency may withhold payments at its discretion, if 
the State agency finds that documented corrective action is not provided 
within the deadlines specified in paragraph (k)(2) of this section, that 
corrective action is not complete or that corrective action was not 
taken as specified in the documented corrective action for a general 
area violation or for a critical area violation which did not exceed the 
review threshold.
    (2) Duration. In all cases, Program payments shall be withheld until 
such time as corrective action is completed, and documented corrective 
action is received and deemed acceptable by the State agency or as 
otherwise specified in paragraph (i)(5) of this section. Subsequent to 
the State agency's acceptance of the corrective actions (and a follow-up 
review, when required), payments will be released for all lunches served 
in accordance with the provisions of this part during the period the 
payments were withheld. In very serious cases, the State agency will 
evaluate whether the degree of non-compliance warrants termination in 
accordance with Sec. 210.25 of this part.
    (3) Exceptions. The State agency may, at its discretion, reduce the 
amount required to be withheld from a school food authority pursuant to 
paragraph (l)(1)(i) through (iii) of this section by as much as 60 
percent of the total Program payments when it is determined to be in the 
best interest of the Program. FNS may authorize a State agency to limit 
withholding of funds to an amount less than 40 percent of the total 
Program payments, if FNS determines such action to be in the best 
interest of the Program.
    (4) Failure to withhold payments. FNS may suspend or withhold 
Program payments, in whole or in part, to those State agencies failing 
to withhold Program payments in accordance with paragraph (l)(1) of this 
section and may withhold administrative funds in accordance with 
Sec. 235.11(b) of this title. The withholding of Program payments will 
remain in effect until such time as the State agency documents 
compliance with paragraph (l)(1) of this section to FNS. Subsequent to 
the documentation of compliance, any withheld administrative funds will 
be released and payment will be released for any lunches served in 
accordance with the provisions of this part during the period the 
payments were withheld.
    (m) Fiscal action. For purposes of the critical areas of the 
administrative review and any follow-up reviews, fiscal action is 
required for all violations of Performance Standards 1 and 2. Except 
that, on an administrative review, the State agency may limit fiscal 
action from the point corrective action occurs

[[Page 51]]

back through the beginning of the review period for errors identified 
under paragraphs (g)(1)(i)(A) and (g)(1)(i)(B) of this section, provided 
corrective action occurs. Fiscal action shall be taken in accordance 
with the provisions identified under Sec. 210.19(c) of this part.
    (n) Miscellaneous reporting requirement. Each State agency shall 
report to FNS the results of reviews by March 1 of each school year, on 
a form designated by FNS. In such annual reports, the State agency shall 
include the results of all administrative reviews and follow-up reviews 
conducted in the preceding school year.
    (o) Summary of reporting requirements. Each State agency shall 
report to FNS:
    (1) The names of those large school food authorities exceeding any 
one of the critical area review thresholds as described in paragraph 
(d)(2) of this section.
    (2) The results of reviews by March 1 of each school year on a form 
designated by FNS, as specified under paragraph (n) of this section.
    (p) Recordkeeping. Each State agency shall keep records which 
document the details of all reviews and demonstrate the degree of 
compliance with the critical and general areas of review. Records shall 
be retained by the State agency as specified in Sec. 210.23(c) of this 
part. Such records shall include documentation of administrative reviews 
and follow-up reviews. As appropriate, the records shall include 
documented corrective action, and documentation of withholding of 
payments and fiscal action, including recoveries made. Additionally, the 
State agency must have on file:
    (1) Criteria for selecting schools on first and follow-up reviews in 
accordance with paragraphs (e)(2)(ii) and (i)(2)(ii) of this section.
    (2) Its system for selecting small school food authorities for 
follow-up reviews in accordance with paragraph (i)(1) of this section.
    (3) Documentation demonstrating compliance with the statistical 
sampling requirements in accordance with paragraph (g)(1)(i)(A)(1) of 
this section, if applicable.
    (q) School food authority appeal of State agency findings. Except 
for FNS-conducted reviews authorized under Sec. 210.29(d)(2), each State 
agency shall establish an appeal procedure to be followed by a school 
food authority requesting a review of a denial of all or a part of the 
Claim for Reimbursement or withholding payment arising from 
administrative or follow-up review activity conducted by the State 
agency under Sec. 210.18 of this part. State agencies may use their own 
appeal procedures provided the same procedures are applied to all 
appellants in the State and the procedures meet the following 
requirements: appellants are assured of a fair and impartial hearing 
before an independent official at which they may be represented by legal 
counsel; decisions are rendered in a timely manner not to exceed 120 
days from the date of the receipt of the request for review; appellants 
are afforded the right to either a review of the record with the right 
to file written information, or a hearing which they may attend in 
person; and adequate notice is given of the time, date, place and 
procedures of the hearing. If the State agency has not established its 
own appeal procedures or the procedures do not meet the above listed 
criteria, the State agency shall observe the following procedures at a 
minimum:
    (1) The written request for a review shall be postmarked within 15 
calendar days of the date the appellant received the notice of the 
denial of all or a part of the Claim for Reimbursement or withholding of 
payment, and the State agency shall acknowledge the receipt of the 
request for appeal within 10 calendar days;
    (2) The appellant may refute the action specified in the notice in 
person and by written documentation to the review official. In order to 
be considered, written documentation must be filed with the review 
official not later than 30 calendar days after the appellant received 
the notice. The appellant may retain legal counsel, or may be 
represented by another person. A hearing shall be held by the review 
official in addition to, or in lieu of, a review of written information 
submitted by the appellant only if the appellant so specifies in the 
letter of request for review. Failure of the appellant school food 
authority's representative to appear at

[[Page 52]]

a scheduled hearing shall constitute the appellant school food 
authority's waiver of the right to a personal appearance before the 
review official, unless the review official agrees to reschedule the 
hearing. A representative of the State agency shall be allowed to attend 
the hearing to respond to the appellant's testimony and to answer 
questions posed by the review official;
    (3) If the appellant has requested a hearing, the appellant and the 
State agency shall be provided with at least 10 calendar days advance 
written notice, sent by certified mail, return receipt requested, of the 
time, date and place of the hearing;
    (4) Any information on which the State agency's action was based 
shall be available to the appellant for inspection from the date of 
receipt of the request for review;
    (5) The review official shall be an independent and impartial 
official other than, and not accountable to, any person authorized to 
make decisions that are subject to appeal under the provisions of this 
section;
    (6) The review official shall make a determination based on 
information provided by the State agency and the appellant, and on 
Program regulations;
    (7) Within 60 calendar days of the State agency's receipt of the 
request for review, by written notice, sent by certified mail, return 
receipt requested, the review official shall inform the State agency and 
the appellant of the determination of the review official. The final 
determination shall take effect upon receipt of the written notice of 
the final decision by the school food authority;
    (8) The State agency's action shall remain in effect during the 
appeal process;
    (9) The determination by the State review official is the final 
administrative determination to be afforded to the appellant.
    (r) FNS review activity. The term ``State agency'' and all the 
provisions specified in paragraphs (a)-(h) of this section refer to FNS 
when FNS conducts administrative reviews or follow-up reviews in 
accordance with Sec. 210.29(d)(2). FNS will notify the State agency of 
the review findings and the need for corrective action and fiscal 
action. The State agency shall pursue any needed follow-up activity.

[56 FR 32942, July 17, 1991; 56 FR 55527, Oct. 28, 1991, as amended at 
57 FR 38584, Aug. 26, 1992; 57 FR 40729, Sept. 4, 1992; 59 FR 1894, Jan. 
13, 1994; 60 FR 31215, June 13, 1995; 60 FR 57147, Nov. 14, 1995; 64 FR 
50740, 50741, Sept. 20, 1999; 64 FR 72471, Dec. 28, 1999; 65 FR 26922, 
May 9, 2000]



Sec. 210.19  Additional responsibilities.

    (a) General Program management. Each State agency shall provide an 
adequate number of consultative, technical and managerial personnel to 
administer programs and monitor performance in complying with all 
Program requirements.
    (1) Compliance with nutrition standards. (i) Beginning with School 
Year 1996-1997, State agencies shall evaluate compliance, over the 
school week, with the nutrition standards for lunches and, as 
applicable, for breakfasts. Review activity may be confined to lunches 
served under the Program unless a menu planning approach is used 
exclusively in the School Breakfast Program or unless the school food 
authority only offers breakfasts under the School Breakfast Program. For 
lunches, compliance with the requirements in Sec. 210.10(b) and 
Sec. 210.10(c), (d), or (i)(1) or the procedures developed under 
Sec. 210.10(l), as applicable, is assessed. For breakfasts, see 
Sec. 220.13(f)(3) of this chapter.
    (A) These evaluations may be conducted at the same time a school 
food authority is scheduled for an administrative review in accordance 
with Sec. 210.18. State agencies may also conduct these evaluations in 
conjunction with technical assistance visits, other reviews, or 
separately.
    (B) The type of evaluation conducted by the State agency shall be 
determined by the menu planning approach chosen by the school food 
authority. At a minimum, the State agency shall review at least one 
school for each type of menu planning approach used in the school food 
authority.
    (C) In addition, State agencies are encouraged to review breakfasts 
offered under the School Breakfast Program as well if the school food 
authority requires technical assistance from the State agency to meet 
the nutrition

[[Page 53]]

standards or if corrective action is needed. Such review shall determine 
compliance with the appropriate requirements in Sec. 220.13(f)(3) of 
this chapter and may be done at the time of the initial review or as 
part of a follow-up to assess compliance with the nutrition standards.
    (ii) At a minimum, State agencies shall conduct evaluations of 
compliance with the nutrition standards in Sec. 210.10 and Sec. 220.8 of 
this Chapter at least once during each 5-year review cycle provided that 
each school food authority is evaluated at least once every 6 years, 
except that the first cycle shall begin July 1, 1996, and shall end on 
June 30, 2003. The compliance evaluation for the nutrition standards 
shall be conducted on the menu for any week of the current school year 
in which such evaluation is conducted. The week selected must continue 
to represent the current menu planning approach(es).
    (iii) For school food authorities choosing the nutrient standard or 
assisted nutrient standard menu planning approaches provided in 
Sec. 210.10(i), Sec. 210.10(j), Sec. 220.8(e) or Sec. 220.8(f) of this 
chapter, or developed under the procedures in Sec. 210.10(l) or 
Sec. 220.8(h) of this chapter, the State agency shall assess the 
nutrient analysis to determine if the school food authority is properly 
applying the methodology in these paragraphs, as applicable. Part of 
this assessment shall be an independent review of menus and production 
records to determine if they correspond to the analysis conducted by the 
school food authority and if the menu, as offered, over a school week, 
corresponds to the nutrition standards set forth in Sec. 210.10(b) and 
the appropriate calorie and nutrient levels in Sec. 210.10(c) or 
Sec. 210.10(i)(1), whichever is applicable.
    (iv) For school food authorities choosing the food-based menu 
planning approaches provided in Sec. 210.10(k) or Sec. 220.8(g) of this 
chapter or developed under the procedures in Sec. 210.10(l) or 
Sec. 220.8(h) of this chapter, the State agency must determine if the 
nutrition standards in Sec. 210.10 and Sec. 220.8 of this chapter are 
met. The State agency shall conduct a nutrient analysis in accordance 
with the procedures in Sec. 210.10(i) or Sec. 220.8(e) of this chapter, 
as appropriate, except that the State agency may:
    (A) Use the nutrient analysis of any school or school food authority 
that offers lunches or breakfasts using the food-based menu planning 
approaches provided in Sec. 210.10(k) and Sec. 220.8(g) of this chapter 
and that conducts its own nutrient analysis under the criteria for such 
analysis established in Sec. 210.10 and Sec. 220.8 of this chapter for 
the nutrient standard and assisted nutrient standard menu planning 
approaches; or
    (B) Develop its own method for compliance reviews, subject to USDA 
approval.
    (v) If the menu for the school week fails to comply with the 
nutrition standards specified in Sec. 210.10(b) and/or Sec. 220.8(a) and 
the appropriate nutrient levels in either Sec. 210.10(c), 
Sec. 210.10(d), or Sec. 210.10(i)(1) whichever is applicable, and/or 
Sec. 220.8(b), Sec. 220.8(c) or Sec. 220.8(e)(1) of this chapter, 
whichever is applicable, the school food authority shall develop, with 
the assistance and concurrence of the State agency, a corrective action 
plan designed to rectify those deficiencies. The State agency shall 
monitor the school food authority's execution of the plan to ensure that 
the terms of the corrective action plan are met.
    (vi) For school food authorities following an alternate approach as 
provided under Sec. 210.10(l) or Sec. 220.8(h) of this chapter that does 
not allow for use of the monitoring procedures in paragraphs (a)(1)(ii) 
or (a)(1)(iii) of this section, the State agency shall monitor 
compliance following the procedures developed in accordance with 
Sec. 210.10(l) or Sec. 220.8(h) of this chapter, whichever is 
appropriate.
    (vii) If a school food authority fails to meet the terms of the 
corrective action plan, the State agency shall determine if the school 
food authority is working in good faith towards compliance and, if so, 
may renegotiate the corrective action plan, if warranted. However, if 
the school food authority has not been acting in good faith to meet the 
terms of the corrective action plan and refuses to renegotiate the plan, 
the State agency shall determine if a disallowance of reimbursement 
funds as authorized under paragraph (c) of this section is warranted.

[[Page 54]]

    (2) Assurance of compliance for finances. Each State agency shall 
ensure that school food authorities comply with the requirements to 
account for all revenues and expenditures of their nonprofit school food 
service. School food authorities shall meet the requirements for the 
allowability of nonprofit school food service expenditures in accordance 
with this part and, as applicable, 7 CFR part 3015. The State agency 
shall ensure compliance with the requirements to limit net cash 
resources and shall provide for approval of net cash resources in excess 
of three months' average expenditures. Each State agency shall monitor, 
through review or audit or by other means, the net cash resources of the 
nonprofit school food service in each school food authority 
participating in the Program. In the event that net cash resources 
exceed 3 months' average expenditures for the school food authority's 
nonprofit school food service or such other amount as may be approved in 
accordance with this paragraph, the State agency may require the school 
food authority to reduce the price children are charged for lunches, 
improve food quality or take other action designed to improve the 
nonprofit school food service. In the absence of any such action, the 
State agency shall make adjustments in the rate of reimbursement under 
the Program.
    (3) Improved management practices. The State agency shall work with 
the school food authority toward improving the school food authority's 
management practices where the State agency has found poor food service 
management practices leading to decreasing or low child participation 
and/or poor child acceptance of the Program or of foods served. If a 
substantial number of children who routinely and over a period of time 
do not favorably accept a particular item that is offered; return foods; 
or choose less than all food items/components or foods and menu items, 
as authorized under Sec. 210.10, poor acceptance of certain menus may be 
indicated.
    (4) Program compliance. Each State agency shall require that school 
food authorities comply with the applicable provisions of this part. The 
State agency shall ensure compliance through audits, administrative 
reviews, technical assistance, training guidance materials or by other 
means.
    (5) Investigations. Each State agency shall promptly investigate 
complaints received or irregularities noted in connection with the 
operation of the Program, and shall take appropriate action to correct 
any irregularities. State agencies shall maintain on file, evidence of 
such investigations and actions. FNS and OIG may make reviews or 
investigations at the request of the State agency or where FNS or OIG 
determines reviews or investigations are appropriate.
    (6) Food service management companies. Each State agency shall 
annually review each contract between any school food authority and food 
service management company to ensure compliance with all the provisions 
and standards set forth in Sec. 210.16 of this part. Each State agency 
shall perform an on-site review of each school food authority 
contracting with a food service management company, at least once during 
each 5-year period. The State agency is encouraged to conduct such a 
review when performing reviews in accordance with Sec. 210.18. Such 
reviews shall include an assessment of the school food authority's 
compliance with Sec. 210.16 of this part. The State agency may require 
that all food service management companies that wish to contract for 
food service with any school food authority in the State register with 
the State agency. State agencies shall provide assistance upon request 
of a school food authority to assure compliance with Program 
requirements.
    (b) Donated food distribution information. Information on schools 
eligible to receive donated foods available under section 6 of the 
National School Lunch Act (42 U.S.C. 1755) shall be prepared each year 
by the State agency with accompanying information on the average daily 
number of lunches to be served in such schools. This information shall 
be prepared as early as practicable each school year and forwarded no 
later than September 1 to the Distributing agency. The State agency 
shall be responsible for promptly revising the information to reflect 
additions or deletions of eligible schools, and for

[[Page 55]]

providing such adjustments in participation as are determined necessary 
by the State agency. Schools shall be consulted by the Distributing 
agency with respect to the needs of such schools relating to the manner 
of selection and distribution of commodity assistance.
    (c) Fiscal action. State agencies are responsible for ensuring 
Program integrity at the school food authority level. State agencies 
shall take fiscal action against school food authorities for Claims for 
Reimbursement that are not properly payable under this part including, 
if warranted, the disallowance of funds for failure to take corrective 
action in accordance with paragraph (a)(1) of this section. In taking 
fiscal action, State agencies shall use their own procedures within the 
constraints of this part and shall maintain all records pertaining to 
action taken under this section. The State agency may refer to FNS for 
assistance in making a claims determination under this part.
    (1) Definition. Fiscal action includes, but is not limited to, the 
recovery of overpayment through direct assessment or offset of future 
claims, disallowance of overclaims as reflected in unpaid Claims for 
Reimbursement, submission of a revised Claim for Reimbursement, and 
correction of records to ensure that unfiled Claims for Reimbursement 
are corrected when filed. Fiscal action also includes disallowance of 
funds for failure to take corrective action in accordance with paragraph 
(a)(1) of this section.
    (2) General principles. When taking fiscal action, State agencies 
shall consider the following:
    (i) The State agency shall identify the school food authority's 
correct entitlement and take fiscal action when any school food 
authority claims or receives more Federal funds than earned under 
Sec. 210.7 of this part. In order to take fiscal action, the State 
agency shall identify accurate counts of reimbursable lunches through 
available data, if possible. In the absence of reliable data, the State 
agency shall reconstruct the lunch accounts in accordance with 
procedures established by FNS. Such procedures will be based on the best 
available information including, participation factors for the review 
period, data from similar schools in the school food authority, etc.
    (ii) Unless otherwise specified under Sec. 210.18(m) of this part, 
fiscal action shall be extended back to the beginning of the school year 
or that point in time during the current school year when the infraction 
first occurred, as applicable. Based on the severity and longevity of 
the problem, the State agency may extend fiscal action back to previous 
school years, as applicable. The State agency shall ensure that any 
Claim for Reimbursement, filed subsequent to the reviews conducted under 
Sec. 210.18 and prior to the implementation of corrective action, is 
limited to lunches eligible for reimbursement under this part.
    (iii) In taking fiscal action, State agencies shall assume that 
children determined by the reviewer to be incorrectly approved for free 
and reduced price lunches participated at the same rate as correctly 
approved children in the corresponding lunch category.
    (3) Failure to collect. If a State agency fails to disallow a claim 
or recover an overpayment from a school food authority, as described in 
this section, FNS will notify the State agency that a claim may be 
assessed against the State agency. In all such cases, the State agency 
shall have full opportunity to submit evidence concerning overpayment. 
If after considering all available information, FNS determines that a 
claim is warranted, FNS will assess a claim in the amount of such 
overpayment against the State agency. If the State agency fails to pay 
any such demand for funds promptly, FNS will reduce the State agency's 
Letter of Credit by the sum due in accordance with FNS' existing offset 
procedures for Letter of Credit. In such event, the State agency shall 
provide the funds necessary to maintain Program operations at the level 
of earnings from a source other than the Program.
    (4) Interest charge. If an agreement cannot be reached with the 
State agency for payment of its debts or for offset of debts on its 
current Letter of Credit, interest will be charged against the State 
agency from the date the demand leter was sent, at the rate established 
by the Secretary of Treasury.

[[Page 56]]

    (5) Use of recovered payment. The amounts recovered by the State 
agency from school food authorities may be utilized during the fiscal 
year for which the funds were initially available, first, to make 
payments to school food authorities for the purposes of the Program; and 
second, to repay any State funds expended in the reimbursement of claims 
under the Program and not otherwise repaid. Any amounts recovered which 
are not so utilized shall be returned to FNS in accordance with the 
requirements of this part.
    (6) Exceptions. The State agency need not disallow payment or 
collect an overpayment arising out of the situations described in 
paragraphs (c)(6) (i) and (ii) of this section; provided that the school 
food authority corrects the problem(s) to the satisfaction of the State 
agency:
    (i) When any review or audit reveals that a school food authority is 
failing to meet the quantities for each meal element (food item/
component, menu item or other items, as applicable) as required under 
Sec. 210.10.
    (ii) when any review or audit reveals that a school food authority 
is approving applications which indicate that the households' incomes 
are within the Income Eligibility Guidelines issued by the Department or 
the applications contain a food stamp or AFDC case number but the 
applications are missing the documentation specified under 7 CFR 245.2 
(a-4) (3) and/or (4); or
    (iii) when any review or audit reveals that a school food 
authority's failure to meet the nutrition standards of Sec. 210.10 is 
unintentional and the school food authority is meeting the requirements 
of a corrective plan developed and agreed to under paragraph (a)(1)(iii) 
of this section.
    (7) Claims adjustment. FNS will have the authority to determine the 
amount of, to settle, and to adjust any claim arising under the Program, 
and to compromise or deny such claim or any part thereof. FNS will also 
have the authority to waive such claims if FNS determines that to do so 
would serve the purposes of the Program. This provision shall not 
diminish the authority of the Attorney General of the United States 
under section 516 of title 28, U.S. Code, to conduct litigation on 
behalf of the United States.
    (d) Management evaluations. Each State agency shall provide FNS with 
full opportunity to conduct management evaluations of all State agency 
Program operations and shall provide OIG with full opportunity to 
conduct audits of all State agency Program operations. Each State agency 
shall make available its records, including records of the receipt and 
disbursement of funds under the Program and records of any claim 
compromised in accordance with this paragraph, upon a reasonable request 
by FNS, OIG, or the Comptroller General of the United States. FNS and 
OIG retain the right to visit schools and OIG also has the right to make 
audits of the records and operations of any school. In conducting 
management evaluations, reviews or audits for any fiscal year, the State 
agency, FNS, or OIG may disregard any overpayment if the total 
overpayment does not exceed $600 or, in the case of State agency claims 
in State administered Programs, it does not exceed the amount 
established under State law, regulations or procedure as a minimum 
amount for which claim will be made for State losses but not to exceed 
$600. However, no overpayment is to be disregarded where there is 
substantial evidence of violations of criminal law or civil fraud 
statutes.
    (e) Additional requirements. Nothing contained in this part shall 
prevent a State agency from imposing additional requirements for 
participation in the Program which are not inconsistent with the 
provisions of this part.
    (f) Cooperation with the Child and Adult Care Food Program. On an 
annual basis, the State agency shall provide the State agency which 
administers the Child and Adult Care Food Program with a list of all 
elementary schools in the State participating in the National School 
Lunch Program in which 50 percent or more of enrolled children have been 
determined eligible for free or reduced price meals as of the last 
operating day of the previous October, or other month specified by the 
State agency. The first list shall be provided by March 15, 1997; 
subsequent lists shall be provided by February 1 of each year or, if 
data is based on a

[[Page 57]]

month other than October, within 90 calendar days following the end of 
the month designated by the State agency. The State agency may provide 
updated free and reduced price enrollment data on individual schools to 
the State agency which administers the Child and Adult Care Food Program 
only when unusual circumstances render the initial data obsolete. In 
addition, the State agency shall provide the current list, upon request, 
to sponsoring organizations of day care homes participating in the Child 
and Adult Care Food Program.

[53 FR 29147, Aug. 2, 1988, as amended at 54 FR 12582, Mar. 28, 1989; 56 
FR 32947, July 17, 1991; 57 FR 38586, Aug. 26, 1992; 59 FR 1894, Jan. 
13, 1994; 60 FR 31215, June 13, 1995; 60 FR 57147, Nov. 14, 1995; 62 FR 
901, Jan. 7, 1997; 63 FR 9104, Feb. 24, 1998; 64 FR 50741, Sept. 20, 
1999; 65 FR 26912, 26922, May 9, 2000]



Sec. 210.20  Reporting and recordkeeping.

    (a) Reporting summary. Participating State agencies shall submit 
forms and reports to FNS to demonstrate compliance with Program 
requirements. The reports include but are not limited to:
    (1) Requests for cash to make reimbursement payments to school food 
authorities as required under Sec. 210.5(a);
    (2) Information on the amounts of Federal Program funds expended and 
obligated to date (SF-269) as required under Sec. 210.5(d);
    (3) Statewide totals on Program participation (FNS-10) as required 
under Sec. 210.5(d);
    (4) Information on State funds provided by the State to meet the 
State matching requirements (FNS-13) specified under Sec. 210.17(g);
    (5) The names of school food authorities in need of a follow-up 
review;
    (6) Results of reviews and audits; and
    (7) Results of the commodity preference survey and recommendations 
for commodity purchases as required under Sec. 250.13(k) of this 
chapter.
    (b) Recordkeeping summary. Participating State agencies are required 
to maintain records to demonstrate compliance with Program requirements. 
The records include but are not limited to:
    (1) Accounting records and source documents to control the receipt, 
custody and disbursement of Federal Program funds as required under 
Sec. 210.5(a);
    (2) Documentation supporting all school food authority claims paid 
by the State agency as required under Sec. 210.5(d);
    (3) Documentation to support the amount the State agency reported 
having used for State revenue matching as required under Sec. 210.17(h);
    (4) Records supporting the State agency's review of net cash 
resources as required under Sec. 210.19(a);
    (5) Reports on the results of investigations of complaints received 
or irregularities noted in connection with Program operations as 
required under Sec. 210.19(a)
    (6) Records of all reviews and audits, including records of action 
taken to correct Program violations; and records of fiscal action taken, 
including documentation of recoveries made;
    (7) State agency criteria for selecting schools for reviews and 
small school food authorities for follow-up reviews;
    (8) Documentation of action taken to disallow improper claims 
submitted by school food authorities, as required by Sec. 210.19(c) and 
as determined through claims processing, resulting from actions such as 
reviews, audits and USDA audits;
    (9) Records of USDA audit findings, State agency's and school food 
authorities' responses to them and of corrective action taken as 
required by Sec. 210.22(a);
    (10) Records pertaining to civil rights responsibilities as defined 
under Sec. 210.23(b); and
    (11) Records pertaining to the annual food preference survey of 
school food authorities as required by Sec. 250.13(k) of this chapter.

[53 FR 29147, Aug. 2, 1988, as amended at 56 FR 32948, July 17, 1991; 56 
FR 55527, Oct. 28, 1991; 64 FR 50741, Sept. 20, 1999]



   Subpart E--State Agency and School Food Authority Responsibilities



Sec. 210.21  Procurement.

    (a) General. State agencies and school food authorities shall comply 
with the requirements of 7 CFR part 3015 concerning the procurement of 
supplies, food, equipment and other services

[[Page 58]]

with Program funds. These requirements ensure that such materials and 
services are obtained for the Program efficiently and economically and 
in compliance with applicable laws and executive orders.
    (b) Contractual responsibilities. The standards contained in 7 CFR 
part 3015 do not relieve the State agency or school food authority of 
any contractual responsibilities under its contracts. The State agency 
or school food authority is the responsible authority, without recourse 
to FNS, regarding the settlement and satisfaction of all contractual and 
administrative issues arising out of procurements entered into in 
connection with the Program. This includes, but is not limited to source 
evaluation, protests, disputes, claims, or other matters of a 
contractual nature. Matters concerning violation of law are to be 
referred to the local, State, or Federal authority that has proper 
jurisdiction.
    (c) Procurement procedure. The State agency or school food authority 
may use its own procurement procedures which reflect applicable State 
and local laws and regulations, provided that procurements made with 
Program funds adhere to the standards set forth in 7 CFR part 3015.
    (d) Buy American.--(1) Definition of domestic commodity or product. 
In this paragraph (d), the term `domestic commodity or product' means--
    (i) An agricultural commodity that is produced in the United States; 
and
    (ii) A food product that is processed in the United States 
substantially using agricultural commodities that are produced in the 
United States.
    (2) Requirement. (i) In general. Subject to paragraph (d)(2)(ii) of 
this section, the Department shall require that a school food authority 
purchase, to the maximum extent practicable, domestic commodities or 
products.
    (ii) Limitations. Paragraph (d)(2)(i) of this section shall apply 
only to--
    (A) A school food authority located in the contiguous United States; 
and
    (B) A purchase of domestic commodity or product for the school lunch 
program under this part.
    (3) Applicability to Hawaii. Paragraph (d)(2)(i) of this section 
shall apply to a school food authority in Hawaii with respect to 
domestic commodities or products that are produced in Hawaii in 
sufficient quantities to meet the needs of meals provided under the 
school lunch program under this part.

[53 FR 29147, Aug. 2, 1988, as amended at 64 FR 50741, Sept. 20, 1999]



Sec. 210.22  Audits.

    (a) General. State agencies and school food authorities shall comply 
with the requirements of 7 CFR part 3015 concerning the audit 
requirements for recipients and subrecipients of the Department's 
financial assistance.
    (b) Audit procedure. These requirements call for organization-wide 
financial and compliance audits to ascertain whether financial 
operations are conducted properly; financial statements are presented 
fairly; recipients and subrecipients comply with the laws and 
regulations that affect the expenditures of Federal funds; recipients 
and subrecipients have established procedures to meet the objectives of 
federally assisted programs; and recipients and subrecipients are 
providing accurate and reliable information concerning grant funds. 
States and school food authorities shall use their own procedures to 
arrange for and prescribe the scope of independent audits, provided that 
such audits comply with the requirements set forth in 7 CFR part 3015.



Sec. 210.23  Other responsibilities.

    (a) Free and reduced price lunches and meal supplements. State 
agencies and school food authorities shall ensure that lunches and meal 
supplements are made available free or at a reduced price to all 
children who are determined by the school food authority to be eligible 
for such benefits. The determination of a child's eligibility for free 
or reduced price lunches and meal supplements is to be made in 
accordance with 7 CFR part 245.
    (b) Civil rights. In the operation of the Program, no child shall be 
denied benefits or be otherwise discriminated against because of race, 
color, national origin, age, sex, or disability. State agencies and 
school food authorities shall comply with the requirements of: Title VI 
of the Civil Rights Act of 1964; title IX of the Education Amendments

[[Page 59]]

of 1972; section 504 of the Rehabilitation Act of 1973; the Age 
Discrimination Act of 1975; Department of Agriculture regulations on 
nondiscrimination (7 CFR parts 15, 15a, and 15b); and FNS Instruction 
113-6.
    (c) Retention of records. State agencies and school food authorities 
may retain necessary records in their original form or on microfilm. 
State agency records shall be retained for a period of 3 years after the 
date of submission of the final Financial Status Report for the fiscal 
year. School food authority records shall be retained for a period of 3 
years after submission of the final Claim for Reimbursement for the 
fiscal year. In either case, if audit findings have not been resolved, 
the records shall be retained beyond the 3-year period as long as 
required for the resolution of the issues raised by the audit.

[53 FR 29147, Aug. 2, 1988, as amended at 58 FR 42489, Aug. 10, 1993; 64 
FR 50741, Sept. 20, 1999]



                    Subpart F--Additional Provisions



Sec. 210.24  Withholding payments.

    In accordance with Sec. 3015.103 of this title, the State agency 
shall withhold Program payments, in whole or in part, to any school food 
authority which has failed to comply with the provisions of this part. 
Program payments shall be withheld until the school food authority takes 
corrective action satisfactory to the State agency, or gives evidence 
that such corrective action will be taken, or until the State agency 
terminates the grant in accordance with Sec. 210.25 of this part. 
Subsequent to the State agency's acceptance of the corrective actions, 
payments will be released for any lunches served in accordance with the 
provisions of this part during the period the payments were withheld.

[56 FR 32948, July 17, 1991]



Sec. 210.25  Suspension, termination and grant closeout procedures.

    Whenever it is determined that a State agency has materially failed 
to comply with the provisions of this part, or with FNS guidelines and 
instructions, FNS may suspend or terminate the Program in whole, or in 
part, or take any other action as may be available and appropriate. A 
State agency may also terminate the Program by mutual agreement with 
FNS. FNS and the State agency shall comply with the provisions of the 
Department's Uniform Federal Assistance Regulations, 7 CFR part 3015, 
subpart N concerning grant suspension, termination and closeout 
procedures. Furthermore, the State agency shall apply these provisions 
to suspension or termination of the Program in school food authorities.

[53 FR 29147, Aug. 2, 1988. Redesignated at 56 FR 32948, July 17, 1991]



Sec. 210.26  Penalties.

    Whoever embezzles, willfully misapplies, steals, or obtains by fraud 
any funds, assets, or property provided under this part whether received 
directly or indirectly from the Department, shall if such funds, assets, 
or property are of a value of $100 or more, be fined no more than 
$25,000 or imprisoned not more than 5 years or both; or if such funds, 
assets, or property are of a value of less than $100, be fined not more 
than $1,000 or imprisoned not more than 1 year or both. Whoever 
receives, conceals, or retains for personal use or gain, funds, assets, 
or property provided under this part, whether received directly or 
indirectly from the Department, knowing such funds, assets, or property 
have been embezzled, willfully misapplied, stolen, or obtained by fraud, 
shall be subject to the same penalties.

[53 FR 29147, Aug. 2, 1988. Redesignated at 56 FR 32948, July 17, 1991, 
as amended at 64 FR 50741, Sept. 20, 1999]



Sec. 210.27  Educational prohibitions.

    In carrying out the provisions of the Act, the Department shall not 
impose any requirements with respect to teaching personnel, curriculum, 
instructions, methods of instruction, or materials of instruction in any 
school as a condition for participation in the Program.

[53 FR 29147, Aug. 2, 1988. Redesignated at 56 FR 32948, July 17, 1991, 
as amended at 64 FR 50741, Sept. 20, 1999]

[[Page 60]]



Sec. 210.28  Pilot project exemptions.

    Those State agencies or school food authorities selected for the 
pilot projects mandated under section 18(d) of the Act may be exempted 
by the Department from some or all of the counting and free and reduced 
price application requirements of this part and 7 CFR part 245, as 
necessary, to conduct an approved pilot project. Additionally, those 
schools selected for pilot projects that also operate the School 
Breakfast Program (7 CFR part 220) and/or the Special Milk Program for 
Children (7 CFR part 215), may be exempted from the counting and free 
and reduced price application requirements mandated under these 
Programs. The Department shall notify the appropriate State agencies and 
school food authorities of its determination of which requirements are 
exempted after the Department's selection of pilot projects.

[55 FR 41504, Oct. 12, 1990. Redesignated at 56 FR 32948, July 17, 1991. 
Further redesignated at 64 FR 50741, Sept. 20, 1999]



Sec. 210.29  Management evaluations.

    (a) Management evaluations. FNS will conduct a comprehensive 
management evaluation of each State agency's administration of the 
National School Lunch Program.
    (b) Basis for evaluations. FNS will evaluate all aspects of State 
agency management of the Program using tools such as State agency 
reviews as required under Sec. 210.18 or Sec. 210.18a of this part; 
reviews conducted by FNS in accordance with Sec. 210.18 of this part; 
FNS reviews of school food authorities and schools authorized under 
Sec. 210.19(a)(4) of this part; follow-up reviews and actions taken by 
the State agency to correct violations found during reviews; FNS 
observations of State agency reviews; and audit reports.
    (c) Scope of management evaluations. The management evaluation will 
determine whether the State agency has taken steps to ensure school food 
authority compliance with Program regulations, and whether the State 
agency is administering the Program in accordance with Program 
requirements and good management practices.
    (1) Local compliance. FNS will evaluate whether the State agency has 
actively taken steps to ensure that school food authorities comply with 
the provisions of this part.
    (2) State agency compliance. FNS will evaluate whether the State 
agency has fulfilled its State level responsibilities, including, but 
not limited to the following areas: use of Federal funds; reporting and 
recordkeeping; agreements with school food authorities; review of food 
service management company contracts; review of the claims payment 
process; implementation of the State agency's monitoring 
responsibilities; initiation and completion of corrective action; 
recovery of overpayments; disallowance of claims that are not properly 
payable; withholding of Program payments; oversight of school food 
authority procurement activities; training and guidance activities; 
civil rights; and compliance with the State Administrative Expense Funds 
requirements as specified in 7 CFR part 235.
    (d) School food authority reviews. FNS will examine State agency 
administration of the Program by reviewing local Program operations. 
When conducting these reviews under paragraph (d)(2) of this section, 
FNS will follow all the administrative review requirements specified in 
Sec. 210.18(a)-(h) of this part. When FNS conducts reviews, the findings 
will be sent to the State agency to ensure all the needed follow-up 
activity occurs. The State agency will, in all cases, be invited to 
accompany FNS reviewers.
    (1) Observation of State agency reviews. FNS may observe the State 
agency conduct of any review and/or any follow-up review as required 
under this part. At State agency request, FNS may assist in the conduct 
of the review.
    (2) Section 210.18 reviews. FNS will conduct administrative reviews 
or follow-up reviews in accordance with Sec. 210.18(a)-(h) of this part 
which will count toward meeting the State agency responsibilities 
identified under Sec. 210.18 of this part.
    (3) School food authority appeal of FNS findings. When 
administrative or follow-up review activity conducted by FNS in 
accordance with the provisions

[[Page 61]]

of paragraph (d)(2) of this section results in the denial of all or part 
of a Claim for Reimbursement or withholding of payment, a school food 
authority may appeal the FNS findings by filing a written request with 
the Chief, Administrative Review Branch, U.S. Department of Agriculture, 
Food and Nutrition Service, 3101 Park Center Drive, Alexandria, 
Virginia, 22302, in accordance with the appeal procedures specified in 
this paragraph:
    (i) The written request for a review of the record shall be 
postmarked within 15 calendar days of the date the appellant received 
the notice of the denial of all or a part of the Claim for Reimbursement 
or withholding payment and the envelope containing the request shall be 
prominently marked ``REQUEST FOR REVIEW''. FNS will acknowledge the 
receipt of the request for appeal within 10 calendar days. The 
acknowledgement will include the name and address of the FNS 
Administrative Review Officer (ARO) reviewing the case. FNS will also 
notify the State agency of the request for appeal.
    (ii) The appellant may refute the action specified in the notice in 
person and by written documentation to the ARO. In order to be 
considered, written documentation must be filed with the ARO not later 
than 30 calendar days after the appellant received the notice. The 
appellant may retain legal counsel, or may be represented by another 
person. A hearing shall be held by the ARO in addition to, or in lieu 
of, a review of written information submitted by the appellant only if 
the appellant so specifies in the letter of request for review. Failure 
of the appellant school food authority's representative to appear at a 
scheduled hearing shall constitute the appellant school food authority's 
waiver of the right to a personal appearance before the ARO, unless the 
ARO agrees to reschedule the hearing. A representative of FNS shall be 
allowed to attend the hearing to respond to the appellant's testimony 
and to answer questions posed by the ARO;
    (iii) If the appellant has requested a hearing, the appellant shall 
be provided with a least 10 calendar days advance written notice, sent 
by certified mail, return receipt requested, of the time, date, and 
place of the hearing;
    (iv) Any information on which FNS's action was based shall be 
available to the appellant for inspection from the date of receipt of 
the request for review;
    (v) The ARO shall be an independent and impartial official other 
than, and not accountable to, any person authorized to make decisions 
that are subject to appeal under the provisions of this section;
    (vi) The ARO shall make a determination based on information 
provided by FNS and the appellant, and on Program regulations;
    (vii) Within 60 calendar days of the receipt of the request for 
review, by written notice, sent by certified mail, return receipt 
requested, the ARO shall inform FNS, the State agency and the appellant 
of the determination of the ARO. The final determination shall take 
effect upon receipt of the written notice of the final decision by the 
school food authority;
    (viii) The action being appealed shall remain in effect during the 
appeal process;
    (ix) The determination by the ARO is the final administrative 
determination to be afforded to the appellant.
    (4) Coordination with State agency. FNS will coordinate school food 
authority selection with the State agency to ensure that no unintended 
overlap exists and to ensure reviews are conducted in a consistent 
manner.
    (e) Management evaluation findings. FNS will consider the results of 
all its review activity within each State, including school food 
authority reviews, in performing management evaluations and issuing 
management evaluation reports. FNS will communicate the findings of the 
management evaluation to appropriate State agency personnel in an exit 
conference. Subsequent to the exit conference, the State agency will be 
notified in writing of the management evaluation findings and any needed 
corrective actions or fiscal sanctions in accordance with the provisions 
Sec. 210.25 of this part and/or 7 CFR part 235.

[56 FR 32949, July 17, 1991, as amended at 57 FR 38586, Aug. 26, 1992. 
Redesignated at 64 FR 50741, Sept. 20, 1999]

[[Page 62]]



Sec. 210.30  Regional office addresses.

    School food authorities desiring information concerning the Program 
should write to their State educational agency or to the appropriate 
Regional Office of FNS as indicated below:
    (a) In the States of Connecticut, Maine, Massachusetts, New 
Hampshire, New York, Rhode Island, and Vermont: Northeast Regional 
Office, FNS, U.S. Department of Agriculture, 10 Causeway Street, Room 
501, Boston, Massachusetts 02222-1065.
    (b) In the States of Alabama, Florida, Georgia, Kentucky, 
Mississippi, North Carolina, South Carolina, and Tennessee: Southeast 
Regional Office, FNS, U.S. Department of Agriculture, 61 Forsyth Street 
SW, Room 8T36, Atlanta, Georgia 30303.
    (c) In the States of Illinois, Indiana, Michigan, Minnesota, Ohio, 
and Wisconsin: Midwest Regional Office, FNS, U.S. Department of 
Agriculture, 77 West Jackson Boulevard, 20th Floor, Chicago, Illinois 
60604-3507.
    (d) In the States of Arkansas, Louisiana, New Mexico, Oklahoma, and 
Texas: Southwest Regional Office, FNS, U.S. Department of Agriculture, 
1100 Commerce Street, Room 5-C-30, Dallas, Texas 75242.
    (e) In the States of Alaska, American Samoa, Arizona, California, 
Guam, Hawaii, Idaho, Nevada, Oregon, the Commonwealth of the Northern 
Mariana Islands, and Washington: Western Regional Office, FNS, U.S. 
Department of Agriculture, 550 Kearny Street, Room 400, San Francisco, 
California 94108.
    (f) In the States of Delaware, District of Columbia, Maryland, New 
Jersey, Pennsylvania, Puerto Rico, Virginia, Virgin Islands, and West 
Virginia: Mid-Atlantic Regional Office, FNS, U.S. Department of 
Agriculture, 300 Corporate Boulevard, Robbinsville, New Jersey 08691-
1598.
    (g) In the States of Colorado, Iowa, Kansas, Missouri, Montana, 
Nebraska, North Dakota, South Dakota, Utah, and Wyoming: Mountain Plains 
Regional Office, FNS, U.S. Department of Agriculture, 1244 Speer 
Boulevard, Suite 903, Denver, Colorado 80204.

[53 FR 29147, Aug. 2, 1988. Redesignated at 55 FR 41503, Oct. 12, 1990. 
Further redesignated at 56 FR 32948, July 17, 1991. Further redesignated 
at 64 FR 50741, Sept. 20, 1999; 65 FR 12434, Mar. 9, 2000]



Sec. 210.31  OMB control numbers.

    The following control numbers have been assigned to the information 
collection requirements in 7 CFR part 210 by the Office of Management 
and Budget pursuant to the Paperwork Reduction Act of 1980, Pub. L. 96-
511.

------------------------------------------------------------------------
                                                           Current OMB
     7 CFR section where requirements are described        control No.
------------------------------------------------------------------------
210.3(b)...............................................        0584-0327
210.5(d)...............................................        0584-0006
210.5(d)(1)............................................        0584-0002
210.5(d)(2)............................................        0584-0341
210.5(d)(3)............................................        0584-0341
210.6(b)...............................................        0584-0006
210.8..................................................        0584-0006
                                                               0584-0284
210.9..................................................        0584-0006
                                                               0584-0026
                                                               0584-0329
210.10(b)..............................................        0584-0006
210.10(i)(1)...........................................        0584-0006
210.14(c)..............................................        0584-0006
210.16.................................................        0584-0006
210.17.................................................        0584-0006
210.17(g)..............................................        0584-0075
210.18.................................................        0584-0006
210.19.................................................        0584-0006
210.22.................................................        0584-0006
210.23(c)..............................................        0584-0006
210.24.................................................        0584-0006
210.27.................................................        0584-0006
------------------------------------------------------------------------


[53 FR 29147, Aug. 2, 1990. Redesignated at 55 FR 41503, Oct. 12, 1990. 
Further redesignated at 56 FR 32948, July 17, 1991. Further redesignated 
at 64 FR 50741, Sept. 20, 1999]

            Appendix A to Part 210--Alternate Foods for Meals

          I. Enriched Macaroni Products with Fortified Protein

    1. Schools may utilize the enriched macaroni products with fortified 
protein defined in paragraph 3 as a food item in meeting the meal 
requirements of this part under the following terms and conditions:
    (a) One ounce (28.35 grams) of a dry enriched macaroni product with 
fortified protein may be used to meet not more than one-half of the meat 
or meat alternate requirements specified in Sec. 210.10, when served in 
combination with 1 or more ounces (28.35

[[Page 63]]

grams) of cooked meat, poultry, fish, or cheese. The size of servings of 
the cooked combination may be adjusted for various age groups.
    (b) Only enriched macaroni products with fortified protein that bear 
a label containing substantially the following legend shall be so 
utilized: ``One ounce (28.35 grams) dry weight of this product meets 
one-half of the meat or meat alternate requirements of lunch or supper 
of the USDA child nutrition programs when served in combination with 1 
or more ounces (28.35 grams) of cooked meat, poultry, fish, or cheese. 
In those States where State or local law prohibits the wording 
specified, a legend acceptable to both the State or local authorities 
and FNS shall be substituted.''
    (c) Enriched macaroni product may not be used for infants under 1 
year of age.
    2. Only enriched macaroni products with fortified protein that have 
been accepted by FNS for use in the USDA Child Nutrition Programs may be 
labeled as provided in paragraph 1(b) of this appendix. Manufacturers 
seeking acceptance of their product shall furnish FNS a chemical 
analysis, the Protein Digestibility-Corrected Amino Acid Score (PDCAAS), 
and such other pertinent data as may be requested by FNS, except that 
prior to November 7, 1994, manufacturers may submit protein efficiency 
ratio analysis in lieu of the PDCAAS. This information is to be 
forwarded to: Director, Nutrition and Technical Services Division, Food 
and Nutrition Service, U.S. Department of Agriculture, 3101 Park Center 
Drive, room 607, Alexandria, VA 22302. All laboratory analyses are to be 
performed by independent or other laboratories acceptable to FNS. (FNS 
prefers an independent laboratory.) All laboratories shall retain the 
``raw'' laboratory data for a period of 1 year. Such information shall 
be made available to FNS upon request. Manufacturers must notify FNS if 
there is a change in the protein portion of their product after the 
original testing. Manufacturers who report such a change in protein in a 
previously approved product must submit protein data in accordance with 
the method specified in this paragraph.
    3. The product should not be designed in such a manner that would 
require it to be classified as a Dietary Supplement as described by the 
Food and Drug Administration (FDA) in 21 CFR part 105. To be accepted by 
FNS, enriched macaroni products with fortified protein must conform to 
the following requirements:
    (a)(1) Each of these foods is produced by drying formed units of 
dough made with one or more of the milled wheat ingredients designated 
in 21 CFR 139.110(a) and 139.138(a), and other ingredients to enable the 
finished food to meet the protein requirements set out in paragraph 
3.(a)(2)(i) under Enriched Macaroni Products with Fortified Protein in 
this appendix. Edible protein sources, including food grade flours or 
meals made from nonwheat cereals or from oilseeds, may be used. Vitamin 
and mineral enrichment nutrients are added to bring the food into 
conformity with the requirements of paragraph (b) under Enriched 
Macaroni Products with Fortified Protein in this appendix. Safe and 
suitable ingredients, as provided for in paragraph (c) under Enriched 
Macaroni Products with Fortified Protein in this appendix, may be added. 
The proportion of the milled wheat ingredient is larger than the 
proportion of any other ingredient used.
    (2) Each such finished food, when tested by the methods described in 
the pertinent sections of ``Official Methods of Analysis of the AOAC 
International,'' (formerly the Association of Official Analytical 
Chemists), 15th Ed. (1990) meets the following specifications. This 
publication is incorporated by reference in accordance with 5 U.S.C. 
552(a) and 1 CFR part 51. Copies may be obtained from the AOAC 
International, 2200 Wilson Blvd., suite 400, Arlington, VA 22201-3301. 
This publication may be examined at the Food and Nutrition Service, 
Nutrition and Technical Services Division, 3101 Park Center Drive, room 
607, Alexandria, Virginia 22302 or the Office of the Federal Register, 
800 North Capital Street, NW., suite 700, Washington, DC.
    (i) The protein content (N x 6.25) is not less than 20 percent by 
weight (on a 13 percent moisture basis) as determined by the appropriate 
method of analysis in the AOAC manual cited in (a)(2) under Enriched 
Macaroni Products with Fortified Protein in this appendix. The protein 
quality is not less than 95 percent that of casein as determined on a 
dry basis by the PDCAAS method as described below:
    (A) The PDCAAS shall be determined by the methods given in sections 
5.4.1, 7.2.1. and 8.0 as described in ``Protein Quality Evaluation, 
Report of the Joint FAO/WHO Expert Consultation on Protein Quality 
Evaluation,'' Rome, 1990, as published by the Food and Agriculture 
Organization (FAO) of the United Nations/World Health Organization 
(WHO). This report is incorporated by reference in accordance with 5 
U.S.C. 552(a) and 1 CFR part 51. Copies of this report may be obtained 
from the Nutrition and Technical Services Division, Food and Nutrition 
Service, 3101 Park Center Drive, room 607, Alexandria, Virginia 22302. 
This report may also be inspected at the Office of the Federal Register 
800 North Capitol St., NW., suite 700, Washington, DC.
    (B) The standard used for assessing protein quality in the PDCAAS 
method is the amino acid scoring pattern established by FAO/WHO and 
United Nations University (UNU) in 1985 for preschool children 2 to 5 
years of age which has been adopted by the National Academy of Sciences, 
Recommended Dietary Allowances (RDA), 1989.

[[Page 64]]

    (C) To calculate the PDCAAS for an individual food, the test food 
must be analyzed for proximate analysis and amino acid composition 
according to AOAC methods.
    (D) The PDCAAS may be calculated using FDA's limited data base of 
published true digestibility values (determined using humans and rats). 
The true digestibility values contained in the WHO/FAO report referenced 
in paragraph 3.(a)(2)(i)(A) under Enriched Macaroni Products with 
Fortified Protein in this appendix may also be used. If the 
digestibility of the protein is not available from these sources it must 
be determined by a laboratory according to methods in the FAO/WHO report 
(sections 7.2.1 and 8.0).
    (E) The most limiting essential amino acid (that is, the amino acid 
that is present at the lowest level in the test food compared to the 
standard) is identified in the test food by comparing the levels of 
individual amino acids in the test food with the 1985 FAO/WHO/UNU 
pattern of essential amino acids established as a standard for children 
2 to 5 years of age.
    (F) The value of the most limiting amino acid (the ratio of the 
amino acid in the test food over the amino acid value from the pattern) 
is multiplied by the percent of digestibility of the protein. The 
resulting number is the PDCAAS.
    (G) The PDCAAS of food mixtures must be calculated from data for the 
amino acid composition and digestibility of the individual components by 
means of a weighted average procedure. An example for calculating a 
PDCAAS for a food mixture of varying protein sources is shown in section 
8.0 of the FAO/WHO report cited in paragraph 3.(a)(2)(i)(A) under 
Enriched Macaroni Products with Fortified Protein in this appendix.
    (H) For the purpose of this regulation, each 100 grams of the 
product (on a 13 percent moisture basis) must contain protein in amounts 
which is equivalent to that provided by 20 grams of protein with a 
quality of not less than 95 percent casein. The equivalent grams of 
protein required per 100 grams of product (on a 13 percent moisture 
basis) would be determined by the following equation:
[GRAPHIC] [TIFF OMITTED] TR07OC94.022

    X=grams of protein required per 100 grams of product
    a=20 grams (amount of protein if casein)
    b=.95 [95%  x  1 (PDCAAS of casein)
    c=PDCAAS for protein used in formulation
    (ii) The total solids content is not less than 87 percent by weight 
as determined by the methods described in the ``Official Methods of 
Analysis of the AOAC International'' cited in paragraph (a)(2) under 
Enriched Macaroni Products with Fortified Protein in this appendix.
    (b)(1) Each pound of food covered by this section shall contain 5 
milligrams of thiamine, 2.2 milligrams of riboflavin, 34 milligrams of 
niacin or niacinamide, and 16.5 milligrams of iron.
    (2) Each pound of such food may also contain 625 milligrams of 
calcium.
    (3) Only harmless and assimilable forms of iron and calcium may be 
added. The enrichment nutrients may be added in a harmless carrier used 
only in a quantity necessary to effect a uniform distribution of the 
nutrients in the finished food. Reasonable overages, within the limits 
of good manufacturing practice, may be used to assure that the 
prescribed levels of the vitamins and mineral(s) in paragraphs (b)(1) 
and (2) under Enriched Macaroni Products with Fortified Protein in this 
appendix are maintained throughout the expected shelf life of the food 
under customary conditions of distribution.
    (c) Ingredients that serve a useful purpose such as to fortify the 
protein or facilitate production of the food are the safe and suitable 
ingredients referred to in paragraph (a) under Enriched Macaroni 
Products with Fortified Protein in this appendix. This does not include 
color additives, artificial flavorings, artificial sweeteners, chemical 
preservatives, or starches. Ingredients deemed suitable for use by this 
paragraph are added in amounts that are not in excess of those 
reasonably required to achieve their intended purposes. Ingredients are 
deemed to be safe if they are not food additives within the meaning of 
section 201(s) of the Federal Food, Drug and Cosmetic Act, or in case 
they are food additives if they are used in conformity with regulations 
established pursuant to section 409 of the act.
    (d)(1) The name of any food covered by this section is ``Enriched 
Wheat ________________ Macaroni Product with Fortified Protein'', the 
blank being filled in with appropriate word(s) such as ``Soy'' to show 
the source of any flours or meals used that were made from non-wheat 
cereals or from oilseeds. In lieu of the words ``Macaroni Product'' the 
words ``Macaroni'', ``Spaghetti'', or ``Vermicelli'' as appropriate, may 
be used if the units conform in shape and size to the requirements of 21 
CFR 139.110 (b), (c), or (d).
    (2) When any ingredient not designated in the part of the name 
prescribed in paragraph (d)(1) under Enriched Macaroni Products with 
Fortified Protein in this appendix, is added in such proportion as to 
contribute 10 percent or more of the quantity of protein contained in 
the finished food, the name shall include the statement ``Made with 
________________'', the blank being filled in with the name of each such 
ingredient, e.g. ``Made with nonfat milk''.
    (3) When, in conformity with paragraph (d)(1) or (d)(2) under 
Enriched Macaroni Products with Fortified Protein in this appendix, two 
or more ingredients are listed in

[[Page 65]]

the name, their designations shall be arranged in descending order of 
predominance by weight.
    (4) If a food is made to comply with a section of 21 CFR part 139, 
but also meets the compositional requirements of the Enriched Macaroni 
with Fortified Protein Appendix, it may alternatively bear the name set 
out in the other section.
    (e) Each ingredient used shall declare its common name as required 
by the applicable section of 21 CFR part 101. In addition, the 
ingredients statement shall appear in letters not less than one half the 
size of that required by 21 CFR 101.105 for the declaration of net 
quantity of contents, and in no case less than one-sixteenth of an inch 
in height.

                     II. Alternate Protein Products

  A. What Are the Criteria for Alternate Protein Products Used in the 
                     National School Lunch Program?

    1. An alternate protein product used in meals planned under the 
food-based menu planning approaches in Sec. 210.10(k), must meet all of 
the criteria in this section.
    2. An alternate protein product whether used alone or in combination 
with meat or other meat alternates must meet the following criteria:
    a. The alternate protein product must be processed so that some 
portion of the non-protein constituents of the food is removed. These 
alternate protein products must be safe and suitable edible products 
produced from plant or animal sources.
    b. The biological quality of the protein in the alternate protein 
product must be at least 80 percent that of casein, determined by 
performing a Protein Digestibility Corrected Amino Acid Score (PDCAAS).
    c. The alternate protein product must contain at least 18 percent 
protein by weight when fully hydrated or formulated. (``When hydrated or 
formulated'' refers to a dry alternate protein product and the amount of 
water, fat, oil, colors, flavors or any other substances which have been 
added).
    d. Manufacturers supplying an alternate protein product to 
participating schools or institutions must provide documentation that 
the product meets the criteria in paragraphs A2. a through c of this 
appendix.
    e. Manufacturers should provide information on the percent protein 
contained in the dry alternate protein product and on an as prepared 
basis.
    f. For an alternate protein product mix, manufacturers should 
provide information on:
    (1) the amount by weight of dry alternate protein product in the 
package;
    (2) hydration instructions; and
    (3) instructions on how to combine the mix with meat or other meat 
alternates.

B. How Are Alternate Protein Products Used in the National School Lunch 
                                Program?

    1. Schools, institutions, and service institutions may use alternate 
protein products to fulfill all or part of the meat/meat alternate 
component discussed in Sec. 210.10.
    2. The following terms and conditions apply:
    a. The alternate protein product may be used alone or in combination 
with other food ingredients. Examples of combination items are beef 
patties, beef crumbles, pizza topping, meat loaf, meat sauce, taco 
filling, burritos, and tuna salad.
    b. Alternate protein products may be used in the dry form 
(nonhydrated), partially hydrated or fully hydrated form. The moisture 
content of the fully hydrated alternate protein product (if prepared 
from a dry concentrated form) must be such that the mixture will have a 
minimum of 18 percent protein by weight or equivalent amount for the dry 
or partially hydrated form (based on the level that would be provided if 
the product were fully hydrated).

 C. How Are Commercially Prepared Products Used in the National School 
                             Lunch Program?

    Schools, institutions, and service institutions may use a 
commercially prepared meat or meat alternate product combined with 
alternate protein products or use a commercially prepared product that 
contains only alternate protein products.

[51 FR 34874, Sept. 30, 1986; 51 FR 41295, Nov. 14, 1986, as amended at 
53 FR 29164, Aug. 2, 1988; 59 FR 51086, Oct. 7, 1994; 60 FR 31216; June 
13, 1995; 61 FR 37671, July 19, 1996; 65 FR 12434, Mar. 9, 2000; 65 FR 
26912, May 9, 2000]

Appendix B to Part 210--Categories of Foods of Minimal Nutritional Value

    (a) Foods of minimal nutritional value--Foods of minimal nutritional 
value are:
    (1) Soda Water--A class of beverages made by absorbing carbon 
dioxide in potable water. The amount of carbon dioxide used is not less 
than that which will be absorbed by the beverage at a pressure of one 
atmosphere and at a temperature of 60 deg. F. It either contains no 
alcohol or only such alcohol, not in excess of 0.5 percent by weight of 
the finished beverage, as is contributed by the flavoring ingredient 
used. No product shall be excluded from this definition because it 
contains artificial sweeteners or discrete nutrients added to the food 
such as vitamins, minerals and protein.
    (2) Water Ices--As defined by 21 CFR 135.160 Food and Drug 
Administration Regulations except that water ices which contain fruit or 
fruit juices are not included in this definition.

[[Page 66]]

    (3) Chewing Gum--Flavored products from natural or synthetic gums 
and other ingredients which form an insoluble mass for chewing.
    (4) Certain Candies--Processed foods made predominantly from 
sweeteners or artifical sweeteners with a variety of minor ingredients 
which characterize the following types:
    (i) Hard Candy--A product made predominantly from sugar (sucrose) 
and corn syrup which may be flavored and colored, is characterized by a 
hard, brittle texture, and includes such items as sour balls, fruit 
balls, candy sticks, lollipops, starlight mints, after dinner mints, 
sugar wafers, rock candy, cinnamon candies, breath mints, jaw breakers 
and cough drops.
    (ii) Jellies and Gums--A mixture of carbohydrates which are combined 
to form a stable gelatinous system of jelly-like character, and are 
generally flavored and colored, and include gum drops, jelly beans, 
jellied and fruit-flavored slices.
    (iii) Marshmallow Candies--An aerated confection composed as sugar, 
corn syrup, invert sugar, 20 percent water and gelatin or egg white to 
which flavors and colors may be added.
    (iv) Fondant--A product consisting of microscopic-sized sugar 
crystals which are separated by thin film of sugar and/or invert sugar 
in solution such as candy corn, soft mints.
    (v) Licorice--A product made predominantly from sugar and corn syrup 
which is flavored with an extract made from the licorice root.
    (vi) Spun Candy--A product that is made from sugar that has been 
boiled at high temperature and spun at a high speed in a special 
machine.
    (vii) Candy Coated Popcorn--Popcorn which is coated with a mixture 
made predominantly from sugar and corn syrup.
    (b) Petitioning Procedures--Reconsideration of the list of foods of 
minimal nutritional value identified in paragraph (a) of this section 
may be pursued as follows:
    (1) Any person may submit a petition to FNS requesting that an 
individual food be exempted from a category of foods of minimal 
nutritional value listed in paragraph (a). In the case of artificially 
sweetened foods, the petition must include a statement of the percent of 
Reference Daily Intake (RDI) for the eight nutrients listed in 
Sec. 210.11(a)(2) ``Foods of minimal nutritional value,'' that the food 
provides per serving and the petitioner's source of this information. In 
the case of all other foods, the petition must include a statement of 
the percent of RDI for the eight nutrients listed in Sec. 210.11(a)(2) 
``Foods of minimal nutritional value,'' that the food provides per 
serving and per 100 calories and the petitioner's source of this 
information. The Department will determine whether or not the individual 
food is a food of minimal nutritional value as defined in 
Sec. 210.11(a)(2) and will inform the petitioner in writing of such 
determination, and the public by notice in the Federal Register as 
indicated below under paragraph (b)(3) of this section. In determining 
whether an individual food is a food of minimal nutritional value, 
discrete nutrients added to the food will not be taken into account.
    (2) Any person may submit a petition to FNS requesting that foods in 
a particular category of foods be classified as foods of minimal 
nutritional value as defined in Sec. 210.11(a)(2). The petition must 
identify and define the food category in easily understood language, 
list examples of the food contained in the category and include a list 
of ingredients which the foods in that category usually contain. If, 
upon review of the petition, the Department determines that the foods in 
that category should not be classified as foods of minimal nutritional 
value, the petitioners will be so notified in writing. If, upon review 
of the petition, the Department determines that there is a substantial 
likelihood that the foods in that category should be classified as foods 
of minimal nutritional value as defined in Sec. 210.11(a)(2), the 
Department shall at that time inform the petitioner. In addition, the 
Department shall publish a proposed rule restricting the sale of foods 
in that category, setting forth the reasons for this action, and 
soliciting public comments. On the basis of comments received within 60 
days of publication of the proposed rule and other available 
information, the Department will determine whether the nutrient 
composition of the foods indicates that the category should be 
classified as a category of foods of minimal nutritional value. The 
petitioner shall be notified in writing and the public shall be notified 
of the Department's final determination upon publication in the Federal 
Register as indicated under paragraph (b)(3) of this section.
    (3) By May 1 and November 1 of each year, the Department will amend 
appendix B to exclude those individual foods identified under paragraph 
(b)(1) of this section, and to include those categories of foods 
identified under paragraph (b)(2) of this section, provided, that there 
are necessary changes. The schedule for amending appendix B is as 
follows:

------------------------------------------------------------------------
                                                Publication
     Actions for publication     ---------------------------------------
                                          May              November
------------------------------------------------------------------------
Deadline for receipt of           Nov. 15...........  May 15.
 petitions by USDA.
USDA to notify petitioners of     Feb. 1............  Aug. 1.
 results of Departmental review
 and publish proposed rule (if
 applicable).
60 Day comment period...........  Feb. 1 through      Aug. 1 through
                                   Apr. 1.             Oct. 1.

[[Page 67]]

 
Public notice of amendment of     May 1.............  Nov. 1.
 appendix B by.
------------------------------------------------------------------------

    (4) Written petitions should be sent to the Chief, Technical 
Assistance Branch, Nutrition and Technical Services Division, FNS, USDA, 
Alexandria, Virginia 22302, on or before November 15 or May 15 of each 
year. Petitions must include all information specified in paragraph (b) 
of this appendix and Sec. 220.12(b) (1) or (2) as appropriate.

[53 FR 29147, Aug. 2, 1988, as amended at 54 FR 18465, May 1, 1989; 59 
FR 23614, May 6, 1994]

        Appendix C to Part 210--Child Nutrition Labeling Program

    1. The Child Nutrition (CN) Labeling Program is a voluntary 
technical assistance program administered by the Food and Nutrition 
Service in conjunction with the Food Safety and Inspection Service 
(FSIS), and Agricultural Marketing Service (AMS) of the U.S. Department 
of Agriculture, and National Marine Fisheries Service of the U.S. 
Department of Commerce (USDC) for the Child Nutrition Programs. This 
program essentially involves the review of a manufacturer's recipe or 
product formulation to determine the contribution a serving of a 
commercially prepared product makes toward meal pattern requirements and 
a review of the CN label statement to ensure its accuracy. CN labeled 
products must be produced in accordance with all requirements set forth 
in this rule.
    2. Products eligible for CN labels are as follows:
    (a) Commercially prepared food products that contribute 
significantly to the meat/meat alternate component of meal pattern 
requirements of 7 CFR 210.10, 225.20, and 226.20 and are served in the 
main dish.
    (b) Juice drinks and juice drink products that contain a minimum of 
50 percent full-strength juice by volume.
    3. For the purpose of this appendix the following definitions apply:
    (a) ``CN label'' is a food product label that contains a CN label 
statement and CN logo as defined in paragraph 3 (b) and (c) below.
    (b) The ``CN logo'' (as shown below) is a distinct border which is 
used around the edges of a ``CN label statement'' as defined in 
paragraph 3(c).
[GRAPHIC] [TIFF OMITTED] TC17SE91.000

    (c) The ``CN label statement'' includes the following:
    (1) The product identification number (assigned by FNS),
    (2) The statement of the product's contribution toward meal pattern 
requirements of 7 CFR 210.10, Sec. 220.8 or Sec. 220.8a, whichever is 
applicable, Secs. 225.20, and 226.20. The statement shall identify the 
contribution of a specific portion of a meat/meat alternate product 
toward the meat/meat alternate, bread/bread alternate, and/or vegetable/
fruit component of the meal pattern requirements. For juice drinks and 
juice drink products the statement shall identify their contribution 
toward the vegetable/fruit component of the meal pattern requirements,
    (3) Statement specifying that the use of the CN logo and CN 
statement was authorized by FNS, and
    (4) The approval date.
    For example:

[[Page 68]]

[GRAPHIC] [TIFF OMITTED] TC17SE91.001

    (d) Federal inspection means inspection of food products by FSIS, 
AMS or USDC.
    4. Food processors or manufacturers may use the CN label statement 
and CN logo as defined in paragraph 3 (b) and (c) under the following 
terms and conditions:
    (a) The CN label must be reviewed and approved at the national level 
by FNS and appropriate USDA or USDC Federal agency responsible for the 
inspection of the product.
    (b) The CN labeled product must be produced under Federal inspection 
by USDA or USDC. The Federal inspection must be performed in accordance 
with an approved partial or total quality control program or standards 
established by the appropriate Federal inspection service.
    (c) The CN label statement must be printed as an integral part of 
the product label along with the product name, ingredient listing, the 
inspection shield or mark for the appropriate inspection program, the 
establishment number where appropriate, and the manufacturer's or 
distributor's name and address. The inspection marking for CN labeled 
non-meat, non-poultry, and non-seafood products with the exception of 
juice drinks and juice drink products is established as follows:
[GRAPHIC] [TIFF OMITTED] TC17SE91.002

    (d) Yields for determining the product's contribution toward meal 
pattern requirements must be calculated using the Food Buying Guide for 
Child Nutrition Programs (Program AID Number 1331).
    5. In the event a company uses the CN logo and CN label statement 
inappropriately, the company will be directed to discontinue the use of 
the logo and statement and the matter will be referred to the 
appropriate agency for action to be taken against the company.
    6. Products that bear a CN label statement as set forth in paragraph 
3(c) carry a warranty. This means that if a food service authority 
participating in the Child Nutrition Programs purchases a CN labeled 
product and uses it in accordance with the manufacturer's directions, 
the school or institution will not have an audit claim filed against it 
for the CN labeled product for noncompliance with the meal pattern 
requirements of 7 CFR 210.10, Sec. 220.8 or Sec. 220.8a, whichever is 
applicable, Secs. 225.20, and 226.20. If a State or Federal auditor 
finds that a product that is CN labeled does not actually meet the meal 
pattern requirements claimed on the label, the auditor will report this 
finding to FNS. FNS will prepare a report of the findings and send it to 
the appropriate divisions of FSIS and AMS of the USDA, National Marine 
Fisheries Services of the USDC, Food and Drug Administration, or the 
Department of Justice for action against the company. Any or all of the 
following courses of action may be taken:
    (a) The company's CN label may be revoked for a specific period of 
time;
    (b) The appropriate agency may pursue a misbranding or mislabeling 
action against the company producing the product;
    (c) The company's name will be circulated to regional FNS offices;
    (d) FNS will require the food service program involved to notify the 
State agency of the labeling violation.
    7. FNS is authorized to issue operational policies, procedures, and 
instructions for the CN Labeling Program. To apply for a CN label and to 
obtain additional information on CN label application procedures write 
to: CN Labels, U.S. Department of Agriculture, Food and Nutrition 
Service, Nutrition and Technical Services Division, 3101 Park Center 
Drive, Alexandria, Virginia 22302.

[51 FR 34874, Sept. 30, 1986, as amended at 53 FR 29164, Aug. 2, 1988; 
60 FR 31216, June 13, 1995; 65 FR 26912, May 9, 2000]



PART 215--SPECIAL MILK PROGRAM FOR CHILDREN--Table of Contents




Sec.
215.1  General purpose and scope.
215.2  Definitions.
215.3  Administration.
215.4  Payments of funds to States and FNSROs.
215.5  Method of payment to States.
215.6  Use of funds.
215.7  Requirements for participation.
215.8  Reimbursement payments.
215.9  Effective date for reimbursement.
215.10  Reimbursement procedures.

[[Page 69]]

215.11  Special responsibilities of State agencies.
215.12  Claims against schools or child-care institutions.
215.13  Management evaluations and audits.
215.13a  Determining eligibility for free milk in child-care 
          institutions.
215.14  Nondiscrimination.
215.14a  Procurement standards.
215.15  Suspension, termination and grant closeout procedures.
215.16  Program information.
215.17  Information collection/recordkeeping--OMB assigned control 
          numbers.

    Authority: 42 U.S.C. 1772 and 1779.



Sec. 215.1  General purpose and scope.

    This part announces the policies and prescribes the general 
regulations with respect to the Special Milk Program for Children, under 
the Child Nutrition Act of 1966, as amended, and sets forth the general 
requirements for participation in the program. The Act reads in 
pertinent part as follows:

    Section 3(a)(1) There is hereby authorized to be appropriated for 
the fiscal year ending June 30, 1970, and for each succeeding fiscal 
year such sums as may be necessary to enable the Secretary of 
Agriculture, under such rules and regulations as he may deem in the 
public interest, to encourage consumption of fluid milk by children in 
the United States in (A) nonprofit schools of high school grade and 
under, except as provided in paragraph (2), which do not participate in 
a meal service program authorized under this Act or the National School 
Lunch Act, and (B) nonprofit nursery schools, child care centers, 
settlement houses, summer camps, and similar nonprofit institutions 
devoted to the care and training of children, which do not participate 
in a meal service program authorized under this Act or the National 
School Lunch Act.
    (2) The limitation imposed under paragraph (1)(A) for participation 
of nonprofit schools in the special milk program shall not apply to 
split-session kindergarten programs conducted in schools in which 
children do not have access to the meal service program operating in 
schools the children attend as authorized under this Act or the National 
School Lunch Act (42 U.S.C. 1751 et seq.).
    (3) For the purposes of this section ``United States'' means the 
fifty States, Guam, the Commonwealth of Puerto Rico, the Virgin Islands, 
American Samoa, the Trust Territory of the Pacific Islands, and the 
District of Columbia.
    (4) The Secretary shall administer the special milk program provided 
for by this section to the maximum extent practicable in the same manner 
as he administered the special milk program provided for by Pub. L. 89-
642, as amended, during the fiscal year ending June 30, 1969.
    (5) Any school or nonprofit child care institution which does not 
participate in a meal service program authorized under this Act or the 
National School Lunch Act shall receive the special milk program upon 
their request.
    (6) Children who qualify for free lunches under guidelines 
established by the Secretary shall, at the option of the school involved 
(or of the local educational agency involved in the case of a public 
school) be eligible for free milk upon their request.
    (7) For the fiscal year ending June 30, 1975, and for subsequent 
school years, the minimum rate of reimbursement for a half-pint of milk 
served in schools and other eligible institutions shall not be less than 
5 cents per half-pint served to eligible children, and such minimum rate 
of reimbursement shall be adjusted on an annual basis each school year 
to reflect changes in the Producer Price Index for Fresh Processed Milk 
published by the Bureau of Labor Statistics of the Department of Labor.
    (8) Such adjustment shall be computed to the nearest one-fourth 
cent.
    (9) Notwithstanding any other provision of this section, in no event 
shall the minimum rate of reimbursement exceed the cost to the school or 
institution of milk served to children.

[52 FR 7562, Mar. 12, 1987]



Sec. 215.2  Definitions.

    For the purpose of this part, the term:
    (a) Act means the Child Nutrition Act of 1966.
    (b) Adults means those persons not included under the definition of 
children.
    (c) [Reserved]
    (d) Child and Adult Care Food Program means the program authorized 
by section 17 of the National School Lunch Act, as amended.
    (e) Child-care institution means any nonprofit nursery school, 
child-care center, settlement house, summer camp, service institution 
participating in the Summer Food Program for Children pursuant to part 
225 of this chapter, institution participating in the Child and Adult 
Care Food Program pursuant to part 226 of this chapter, or similar 
nonprofit institution devoted to the care and training of children. The 
term ``child-care institution'' also includes a nonprofit agency to 
which such institution has delegated authority for the operation of a 
milk program

[[Page 70]]

in the institution. It does not include any institution falling within 
the definition of ``School'' in paragraph (v) of this section.
    (e-1) Children means persons under 19 chronological years of age in 
child-care institutions as defined in Sec. 215.2(e); or persons under 21 
chronological years of age attending schools as defined in 
Sec. 215.2(v)(3) and (4) of this part; or students, including students 
who are mentally or physically disabled as defined by the State and who 
are participating in a school program established for the mentally or 
physically disabled, of high school grade or under as determined by the 
State educational agency in schools as defined in Sec. 215.2(v)(1) and 
(2) of this part.
    (e-2) CND means the Child Nutrition Division of the Food and 
Nutrition Service of the Department.
    (f) FNS means the Food and Nutrition Service of the U.S. Department 
of Agriculture.
    (g) FNSRO means Food and Nutrition Services Regional Offices, of the 
Food and Nutrition Service of the U.S. Department of Agriculture.
    (h) Cost of milk means the net purchase price paid by the school or 
child-care institution to the milk supplier for milk delivered to the 
school or child-care institution. This shall not include any amount paid 
to the milk supplier for servicing, rental of or installment purchase of 
milk service equipment.
    (i) Department means the U.S. Department of Agriculture.
    (i-1) Disclosure means individual children's program eligibility 
information obtained through the free milk eligibility process that is 
revealed or used for a purpose other than for the purpose for which the 
information was obtained. The term refers to access, release, or 
transfer of personal data about children by means of print, tape, 
microfilm, microfiche, electronic communication or any other means.
    (j) Family means a group of related or nonrelated individuals, who 
are not residents of an institution or boarding house, but who are 
living as one economic unit.
    (j-1) Free milk means milk for which neither the child nor any 
member of his family pays or is required to work in the school or child-
care institution or in its food service.
    (k) Fiscal year means the period of 12 calendar months beginning 
October 1, 1977, and each October 1 of any calendar year thereafter and 
ending September 30 of the following calendar year.
    (k-1) Medicaid means the State medical assistance program under 
title XIX of the Social Security Act (42 U.S.C. 1396 et seq.).
    (l) Milk means pasteurized fluid types of unflavored or flavored 
whole milk, lowfat milk, skim milk, or cultured buttermilk which meet 
State and local standards for such milk. In Alaska, Hawaii, American 
Samoa, Guam, Puerto Rico, the Trust Territory of the Pacific Islands, 
and the Virgin Islands, if a sufficient supply of such types of fluid 
milk cannot be obtained, milk shall include reconstituted or recombined 
milk. All milk should contain vitamins A and D at levels specified by 
the Food and Drug Administration and consistent with State and local 
standards for such milk.
    (m) National School Lunch Program means the program under which 
general cash-for-food assistance and special cash assistance are made 
available to schools pursuant to part 210 of this chapter.
    (n) Needy children means: (1) Children who attend schools 
participating in the Program and who meet the School Food Authority's 
eligibility standards for free milk approved by the State agency, or 
FNSRO where applicable, under part 245 of this chapter; and (2) children 
who attend child-care institutions participating in the Program and who 
meet the eligibility standards for free milk approved by the State 
agency, or FNSRO where applicable, under Sec. 215.13a of this part.
    (o) [Reserved]
    (p) Nonpricing program means a program which does not sell milk to 
children. This shall include any such program in which children are 
normally provided milk, along with food and other services, in a school 
or child-care institution financed by a tuition, boarding, camping or 
other fee, or by private donations or endowments.
    (q) Nonprofit milk service means milk service maintained by or on 
behalf of

[[Page 71]]

the school or child-care institution for the benefit of the children, 
all of the income from which is used solely for the operation or 
improvement of such milk service.
    (r) Nonprofit means exempt from income tax under the Internal 
Revenue Code, as amended.
    (s) OA means the Office of Audit of the United States Department of 
Agriculture.
    (s-1) OIG means the Office of the Inspector General of the 
Department.
    (t) Pricing program means a program which sells milk to children. 
This shall include any such program in which maximum use is made of 
Program reimbursement payments in lowering, or reducing to ``zero,'' 
wherever possible, the price per half pint which children would normally 
pay for milk.
    (u) Program means the Special Milk Program for Children.
    (u-1) Reimbursement means financial assistance paid or payable to 
participating schools and child-care institutions for milk served to 
eligible children.
    (v) School means: (1) An educational unit of high school grade or 
under, recognized as part of the educational system in the State and 
operating under public or nonprofit private ownership in a single 
building or complex of buildings; (2) any public or nonprofit private 
classes of preprimary grade when they are conducted in the 
aforementioned schools; (3) any public or nonprofit private residential 
child care institution, or distinct part of such institution, which 
operates principally for the care of children, and, if private, is 
licensed to provide residential child care services under the 
appropriate licensing code by the State or a subordinate level of 
government, except for residential summer camps which participate in the 
Summer Food Service Program for Children, Job Corps centers funded by 
the Department of Labor, and private foster homes. The term residential 
child care institutions includes, but is not limited to: Homes for the 
mentally, emotionally or physically impaired, and unmarried mothers and 
their infants; group homes; halfway houses; orphanages; temporary 
shelters for abused children and for runaway children; long-term care 
facilities for chronically ill children; and juvenile detention centers. 
A long-term care facility is a hospital, skilled nursing facility, 
intermediate care facility, or distinct part thereof, which is intended 
for the care of children confined for 30 days or more; or (4) with 
respect to the Commonwealth of Puerto Rico, nonprofit child care centers 
certified as such by the Governor of Puerto Rico.
    (w) School Breakfast Program means the program authorized by section 
4 of the Child Nutrition Act of 1966, as amended.
    (w-1) School Food Authority means the governing body which is 
responsible for the administration of one or more schools and which has 
the legal authority to operate a milk program therein. The term ``School 
Food Authority'' also includes a nonprofit agency to which such 
governing body has delegated authority for the operation of a milk 
program in a school.
    (x) School year means the period of 12 calendar months beginning 
July 1, 1977, and each July 1 of any calendar year thereafter and ending 
June 30 of the following calendar year.
    (x-1) 7 CFR part 3015 means the Uniform Federal Assistance 
Regulations published by the Department to implement OMB Circulars A-21, 
A-87, A-102, A-110, and A-122; and Executive Order 12372. (For 
availability of OMB Circulars referenced in this definition, see 5 CFR 
1310.3.)
    (x-2) 7 CFR part 3017 means the Department's regulation to implement 
Executive Order 12549, covering governmentwide rules on suspension and 
debarment as well as The Drug Free Workplace Act of 1988.
    (x-3) 7 CFR part 3018 means the Department's Common Rule regarding 
Governmentwide New Restrictions on Lobbying. Part 3018 implements the 
requirements established by section 319 of the 1990 Appropriations Act 
for the Department of Interior and Related Agencies (Pub. L. 101-121).
    (x-4) 7 CFR part 3052 means the Department's regulations 
implementing OMB Circular A-133, ``Audits of State, Local Governments, 
and Non-Profit Organizations.'' (For availability of OMB Circulars 
referenced in this definition, see 5 CFR 1310.3.)

[[Page 72]]

    (x-5) Split-session means an educational program operating for 
approximately one-half of the normal school day.
    (y) State means any of the 50 States, District of Columbia, the 
Commonwealth of Puerto Rico, the Virgin Islands, Guam, and, as 
applicable, American Samoa and the Commonwealth of the Northern 
Marianas.
    (z) State agency means the State educational agency or any other 
State agency that has been designated by the Governor or other 
appropriate executive or legislative authority of the State and approved 
by the Department to administer the Program.
    (aa) State Children's Health Insurance Program (SCHIP) means the 
State medical assistance program under title XXI of the Social Security 
Act (42 U.S.C. 1397aa et seq.).
    (bb) Summer Food Service Program for Children means the program 
authorized by section 13 of the National School Lunch Act, as amended.

(Sec. 11, Pub. L. 95-166, 91 Stat. 1337 (42 U.S.C. 1772, 1753, 1766; 
sec. 10(a), Pub. L. 95-627, 92 Stat. 3623 (42 U.S.C. 1760; sec. 10(d)), 
Pub. L. 95-627, 92 Stat. 3624 (42 U.S.C. 1757); sec. 14, Pub. L. 95-627, 
92 Stat. 3625-3626; sec. 205, Pub. L. 96-499, The Omnibus Reconciliation 
Act of 1980, 94 Stat. 2599; secs. 807 and 808, Pub. L. 97-35, 95 Stat. 
521-535 (42 U.S.C. 1772, 1784, 1760))

[32 FR 12587, Aug. 31, 1967]

    Editorial Note: For Federal Register citations affecting Sec. 215.2, 
see the List of CFR Sections Affected, which appears in the Finding Aids 
section of the printed volume and on GPO Access.



Sec. 215.3  Administration.

    (a) Within the Department, FNS shall act on behalf of the Department 
in the administration of the Program. Within FNS, CND shall be 
responsible for Program administration.
    (b) Within the States, to the extent practicable and permissible 
under State law, responsibility for the administration of the Program in 
schools and child-care institutions shall be in the educational agency 
of the State: Provided, however, That another State agency, upon request 
by the Governor or other appropriate State executive or legislative 
authority, may be approved to administer the Program in schools as 
defined in Sec. 215.2(v)(3) or Sec. 215.2(v)(4) or in child-care 
institutions.
    (c) FNSRO shall administer the Program in any school as defined in 
Sec. 215.2(v)(1), Sec. 215.2(v)(2) or Sec. 215.2(v)(3) or in any child-
care institution as defined in Sec. 215.2(e) wherein the State agency is 
not permitted by law to disburse Federal funds paid to it under the 
Program; Provided, however, That FNSRO shall also administer the Program 
in all other schools and child-care institutions which have been under 
continuous FNS administration since October 1, 1980 unless the 
administration of such schools and institutions is assumed by a State 
agency. References in this part to ``FNSRO where applicable'' are to 
FNSRO as the agency administering the Program to schools or child-care 
institutions within certain States.
    (d) Each State agency desiring to take part in the Program shall 
enter into a written agreement with the Department for the 
administration of the Program in the State in accordance with the 
provisions of this part. Such agreement shall cover the operation of the 
Program during the period specified therein and may be extended at the 
option of the Department.

(Secs. 804, 816 and 817, Pub. L. 97-35; 95 Stat. 521-535 (42 U.S.C. 
1753, 1756, 1759, 1771 and 1785))

[Amdt. 14, 41 FR 31174, July 27, 1976, as amended by Amdt. 24, 47 FR 
14133 Apr. 2, 1982; Amdt. 36, 54 FR 2989, Jan. 23, 1989]



Sec. 215.4  Payments of funds to States and FNSROs.

    (a) For each fiscal year, the Secretary shall make payments to each 
State agency at such times as he may determine from the funds 
appropriated for Program reimbursement. Subject to Sec. 215.11(c)(2), 
the total of these payments for each State for any fiscal year shall be 
limited to the amount of reimbursement payable to School Food 
Authorities and child care institutions under Sec. 215.8 of this part 
for the total number of half-pints of milk served under the Program to 
eligible children from October 1 to September 30.
    (b) Each State agency shall be responsible for controlling Program 
reimbursement payments so as to keep within the funds made available to 
it,

[[Page 73]]

and for the timely reporting to FNS of the number of half pints of milk 
actually served. The Secretary shall increase or decrease the available 
level of funding by adjusting the State agency's Letter of Credit when 
appropriate.

(Pub. L. 97-370, 96 Stat. 1806)

[Amdt. 14, 41 FR 31174, July 27, 1976, as amended by Amdt. 30, 49 FR 
18986, May 4, 1984]



Sec. 215.5  Method of payment to States.

    (a) Funds to be paid to any State shall be made available by means 
of Letters of Credit issued by FNS in favor of the State agency. The 
State agency shall:
    (1) Obtain funds needed to reimburse School Food Authorities and 
child-care institutions through presentation by designated State 
officials of a Payment Voucher on Letter of Credit (Treasury Form GFO 
7578) in accordance with procedures prescribed by FNS and approved by 
the U.S. Treasury Department; (2) submit requests for funds only at such 
times and in such amounts as will permit prompt payment of claims; (3) 
use the funds received from such requests without delay for the purpose 
for which drawn. Notwithstanding the foregoing provisions, if funds are 
made available by Congress for the operation of the Program under a 
continuing resolution, Letters of Credit shall reflect only the amount 
available for the effective period of the resolution.
    (b) [Reserved]
    (c) The State agency shall release to FNS any Federal funds made 
available to it under the Program which are unobligated at the end of 
each fiscal year. Release of funds by the State agency shall be made as 
soon as practicable but in no event later than 30 days following demand 
by FNSRO, and shall be reflected by a related adjustment in the State 
agency's Letter of Credit.

[Amdt. 13, 39 FR 28416, Aug. 7, 1974, as amended by Amdt. 14, 41 FR 
31174, July 27, 1976]



Sec. 215.6  Use of funds.

    (a) Federal funds made available under the Program shall be used to 
encourage the consumption of milk through reimbursement payments to 
schools and child-care institutions in connection with the purchase and 
service of milk to children in accordance with the provisions of this 
part: Provided, however, That, with the approval of FNS, any State 
agency, or FNSRO where applicable, may reserve for use in carrying out 
special developmental projects an amount equal to not more than 1 per 
centum of the Federal funds so made available for any fiscal year.
    (b) Whoever embezzles, willfully misapplies, steals, or obtains by 
fraud any funds, assets, or property provided under this part, whether 
received directly or indirectly from the Department, shall: (1) If such 
funds, assets, or property are of a value of $100 or more, be fined not 
more than $25,000 or imprisoned not more than 5 years or both; or (2) if 
such funds, assets, or property are of a value of less than $100, be 
fined not more than $1,000 or imprisoned not more than one year or both.
    (c) Whoever receives, conceals, or retains to his use or gain funds, 
assets, or property provided under this part, whether received directly 
or indirectly from the Department, knowing such funds, assets, or 
property have been embezzled, willfully misapplied, stolen, or obtained 
by fraud, shall be subject to the same penalties provided in paragraph 
(b) of this section.

(Sec. 10(a), Pub. L. 95-627, 92 Stat. 3623 (42 U.S.C. 1760; sec. 
10(d)(3), Pub. L. 95-627, 92 Stat. 3624 (42 U.S.C. 1757); sec. 14, Pub. 
L. 95-627, 92 Stat. 3625-3626; 44 U.S.C. 3506))

[Amdt. 14, 41 FR 31174, July 27, 1976, as amended by Amdt. 18, 44 FR 
37898, June 29, 1979; 47 FR 746, Jan. 7, 1982; 64 FR 50741, Sept. 20, 
1999]



Sec. 215.7  Requirements for participation.

    (a) Any school or nonprofit child care institution shall receive the 
Special Milk Program upon request provided it does not participate in a 
meal service program authorized under the Child Nutrition Act of 1966 or 
the National School Lunch Act; except that schools with such meal 
service may receive the Special Milk Program upon request only for the 
children attending split-session kindergarten programs who do not have 
access to the meal service. Each School Food Authority or child-care 
institution shall make written application to the State agency, or FNSRO 
where applicable, for any

[[Page 74]]

school or child-care institution in which it desires to operate the 
Program, if such school or child-care institution did not participate in 
the Program in the prior fiscal year.
    (b) Any School Food Authority or child care institution 
participating in the Program may elect to serve free milk to children 
eligible for free meals. Upon application for the Program, each School 
Food Authority or child care institution:
    (1) Shall be required by the State agency, or FNSRO where 
applicable, to state whether or not it wishes to provide free milk in 
the schools or institutions participating under its jurisdiction and
    (2) If it so wishes to provide free milk, shall also submit for 
approval a free milk policy statement which, if for a school, shall be 
in accordance with part 245 of this chapter or, if for a child care 
institution, shall be in accordance with Sec. 215.13a of this part.
    (c) The application shall include information in sufficient detail 
to enable the State agency, or FNSRO where applicable, to determine 
whether the School Food Authority or child-care institution is eligible 
to participate in the Program and extent of the need for Program 
payments.
    (d) Each school food authority or child care institution approved to 
participate in the program shall enter into a written agreement with the 
State agency or FNSRO, as applicable, that may be amended as necessary. 
Nothing in the preceding sentence shall be construed to limit the 
ability of the State agency to suspend or terminate the agreement in 
accordance with Sec. 215.15. If a single State agency administers any 
combination of the Child Nutrition Programs, that State agency shall 
provide each SFA with a single agreement with respect to the operation 
of those programs. Such agreement shall provide that the School Food 
Authority or child-care institution shall, with respect to participating 
schools and child-care institutions under its jurisdiction:
    (1) Operate a nonprofit milk service. However, school food 
authorities may use facilities, equipment, and personnel supported with 
funds provided to a school food authority under this part to support a 
nonprofit nutrition program for the elderly, including a program funded 
under the Older Americans Act of 1965 (42 U.S.C. 3001 et seq.).
    (2) If electing to provide free milk (i) serve milk free to all 
eligible children, at times that milk is made available to nonneedy 
children under the Program; and (ii) make no discrimination against any 
needy child because of his inability to pay for the milk.
    (3) Comply with the requirements of the Department's regulations 
respecting nondiscrimination (7 CFR part 15);
    (4) Claim reimbursement only for milk as defined in this part and in 
accordance with the provisions of Sec. 215.8 and Sec. 215.10;
    (5) Submit Claims for Reimbursement in accordance with Sec. 215.10 
of this part and procedures established by the State agency or FNSRO 
where applicable;
    (6) Maintain a financial management system as prescribed by the 
State agency, or FNSRO where applicable;
    (7) Upon request, make all records pertaining to its milk program 
available to the State agency and to FNS or OA for audit and 
administrative review, at any reasonable time and place. Such records 
shall be retained for a period of three years after the end of the 
fiscal year to which they pertain, except that, if audit findings have 
not been resolved, the records shall be retained beyond the three-year 
period as long as required for the resolution of the issues raised by 
the audit;
    (8) Retain the individual applications for free milk submitted by 
families for a period of three years after the end of the fiscal year to 
which they pertain, except that, if audit findings have not been 
resolved, the records shall be retained beyond the three-year period as 
long as required for the resolution of the issues raised by the audit.
    (e) State requirements. Nothing contained in this part shall prevent 
a State agency from imposing additional requirements for participation 
in the

[[Page 75]]

Program which are not inconsistent with the provision of this part.

(Sec. 11, Pub. L. 95-166, 91 Stat. 1337 (42 U.S.C. 1772, 1753, 1766); 
sec. 5, Pub. L. 95-627, 92 Stat. 3619 (42 U.S.C. 1772); secs. 801, 803, 
812; Pub. L. 97-35, 95 Stat. 521-535 (42 U.S.C. 1753, 1759(a), 1773, 
1758); 44 U.S.C. 3506)

[Amdt. 13, 39 FR 28416, Aug. 7, 1974, as amended by Amdt. 14, 41 FR 
31174, July 27, 1976; Amdt. 16, 43 FR 1059, Jan. 6, 1978; 44 FR 10700, 
Feb. 23, 1979; Amdt. 17, 44 FR 33047, June 8, 1979; 46 FR 51635, Oct. 
20, 1981; 47 FR 745, Jan. 7, 1982; Amdt. 30, 49 FR 18986, 18987, May 4, 
1984; 52 FR 7562, Mar. 12, 1987; 52 FR 15298, Apr. 28, 1987; 64 FR 
50741, Sept. 20, 1999]



Sec. 215.8  Reimbursement payments.

    (a) [Reserved]
    (b)(1) The rate of reimbursement per half-pint of milk purchased and 
(i) served in nonpricing programs to all children; (ii) served to all 
children in pricing programs by institutions and School Food Authorities 
not electing to provide free milk; and (iii) served to children other 
than needy children in pricing programs by institutions and School Food 
Authorities electing to provide free milk shall be the rate announced by 
the Secretary for the applicable school year. However, in no event shall 
the reimbursement for each half-pint (236 ml.) of milk served to 
children exceed the cost of the milk to the school or child care 
institution.
    (2) The rate of reimbursement for milk purchased and served free to 
needy children in pricing programs by institutions and School Food 
Authorities electing to provide free milk shall be the average cost of 
milk, i.e., the total cost of all milk purchased during the claim 
period, divided by the total number of purchased half-pints.
    (c) Schools and child-care institutions having pricing programs 
shall use the reimbursement payments received to reduce the price of 
milk to children.

(Sec. 11, Pub. L. 95-166, 91 Stat. 1337 (42 U.S.C. 1772, 1753, 1766); 
sec. 5, Pub. L. 95-627, 92 Stat. 3619 (42 U.S.C. 1772); Omnibus 
Reconciliation Act of 1980, sec. 209, Pub. L. 96-499, 94 Stat. 2599; 
secs. 807 and 808, Pub. L. 97-35, 95 Stat. 521-535, 42 U.S.C. 1772, 
1784, 1760; secs. 805 and 819, Pub. L. 97-35, 95 Stat. 521-535 (42 
U.S.C. 1773))

[Amdt. 13, 39 FR 28416, Aug. 7, 1974, as amended by Amdt. 16, 43 FR 
1060, Jan. 6, 1978; 44 FR 10700, Feb. 23, 1979; Amdt. 17, 44 FR 33047, 
June 8, 1979; 46 FR 51365, Oct. 20, 1981; Amdt. 23, 47 FR 14134, Apr. 2, 
1982]



Sec. 215.9  Effective date for reimbursement.

    (a) A State Agency, or FNSRO where applicable, may grant written 
approval to begin operations under the Program prior to the receipt of 
the application from the School Food Authority or child-care 
institution. Such written approval shall be attached to the subsequently 
filed application, and the agreement executed by the School Food 
Authority or child-care institution shall be effective from the date 
upon which the School Food Authority or child-care institution was 
authorized to begin operations: Provided, however, That such effective 
date shall not be earlier than the calendar month preceding the calendar 
month in which the agreement is executed by the State Agency or by the 
Department.
    (b) Reimbursement payments pursuant to Sec. 215.8 shall be made for 
milk purchased and served to children at any time during the effective 
period of an agreement between a School Food Authority or child care 
institution and the State agency or the Department.

(Sec. 11, Pub. L. 95-166, 91 Stat. 1337 (42 U.S.C. 1772, 1753, 1766))

[32 FR 12587, Aug. 31, 1967, as amended by Amdt. 5, 37 FR 14686, July 
22, 1972; Amdt. 13, 39 FR 28417, Aug. 7, 1974; Amdt. 16, 43 FR 1060, 
Jan. 6, 1978; 44 FR 10700, Feb. 23, 1979]

[[Page 76]]



Sec. 215.10  Reimbursement procedures.

    (a) To be entitled to reimbursement under this part, each School 
Food Authority shall submit to the State agency, or FNSRO where 
applicable, a monthly Claim for Reimbursement.
    (b) Claims for Reimbursement shall include data in sufficient detail 
to justify the reimbursement claimed and to enable the State agency to 
provide the Reports of School Program Operations required under 
Sec. 215.11(c)(2). Unless otherwise approved by FNS, the Claim for 
Reimbursement for any month shall include only milk served in that month 
except if the first or last month of Program operations for any year 
contains 10 operating days or less, such month may be added to the Claim 
for Reimbursement for the appropriate adjacent month; however, Claims 
for Reimbursement may not combine operations occurring in two fiscal 
years. If a single State agency administers any combination of the Child 
Nutrition Programs, the SFA shall be able to use a common claim form 
with respect to claims for reimbursement for meals served under those 
programs. A final Claim for Reimbursement shall be postmarked and/or 
submitted to the State agency, or FNSRO where applicable, not later than 
60 days following the last day of the full month covered by the claim. 
State agencies may establish shorter deadlines at their discretion. 
Claims not postmarked and/or submitted within 60 days shall not be paid 
with Program funds unless FNS determines that an exception should be 
granted. The State agency, or FNSRO where applicable, shall promptly 
take corrective action with respect to any Claim for Reimbursement as 
determined necessary through its claim review process or otherwise. In 
taking such corrective action, State agencies may make upward 
adjustments in Program funds claimed on claims filed within the 60 day 
deadline if such adjustments are completed within 90 days of the last 
day of the claim month and are reflected in the final Report of School 
Program Operations (FNS-10) for the claim month which is required under 
Sec. 215.11(c)(2). Upward adjustments in Program funds claimed which are 
not reflected in the final FNS-10 for the claim month shall not be made 
unless authorized by FNS. Downward adjustments in Program funds claimed 
shall always be made, without FNS authorization, regardless of when it 
is determined that such adjustments are necessary.
    (c) [Reserved]
    (d) In submitting a Claim for Reimbursement, each School Food 
Authority or child-care institution shall certify that the claim is true 
and correct; that records are available to support the claim; that the 
claim is in accordance with the existing agreement; and that payment 
therefor has not been received.
    (e) Milk served to adults is not eligible for reimbursement.
    (f) Any School Food Authority or child care institution which 
operates both a nonpricing and pricing milk program in the same school 
or child care institution, may elect to claim reimbursement for:
    (1) All milk purchased and served to children under the Program at 
the nonpricing rate prescribed in Sec. 215.8(b) (1), or (2) only milk 
purchased and served to children in the pricing program at the rates 
prescribed in Sec. 215.8(b) (1) and (2) for pricing programs.

(Sec. 11, Pub. L. 95-166, 91 Stat. 1337 (42 U.S.C. 1772, 1753, 1766); 
Pub. L. 97-370, 96 Stat. 1806)

[Amdt. 13, 39 FR 28417, Aug. 7, 1974, as amended by Amdt. 14, 41 FR 
31175, July 27, 1976; Amdt. 16, 43 FR 1060, Jan. 6, 1978; 44 FR 10700, 
Feb. 23, 1979; 45 FR 82622, Dec. 16, 1980; 48 FR 20896, May 10, 1983; 
Amdt. 30, 49 FR 18986, May 4, 1984; 64 FR 50742, Sept. 20, 1999]



Sec. 215.11  Special responsibilities of State agencies.

    (a) [Reserved]
    (b) Program assistance. Each State agency, or FNSRO where 
applicable, shall provide Program assistance, as follows:
    (1) Consultive, technical, and managerial personnel to administer 
the Program and monitor performance of schools and child-care 
institutions and to measure progress toward achieving Program goals.
    (2) Visits to participating schools and child-care institutions to 
ensure compliance with Program regulations and with the Department's 
nondiscrimination regulations (part 15 of this title),

[[Page 77]]

issued under title VI of the Civil Rights Act of 1964. State agencies 
shall conduct reviews of schools participating in the Program for 
compliance with the provisions of this part when such schools are being 
reviewed under the provisions identified under Sec. 210.18(i) of this 
title. Compliance reviews of participating schools shall focus on the 
reviewed school's compliance with the required certification, counting 
and milk service procedures. School food authorities may appeal a denial 
of all or a part of the Claim for Reimbursement or withholding of 
payment arising from review activity conducted by the State agency under 
Sec. 210.18 of this title or by FNS under Sec. 210.30(d)(2) of this 
title. Any such appeal shall be subject to the procedures set forth 
under Sec. 210.18(q) of this title or Sec. 210.30(d)(3) of this title, 
as appropriate.
    (3) Documentation of such Program assistance shall be maintained on 
file by the State agency, or FNSRO where applicable.
    (c) Records and reports. (1) Each State agency shall maintain 
Program records as necessary to support the reimbursement payments made 
to child care institutions or School Food Authorities under Sec. 215.8 
and Sec. 215.10 and the reports submitted to FNS under 
Sec. 215.11(c)(2). The records may be kept in their original form or on 
microfilm, and shall be retained for a period of three years after the 
date of submission of the final Financial Status Report for the fiscal 
year, except that if audit findings have not been resolved, the records 
shall be retained beyond the three-year period as long as required for 
the resolution of the issues raised by the audit.
    (2) Each State agency shall submit to FNS a final Report of School 
Program Operations (FNS-10) for each month which shall be limited to 
claims submitted in accordance with Sec. 215.10(b) and which shall be 
postmarked and/or submitted no later than 90 days following the last day 
of the month covered by the report. States shall not receive Program 
funds for any month for which the final report is not submitted within 
this time limit unless FNS grants an exception. Upward adjustments to a 
State agency's report shall not be made after 90 days from the month 
covered by the report unless authorized by FNS. Downward adjustments 
shall always be made, without FNS authorization, regardless of when it 
is determined that such adjustments are necessary. Adjustments shall be 
reported to FNS in accordance with procedures established by FNS. Each 
State agency shall also submit to FNS a quarterly Financial Status 
Report (SF-269) on the use of Program funds. Such reports shall be 
postmarked and/or submitted no later than 30 days after the end of each 
fiscal year quarter. Obligations shall be reported only for the fiscal 
year in which they occur. A final Financial Status Report for each 
fiscal year shall be postmarked and/or submitted to FNS within 120 days 
after the end of the fiscal year. FNS shall not be responsible for 
reimbursing unpaid program obligations reported later than 120 days 
after the close of the fiscal year in which they were incurred.
    (d) Compliance. State agencies, or FNSROs where applicable, shall 
require School Food Authorities and child-care institutions to comply 
with applicable provisions of this part.
    (e) Investigations. Each State Agency shall promptly investigate 
complaints received or irregularities noted in connection with the 
operation of the Program and shall take appropriate action to correct 
any irregularities. State Agencies shall maintain on file evidence of 
such investigations and actions. The Office of Investigation of the 
Department (OI) shall make investigations at the request of the State 
Agency or if CND or FNSRO determines investigations by OI are 
appropriate.

(Sec. 11, Pub. L. 95-166, 91 Stat. 1337 (42 U.S.C. 1772, 1753, 1766); 44 
U.S.C. 3506; sec. 812, Pub. L. 97-35, 95 Stat. 521-535 (42 U.S.C. 
1759a))

[32 FR 12587, Aug. 31, 1967, as amended by Amdt. 13, 39 FR 28417, Aug. 
7, 1974; Amdt. 14, 41 FR 31175, July 27, 1976; 47 FR 745, Jan. 7, 1982; 
Amdt. 25, 47 FR 18564, Apr. 30, 1982; Amdt. 30, 49 FR 18987, May 4, 
1984; 56 FR 32949, July 17, 1991; 57 FR 38586, Aug. 26, 1992]



Sec. 215.12  Claims against schools or child-care institutions.

    (a) State agencies, or FNSROs where applicable, shall disallow any 
portion of a claim and recover any payment made to a School Food 
Authority or

[[Page 78]]

child-care institution that was not properly payable under this part. 
State agencies will use their own procedures to disallow claims and 
recover overpayments already made.
    (b) [Reserved]
    (c) The State Agency may refer any matter in connection with this 
section to FNSRO and CND for determination of the action to be taken.
    (d) Each State agency shall maintain all records pertaining to 
action taken under this section. Such records shall be retained for a 
period of three years after the date of the submission of the final 
Financial Status Report, except that, if audit findings have not been 
resolved, the records shall be retained beyond the three-year period as 
long as required for the resolution of the issues raised by the audit.
    (e) If CND does not concur with the State Agency action in paying a 
claim or a reclaim, or in failing to collect an overpayment FNSRO shall 
assert a claim against the State Agency for the amount of such claim, 
reclaim or overpayment. In all such cases, the State Agency shall have 
full opportunity to submit to CND evidence or information concerning the 
action taken. If in the determination of CND, the State Agency's action 
was unwarranted, the State Agency shall promptly pay to FNS the amount 
of the claim, reclaim, or overpayment.
    (f) The amounts recovered by the State Agency from schools and 
child-care institutions may be utilized, first, to make reimbursement 
payments for milk served during the fiscal year for which the funds were 
initially available, and second, to repay any State funds expended in 
the reimbursement of claims under the program and not otherwise repaid. 
Any amounts recovered which are not so utilized shall be returned to FNS 
in accordance with the requirements of Sec. 215.5(c).
    (g) With respect to schools or child-care institutions in which 
FNSRO administers the Program, when FNSRO disallows a claim or a portion 
of a claim, or makes a demand for refund of an alleged overpayment, it 
shall notify the School Food Authority or child-care institutions of the 
reasons for such disallowance or demand and the School Food Authority or 
child-care institutions shall have full opportunity to submit evidence 
or to file reclaim for any amount disallowed or demanded in the same 
manner afforded in this section to schools or child-care institutions 
administered by State Agencies.
    (h) The Secretary shall have the authority to determine the amount 
of, to settle, and to adjust any claims arising under the Program, and 
to compromise or deny such claim or any part thereof. The Secretary 
shall also have the authority to waive such claims if the Secretary 
determines that to do so would serve the purposes of the Program. This 
provision shall not diminish the authority of the Attorney General of 
the United States under section 516 of Title 28, U.S. Code, to conduct 
litigation on behalf of the United States.

(47 FR 745, Jan. 7, 1982 (44 U.S.C. 3506; secs. 804, 816 and 817, Pub. 
L. 97-35; 95 Stat. 521-535 (42 U.S.C. 1753, 1756, 1759, 1771 and 1785))

[32 FR 12587, Aug. 31, 1967, as amended by Amdt. 5, 37 FR 14686, July 
22, 1972; Amdt. 13, 39 FR 28418, Aug. 7, 1974; Amdt. 14, 41 FR 31175, 
July 27, 1976; 47 FR 745, Jan. 7, 1982; Amdt. 24, 47 FR 14133, Apr. 2, 
1982]



Sec. 215.13  Management evaluations and audits.

    (a) State agencies and school food authorities shall comply with the 
requirements of part 3015 of this title concerning the audit 
requirements for recipients and subrecipients of the Department's 
financial assistance.
    (b) These requirements call for organization-wide financial and 
compliance audits to ascertain whether financial operations are 
conducted properly; financial statements are presented fairly; 
recipients and subrecipients comply with the laws and regulations that 
affect the expenditures of Federal funds; recipients and subrecipients 
have established procedures to meet the objectives of federally assisted 
programs; and recipients and subrecipients are providing accurate and 
reliable information concerning grant funds. States and school food 
authorities shall use their own procedures to arrange for and prescribe 
the scope of independent audits, provided that such audits comply with 
the requirements set forth in part 3015 of this title.

[[Page 79]]

    (c) Each State agency shall provide FNS with full opportunity to 
conduct management evaluations (including visits to schools and child-
care institutions) of any operations of the State agency under the 
Program and shall provide OA with full opportunity to conduct audits 
(including visits to schools and child-care institutions) of all 
operations of the State agency under the Program. Each State agency 
shall make available its records, including records of the receipt and 
expenditure of funds under the Program, upon a reasonable request by FNS 
or OA. OA shall also have the right to make audits of the records and 
operations of any school or child-care institution.
    (d) In conducting management evaluations, reviews or audits for any 
fiscal year, the State agency, FNS, or OIG may disregard any overpayment 
if the total overpayment does not exceed $600 or, in the case of State 
agency claims in State administered Programs, it does not exceed the 
amount established under State law, regulations or procedure as a 
minimum amount for which claim will be made for State losses but not to 
exceed $600. However, no overpayment is to be disregarded where there is 
substantial evidence of violations of criminal law or civil fraud 
statutes.

(Secs. 805 and 819, Pub. L. 97-35, 95 Stat. 521-535 (42 U.S.C. 1773); 
sec. 812, Pub. L. 97-35, 95 Stat. 521-535 (42 U.S.C. 1759a))

[Amdt. 14, 41 FR 31175, July 27, 1976, as amended at 43 FR 58925, Dec. 
22, 1978; Amdt. 23, 47 FR 14135, Apr. 2, 1982; Amdt. 25, 47 FR 18564, 
Apr. 30, 1982; Amdt. 36, 54 FR 2990, Jan. 23, 1989; 57 FR 38586, Aug. 
26, 1992; 59 FR 1894, Jan. 13, 1994; 64 FR 50742, Sept. 20, 1999]



Sec. 215.13a  Determining eligibility for free milk in child-care institutions.

    (a) General. Child care institutions which operate pricing programs 
may elect to make free milk available, as set forth in Sec. 215.7(d)(2), 
to children who meet the approved eligibility criteria. Such child care 
institutions shall determine the children who are eligible for free milk 
and assure that there is no physical segregation of, or other 
discrimination against, or overt identification of, children unable to 
pay the full price for milk.
    (b) Action by State agencies and FNSROs. Each State agency, or FNSRO 
where applicable, upon application for the program by a child care 
institution operating a pricing program, and annually thereafter, shall 
require the institution to state whether or not it wishes to serve free 
milk to eligible children at times that milk is provided under the 
Program. It shall annually require each child care institution electing 
to provide free milk to submit a free milk policy statement and shall 
provide such institutions with a prototype free milk policy statement 
and a copy of the State's family-size income standards for determining 
eligibility for free meals and milk under the National School Lunch and 
School Breakfast Programs to assist the institutions in meeting its 
responsibilities.
    (c) Action by institutions. Each child care institution which 
operates a pricing program shall inform the State agency, or FNSRO where 
applicable, at the time it applies for Program participation and at 
least annually thereafter, whether or not it wishes to provide free 
milk. Institutions electing to provide free milk shall annually submit a 
written free milk policy statement for determining free milk eligibility 
of children under their jurisdiction, which shall contain the items 
specified in paragraph (d) of this section. Such institutions shall not 
be approved for Program participation of their agreements renewed unless 
the free milk policy has been reviewed and approved. Pending approval or 
a revision of a policy statement, the existing policy shall remain in 
effect.
    (d) Policy statement. A free milk policy statement as required in 
paragraph (c) of this section shall contain the following:
    (1) The specific criteria to be used in determining eligibility for 
free milk. These criteria shall give consideration to economic need as 
reflected by family size and income. The criteria used by the child-care 
institution may not result in the eligibility of children from families 
whose incomes exceed the State's family-size income standards for 
determining eligibility for free meals under the National School Lunch 
and School Breakfast Programs.

[[Page 80]]

    (2) The method by which the child-care institution will collect 
information from families in order to determine a child's eligibility 
for free milk.
    (3) The method by which the child-care institution will collect milk 
payments so as to prevent the overt identification of children receiving 
free milk.
    (4) A hearing procedure substantially like that outlined in part 245 
of this chapter.
    (5) An assurance that there will be no discrimination against free 
milk recipients and no discrimination against any child on the basis of 
race, color, or national origin.
    (e) Public announcement of eligibility criteria. Each child care 
institution which elects to make free milk available under the Program 
shall annually make a public announcement of the availability of free 
milk to children who meet the approved eligibility criteria to the 
information media serving the area from which its attendance is drawn. 
The public announcement must also state that milk is available to all 
children in attendance without regard to race, color, or national 
origin.
    (f) Is a Privacy Act notice required on the free milk application? 
Each free milk application must include substantially the following 
statement: ``Unless you include your child's case number for the Food 
Stamp Program, the Food Distribution Program on Indian Reservations (or 
other identifier for the Food Distribution Program on Indian 
Reservations) or the Temporary Assistance for Needy Families Program, 
you must include the social security number of the adult household 
member signing the application or indicate that the household member 
does not have a social security number. This is required by section 9 of 
the National School Lunch Act. The social security number is not 
mandatory, but the application cannot be approved if a social security 
number is not given or an indication is not made that the signer does 
not have a social security number. The social security number will be 
used in the administration and enforcement of the program.''
    (g) Disclosure of program eligibility information to State Medicaid 
(Medicaid) and the State Children's Health Insurance Program (SCHIP) 
Program eligibility information about children eligible for free milk 
may be disclosed to Medicaid and SCHIP as described in this section.
    (1) Who decides whether to disclose program eligibility information 
to Medicaid and/or SCHIP? The State agency may elect to allow child care 
institutions to disclose children's free milk eligibility information to 
Medicaid and SCHIP. Child care institutions may then elect to do so. 
Children's program eligibility information may only be disclosed to 
Medicaid or SCHIP when both the State agency and the child care 
institution so elect, the parent/guardian does not decline to have their 
eligibility information disclosed as described in paragraph (g)(5), and 
the requirements in this paragraph (g) are met.
    (2) What information may we disclose for use by Medicaid and SCHIP? 
The State agency or child care institution, as appropriate, may disclose 
children's names, eligibility status (whether they are eligible for free 
milk), and any other eligibility information obtained through the free 
milk application or obtained through direct certification to persons 
directly connected with the administration of Medicaid or SCHIP.
    (3) Who are persons ``directly connected'' with the administration 
of Medicaid and SCHIP? State employees and persons authorized under 
Federal and State Medicaid and SCHIP requirements to carry out initial 
processing of Medicaid or SCHIP applications or to make eligibility 
determinations are persons directly connected with the administration of 
Medicaid and SCHIP for purposes of disclosure of children's free milk 
eligibility information.
    (4) What are the restrictions on how Medicaid and SCHIP use 
children's free milk eligibility information? Medicaid and SCHIP 
agencies and health insurance program operators receiving children's 
free milk eligibility information may only use the information to seek 
to enroll children in Medicaid or SCHIP. The Medicaid and SCHIP 
enrollment process may include targeting and identifying children from 
low-income households who are potentially eligible for Medicaid or SCHIP 
for the purpose of seeking to enroll them in Medicaid or SCHIP.

[[Page 81]]

    (5) Must we notify households of potential disclosure to Medicaid or 
SCHIP? The State agency or child care institution, as appropriate, must 
notify parents/guardians that their children's free milk eligibility 
information will be disclosed to Medicaid and/or SCHIP unless the 
parent/guardian elects not to have their information disclosed. 
Additionally, the State agency or sponsor, as appropriate, must give 
parents/guardians an opportunity to elect not to have their information 
disclosed to Medicaid or SCHIP. Only the parent or guardian who is a 
member of the household or family for purposes of the free and reduced 
price meal or free milk application may decline the disclosure of 
eligibility information. The notification must inform parents/guardians 
that they are not required to consent to the disclosure, that the 
information, if disclosed, will be used to identify children eligible 
for and to seek to enroll children in a health insurance program, and 
that their decision will not affect their children's eligibility for 
free milk. The notification may be included in the letter/notice to 
parents/guardians that accompanies the free milk application, on the 
application itself or in a separate notice provided to parents/
guardians. The notice must give parents/guardians adequate time to 
respond. For children determined eligible through direct certification, 
the notice of potential disclosure may be included in the document 
informing parents/guardians of their children's eligibility for free 
milk through direct certification.
    (6) May social security numbers be disclosed? The State agency or 
child care institution, as appropriate, may disclose social security 
numbers to any programs or persons authorized to receive all program 
eligibility information under this paragraph (g), provided parents/
guardians have not declined to have their information disclosed. However 
State agencies and child care institutions that plan to disclose social 
security numbers must give notice of the planned use of the social 
security numbers. This notice must be in accordance with section 7(b) of 
the Privacy Act of 1974 (5 U.S.C. 552a note). The application must 
include substantially the following language for disclosures of social 
security numbers to Medicaid or SCHIP: ``The social security number may 
also be disclosed to Medicaid and the State Children's Health Insurance 
Program for the purpose of identifying and seeking to enroll eligible 
children in one of these health insurance programs.'' This language is 
in addition to the notice required in paragraph (f) of this section. 
State agencies and child care institutions are responsible for drafting 
the appropriate notice for disclosures of social security numbers.
    (7) Are agreements required before disclosing program eligibility 
information? The State agency or child care institution, as appropriate, 
must have a written agreement with the State or local agency or agencies 
administering Medicaid or SCHIP prior to disclosing children's free milk 
eligibility information. At a minimum, the agreement must:
    (i) Identify the health insurance program or health agency receiving 
children's eligibility information;
    (ii) Describe the information that will be disclosed;
    (iii) Require that the Medicaid or SCHIP agency use the information 
obtained and specify that the information must only be used to seek to 
enroll children in Medicaid or SCHIP;
    (iv) Describe how the information will be protected from 
unauthorized uses and disclosures;
    (v) Describe the penalties for unauthorized disclosure; and
    (vi) Be signed by both the Medicaid or SCHIP program or agency and 
the State agency or child care institution, as appropriate.
    (8) What are the penalties for unauthorized disclosure or misuse of 
information? In accordance with section 9(b)(2)(C)(v) of the Richard B. 
Russell National School Lunch Act (42 U.S.C. 1758(b)(2)(C)(v)), any 
individual who publishes, divulges, discloses or makes known in any 
manner, or to any extent not authorized by statute or this section, any 
information obtained under this paragraph (g) will be fined not more 
than $1,000 or imprisoned for up to 1 year, or both.
    (9) What are the State agency's responsibilities regarding 
disclosures? State agencies that elect to allow disclosure

[[Page 82]]

of children's free milk eligibility information to Medicaid or SCHIP, as 
provided in this paragraph (g), must ensure that any child care 
institution acting in accordance with that option:
    (i) Has a written agreement with the State or local agency or 
agencies administering health insurance programs for children under 
titles XIX and XXI of the Social Security Act (42 U.S.C. 1396 et seq. 
and 1397aa et seq.) that requires the health agencies to use children's 
free milk eligibility information to seek to enroll children in those 
health insurance programs; and
    (ii) Notifies each household of the information that will be 
disclosed, that the information disclosed will be used only to seek to 
enroll children in Medicaid or SCHIP and provides each parent/guardian 
with an opportunity to elect not to have the information disclosed.

(Sec. 11, Pub. L. 95-166, 91 Stat. 1337 (42 U.S.C. 1772, 1753, 1766); 
sec. 5, Pub. L. 95-627, 92 Stat. 3619 (42 U.S.C. 1772))

[Amdt. 14, 41 FR 31176, July 27, 1976, as amended by Amdt. 16, 43 FR 
1060, Jan. 6, 1978; 44 FR 10700, Feb. 23, 1979; Amdt. 17, 44 FR 33047, 
June 8, 1979; 66 FR 2201, Jan. 11, 2001]



Sec. 215.14  Nondiscrimination.

    The Department's regulations on nondiscrimination in federally 
assisted programs are set forth in part 15 of this title. The 
Department's agreements with State agencies, the State agencies' 
agreements with School Food Authorities and child-care institutions and 
the FNSRO agreements with School Food Authorities administering 
nonprofit private schools and with child-care institutions shall contain 
the assurances required by such regulations. When different types of 
milk are served to children, (a) a uniform price for each type of milk 
served shall be charged to all non-needy children in the school or 
child-care institution who purchase milk, and (b) needy children shall 
be given the opportunity to select any type of milk offered.

(44 U.S.C. 3506)

[Amdt. 13, 39 FR 28418, Aug. 7, 1974, as amended at 47 FR 745, Jan. 7, 
1982]



Sec. 215.14a  Procurement standards.

    (a) Requirements. State agencies and School Food Authorities shall 
comply with the requirements of the Office of Management and Budget 
(OMB) Circular A-102 and the Department's Uniform Federal Assistance 
Regulations, 7 CFR part 3015, subpart S (46 FR 55658) concerning the 
procurement of supplies, food, equipment and other services with Program 
funds. These requirements are adopted by FNS to ensure that such 
materials and services are obtained for the Program efficiently and 
economically and in compliance with applicable laws and executive 
orders.
    (b) Contractual responsibilities. The standards contained in OMB 
Circular A-102 and 7 CFR part 3015, do not relieve the State agency or 
School Food Authority of any contractual responsibilities under its 
contract. The State agency or School Food Authority is the responsible 
authority, without recourse to FNS, regarding the settlement and 
satisfaction of all contractual and administrative issues arising out of 
procurements entered into in connection with the Program. This includes 
but is not limited to: Source evaluation, protests, disputes, claims, or 
other matters of a contractual nature. Matters concerning violation of 
law are to be referred to the local, State or Federal authority that has 
proper jurisdiction.
    (c) Procurement procedure. The State agency or School Food Authority 
may use their own procurement procedures which reflect applicable State 
and local laws and regulations, provided that procurements made with 
Program funds adhere to the standards set forth in OMB Circular A-102 
and 7 CFR part 3015.

(Pub. L. 79-396, 60 Stat. 231 (42 U.S.C. 1751); Pub. L. 89-642, 80 Stat. 
885-890 (42 U.S.C. 1773); Pub. L. 91-248, 84 Stat. 207 (42 U.S.C. 1759))

[Amdt. 27, 48 FR 19355, Apr. 29, 1983]



Sec. 215.15  Suspension, termination and grant closeout procedures.

    Whenever it is determined that a State agency has materially failed 
to comply with the provisions of this

[[Page 83]]

part, or with FNS guidelines and instructions, FNS may suspend or 
terminate the Program in whole, or in part, or take any other action as 
may be available and appropriate. A State agency may also terminate the 
Program by mutual agreement with FNS. FNS and the State agency shall 
comply with the provisions of the Department's Uniform Federal 
Assistance Regulations, 7 CFR part 3015, subpart N concerning grant 
suspension, termination and closeout procedures. Furthermore, the State 
agency, or FNSRO where applicable, shall apply these provisions to 
suspension or termination of the Program in School Food Authorities.

[Amdt. 30, 49 FR 18987, May 4, 1984]



Sec. 215.16  Program information.

    School Food Authorities and child-care institutions desiring 
information concerning the Program should write to their State 
educational agency, or the appropriate Food and Nutrition Service 
Regional Office of FNS as indicated below:
    (a) In the States of Connecticut, Maine, Massachusetts, New 
Hampshire, New York, Rhode Island, and Vermont: Northeast Regional 
Office, FNS, U.S. Department of Agriculture, 10 Causeway Street, Room 
501, Boston, Massachusetts 02222-1065.
    (b) In the States of Delaware, District of Columbia, Maryland, New 
Jersey, Pennsylvania, Puerto Rico, Virginia, Virgin Islands, and West 
Virginia: Mid-Atlantic Regional Office, FNS, U.S. Department of 
Agriculture, 300 Corporate Boulevard, Robbinsville, New Jersey 08691-
1598.
    (c) In the States of Alabama, Florida, Georgia, Kentucky, 
Mississippi, North Carolina, South Carolina, and Tennessee: Southeast 
Regional Office, FNS, U.S. Department of Agriculture, 61 Forsyth Street 
SW., Room 8T36, Atlanta, Georgia 30303.
    (d) In the States of Illinois, Indiana, Michigan, Minnesota, Ohio, 
and Wisconsin: Midwest Regional Office, FNS, U.S. Department of 
Agriculture, 77 West Jackson Boulevard, 20th Floor, Chicago, Illinois 
60604-3507.
    (e) In the States of Arkansas, Louisiana, New Mexico, Oklahoma, 
Texas: Southwest Regional Office, Food and Nutrition Service, U.S. 
Department of Agriculture, 1100 Commerce Street, Room 5-C-30, Dallas, 
Texas 75242.
    (f) In the States of Alaska, American Samoa, Arizona, California, 
Guam, Hawaii, Idaho, Nevada, Oregon, The Commonwealth of the Northern 
Mariana Islands, and Washington: Western Regional Office, FNS, U.S. 
Department of Agriculture, 550 Kearny Street, Room 400, San Francisco, 
California 94108.
    (g) In the States of Colorado, Iowa, Kansas, Missouri, Montana, 
Nebraska, North Dakota, South Dakota, Utah, and Wyoming: Mountain Plains 
Regional Office, FNS, U.S. Department of Agriculture, 1244 Speer 
Boulevard, Suite 903, Denver, Colorado 80204.

(Sec. 11, Pub. L. 95-166, 91 Stat. 1337 (42 U.S.C. 1772, 1753, 1766); 
sec. 10(a), Pub. L. 95-627, 92 Stat. 3623 (42 U.S.C. 1760); sec. 
10(d)(3), Pub. L. 95-627, 92 Stat. 3624 (42 U.S.C. 1757); sec. 14, Pub. 
L. 95-627, 92 Stat. 3625-3626); secs. 804, 816, 817 and 819, Pub. L. 97-
35, 95 Stat. 521-535 (42 U.S.C. 1753, 1756, 1759, 1771, 1773 and 1785)

[Amdt. 14, 41 FR 31178, July 27, 1976, as amended by Amdt. 18, 44 FR 
37898, June 29, 1979; Amdt. 27, 48 FR 195, Jan. 4, 1983; Amdt. 36, 54 FR 
2990, Jan. 23, 1989; 65 FR 12435, Mar. 9, 2000]



Sec. 215.17  Information collection/recordkeeping--OMB assigned control numbers.

------------------------------------------------------------------------
                                                             Current OMB
       7 CFR section where requirements are described          control
                                                                number
------------------------------------------------------------------------
215.3(d)...................................................    0584-0327
215.5(a)...................................................    0584-0005
                                                               0584-0002
215.5(c)...................................................    0584-0341
215.7 (a), (c).............................................    0584-0005
215.7 (b)(2)...............................................    0584-0026
215.7(d)...................................................    0584-0329
                                                               0584-0005
215.10 (a), (b), (d).......................................    0584-0005
                                                               0584-0284
215.11 (b), (c)(1), (e)....................................    0584-0005
215.11(c)(2)...............................................    0584-0002
                                                               0584-0341
215.12 (a), (d), (e), (g)..................................    0584-0005
215.13(a)..................................................    0584-0005
215.13a(a)-(e).............................................    0584-0026
215.14.....................................................    0584-0005
215.14a(a)-(c).............................................    0584-0005
215.15.....................................................    0584-0005
------------------------------------------------------------------------


[50 FR 53258, Dec. 31, 1985]

[[Page 84]]



PART 220--SCHOOL BREAKFAST PROGRAM--Table of Contents




Sec.
220.1  General purpose and scope.
220.2  Definitions.
220.3  Administration.
220.4  Payment of funds to States and FNSROs.
220.5  Method of payment to States.
220.6  Use of funds.
220.7  Requirements for participation.
220.8  What are the nutrition standards and menu planning approaches for 
          breakfasts?
220.9  Reimbursement payments.
220.10  Effective date for reimbursement.
220.11  Reimbursement procedures.
220.12  Competitive food services.
220.13  Special responsibilities of State agencies.
220.14  Claims against school food authorities.
220.15  Management evaluations and audits.
220.16  Procurement standards.
220.17  Prohibitions.
220.18  Suspension, termination and grant closeout procedures.
220.19  Free and reduced price breakfasts.
220.20  Program information.
220.21  Information collection/recordkeeping--OMB assigned control 
          numbers.

Appendix A to Part 220--Alternate Foods for Meals
Appendix B to Part 220--Categories of Foods of Minimal Nutritional Value
Appendix C to Part 220--Child Nutrition (CN) Labeling Program

    Authority: 42 U.S.C. 1773, 1779, unless otherwise noted.



Sec. 220.1  General purpose and scope.

    This part announces the policies and prescribes the regulations 
necessary to carry out the provisions of section 4 of the Child 
Nutrition Act of 1966, as amended, which authorizes payments to the 
States to assist them to initiate, maintain, or expand nonprofit 
breakfast programs in schools.

[Amdt. 25, 41 FR 34758, Aug. 17, 1976]



Sec. 220.2  Definitions.

    For the purpose of this part the term:
    (a) Act means the Child Nutrition Act of 1966, as amended.
    (b) Breakfast means a meal which meets the nutritional requirements 
set out in Sec. 220.8, and which is served to a child in the morning 
hours. The meal shall be served at or close to the beginning of the 
child's day at school.
    (c) Child means: (1) A student of high school grade or under as 
determined by the State educational agency, who is enrolled in an 
educational unit of high school grade or under as described in 
paragraphs (1) and (2) of the definition of ``School'', including 
students who are mentally or physically disabled as defined by the State 
and who are participating in a school program established for the 
mentally or physically disabled; or (2) a person under 21 chronological 
years of age who is enrolled in an institution or center as described in 
paragraphs (3) and (4) of the definition of ``School''.
    (c-1) Competitive foods means any foods sold in competition with the 
School Breakfast Program to children in food service areas during the 
breakfast period.
    (d) CND means the Child Nutrition Division of the Food and Nutrition 
Service of the Department.
    (e) Department means the U.S. Department of Agriculture.
    (f) Distributing agency means a State, Federal, or private agency 
which enters into an agreement with the Department for the distribution 
of commodities pursuant to part 250 of this chapter.
    (g) Fiscal year means the period of 15 calendar months beginning 
July 1, 1976, and ending September 30, 1977; and the period of 12 
calendar months beginning October 1, 1977, and each October 1 of any 
calendar year thereafter and ending September 30 of the following 
calendar year.
    (h) FNS means the Food and Nutrition Service of the Department.
    (i) FNSRO means the appropriate Food and Nutrition Service Regional 
Office of the Food and Nutrition Service of the Department.
    (i-1) Foods of minimal nutritional value means: (1) In the case of 
artificially sweetened foods, a food which provides less than five 
percent of the Reference Daily Intake (RDI) for each of eight specified 
nutrients per serving; (2) in the case of all other foods, a food that 
provides less than five percent of the RDI for each of eight specified 
nutrients per 100 calories and less than five percent of the RDI for 
each of eight specified nutrients per serving. The eight nutrients to be 
assessed for this

[[Page 85]]

purpose are: Protein, vitamin A, vitamin C, niacin, riboflavin, thiamin, 
calcium and iron. Categories of foods of minimal nutritional value are 
listed in appendix B of this part.
    (j) Free breakfast means a breakfast for which neither the child nor 
any member of his family pays or is required to work in the school or in 
the school's food service.
    (k) Infant cereal means any iron fortified dry cereal especially 
formulated and generally recognized as cereal for infants that is 
routinely mixed with breast milk or iron-fortified infant formula prior 
to consumption.
    (l) Infant formula means any iron-fortified infant formula intended 
for dietary use solely as a food for normal healthy infants excluding 
those formulas specifically formulated for infants with inborn errors of 
metabolism or digestive or absorptive problems. Infant formula, as 
served, must be in liquid state at recommended dilution.
    (m) Menu item means, under Nutrient Standard Menu Planning or 
Assisted Nutrient Standard Menu Planning, any single food or combination 
of foods. All menu items or foods offered as part of the reimbursable 
meal may be considered as contributing towards meeting the nutrition 
standards provided in Sec. 220.8, except for those foods that are 
considered as foods of minimal nutritional value as provided for in 
Sec. 220.2(i-1) which are not offered as part of a menu item in a 
reimbursable meal. For the purposes of a reimbursable breakfast, a 
minimum of three menu items must be offered, one of which shall be fluid 
milk served as a beverage or on cereal or both; under offer versus 
serve, a student may decline only one menu item.
    (n) Milk means pasteurized fluid types of unflavored or flavored 
whole milk, lowfat milk, skim milk, or cultured buttermilk which meet 
State and local standards for such milk except that, in the meal pattern 
for infants (0 to 1 year of age), milk means breast milk or iron-
fortified infant formula. In Alaska, Hawaii, American Samoa, Guam, 
Puerto Rico, the Trust Territory of the Pacific Islands, and the Virgin 
Islands, if a sufficient supply of such types of fluid milk cannot be 
obtained, ``milk'' shall include reconstituted or recombined milk. All 
milk should contain vitamins A and D at levels specified by the Food and 
Drug Administration and consistent with State and local standards for 
such milk.
    (o) National School Lunch Program means the Program authorized by 
the National School Lunch Act.
    (o-1) Net cash resources means all monies as determined in 
accordance with the State agency's established accounting system, that 
are available to or have accrued to a School Food Authority's nonprofit 
school food service at any given time, less cash payable. Such monies 
may include but are not limited to, cash on hand, cash receivable, 
earnings or investments, cash on deposit and the value of stocks, bonds 
or other negotiable securities.
    (o-2) Nonprofit school food service means all food service 
operations conducted by the School Food Authority principally for the 
benefit of school children, all of the revenue from which is used solely 
for the operation or improvement of such food service.
    (p) Nonprofit when applied to schools or institutions eligible for 
the Program means exempt from income tax under section 501(c)(3) of the 
Internal Revenue Code of 1954, as amended; or in the Commonwealth of 
Puerto Rico, certified by the Governor.
    (p-1) Nutrient Standard Menu Planning/Assisted Nutrient Standard 
Menu Planning means ways to develop breakfast menus based on the 
analysis for nutrients in the menu items and foods offered over a school 
week to determine if specific levels for a set of key nutrients and 
calories were met in accordance with Sec. 220.8(e)(5). However, for the 
purposes of Assisted Nutrient Standard Menu Planning, breakfast menu 
planning and analysis are completed by other entities and must 
incorporate the production quantities needed to accommodate the specific 
service requirements of a particular school or school food authority in 
accordance with Sec. 220.8(f).
    (q) OA means the Office of Audit of the Department.
    (q-1) OI means the Office of Investigation of the Department.
    (q-2) OIG means the Office of the Inspector General of the 
Department.

[[Page 86]]

    (r) Program means the School Breakfast Program.
    (s) Reduced price breakfast means a breakfast which meets all of the 
following criteria: (1) The price shall be less than the full price of 
the breakfast, (2) the price shall be 30 cents or lower, and (3) neither 
the child nor any member of his family shall be required to supply an 
equivalent value in work for the school or the school's food service.
    (t) Reimbursement means financial assistance paid or payable to 
participating schools for breakfasts meeting the requirements of 
Sec. 220.8 served to eligible children at rates assigned by the State 
agency, or FNSRO where applicable. The term ``reimbursement'' also 
includes financial assistance made available through advances to School 
Food Authorities.
    (t-1) Revenue when applied to nonprofit school food service means 
all monies received by or accruing to the nonprofit school food service 
in accordance with the State agency's established accounting system 
including, but not limited to, children's payments, earnings on 
investments, other local revenues, State revenues, and Federal cash 
reimbursements.
    (u) School means: (1) An educational unit of high school grade or 
under, recognized as part of the educational system in the State and 
operating under public or nonprofit private ownership in a single 
building or complex of buildings; (2) any public or nonprofit private 
classes of preprimary grade when they are conducted in the 
aforementioned schools; or (3) any public or nonprofit private 
residential child care institution, or distinct part of such 
institution, which operates principally for the care of children, and, 
if private, is licensed to provide residential child care services under 
the appropriate licensing code by the State or a subordinate level of 
government, except for residential summer camps which participate in the 
Summer Food Service Program for Children, Job Corps centers funded by 
the Department of Labor, and private foster homes. The term 
``residential child care institutions'' includes, but is not limited to: 
Homes for the mentally, emotionally or physically impaired, and 
unmarried mothers and their infants; group homes; halfway houses; 
orphanages; temporary shelters for abused children and for runaway 
children; long-term care facilities for chronically ill children; and 
juvenile detention centers. A long-term care facility is a hospital, 
skilled nursing facility, intermediate care facility, or distinct part 
thereof, which is entended for the care of children confined for 30 days 
or more.
    (v) School Breakfast Program means the program authorized by section 
4 of the Child Nutrition Act of 1966.
    (v-1) School in severe need means a school determined to be eligible 
for rates of reimbursement in excess of the prescribed National Average 
Payment Factors, based upon the criteria set forth in Sec. 220.9(e).
    (w) School Food Authority means the governing body which is 
responsible for the administration of one or more schools and which has 
legal authority to operate a breakfast program therein.
    (w-1) School week means the period of time used to determine 
compliance with the nutrition standards and the appropriate calorie and 
nutrient levels in Sec. 220.8. Further, if applicable, school week is 
the basis for conducting Nutrient Standard Menu Planning or Assisted 
Nutrient Standard Menu Planning for breakfasts as provided in 
Sec. 220.8(e) and Sec. 220.8(f). The period shall be a normal school 
week of five consecutive days; however, to accommodate shortened weeks 
resulting from holidays and other scheduling needs, the period shall be 
a minimum of three consecutive days and a maximum of seven consecutive 
days. Weeks in which school breakfasts are offered less than three times 
shall be combined with either the previous or the coming week.
    (x) Secretary means the Secretary of Agriculture.
    (x-1) 7 CFR part 3015 means the Uniform Federal Assistance 
Regulations published by the Department to implement OMB Circulars A-21, 
A-87, A-102, A-110, and A-122; and Executive Order 12372. (For 
availability of OMB Circulars referenced in this definition, see 5 CFR 
1310.3.)
    (x-2) 7 CFR part 3017 means the Department's regulation to implement

[[Page 87]]

Executive Order 12549, covering governmentwide rules on suspension and 
debarment as well as The Drug Free Workplace Act of 1988.
    (x-3) 7 CFR part 3018 means the Department's Common Rule regarding 
Governmentwide New Restrictions on Lobbying. Part 3018 implements the 
requirements established by section 319 of the 1990 Appropriations Act 
for the Department of Interior and Related Agencies (Pub. L. 101-121).
    (x-4) 7 CFR part 3052 means the Department's regulations 
implementing A-133, ``Audits of State, Local Governments, and Non-Profit 
Organizations.'' (For availability of OMB Circulars referenced in this 
definition, see 5 CFR 1310.3.)
    (y) State means any of the 50 States, District of Columbia, the 
Commonwealth of Puerto Rico, the Virgin Islands, Guam, and, as 
applicable, American Samoa and the Commonwealth of the Northern 
Marianas.
    (z) State agency means: (1) The State educational agency or (2) such 
other agency of the State as has been designated by the Governor or 
other appropriate executive or legislative authority of the State and 
approved by the Department to administer the Program in schools as 
defined in Sec. 220.2(u)(3) of this part.
    (aa) State educational agency means, as the State legislature may 
determine: (1) The chief State school officer (such as the State 
Superintendent of Public Instruction, Commissioner of Education, or 
similar officer), or (2) a board of education controlling the State 
department of education.
    (bb) Yogurt means commercially prepared coagulated milk products 
obtained by the fermentation of specific bacteria, that meet milk fat or 
milk solid requirements and to which flavoring foods or ingredients may 
be added. These products are covered by the Food and Drug 
Administration's Definition and Standard of Identity for yogurt, lowfat 
yogurt, and nonfat yogurt, 21 CFR 131.200, 21 CFR 131.203, and 21 CFR 
131.206, respectively.

(Sec. 6, Pub. L. 95-627, 92 Stat. 3620 (42 U.S.C. 1760); sec. 205, Pub. 
L. 96-499, The Omnibus Reconciliation Act of 1980, 94 Stat. 2599; secs. 
801, 803, 812; Pub. L. 97-35, 95 Stat. 521-535 (42 U.S.C. 1753, 1759(a), 
1773, 1758; secs. 807 and 808, Pub. L. 97-35, 95 Stat. 521-535, 42 
U.S.C. 1772, 1784, 1760; sec. 819, Pub. L. 97-35; 95 Stat. 533 (42 
U.S.C. 1759a, 1773 and 1757))

[Amdt. 25, 41 FR 34758, Aug. 17, 1976]

    Editorial Note: For Federal Register citations affecting Sec. 220.2, 
see the List of CFR Sections Affected, which appears in the Finding Aids 
section of the printed volume and on GPO Access.



Sec. 220.3  Administration.

    (a) Within the Department, FNS shall act on behalf of the Department 
in the administration of the Program covered by this part. Within FNS, 
CND shall be responsible for administration of the Program.
    (b) Within the States, responsibility for the administration of the 
Program in schools as defined in Sec. 220.2(u)(1), (u)(2) and (u)(4) 
shall be in the State educational agency, except that FNSRO shall 
administer the Program with respect to nonprofit private schools as 
defined in Sec. 220.2(u)(1) of any State wherein the State educational 
agency is not permitted by law to disburse Federal funds paid to it 
under the Program; Provided, however, That FNSRO shall also administer 
the Program in all other nonprofit private schools which have been under 
continuous FNS administration since October 1, 1980, unless the 
administration of such private schools is assumed by a State agency.
    (c) Within the States, responsibility for the administration of the 
Program in schools as defined in Sec. 220.2(u)(3) shall be in the State 
educational agency, or if the State educational agency cannot administer 
the Program in such schools, such other agency of the State as has been 
designated by the Governor

[[Page 88]]

or other appropriate executive or legislative authority of the State and 
approved by the Department to administer the Program in such schools: 
Provided, however, That FNSRO shall administer the Program in such 
schools if the State agency is not permitted by law to disburse Federal 
funds paid to it under the Program to such schools; and Provided, 
further, That FNSRO shall also administer the Program in all other such 
schools which have been under continuous FNS administration since 
October 1, 1980, unless the administration of such schools is assumed by 
a State agency.
    (d) References in this part to ``FNSRO where applicable'' are to 
FNSRO as the agency administering the Program.
    (e) Each State agency desiring to take part in any of the programs 
shall enter into a written agreement with the Department for the 
administration of the Program in the State in accordance with the 
provisions of this part. Such agreement shall cover the operation of the 
Program during the period specified therein and may be extended at the 
option of the Department.

(Sec. 804, 816 and 817, Pub. L. 97-35, 95 Stat. 521-535 (42 U.S.C. 1753, 
1756, 1759, 1771 and 1785); 44 U.S.C. 3506)

[Amdt. 25, 41 FR 34759, Aug. 17, 1976, as amended at 47 FR 745, Jan. 7, 
1982; Amdt. 42, 47 FR 14133, Apr. 2, 1982; Amdt. 56, 54 FR 2990, Jan. 
23, 1989]



Sec. 220.4  Payment of funds to States and FNSROs.

    (a) To the extent funds are available, the Secretary shall make 
breakfast assistance payments to each State agency for breakfasts served 
to children under the Program. Subject to Sec. 220.13(b)(2), the total 
of these payments for each State for any fiscal year shall be limited to 
the total amount of reimbursement payable to eligible schools within the 
State under this part for the fiscal year.
    (b) The Secretary shall prescribe by July 1 of each fiscal year 
annual adjustments to the nearest one-fourth cent in the national 
average per breakfast factors for all breakfasts and for free and 
reduced price breakfasts, that shall reflect changes in the cost of 
operating a breakfast program.
    (c) In addition to the funds made available under paragraph (a) of 
this section, funds shall be made available to the State agencies, and 
FNSROs where applicable, in such amounts as are needed to finance 
reimbursement rates assigned in accordance with the provisions of 
Sec. 220.9(c).

(Secs. 801, 803, 812; Pub. L. 97-35, 95 Stat. 521-535 (42 U.S.C. 1753, 
1759(a), 1773, 1758); Pub. L. 97-370, 96 Stat. 1806)

[38 FR 35554, Dec. 28, 1973, as amended at 40 FR 30923, July 24, 1975; 
46 FR 51367, Oct. 20, 1981; 48 FR 20896, May 10, 1983; Amdt. 49, 49 FR 
18987, May 4, 1984]



Sec. 220.5  Method of payment to States.

    Funds to be paid to any State for the School Breakfast Program shall 
be made available by means of Letters of Credit issued by FNS in favor 
of the State agency. The State agency shall:
    (a) Obtain funds needed for reimbursement to School Food Authorities 
through presentation by designated State officials of a payment Voucher 
on Letter of Credit in accordance with procedures prescribed by FNS and 
approved by the U.S. Treasury Department; (b) submit requests for funds 
only at such times and in such amounts, as will permit prompt payment of 
claims or authorized advances; and (c) use the funds received from such 
requests without delay for the purpose for which drawn.

[Amdt. 25, 41 FR 34759, Aug. 17, 1976]



Sec. 220.6  Use of funds.

    (a) Federal funds made available under the School Breakfast Program 
shall be used by State agencies, or FNSROs where applicable, to 
reimburse or make advance payments to School Food Authorities in 
connection with breakfasts served in accordance with the provisions of 
this part. However, with the approval of FNS, any State agency, or FNSRO 
where applicable, may reserve for use in carrying out special 
developmental projects an amount up to 1 per centum of the funds earned 
in any fiscal year under the School Breakfast Program. Advance payments 
to School Food Authorities may be made at such times and in such amounts 
as are necessary to meet current obligations.

[[Page 89]]

    (b) Whoever embezzles, willfully misapplies, steals, or obtains by 
fraud any funds, assets, or property provided under this part, whether 
received directly or indirectly from the Department, shall--
    (1) If such funds, assets, or property are of a value of $100 or 
more, be fined not more than $25,000 or imprisoned not more than 5 years 
or both; or
    (2) If such funds, assets, or property are of a value of less than 
$100, be fined not more than $1,000 or imprisoned not more than one year 
or both.
    (c) Whoever receives, conceals, or retains to his use or gain funds, 
assets, or property provided under this part, whether received directly 
or indirectly from the Department, knowing such funds, assets, or 
property have been embezzled, willfully misapplied, stolen, or obtained 
by fraud, shall be subject to the same penalties provided in paragraph 
(b) of this section.

(Sec. 10(a), Pub. L. 95-627, 92 Stat. 3623 (42 U.S.C. 1760); sec. 
10(d)(3), Pub. L. 95-627, 92 Stat. 3624 (42 U.S.C. 1757); sec. 14, Pub. 
L. 95-627, 92 Stat. 3625-3626)

[40 FR 30923, July 24, 1975, as amended by Amdt. 25, 41 FR 34759, Aug. 
17, 1976; Amdt. 28, 44 FR 37899, June 29, 1979; 64 FR 50742, Sept. 20, 
1999]



Sec. 220.7  Requirements for participation.

    (a) The School Food Authority shall make written application to the 
State agency, or FNSRO where applicable, for any school in which it 
desires to operate the School Breakfast Program, if such school did not 
participate in the Program in the prior fiscal year. The School Food 
Authority shall also submit for approval, either with the application or 
at the request of the State agency, or FNSRO where applicable, a free 
and reduced price policy statement in accordance with part 245 of this 
chapter. A School Food Authority which simultaneously makes application 
for the National School Lunch Program and the School Breakfast Program 
shall submit one free and reduced price policy statement which shall 
provide that the terms, conditions, and eligibility criteria set forth 
in such policy statement shall apply to the service of free and reduced 
price lunches and to the service of free and reduced price breakfasts. 
If, at the time application is made for the School Breakfast Program, a 
School Food Authority has an approved free and reduced price policy 
statement on file with the State agency, or FNSRO where applicable, for 
the National School Lunch Program, it need only confirm in writing that 
such approved policy statement will also apply to the operation of its 
School Breakfast Program. Applications for the School Breakfast Program 
shall not be approved in the absence of an approved free and reduced 
price policy statement.
    (a-1) A school which also either participates in the National School 
Lunch Program or only receives donations of commodities for its 
nonprofit lunch program under the provisions of part 250 of this chapter 
(commodity only school) shall apply the same set of eligibility criteria 
so that children who are eligible for free lunches shall also be 
eligible for free breakfasts and children who are eligible for reduced 
price lunches shall also be eligible for reduced price breakfasts.
    (a-2) Schools shall, at least once during each school year, obtain a 
food safety inspection conducted by a State or local governmental agency 
responsible for food safety inspections. However, this requirement shall 
not apply to a school if a food safety inspection of the school is 
required by a State or local governmental agency responsible for food 
safety inspections.
    (b) Applications shall solicit information in sufficient detail to 
enable the State agency to determine whether the School Food Authority 
is eligible to participate in the Program and extent of the need for 
Program payments.
    (c) Within the funds available to them, State agencies, or FNSRO's 
where applicable, shall approve for participation in the School 
Breakfast Program any school making application and agreeing to carry 
out the program in accordance with this part. State agencies, or FNSRO's 
where applicable, have a positive obligation, however, to extend the 
benefits of the School Breakfast Program to children attending schools 
in areas where poor economic conditions exist.
    (d) Any School Food Authority may employ a food service management

[[Page 90]]

company (or other nonprofit agency or nonprofit organization) in the 
conduct of its feeding operation in one or more of its schools. A School 
Food Authority that employs a food service management company shall 
remain responsible for seeing that the feeding operation is in 
conformance with its agreement with the State Agency or the FNS Regional 
Office. The contract between the School Food Authority and the food 
service management company shall expressly provide that:
    (1) The food service management company shall maintain such records 
(supported by invoices, receipts, or other evidence) as the School Food 
Authority will need to meet its responsibilities under this part, and 
shall report thereon to the School Food Authority promptly at the end of 
each month;
    (2) Any federally donated commodities received by the School Food 
Authority and made available to the food service management company 
shall enure only to the benefit to the School Food Authority's nonprofit 
school food service and be utilized therein; and
    (3) The books and records of the food service management company 
pertaining to the School Food Authority's feeding operation shall be 
available for a period of 3 years from the date of the submission of the 
final Financial Status Report, for inspection and audit by 
representatives of the State agency, of the Department, and of the 
General Accounting Office at any reasonable time and place, except that 
if audit findings have not been resolved, the records shall be retained 
beyond the three-year period as long as required for the resolution of 
the issues raised by the audit.
    (e) Each school food authority approved to participate in the 
program shall enter into a written agreement with the State agency or 
the Department through the FNSRO, as applicable, that may be amended as 
necessary. Nothing in the preceding sentence shall be construed to limit 
the ability of the State agency or the FNSRO to suspend or terminate the 
agreement in accordance with Sec. 220.18. If a single State agency 
administers any combination of the Child Nutrition Programs, that State 
agency shall provide each SFA with a single agreement with respect to 
the operation of those programs. Such agreements shall provide that the 
School Food Authority shall, with respect to participating schools under 
its jurisdiction:
    (1)(i) Maintain a nonprofit school food service; (ii) in accordance 
with the financial management system established under Sec. 220.13(i) of 
this part, use all revenues received by such food service only for the 
operation or improvement of that food service Except that, facilities, 
equipment, and personnel support with funds provided to a school food 
authority under this part may be used to support a nonprofit nutrition 
program for the elderly, including a program funded under the Older 
Americans Act of 1965 (42 U.S.C. 3001 et seq.); (iii) revenues received 
by the nonprofit school food service shall not be used to purchase land 
or buildings or to contruct buildings; (iv) limit its net cash resources 
to an amount that does not exceed three months average expenditure for 
its nonprofit school food service or such other amount as may be 
approved by the State agency; and (v) observe the limitations on any 
competitive food service as set forth in Sec. 220.12 of this part;
    (2) Serve breakfasts which meet the minimum requirements prescribed 
in Sec. 220.8, during a period designated as the breakfast period by the 
school;
    (3) Price the breakfast as a unit;
    (4) Supply breakfast without cost or at reduced price to all 
children who are determined by the School Food Authority to be unable to 
pay the full price thereof in accordance with the free and reduced price 
policy statements approved under part 245 of this chapter;
    (5) Make no discrimination against any child because of his 
inability to pay the full price of the breakfasts;
    (6) Claim reimbursement at the assigned rates only for breakfasts 
served in accordance with the agreement;
    (7) Submit Claims for Reimbursement in accordance with Sec. 220.11 
of this part and procedures established by the State agency, or FNSRO 
where applicable;

[[Page 91]]

    (8) Maintain, in the storage, preparation and service of food, 
proper sanitation and health standards in conformance with all 
applicable State and local laws and regulations;
    (9) Purchase, in as large quantities as may be efficiently utilized 
in its nonprofit school food service, foods designated as plentiful by 
the State Agency, or CFPDO, where applicable;
    (10) Accept and use, in as large quantities as may be efficiently 
utilized in its nonprofit school food service, such foods as may be 
offered as a donation by the Department;
    (11) Maintain necessary facilities for storing, preparing, and 
serving food;
    (12) Maintain a financial management system as prescribed by the 
State agency, or FNSRO where applicable;
    (13) Upon request, make all accounts and records pertaining to its 
nonprofit school food service available to the State agency, to FNS and 
to OA for audit or review at a reasonable time and place. Such records 
shall be retained for a period of three years after the end of the 
fiscal year to which they pertain, except that if audit findings have 
not been resolved, the records shall be retained beyond the three-year 
period as long as required for the resolution of the issues raised by 
the audit;
    (14) Retain the individual application for free and reduced price 
breakfasts submitted by families for a period of three years after the 
end of the fiscal year to which they pertain; and
    (15) Comply with the requirements of the Department's regulations 
respecting nondiscrimination (7 CFR part 15).
    (f) Nothing contained in this part shall prevent the State Agency 
from imposing additional requirements for participation in the program 
which are not inconsistent with the provisions of this part.

(44 U.S.C. 3506; sec. 819, Pub. L. 97-35, 95 Stat. 533 (42 U.S.C. 1759a, 
1773 and 1757); Pub. L. 79-396, 60 Stat. 231 (42 U.S.C. 1751); Pub. L. 
89-647, 80 Stat. 885-890 (42 U.S.C. 1773); Pub. L. 91-248, 84 Stat. 207 
(42 U.S.C. 1759))

[32 FR 34, Jan. 5, 1967]

    Editorial Note: For Federal Register citations affecting Sec. 220.7, 
see the List of CFR Sections Affected, which appears in the Finding Aids 
section of the printed volume and on GPO Access.



Sec. 220.8  What are the nutrition standards and menu planning approaches for breakfasts?

    (a) What are the nutrition standards for breakfasts for children age 
2 and over? School food authorities must ensure that participating 
schools provide nutritious and well-balanced breakfasts. For children 
age 2 and over, breakfasts, when averaged over a school week, must meet 
the nutrition standards and the appropriate nutrient and calorie levels 
in this section. The nutrition standards are:
    (1) Provision of one-fourth of the Recommended Dietary Allowances 
(RDA) for protein, calcium, iron, vitamin A and vitamin C in the 
appropriate levels (see paragraphs (b), (c), (e)(1), or (h) of this 
section);
    (2) Provision of the breakfast energy allowances (calories) for 
children in the appropriate levels (see paragraphs (b), (c), (e)(1), or 
(h) of this section);
    (3) These applicable recommendations of the 1995 Dietary Guidelines 
for Americans:
    (i) Eat a variety of foods;
    (ii) Limit total fat to 30 percent of total calories;
    (iii) Limit saturated fat to less than 10 percent of total calories;
    (iv) Choose a diet low in cholesterol;
    (v) Choose a diet with plenty of grain products, vegetables, and 
fruits; and
    (vi) Choose a diet moderate in salt and sodium.
    (4) These measures of compliance with the applicable recommendations 
of the 1995 Dietary Guidelines for Americans:
    (i) Limit the percent of calories from total fat to 30 percent of 
the actual number of calories offered;
    (ii) Limit the percent of calories from saturated fat to less than 
10 percent of the actual number of calories offered;
    (iii) Reduce sodium and cholesterol levels; and
    (iv) Increase the level of dietary fiber.
    (5) School food authorities have several ways to plan menus. The 
minimum levels of nutrients and calories that breakfasts must offer 
depends on the menu planning approach used and the age/grades served. 
The menu planning approaches are:

[[Page 92]]

    (i) Nutrient standard menu planning (see paragraphs (b) and (e) of 
this section);
    (ii) Assisted nutrient standard menu planning (see paragraphs (b) 
and (f) of this section);
    (iii) Traditional food-based menu planning (see paragraphs (c) and 
(g)(1) of this section);
    (iv) Enhanced food-based menu planning (see paragraphs (c) and 
(g)(2) of this section); or
    (v) Alternate menu planning as provided for in paragraph (h) of this 
section.
    (6) Schools must keep production and menu records for the breakfasts 
they produce. These records must show how the breakfasts contribute to 
the required food components, food items or menu items every day. In 
addition, these records must show how the breakfasts contribute to the 
nutrition standards in paragraph (a) of this section and the appropriate 
calorie and nutrient levels (see paragraphs (c), (d) or (h) of this 
section, depending on the menu planning approach used) over the school 
week. If applicable, schools or school food authorities must maintain 
nutritional analysis records to demonstrate that breakfasts, when 
averaged over each school week, meet:
    (i) The nutrition standards provided in paragraph (a) of this 
section; and
    (ii) The nutrient and calorie levels for children for each age or 
grade group in accordance with paragraphs (b), (e)(1) of this section or 
developed under paragraph (h) of this section.
    (b) What are the levels for nutrients and calories for breakfasts 
planned under the nutrient standard or assisted nutrient standard menu 
planning approaches?
    (1) The required levels are:
    [GRAPHIC] [TIFF OMITTED] TR09MY00.007
    
    (2) Optional levels are:

[[Page 93]]

[GRAPHIC] [TIFF OMITTED] TR09MY00.008

    (3) Schools may also develop a set of nutrient and calorie levels 
for a school week. These levels are customized for the age groups of the 
children in the particular school.
    (c) What are the nutrient and calorie levels for breakfasts planned 
under the food-based menu planning approaches?
    (1) Traditional approach. For the traditional food-based menu 
planning approach, the required levels are:
[GRAPHIC] [TIFF OMITTED] TR09MY00.009

(2) Enhanced approach. For the enhanced food-based menu planning 
approach, the required levels are:

[[Page 94]]

[GRAPHIC] [TIFF OMITTED] TR09MY00.010

    (d) What exceptions and variations are allowed in reimbursable 
breakfasts? (1) Exceptions for medical or special dietary needs. Schools 
must make substitutions in breakfasts for students who are considered to 
have a disability under 7 CFR Part 15b and whose disability restricts 
their diet. Schools may also make substitutions for students who do not 
have a disability but who cannot consume the regular breakfast because 
of medical or other special dietary needs. Substitutions must be made on 
a case by case basis only when supported by a statement of the need for 
substitutions that includes recommended alternate foods, unless 
otherwise exempted by FNS. Such statement must, in the case of a student 
with a disability, be signed by a physician or, in the case of a student 
who is not disabled, by a recognized medical authority.
    (2) Variations for ethnic, religious, or economic reasons. Schools 
should consider ethnic and religious preferences when planning and 
preparing breakfasts. Variations on an experimental or continuing basis 
in the food components for the food-based menu planning approaches in 
paragraph (g) may be allowed by FNS. Any variations must be 
nutritionally sound and needed to meet ethnic, religious, or economic 
needs.
    (3) Exceptions for natural disasters. If there is a natural disaster 
or other catastrophe, FNS may temporarily allow schools to serve 
breakfasts for reimbursement that do not meet the requirements in this 
section.
    (e) What are the requirements for the nutrient standard menu 
planning approach?
    (1) Nutrient levels.
    (i) Adjusting nutrient levels for young children. Schools with 
children who are age 2 must at least meet the nutrition standards in 
paragraph (a) of this section and the preschool nutrient and calorie 
levels in paragraph (b)(1) of this section over a school week. Schools 
may also use the preschool nutrient and calorie levels in paragraph 
(b)(2) of this section or may calculate nutrient and calorie levels for 
two year olds. FNS has a method for calculating these levels in menu 
planning guidance materials.
    (ii) Minimum levels for nutrients. Breakfasts must at least offer 
the nutrient and calorie levels for the required grade groups in the 
table in paragraph (b)(1) of this section. Schools may also offer 
breakfasts meeting the nutrient and calorie levels for the age groups in 
paragraph (b)(2) of this section. If only one grade or age group is 
outside the established levels, schools may follow the levels for the 
majority of the children. Schools may also customize the nutrient and 
calorie levels for the children they serve. FNS has a method for 
calculating these levels in guidance materials for menu planning.
    (2) Reimbursable breakfasts.
    (i) Contents of a reimbursable breakfast. A reimbursable breakfast 
must include at least three menu items. All menu

[[Page 95]]

items or foods offered in a reimbursable breakfast contribute to the 
nutrition standards in paragraph (a) of this section and to the levels 
of nutrients and calories that must be met in paragraphs (c) or (e)(1) 
of this section. Unless offered as part of a menu item in a reimbursable 
breakfast, foods of minimal nutritional value (see appendix B to part 
220) are not included in the nutrient analysis. Reimbursable breakfasts 
planned under the nutrient standard menu planning approach must meet the 
nutrition standards in paragraph (a) of this section and the appropriate 
nutrient and calorie levels in paragraph (b) or (e)(1) of this section.
    (ii) Offer versus serve. Schools must offer at least three menu 
items. At their option, school food authorities may allow students to 
select only two menu items and to decline a maximum of one menu item. 
The price of a reimbursable breakfast does not change if the student 
does not take a menu item or requests smaller portions.
    (3) Doing the analysis. Schools using nutrient standard menu 
planning must conduct the analysis on all menu items and foods offered 
in a reimbursable breakfast. The analysis is conducted over a school 
week. Unless offered as part of a menu item in a reimbursable breakfast, 
foods of minimal nutritional value (see appendix B to part 220) are not 
included in the nutrient analysis.
    (4) Software elements.
    (i) The Child Nutrition Database. The nutrient analysis is based on 
the Child Nutrition Database. This database is part of the software used 
to do a nutrient analysis. Software companies or others developing 
systems for schools may contact FNS for more information about the 
database.
    (ii) Software evaluation. FNS or an FNS designee evaluates any 
nutrient analysis software before it may be used in schools. FNS or its 
designee determines if the software, as submitted, meets the minimum 
requirements. The approval of software does not mean that FNS or USDA 
endorses it. The software must be able to do all functions after the 
basic data is entered. The required functions include weighted averages 
and the optional combined analysis of the lunch and breakfast programs.
    (5) Nutrient analysis procedures.
    (i) Weighted averages. Schools must include all menu items and foods 
offered in reimbursable breakfasts in the nutrient analysis. Menu items 
and foods are included based on the portion sizes and projected serving 
amounts. They are also weighted based on their proportionate 
contribution to the breakfasts offered. This means that menu items or 
foods more frequently offered are weighted more heavily than those not 
offered as frequently. Schools calculate weighting as indicated by FNS 
guidance and by the guidance provided by the software. Through September 
30, 2003, schools are not required to conduct a weighted analysis.
    (ii) Analyzed nutrients. The analysis includes all menu items and 
foods offered over a school week. The analysis must determine the levels 
of: Calories, protein, vitamin A, vitamin C, iron, calcium, total fat, 
saturated fat, sodium, cholesterol and dietary fiber.
    (iii) Combining the analysis of the lunch and breakfast programs. At 
their option, schools may combine the analysis of breakfasts offered 
under this part and lunches offered under part 210 of this chapter. The 
analysis is done proportionately to the levels of participation in each 
program based on FNS guidance.
    (6) Comparing the results of the nutrient analysis. Once the 
procedures in paragraph (i)(5) of this section are completed, schools 
must compare the results of the analysis to the appropriate nutrient and 
calorie levels, by age/grade groups, in paragraph (b) of this section or 
those developed under paragraph (e)(1) of this section. This comparison 
determines the school week's average. Schools must also make comparisons 
to the nutrition standards in paragraph (a) of this section to determine 
how well they are meeting the nutrition standards over the school week.
    (7) Adjustments to the menus. Once schools know the results of the 
nutrient analysis based on the procedures in paragraphs (e)(5) and 
(e)(6) of this section, they must adjust future menu cycles to reflect 
production and how often the menu items and foods are offered. Schools 
may need to reanalyze menus when the students' selections

[[Page 96]]

and, consequently, production levels change. Schools may need to change 
the menu items and foods offered given the students' selections and may 
need to modify the recipes and other specifications to make sure that 
the nutrition standards in paragraph (a) and either paragraph (b) or 
(e)(1) of this section are met.
    (8) Standardized recipes. If a school follows the nutrient standard 
menu planning approach, it must develop and follow standardized recipes. 
A standardized recipe is a recipe that was tested to provide an 
established yield and quantity using the same ingredients for both 
measurement and preparation methods. Any standardized recipes developed 
by USDA/FNS are in the Child Nutrition Database. If a school has its own 
recipes, they must be standardized and analyzed to determine the levels 
of calories, nutrients, and dietary components listed in paragraph 
(e)(5)(ii) of this section. Schools must add any local recipes to their 
local database as outlined in FNS guidance.
    (9) Processed foods. The Child Nutrition Database includes a number 
of processed foods. Schools may use purchased processed foods and menu 
items that are not in the Child Nutrition Database. Schools or the State 
agency must add any locally purchased processed foods and menu items to 
their local database as outlined in FNS guidance. Schools or State 
agencies must obtain the levels of calories, nutrients, and dietary 
components listed in paragraph (e)(5)(ii) of this section.
    (10) Menu substitutions. Schools may need to substitute foods or 
menu items in a menu that was already analyzed. If the substitution(s) 
occurs more than two weeks before the planned menu is served, the school 
must reanalyze the revised menu. If the substitution(s) occurs two weeks 
or less before the planned menu is served, the school does not need to 
do a reanalysis. However, schools should always try to substitute 
similar foods.
    (11) Meeting the nutrition standards. The school's analysis shows 
whether their menus are meeting the nutrition standards in paragraph (a) 
of this section and the appropriate levels of nutrients and calories in 
paragraph (b) of this section or customized levels developed under 
paragraph (e)(1) of this section. If the analysis shows that the menu(s) 
are not meeting these standards, the school needs to take action to make 
sure that the breakfasts meet the nutrition standards and the calorie, 
nutrient, and dietary component levels. Actions may include technical 
assistance and training and may be taken by the State agency, the school 
food authority or by the school as needed.
    (12) Other Child Nutrition Programs and nutrient standard analysis 
menu planning. School food authorities that operate the Summer Food 
Service Program (part 225 of this chapter) and/or the Child and Adult 
Care Food Program (part 226 of this chapter) may, with State agency 
approval, prepare breakfasts for these programs using the nutrient 
standard menu planning approach for children age two and over. FNS has 
guidance on the levels of nutrient and calories for adult breakfasts 
offered under the Child and Adult Care Food Program.
    (f) What are the requirements for the assisted nutrient standard 
menu planning approach?
    (1) Definition of assisted nutrient standard menu planning. Some 
school food authorities may not be able to do all of the procedures 
necessary for nutrient standard menu planning. The assisted nutrient 
standard menu planning approach provides schools with menu cycles 
developed and analyzed by other sources. These sources include the State 
agency, other schools, consultants, or food service management 
companies.
    (2) Elements of assisted nutrient standard menu planning. School 
food authorities using menu cycles developed under assisted nutrient 
standard menu planning must follow the procedures in paragraphs (e)(1) 
through (e)(10) of this section. The menu cycles must also incorporate 
local food preferences and accommodate local food service operations. 
The menu cycles must meet the nutrition standards in paragraph (a) of 
this section and meet the applicable nutrient and calorie levels for 
nutrient standard menu planning in paragraphs (b) or (e)(1) of this 
section. The supplier of the assisted nutrient standard menu planning 
approach must also develop

[[Page 97]]

and provide recipes, food product specifications, and preparation 
techniques. All of these components support the nutrient analysis 
results of the menu cycles used by the receiving school food 
authorities.
    (3) State agency approval. Prior to its use, the State agency must 
approve the initial menu cycle, recipes and other specifications of the 
assisted nutrient standard menu planning approach. The State agency 
needs to make sure all the steps required for nutrient analysis were 
followed. School food authorities may also ask the State agency for 
assistance with implementation of their assisted nutrient standard menu 
planning approach.
    (4) Required adjustments. After the initial service of the menu 
cycle developed under the assisted nutrient standard menu planning 
approach, the nutrient analysis must be reassessed and appropriate 
adjustments made as discussed in paragraph (e)(7) of this section.
    (5) Final responsibility for meeting the nutrition standards. The 
school food authority using the assisted nutrient standard menu planning 
approach retains final responsibility for meeting the nutrition 
standards in paragraph (a) of this section and the applicable calorie 
and nutrient levels in paragraphs (b) or (e)(1) of this section.
    (6) Adjustments to the menus. If the nutrient analysis shows that 
the breakfasts offered are not meeting the nutrition standards in 
paragraph (a) of this section and the applicable calorie and nutrient 
levels in paragraphs (b) or (e)(1) of this section, the State agency, 
school food authority or school must take action to make sure the 
breakfasts offered meet these requirements. Actions needed include 
technical assistance and training.
    (7) Other Child Nutrition Programs and assisted nutrient analysis 
menu planning. School food authorities that operate the Summer Food 
Service Program (part 225 of this chapter) and/or the Child and Adult 
Care Food Program (part 226 of this chapter) may, with State agency 
approval, prepare breakfasts for these programs using the assisted 
nutrient standard menu planning approach for children age two and over. 
FNS has guidance on the levels of nutrients and calories for adult 
breakfasts offered under the Child and Adult Care Food Program.
    (g) What are the requirements for the food-based menu planning 
approaches? (1) Food items. There are two menu planning approaches based 
on meal patterns, not nutrient analysis. These approaches are the 
traditional food-based menu planning approach and the enhanced food-
based menu planning approach. Schools using one of these approaches must 
offer these food items in at least the portions required for various 
age/grade groups:
    (i) A serving of fluid milk as a beverage or on cereal or used 
partly for both;
    (ii) A serving of fruit or vegetable or both, or full-strength fruit 
or vegetable juice; and
    (iii) Two servings from one of the following components or one 
serving from each component:
    (A) Grains/breads; and/or
    (B) Meat/meat alternate.
    (2) Quantities for the traditional food-based menu planning 
approach. At a minimum, schools must offer the food items in the 
quantities specified for the appropriate age/grade group in the 
following table:

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[GRAPHIC] [TIFF OMITTED] TR09MY00.011

(3) Quantities for the enhanced food-based menu planning approach. At a 
minimum, schools must offer the food items in the quantities specified 
for the appropriate age/grade group in the following table:

[[Page 99]]

[GRAPHIC] [TIFF OMITTED] TR09MY00.012

    (4) Offer versus serve. Each school must offer all four required 
food items listed in paragraph (g)(1) of this section. At the option of 
the school food authority, each school may allow students to refuse one 
food item from any component. The refused food item may be any of the 
four items offered to the student. A student's decision to accept all 
four food items or to decline one of the four food items must not affect 
the charge for a reimbursable breakfast.
    (5) Meal pattern exceptions for outlying areas. Schools in American 
Samoa, Puerto Rico and the Virgin Islands may serve a starchy vegetable 
such as yams, plantains, or sweet potatoes to meet the grain/bread 
requirement.
    (h) What are the requirements for alternate menu planning 
approaches?
    (1) Definition. Alternate menu planning approaches are those adopted 
or developed by school food authorities or State agencies that differ 
from the standard approaches established in paragraphs (e) through (g) 
of this section.
    (2) Use and approval of major changes or new alternate approaches. 
Within the guidelines established for developing alternate menu planning 
approaches, school food authorities or State agencies may modify one of 
the established

[[Page 100]]

menu planning approaches in paragraphs (e) through (g) of this section 
or may develop their own menu planning approach. The alternate menu 
planning approach must be available in writing for review and monitoring 
purposes. No formal plan is required; guidance material, a handbook or 
protocol is sufficient. As appropriate, the material must address how 
the guidelines in paragraph (h)(3) of this section are met. A State 
agency that develops an alternate approach that is exempt from FNS 
approval under paragraph (h)(2)(iii) of this section must notify FNS in 
writing when implementing the alternate approach.
    (i) Approval of local level plans. Any school food authority-
developed menu planning approach must have prior State agency review and 
approval.
    (ii) Approval of State agency plans. Unless exempt under paragraph 
(h)(2)(iii) of this section, any State agency-developed menu planning 
approach must have prior FNS approval.
    (iii) State agency plans not subject to approval. A State agency-
developed menu planning approach does not need FNS approval if:
    (A) Five or more school food authorities in the State use it; and
    (B) The State agency maintains on-going oversight of the operation 
and evaluation of the approach and makes any needed adjustments to its 
policies and procedures to ensure that the appropriate guidelines in 
paragraph (h)(3) of this section are met.
    (3) Elements for major changes or new approaches. Any alternate menu 
planning approach must:
    (i) offer fluid milk, as provided in paragraph (i) of this section;
    (ii) include the procedures for offer versus serve if the school 
food authority chooses to implement the offer versus serve option. 
Alternate approaches should follow the offer versus serve procedures in 
paragraphs (e)(2)(ii) and (g)(4) of this section, as appropriate. If 
these requirements are not followed, the approach must indicate:
    (A) The affected age/grade groups;
    (B) The number and type of items (and, if applicable, the quantities 
for the items) that constitute a reimbursable breakfast under offer 
versus serve;
    (C) How such procedures will reduce plate waste; and
    (D) How a reasonable level of calories and nutrients for the 
breakfast as taken is provided.
    (iii) Meet the Recommended Dietary Allowances and breakfast energy 
allowances (nutrient levels) and indicate the age/grade groups served 
and how the nutrient levels are met for those age/grade groups;
    (iv) Follow the requirements for competitive foods in 
Sec. Sec. 220.2(i-1) and 220.12 and appendix B to this part;
    (v) Follow the requirements for counting food items and products 
towards meeting the meal patterns. These requirements are found in 
paragraphs (g) and (i) of this section, in appendices A through C to 
this part, and in instructions and guidance issued by FNS. This only 
applies if the alternate approach is a food-based menu planning 
approach.
    (vi) Identify a reimbursable breakfast at the point of service.
    (A) To the extent possible, the procedures provided in paragraph 
(e)(2)(i) of this section for nutrient standard or assisted nutrient 
standard menu planning approaches or for food-based menu planning 
approaches provided in paragraph (g) of this section must be followed. 
Any instructions or guidance issued by FNS that further defines the 
elements of a reimbursable breakfast must be followed when using the 
existing regulatory provisions.
    (B) Any alternate approach that deviates from the provisions in 
paragraph (e)(2)(i) or paragraph (g) of this section must indicate what 
constitutes a reimbursable breakfast, including the number and type of 
items (and, if applicable, the quantities for the items) which comprise 
the breakfast, and how a reimbursable breakfast is to be identified at 
the point of service.
    (vii) explain how the alternate menu planning approach can be 
monitored under the applicable provisions of Sec. 210.18 and Sec. 210.19 
of this chapter, including a description of the records that will be 
maintained to document compliance with the program's administrative and 
nutrition requirements. However, if the procedures under Sec. 210.19 of 
this chapter cannot be used to monitor the alternate approach, a

[[Page 101]]

description of review procedures which will enable the State agency to 
assess compliance with the nutrition standards in paragraphs (a)(1) 
through (a)(4) of this section must be included; and
    (viii) follow the requirements for weighted analysis and for 
approved software for nutrient standard menu planning as required by 
paragraphs (e)(4) and (e)(5) of this section unless a State agency-
developed approach meets the criteria in paragraph (h)(2)(iii) of this 
section. Through September 30, 2003, schools are not required to conduct 
a weighted analysis.
    (i) What are the requirements for offering milk?
    (1) Serving milk. A serving of milk as a beverage or on cereal or 
used in part for each purpose must be offered for breakfasts.
    (2) Inadequate milk supply. If a school cannot get a supply of milk, 
it can still participate in the Program under the following conditions:
    (i) If emergency conditions temporarily prevent a school that 
normally has a supply of fluid milk from obtaining delivery of such 
milk, the State agency may allow the school to serve breakfasts during 
the emergency period with an alternate form of milk or without milk.
    (ii) If a school is unable to obtain a supply of any type of fluid 
milk on a continuing basis, the State agency may allow schools to 
substitute canned or dry milk in the required quantities in the 
preparation of breakfasts. In Alaska, Hawaii, American Samoa, Guam, 
Puerto Rico, and the Virgin Islands, if a sufficient supply of fluid 
milk cannot be obtained, ``milk'' includes reconstituted or recombined 
milk, or otherwise as allowed by FNS through a written exception.
    (j) What are the requirements for the infant meal pattern? Schools 
must offer infants ages birth through 11 months of age an infant 
breakfast. Foods included in the infant breakfast pattern must be of 
texture and consistency appropriate for the age group served. Foods must 
be served to the infant during a span of time consistent with the 
infant's eating habits. For infants 4 through 7 months of age, solid 
foods are optional and should be introduced only when the infant is 
developmentally ready. Whenever possible, the school should consult with 
the infant's parents in making the decision to introduce solid foods. 
Solid foods should be introduced one at a time on a gradual basis with 
the intent of ensuring health and nutritional well-being. For infants 8 
through 11 months of age, the total amount of food in the meal patterns 
in paragraph (j)(3) of this section must be provided to qualify for 
reimbursement. Additional foods may be served to infants 4 months of age 
and older with the intent of improving their overall nutrition. Breast 
milk, provided by the infant's mother, may be served in place of infant 
formula from birth through 11 months of age. Either breast milk or iron-
fortified infant formula must be served for the entire first year. For 
some breastfed infants who regularly consume less than the minimum 
amount of breast milk per feeding, a serving of less than the minimum 
amount of breast milk may be offered, with additional ounces offered if 
the infant is still hungry. The infant breakfast pattern must have at 
least each of the following components in the amounts indicated for the 
appropriate age group:
    (1) Birth through 3 months--4 to 6 fluid ounces of breast milk or 
iron-fortified infant formula.
    (2) 4 through 7 months--4 to 8 fluid ounces of breast milk or iron-
fortified infant formula; and 0 to 3 tablespoons of iron-fortified dry 
infant cereal (optional).
    (3) 8 through 11 months--6 to 8 fluid ounces of breast milk or iron-
fortified infant formula; 2 to 4 tablespoons of iron-fortified dry 
infant cereal; and 1 to 4 tablespoons of fruit or vegetable of 
appropriate consistency or a combination of both.

[[Page 102]]

[GRAPHIC] [TIFF OMITTED] TR09MY00.013

    (k) What about serving additional foods? Schools may offer 
additional foods with breakfasts to children over one year of age.
    (l) Must schools offer choices at breakfast? FNS encourages schools 
to offer children a selection of foods and menu items at breakfast. 
Choices provide variety and encourage consumption. Schools may offer 
choices of reimbursable breakfasts or foods within a reimbursable 
breakfast. When a school offers a selection of more than one type of 
breakfast or when it offers a variety of food components, menu items or 
foods and milk for choice as a reimbursable breakfast, the school must 
offer all children the same selection(s) regardless of whether the child 
is eligible for free or reduced price breakfasts or must pay the 
designated full price. The school may establish different unit prices 
for each type of breakfast offered provided that the benefits made 
available to children eligible for free or reduced price breakfasts are 
not affected.
    (m) What must schools do about nutrition disclosure? To the extent 
that school food authorities identify foods in a menu, or on the serving 
line or through other available means of communicating with program 
participants, school food authorities must identify products or dishes 
containing more than 30 parts fully hydrated alternate protein products 
(as specified in appendix A of this part) to less than 70 parts beef, 
pork, poultry or seafood on an uncooked basis, in a manner which does 
not characterize the product or dish solely as beef, pork, poultry or 
seafood. Additionally, FNS encourages schools to inform the students, 
parents, and the public about efforts they are making to meet the 
nutrition standards (see paragraph (a) of this section) for school 
breakfasts.

[65 FR 26923, May 9, 2000, as amended at 65 FR 36317, June 8, 2000]



Sec. 220.9  Reimbursement payments.

    (a) State agencies, or FNSRO's where applicable, shall make 
reimbursement payments to schools only in connection with breakfasts 
meeting the requirements of Sec. 220.8, and reported in accordance with 
Sec. 220.11(b) of this part. School Food Authorities shall plan for and 
prepare breakfasts on the basis of participation trends, with the 
objective of providing one breakfast per child per day. Production and 
participation records shall be maintained to demonstrate positive action 
toward this objective. In recognition of the fluctuation in 
participation levels which makes it difficult to precisely estimate the 
number of breakfasts needed and to reduce the resultant waste, any 
excess breakfasts that are prepared may be served to eligible children 
and may be claimed for reimbursement unless the State agency, or FNSRO 
where applicable, determines that the School Food Authority has failed 
to plan and prepare breakfasts with the objective of providing one 
breakfast per child per day. In no event shall the School Food Authority 
claim reimbursement for

[[Page 103]]

free and reduced price breakfasts in excess of the number of children 
approved for free and reduced price meals.
    (b) The rates of reimbursement for breakfasts served to eligible 
children in schools not in severe need are the applicable national 
average payment factors for breakfasts. The maximum rates of 
reimbursement for breakfasts served to eligible children in schools 
determined to be in severe need are those prescribed by the Secretary. 
National average payment factors and maximum rates of reimbursement for 
the School Breakfast Program shall be prescribed annually by the 
Secretary in the Federal Register.
    (c) The total reimbursement for breakfasts served to eligible 
children in, (1) schools not in severe need, and (2) severe need schools 
in State's with State Breakfast mandates as provided for in 
Sec. 220.9(e)(3) (i) and (ii) in any School Food Authority during the 
school year shall not exceed the sum of the products obtained by 
multiplying the total numbers of such free, reduced price and paid 
breakfasts, respectively, by the applicable rate of reimbursement for 
each type of breakfast as prescribed for the school year.
    (d) For any school year, severe need reimbursement payments to any 
School Food Authority except as provided for in paragraph (c) of this 
section shall be the lesser of: (1) The cost of providing free and 
reduced price breakfast to eligible children in schools determined to be 
in severe need, less the reduced price payments received by such 
schools; or (2) the number of free and the number of reduced price 
breakfasts, respectively, that are served to eligible children in 
schools determined to be in severe need, multiplied by the applicable 
severe need reimbursement rates for such breakfasts.
    (e) Severe need schools. The State agency, or FNSRO where 
applicable, shall determine whether a school is in severe need based on 
the following eligibility criteria: (1) The reimbursement rate per meal 
established by the Secretary is insufficient to cover the costs of the 
school's breakfast program; (2) the school is participating in or 
desiring to initiate a breakfast program; and (3) 40 percent or more of 
the lunches served to students at the school in the second preceding 
school year were served free or at a reduced price. In addition, schools 
which are required by State law to serve breakfasts and which fail to 
satisfy the required 40 percent eligibility criteria are eligible for 
severe need reimbursement rates only for the following limited time 
periods:
    (i) In States where the State legislature meets annually, the 
schools may receive severe need reimbursement rates until July 1, 1983; 
and (ii) in States where the State legislature meets biennially, the 
schools may receive severe need reimbursement rates until July 1, 1984. 
State agencies shall maintain on file, and have available for review and 
audits, their eligibility criteria for determining the severe need of 
schools and the source of the data to be used in making individual 
determinations. The State agency, or FNSRO where applicable, shall be 
responsible for establishing systems for determining breakfast costs 
where such costs are necessary to the determination of whether or not a 
school is in severe need.

(Sec. 6, Pub. L. 95-627, 92 Stat. 3620 (42 U.S.C. 1776; secs. 801, 803, 
812; Pub. L. 97-35, 95 Stat. 521-535, 42 U.S.C. 1753, 1759(a), 1758, 
1773; sec. 819, Pub. L. 97-35, 95 Stat. 533 (42 U.S.C. 1759a, 1773 and 
1757); 44 U.S.C. 3506))

[Amdt. 25, 41 FR 34760, Aug. 17, 1976, as amended by Amdt. 29, 44 FR 
48159, Aug. 17, 1979; Amdt. No. 38, 46 FR 50928, Oct. 16, 1981; 46 FR 
51368, Oct. 20, 1981; 47 FR 746, Jan. 7, 1982; 47 FR 31375, July 20, 
1982; 48 FR 40196, 40197, Sept. 6, 1983; 60 FR 31222, June 13, 1995; 65 
FR 26923, May 9, 2000]



Sec. 220.10  Effective date for reimbursement.

    Reimbursement payments under the School Breakfast Program may be 
made only to School Food Authorities operating under an agreement with 
the State Agency or the Department, and may be made only after execution 
of the agreement. Such payments may include reimbursement in connection 
with breakfasts served in accordance with provisions of the program in 
the calendar month preceding the calendar

[[Page 104]]

month in which the agreement is executed.

[32 FR 35, Jan. 5, 1967, as amended by Amdt. 9, 37 FR 9613, May 13, 
1972]



Sec. 220.11  Reimbursement procedures.

    (a) To be entitled to reimbursement under this part, each School 
Food Authority shall submit to the State agency, or FNSRO where 
applicable, a monthly Claim for Reimbursement.
    (b) Claims for Reimbursement shall include data in sufficient detail 
to justify the reimbursement claimed and to enable the State agency to 
provide the Reports of School Program Operations required under 
Sec. 220.13(b)(2). Unless otherwise approved by FNS, the Claim for 
Reimbursement for any month shall include only breakfasts served in that 
month except if the first or last month of Program operations for any 
year contains 10 operating days or less, such month may be added to the 
Claim for Reimbursement for the appropriate adjacent month; however, 
Claims for Reimbursement may not combine operations occurring in two 
fiscal years. If a single State agency administers any combination of 
the Child Nutrition Programs, the SFA shall be able to use a common 
claim form with respect to claims for reimbursement for meals served 
under those programs. A final Claim for Reimbursement shall be 
postmarked and/or submitted to the State agency, or FNSRO where 
applicable, not later than 60 days following the last day of the full 
month covered by the claim. State agencies may establish shorter 
deadlines at their discretion. Claims not postmarked and/or submitted 
within 60 days shall not be paid with Program funds unless FNS 
determines that an exception should be granted. The State agency, or 
FNSRO where applicable, shall promptly take corrective action with 
respect to any Claim for Reimbursement as determined necessary through 
its claim review process or otherwise. In taking such corrective action, 
State agencies may make upward adjustments in Program funds claimed on 
claims filed within the 60 day deadline if such adjustments are 
completed within 90 days of the last day of the claim month and are 
reflected in the final Report of School Program Operations (FNS-10) for 
the claim month which is required under Sec. 220.13(b)(2). Upward 
adjustments in Program funds claimed which are not reflected in the 
final FNS-10 for the claim month shall not be made unless authorized by 
FNS. Downward adjustments in Program funds claimed shall always be made, 
without FNS authorization, regardless of when it is determined that such 
adjustments are necessary.
    (c) Where a school participates in both the National School Lunch 
Program and the School Breakfast Program, the State agency or FNSRO, 
where applicable, may authorize the submission of one claim for 
reimbursement to cover both programs.
    (d) [Reserved]
    (e) Notwithstanding any other provision of this section, the State 
agency, or FNSRO where applicable, may advance funds available for the 
School Breakfast Program to a School Food Authority in an amount equal 
to the reimbursement estimated for the total number of breakfasts, 
including free and reduced price breakfasts, to be served to children 
for 1 month. The State agency, or FNSRO where applicable, shall require 
School Food Authorities who receive advances of funds under the 
provisions of this paragraph to make timely submissions of claims for 
reimbursement on a monthly basis and shall suspend advances of funds in 
the absence of such timely submissions. Following the receipt of claims 
the State agency, or FNSRO where applicable, shall make such adjustments 
as are necessary in such advances of funds to insure that the total 
amount of reimbursement received by a School Food Authority for the 
fiscal year will not exceed an amount equal to the number of breakfasts, 
including free and reduced price breakfast, served to children times the 
respective rates of reimbursement assigned by the State

[[Page 105]]

agency, or FNSRO where applicable, in accordance with Sec. 220.9.

(Title 1, Chapter I, Pub. L. 96-38, 93 Stat. 98 (42 U.S.C. 1776a); secs. 
807 and 808, Pub. L. 97-35, 95 Stat. 521-535, 42 U.S.C. 1772, 1784, 
1760; sec. 819, Pub. L. 97-35, 95 Stat. 533 (42 U.S.C. 1759a, 1773, 
1757); Pub. L. 97-370, 96 Stat. 1806)

[32 FR 35, Jan. 5, 1967, as amended by Amdt. 9, 37 FR 9613, May 13, 
1972; 40 FR 30924, July 24, 1975; 45 FR 82622, Dec. 16, 1980; 47 FR 
31376, July 20, 1982; 48 FR 40196, Sept. 6, 1983; Amdt. 49, 49 FR 18987, 
May 4, 1984; 64 FR 50742, Sept. 20, 1999]



Sec. 220.12  Competitive food services.

    (a) State agencies and School Food Authorities shall establish such 
rules or regulations as are necessary to control the sale of foods in 
competition with breakfasts served under the Program. Such rules or 
regulations shall prohibit the sale of foods of minimal nutritional 
value, as listed in appendix B of this part, in the food service areas 
during the breakfast periods. The sale of other competitive foods may, 
at the discretion of the State agency and the School Food Authority, be 
allowed in the food service area during the breakfast period only if all 
income from the sale of such foods accrues to the benefit of the 
nonprofit school food service or the school or student organizations 
approved by the school. State agencies and School Food Authorities may 
impose additional restrictions on the sale of and income from all foods 
sold at any time throughout schools participating in the School 
Breakfast Program.
    (b)(1) Any person may submit a petition to FNS requesting that an 
individual food be exempted from a category of foods of minimal 
nutritional value listed in appendix B. In the case of artificially 
sweetened foods, the petition must include a statement of the percent of 
RDI for the eight nutrients listed in Sec. 220.2(i-1) that the food 
provides per serving and the petitioner's source of this information. In 
the case of all other foods, the petition must include a statement of 
the percent of RDI for the eight nutrients listed in Sec. 220.2(i-1) 
that the food provides per serving and per 100 calories and the 
petitioner's source of this information. The Department will determine 
whether or not the individual food is a food of minimal nutritional 
value as defined Sec. 220.2(i-1), and will inform the petitioner in 
writing of such determination, and the public by notice in the Federal 
Register as indicated under paragraph (b)(3) of this section. In 
determining whether an individual food is a food of minimal nutritional 
value, discrete nutrients added to the food will not be taken into 
account.
    (2) Any person may submit a petition to FNS requesting that foods in 
a particular category of foods be classified as foods of minimal 
nutritional value as defined in Sec. 220.2(i-1). The petition must 
identify and define the food category in easily understood language, 
list examples of the foods contained in the category and include a list 
which the foods in that category usually contain. If, upon review of the 
petition, the Department determines that the foods in that category 
should not be classified as foods of minimal nutritional value, the 
petitioner will be so notified in writing. If upon review of the 
petition, the Department determines that there is a substantial 
likelihood that the foods in that category should be classified as foods 
of minimal nutritional value as defined in Sec. 220.2(i-1), the 
Department shall at that time inform the petitioner. In addition, the 
Department shall publish a proposed rule restricting the sale of the 
foods in that category, setting forth the reasons for this action, and 
soliciting public comments. On the basis of comments received within 60 
days of publication of the proposed rule and other available 
information, the Department will determine whether the nutrient 
composition of the foods indicates that the category should be 
classified as a category of foods of minimal nutritional value.

The petitioner shall be notified in writing and the public shall be 
notified of the Department's final determination upon publication in the 
Federal Register as indicated under section (b)(3) of this section.
    (3) By May 1 and November 1 of each year, the Department shall amend 
appendix B to exclude those individual foods identified under paragraph 
(b)(1) of this section, and to include those categories of foods 
identified under

[[Page 106]]

paragraph (b)(2) of this section, Provided That there are necessary 
changes.

(Sec. 819, Pub. L. 97-35, 95 Stat. 533 (42 U.S.C. 1759a, 1773 and 1757))

[Amdt. 32, 45 FR 6771, Jan. 29, 1980, as amended by Amdt. 34, 45 FR 
76937, Nov. 21, 1980; 50 FR 20547, May 17, 1985; 59 FR 23614, May 6, 
1994]



Sec. 220.13  Special responsibilities of State agencies.

    (a) [Reserved]
    (a-1) Each State agency, or FNSRO where applicable, shall require 
each School Food Authority of a school participating in the School 
Breakfast Program to develop and file for approval a free and reduced 
price policy statement in accordance with paragraph (a) of Sec. 220.7.
    (b) Records and reports. (1) Each State agency shall maintain 
Program records as necessary to support the reimbursement payments made 
to School Food Authorities under Sec. 220.9 and the reports submitted to 
FNS under Sec. 220.13(b)(2). The records may be kept in their original 
form or on microfilm, and shall be retained for a period of three years 
after the date of submission of the final Financial Status Report for 
the fiscal year, except that if audit findings have not been resolved, 
the records shall be retained beyond the three-year period as long as 
required for the resolution of the issues raised by the audit.
    (2) Each State agency shall submit to FNS a final Report of School 
Program Operations (FNS-10) for each month which shall be limited to 
claims submitted in accordance with Sec. 220.11(b) and which shall be 
postmarked and/or submitted no later than 90 days following the last day 
of the month covered by the report. States shall not receive Program 
funds for any month for which the final report is not submitted within 
this time limit unless FNS grants an exception. Upward adjustments to a 
State agency's report shall not be made after 90 days from the month 
covered by the report unless authorized by FNS. Downward adjustments 
shall always be made, without FNS authorization, regardless of when it 
is determined that such adjustments are necessary. Adjustments shall be 
reported to FNS in accordance with procedures established by FNS. Each 
State agency shall also submit to FNS a quarterly Financial Status 
Report (SF-269) on the use of Program funds. Such reports shall be 
postmarked and/or submitted no later than 30 days after the end of each 
fiscal year quarter. Obligations shall be reported only for the fiscal 
year in which they occur. A final Financial Status Report for each 
fiscal year shall be postmarked and/or submitted to FNS within 120 days 
after the end of the fiscal year. FNS shall not be responsible for 
reimbursing unpaid Program obligations reported later than 120 days 
after the close of the fiscal year in which they were incurred.
    (c) Each State agency shall promptly investigate complaints received 
or irregularities noted in connection with the operation of either 
program, and shall take appropriate action to correct any 
irregularities. State Agencies shall maintain on file evidence of such 
investigations and actions. FNS or OI shall make investigations at the 
request of the State Agency or where FNS or OI determines investigations 
are appropriate.
    (d) The State agency shall release to FNS any Federal funds made 
available to it under the Act which are unobligated at the end of each 
fiscal year. Any such funds shall remain available to FNS for the 
purposes of the programs authorized by the Act until expended. Release 
of funds by the State Agency shall be made as soon as practicable, but 
in any event not later than 30 days following demand by FNSRO and shall 
be reflected by related adjustment in the State Agency's Letter of 
Credit.
    (e) State agencies shall provide School Food Authorities with 
monthly information on foods available in plentiful supply, based on 
information provided by the Department.
    (f) Each State agency shall provide program assistance as follows:
    (1) Each State agency or FNSRO where applicable shall provide 
consultative, technical, and managerial personnel to administer 
programs, monitor performance, and measure progress toward achieving 
program goals.
    (2) State agencies shall conduct reviews of schools participating in 
the

[[Page 107]]

Program for compliance with the provisions of this part when such 
schools are being reviewed under the provisions identified under 
Sec. 210.18(i) of this title. Compliance reviews of participating 
schools shall focus on the reviewed school's compliance with the 
required certification, counting and breakfast service procedures. 
School food authorities may appeal a denial of all or a part of the 
Claim for Reimbursement or withholding of payment arising from review 
activity conducted by the State agency under Sec. 210.18 of this title 
or by FNS under Sec. 210.30(d)(2) of this title. Any such appeal shall 
be subject to the procedures set forth under Sec. 210.18(q) of this 
title or Sec. 210.30(d)(3) of this title, as appropriate.
    (3) For the purposes of compliance with the nutrition standards in 
Sec. 220.8(a) and the nutrient and calorie levels in Sec. 220.8(b) or 
(c) or those developed under Sec. 220.8(e)(1) or (h), the State agency 
shall follow the provisions specified Sec. 210.19(a)(1) of this chapter.
    (4) Such assistance shall include visits to participating schools to 
ensure compliance with program regulations and with the Department's 
nondiscrimination regulations (part 15 of this title), issued under 
title VI, of the Civil Rights Act of 1964.
    (5) Documentation of such assistance shall be maintained on file by 
the State agency, or FNSRO where applicable.
    (g) State agencies shall adequately safeguard all assets and assure 
that they are used solely for authorized purposes.
    (h) [Reserved]
    (i) Each State agency, or FNS where applicable, shall establish a 
financial management system under which School Food Authorities shall 
account for all revenues and expenditures of their nonprofit school food 
service. The system shall prescribe the allowability of nonprofit school 
food service expenditures in accordance with this part and, as 
applicable, the cost principles contained in OMB Circular A-87 and 7 CFR 
part 3015. The system shall permit determination of school food service 
net cash resources, and shall include any criteria for approval of net 
cash resources in excess of three months average expenditures. In 
addition, School Food Authorities shall be required to account 
separately for other food services which are operated by the School Food 
Authority.
    (j) During audits, supervisory assistance reviews, or by other 
means, State agencies, or FNSROs where applicable, shall be responsible 
for monitoring the net cash resources of the nonprofit school food 
service of each School Food Authority participating in the Program. In 
the event that such resources exceed three months average expenditures 
for the School Food Authority's nonprofit school food service, or such 
amount as may be approved by the State agency or FNSRO where applicable, 
the State agency or FNSRO where applicable, may require the School Food 
Authority to reduce children's prices, improve food quality or take 
other actions designed to improve the nonprofit school food service. In 
the absence of any such action, adjustments in the rates of 
reimbursement under the Program shall be made.
    (k)State agencies shall require compliance by School Food 
Authorities with applicable provisions of this part.

(44 U.S.C. 3506; sec. 812, Pub. L. 97-35, 95 Stat. 521-535 (42 U.S.C. 
1759a); sec. 819, Pub. L. 97-35, 95 Stat. 533 (42 U.S.C. 1759a, 1773 and 
1757); Pub. L. 79-396, 60 Stat. 231 (42 U.S.C. 1751); Pub. L. 89-642, 80 
Stat 885-890 (42 U.S.C. 1773); Pub. L. 91-248, 84 Stat. 207 (42 U.S.C. 
1759))

[32 FR 37, Jan. 5, 1967. Redesignated by Amdt. 2, 33 FR 14513, Sept. 27, 
1968]

    Editorial Note: For Federal Register citations affecting 
Sec. 220.13, see the List of CFR Sections Affected, which appears in the 
Finding Aids section of the printed volume and on GPO Access.



Sec. 220.14  Claims against school food authorities.

    (a) State agencies shall disallow any portion of a claim and recover 
any payment made to a School Food Authority that was not properly 
payable under this part. State agencies will use their own procedures to 
disallow claims and recover overpayments already made.
    (b) [Reserved]
    (c) The State agency may refer to CND through the FNSRO for 
determination any action it proposes to take under this section.
    (d) The State agency shall maintain all records pertaining to action 
taken

[[Page 108]]

under this section. Such records shall be retained for a period of 3 
years after the end of the fiscal year to which they pertain.
    (e) If CND does not concur with the State agency's action in paying 
a claim or a reclaim, or in failing to collect an overpayment, CND shall 
assert a claim against the State agency for the amount of such claim, 
reclaim, or overpayment. In all such cases the State agency shall have 
full opportunity to submit to CND evidence or information concerning the 
action taken. If, in the determination of CND, the State agency's action 
was unwarranted, the State agency shall promptly pay to FNS the amount 
of the claim, reclaim, or overpayment.
    (f) The amounts recovered by the State agency from Schools may be 
utilized, first, to make payments to School Food Authorities for the 
purposes of the related program during the fiscal year for which the 
funds were initially available, and second to repay any State funds 
expended in the reimbursement of claims under the program and not 
otherwise repaid. Any amounts recovered which are not so utilized shall 
be returned to FNS in accordance with the requirements of this part.
    (g) With respect to School Food Authorities of schools in which the 
program is administered by FNSRO, when FNSRO disallows a claim or a 
portion of a claim, or makes a demand for refund of an alleged 
overpayment, it shall notify the School Food Authority of the reasons 
for such disallowance or demand and the School Food Authority shall have 
full opportunity to submit evidence or to file reclaims for any amounts 
disallowed or demanded in the same manner as that afforded in this 
section to School Food Authorities of schools in which the program is 
administered by State agencies.
    (h) In the event that the State agency or FNSRO, where applicable, 
finds that a school is failing to meet the requirements of 
Sec. 220.8(g), Sec. 220.8(i)(2) and (i)(3), whichever is applicable, the 
State agency or FNSRO need not disallow payment or collect an 
overpayment arising out of such failure, if the State agency or FNSRO 
takes such other action as, in its opinion, will have a corrective 
effect.
    (i) The Secretary shall have the authority to determine the amount 
of, to settle, and to adjust any claim arising under the Program, and to 
compromise or deny such claim or any part thereof. The Secretary shall 
also have the authority to waive such claims if the Secretary determines 
that to do so would serve the purposes of the Program. This provision 
shall not diminish the authority of the Attorney General of the United 
States under section 516 of Title 28, U.S. Code, to conduct litigation 
on behalf of the United States.

(44 U.S.C. 3506; secs. 804, 816 and 817, Pub. L. 97-35, 95 Stat. 521-535 
(42 U.S.C. 1753, 1756, 1759, 1771 and 1785))

[32 FR 37, Jan. 5, 1967. Redesignated by Amdt. 2, 33 FR 14513, Sept. 27, 
1968, and amended by Amdt. 9, 37 FR 9614, May 13, 1972; 40 FR 30925, 
July 24, 1975. Redesignated and amended by Amdt. 25, 41 FR 34757, 34760, 
Aug. 17, 1976; 47 FR 746, Jan. 7, 1982; Amdt. 42, 47 FR 14134, Apr. 2, 
1982; 60 FR 31222, June 13, 1995; 65 FR 26931, May 9, 2000]



Sec. 220.15  Management evaluations and audits.

    (a) State agencies and school food authorities shall comply with the 
requirements of part 3015 of this title concerning the audit 
requirements for recipients and subrecipients of the Department's 
financial assistance.
    (b) These requirements call for organization-wide financial and 
compliance audits to ascertain whether financial operations are 
conducted properly; financial statements are presented fairly; 
recipients and subrecipients comply with the laws and regulations that 
affect the expenditures of Federal funds; recipients and subrecipients 
have established procedures to meet the objectives of federally assisted 
programs; and recipients and subrecipients are providing accurate and 
reliable information concerning grant funds. States and school food 
authorities shall use their own procedures to arrange for and prescribe 
the scope of independent audits, provided that such audits comply with 
the requirements set forth in part 3016 of this title.
    (c) Each State agency shall provide FNS with full opportunity to 
conduct management evaluations (including visits to schools) of all 
operations of the State agency under the programs

[[Page 109]]

covered by this part and shall provide OA with full opportunity to 
conduct audits (including visits to schools) of all operations of the 
State agency under such programs. Each State agency shall make available 
its records, including records of the receipt and expenditure of funds 
under such programs, upon a reasonable request by FNS or OA. OA shall 
also have the right to make audits of the records and operations of any 
school.
    (d) In conducting management evaluations, reviews or audits for any 
fiscal year, the State agency, FNS, or OIG may disregard any overpayment 
if the total overpayment does not exceed $600 or, in the case of State 
agency claims in State administered Programs, it does not exceed the 
amount established under State law, regulations or procedure as a 
minimum amount for which claim will be made for State losses but not to 
exceed $600. However, no overpayment is to be disregarded where there is 
substantial evidence of violations of criminal law or civil fraud 
statutes.

(Secs. 805 and 819, Pub. L. 97-35, 95 Stat. 521-535 (42 U.S.C. 1773); 
sec. 812, Pub. L. 97-35, 95 Stat. 521-535 (42 U.S.C. 1759a))

[40 FR 30925, July 24, 1975. Redesignated and amended by Amdt. 25, 41 FR 
34757, 34760, Aug. 17, 1976; 43 FR 59825, Dec. 22, 1978; Amdt. 41, 47 FR 
14135, Apr. 2, 1982; Amdt. 43, 47 FR 18564, Apr. 30, 1982; Amdt. 56, 54 
FR 2990, Jan. 23, 1989; 57 FR 38587, Aug. 26, 1992; 59 FR 1894, Jan. 13, 
1994; 64 FR 50742, Sept. 20, 1999]



Sec. 220.16  Procurement standards.

    (a) Requirements. State agencies and School Food Authorities shall 
comply with the requirements of the Office of Management and Budget 
(OMB) Circular A-102 and the Department's Uniform Federal Assistance 
Regulations, 7 CFR part 3015, subpart S (46 FR 55658) concerning the 
procurement of supplies, food, equipment and other services with Program 
funds. These requirements are adopted by FNS to ensure that such 
materials and services are obtained for the Program efficiently and 
economically and in compliance with applicable laws and executive 
orders.
    (b) Contractual responsibilities. The standards contained in OMB 
Circular A-102 and 7 CFR 3015, do not relieve the State agency or School 
Food Authority of any contractual responsibilities under its contract. 
The State agency or School Food Authority is the responsible authority, 
without recourse to FNS, regarding the settlement and satisfaction of 
all contractual and administrative issues arising out of procurements 
entered into in connection with the Program. This includes but is not 
limited to: source evaluation, protests, disputes, claims, or other 
matters of a contractual nature. Matters concerning violation of law are 
to be referred to the local, State or Federal authority that has proper 
jurisdiction.
    (c) Procurement procedure. The State agency or School Food Authority 
may use their own procurement procedures which reflect applicable State 
and local laws and regulations, provided that procurements made with 
Program funds adhere to the standards set forth in OMB Circular A-102 
and 7 CFR part 3015.
    (d) Buy American.--(1) Definition of domestic commodity or product. 
In this paragraph (d), the term ``domestic commodity or product'' 
means--
    (i) An agricultural commodity that is produced in the United States; 
and
    (ii) A food product that is processed in the United States 
substantially using agricultural commodities that are produced in the 
United States.
    (2) Requirement.--(i) In general. Subject to paragraph (d)(2)(ii) of 
this section, the Department shall require that a school food authority 
purchase, to the maximum extent practicable, domestic commodities or 
products.
    (ii) Limitations. Paragraph (d)(2)(i) of this section shall apply 
only to--
    (A) A school food authority located in the contiguous United States; 
and
    (B) A purchase of domestic commodity or product for the school 
breakfast program under this part.
    (3) Applicability to Hawaii. Paragraph (d)(2)(i) of this section 
shall apply to a school food authority in Hawaii with respect to 
domestic commodities or products that are produced in Hawaii in 
sufficient quantities to meet the needs of meals provided under the

[[Page 110]]

school breakfast program under this part.

(Pub. L. 79-396, 60 Stat. 231 (42 U.S.C. 1751); Pub. L. 89-642, 80 Stat. 
885-890 (42 U.S.C. 1773); Pub. L. 91-248, 84 Stat. 207 (42 U.S.C. 1759))

[Amdt. 45, 48 FR 19355, Apr. 29, 1983, as amended at 64 FR 50743, Sept. 
20, 1999]



Sec. 220.17  Prohibitions.

    (a) In carrying out the provisions of this part, the Department 
shall not impose any requirements with respect to teaching personnel, 
curriculum, instructions, methods of instruction, and materials of 
instruction in any school as a condition for participation in the 
Program.
    (b) The value of assistance to children under the Act shall not be 
considered to be income or resources for any purposes under any Federal 
or State laws, including, but not limited to, laws relating to taxation, 
welfare, and public assistance programs. Expenditure of funds from State 
and local sources for the maintenance of food programs for children 
shall not be diminished as a result of funds received under the Act.

[32 FR 37, Jan. 5, 1967. Redesignated by Amdt. 2, 33 FR 14513, Sept. 27, 
1968. Redesignated and amended by Amdt. 25, 41 FR 34757, 34760, Aug. 17, 
1976; 64 FR 50743, Sept. 20, 1999]



Sec. 220.18  Suspension, termination and grant closeout procedures.

    Whenever it is determined that a State agency has materially failed 
to comply with the provisions of this part, or with FNS guidelines and 
instructions, FNS may suspend or terminate the Program in whole, or in 
part, or take any other action as may be available and appropriate. A 
State agency may also terminate the Program by mutual agreement with 
FNS. FNS and the State agency shall comply with the provisions of the 
Department's Uniform Federal Assistance Regulations, 7 CFR part 3015, 
subpart N concerning grant suspension, termination and closeout 
procedures. Furthermore, the State agency or FNSRO were applicable, 
shall apply these provisions to suspension or termination of the Program 
in School Food Authorities.

[Amdt. 49, 49 FR 18988, May 4, 1984]



Sec. 220.19  Free and reduced price breakfasts.

    The determination of the children to whom free and reduced price 
breakfasts are to be served because of inability to pay the full price 
thereof, and the serving of the breakfasts to such children, shall be 
effected in accordance with part 245 of this chapter.

[Amdt. 25, 41 FR 34760, Aug. 17, 1976]



Sec. 220.20  Program information.

    School Food Authorities desiring information concerning the program 
should write to their State educational agency or to the appropriate 
Food and Nutrition Service Regional Office as indicated below:
    (a) In the States of Delaware, District of Columbia, Maryland, New 
Jersey, Pennsylvania, Puerto Rico, Virginia, Virgin Islands, and West 
Virginia: Mid-Atlantic Regional Office, FNS, U.S. Department of 
Agriculture, 300 Corporate Boulevard, Robbinsville, New Jersey 08691-
1598.
    (b) In the States of Alabama, Florida, Georgia, Kentucky, 
Mississippi, North Carolina, South Carolina, and Tennessee: Southeast 
Regional Office, FNS, U.S. Department of Agriculture, 161 Forsyth Street 
SW., Room 8T36, Atlanta, Georgia 30303.
    (c) In the States of Illinois, Indiana, Michigan, Minnesota, Ohio, 
and Wisconsin: Midwest Regional Office, FNS, U.S. Department of 
Agriculture, 77 West Jackson Boulevard, 20th Floor, Chicago, Illinois 
60604-3507.
    (d) In the States of Arkansas, Louisiana, New Mexico, Oklahoma, and 
Texas: Southwest Regional Office, FNS, U.S. Department of Agriculture, 
1100 Commerce Street, Room 5-C-30, Dallas, Texas 75242.
    (e) In the States of Alaska, American Samoa, Arizona, California, 
Guam, Hawaii, Idaho, Nevada, Oregon, the Commonwealth of the Northern 
Mariana Islands, and Washington: Western Regional Office, FNS, U.S. 
Department of Agriculture, 550 Kearny Street, Room 400, San Francisco, 
California 94108.

[[Page 111]]

    (f) In the States of Connecticut, Maine, Massachusetts, New 
Hampshire, New York, Rhode Island, and Vermont: Northeast Regional 
Office, FNS, U.S. Department of Agriculture, 10 Causeway Street, Room 
501, Boston, Massachusetts 02222-1065.
    (g) In the States of Colorado, Iowa, Kansas, Missouri, Montana, 
Nebraska, North Dakota, South Dakota, Utah, and Wyoming: Mountain Plains 
Regional Office, FNS, U.S. Department of Agriculture, 1244 Speer 
Boulevard, Suite 903, Denver, Colorado 80204.

(Sec. 10(a), Pub. L. 95-627, 92 Stat. 3623 (42 U.S.C. 1760); sec. 
10(d)(3), Pub. L. 95-627, 92 Stat. 3624 (42 U.S.C. 1757); sec. 14, Pub. 
L. 95-627, 92 Stat. 3625-3626; secs. 804, 816, 817 and 819, Pub. L. 97-
35, 95 Stat. 521-535 (42 U.S.C. 1753, 1756, 1759, 1771, 1773, and 1785))

[32 FR 37, Jan. 5, 1967. Redesignated at 49 FR 18988, May 4, 1984]

    Editorial Note: For Federal Register citations affecting 
Sec. 220.20, see the List of CFR Sections Affected, which appears in the 
Finding Aids section of the printed volume and on GPO Access.



Sec. 220.21  Information collection/recordkeeping--OMB assigned control numbers.

------------------------------------------------------------------------
                                                             Current OMB
       7 CFR section where requirements are described          control
                                                                number
------------------------------------------------------------------------
220.3(e)...................................................    0584-0327
220.5......................................................    0584-0012
220.7(a)-(e)...............................................    0584-0329
                                                               0584-0012
                                                               0584-0026
220.8(f)...................................................    0584-0012
220.9(a)...................................................    0584-0012
220.11 (a), (b), (e).......................................    0584-0012
                                                               0584-0002
                                                               0584-0341
220.12(b)..................................................    0584-0012
220.13 (a-1)-(c), (f)......................................    0584-0026
                                                               0584-0002
                                                               0584-0341
                                                               0584-0012
220.14(d)..................................................    0584-0012
220.15.....................................................    0584-0012
------------------------------------------------------------------------


[Amdt. 56, 54 FR 2990, Jan. 23, 1989]

            Appendix A to Part 220--Alternate Foods for Meals

                   I. Formulated Grain-Fruit Products

    1. Schools may utilize the formulated grain-fruit products defined 
in paragraph 3 as a food component in meeting the meal requirements of 
this part under the following terms and conditions:
    (a) Formulated grain-fruit products may be used to meet one bread/
bread alternate and the fruit/vegetable requirement in the breakfast 
pattern specified in Sec. 220.8.
    (b) Only individually wrapped formulated grain-fruit products which 
bear a label conforming to the following legend shall be utilized. 
``This product conforms to U.S.D.A. Child Nutrition Program 
specifications. For breakfast, it meets the requirements for fruit/
vegetable/juice and one bread/bread alternate.''
    2. Only formulated grain-fruit products that have been accepted by 
the Food and Nutrition Service (FNS) for use in the USDA child nutrition 
programs may be labeled as provided in paragraph 1.(b) of this appendix. 
Manufacturers seeking acceptance of their product shall furnish FNS a 
chemical analysis, protein efficiency ratio analysis, and such other 
pertinent data as may be requested by FNS. This information shall be 
forwarded to: Director, Nutrition and Technical Services Staff, Food and 
Nutrition Service, U.S. Department of Agriculture, Alexandria, Virginia 
22302. All laboratory analyses are to be performed by independent or 
other laboratories acceptable to FNS. (FNS prefers an independent 
laboratory.) All laboratories shall retain the ``raw'' laboratory data 
for a period of one year. Such information shall be made available to 
FNS upon request.
    3. To be accepted by FNS, products must have the following 
characteristics and meet the following nutritional specifications:
    (a) Types. There are two types of products: one is a grain-type 
product and the other a grain-fruit type product.
    (b) Ingredients. A grain-type product shall have grain as its 
primary ingredient. A grain-fruit type product shall have fruit as its 
primary ingredient. Both types of products must have at least 25 percent 
of their weight derived from grain. All ingredients and/or components 
shall comply with pertinent requirements or standards of the USDA and 
the Food, Drug, and Cosmetic Act, as amended, and any regulations issued 
thereunder.
    (c) Nutritional specifications. Each serving of the product shall 
meet the minimum compositional requirements in the following table. The 
requirements as specified for those nutrients not limited by maximum 
values will be deemed to have been met if reasonable overages of the 
vitamins and minerals, within the limits of good manufacturing practice, 
are present to insure that the required levels are maintained throughout 
the expected shelf life under customary conditions of distribution and 
storage. An exception will be made for vitamins or minerals which occur 
naturally in an ingredient at such concentration that the level 
specified will be substantially exceeded in the final product. Such 
excess will be permitted

[[Page 112]]

but no lable claim of nutritional advantage can be made for overages for 
any nutrients. Analytical methods employed should be according to the 
standard procedures defined in the Association of Official Analytical 
Chemists, 1970, ``Official Methods of Analysis,'' 11th edition, 
Washington, DC or by appropriate analytical procedures FNS considers 
reliable.

             Nutritional Levels of Grain-Fruit Products \1\
------------------------------------------------------------------------
            Nutrient                      Unit          Minimum  Maximum
------------------------------------------------------------------------
Weight..........................  Ounce...............        2      4.0
PER.............................  Casein=2.5..........      2.0  .......
Moisture........................  Percent weight......  .......     40.0
Fat \2\.........................  ......do............  .......     22.0
Fiber...........................  ......do............  .......      0.8
Protein (N x 6.25)..............  Gram................      5.0  .......
Energy..........................  Kilocalorie.........      250  .......
Vitamin A \3\...................  International unit..    1,115  1,675.0
Vitamin E.......................  ......do............        5  .......
Vitamin B12.....................  Microgram...........     1.25  .......
Thiamin.........................  Milligram...........      .26  .......
Riboflavin......................  ......do............      .13  .......
Vitamin B6......................  ......do............      .26  .......
Vitamin C.......................  ......do............       20  .......
Niacin..........................  ......do............     2.65  .......
Folacin.........................  ......do............      .04  .......
Iron \4\........................  ......do............      4.4  .......
Calcium.........................  ......do............      120  .......
Phosphorus......................  ......do............      120  .......
Magnesium.......................  ......do............       30  .......
------------------------------------------------------------------------
\1\ These specifications are based on a nutrient level for acceptable
  products plus \1/2\ pint of fluid milk (as defined in Sec.  220.2 of
  the regulations (7 CFR part 220)) to provide at least 25 percent of
  the Recommended Dietary Allowances (RDA), 1968, for 10- to 12-year-old
  boys and girls for specified nutrients except magnesium and
  kilocalories. Magnesium and kilocalories--at least 13 percent of this
  RDA.
\2\ Although the maximum fat in these specifications is 22 percent,
  consideration should be given to the development of formulated items
  containing less fat. Most medical authorities recommend keeping the
  dietary intake of fats at about \1/3\ of the day's calories. At least
  5 percent of the total calories shall be from linoleic acid.
\3\ Vitamin A levels above the maximum of 1,675 I.U. will be allowed in
  products containing this nutrient as a natural food, and if the
  vitamin has not been added to the ingredients or foods.
\4\ Recommended sources of iron are ferric ammonium citrate, ferrous
  fumarate, ferrous sulfates (FeSO4 or FeSO4 7H2 O), ferrous gluconate,
  reduced iron, or other sources known to have a similar relative
  biological value.

                     II. Alternate Protein Products

  A. What Are the Criteria for Alternate Protein Products Used in the 
                        School Breakfast Program?

    1. An alternate protein product used in meals planned under the 
food-based menu planning approaches in Sec. 220.8(g), must meet all of 
the criteria in this section.
    2. An alternate protein product whether used alone or in combination 
with meat or other meat alternates must meet the following criteria:
    a. The alternate protein product must be processed so that some 
portion of the non-protein constituents of the food is removed. These 
alternate protein products must be safe and suitable edible products 
produced from plant or animal sources.
    b. The biological quality of the protein in the alternate protein 
product must be at least 80 percent that of casein, determined by 
performing a Protein Digestibility Corrected Amino Acid Score (PDCAAS).
    c. The alternate protein product must contain at least 18 percent 
protein by weight when fully hydrated or formulated. (``When hydrated or 
formulated'' refers to a dry alternate protein product and the amount of 
water, fat, oil, colors, flavors or any other substances which have been 
added).
    d. Manufacturers supplying an alternate protein product to 
participating schools or institutions must provide documentation that 
the product meets the criteria in paragraphs A.2. a through c of this 
appendix.
    e. Manufacturers should provide information on the percent protein 
contained in the dry alternate protein product and on an as prepared 
basis.
    f. For an alternate protein product mix, manufacturers should 
provide information on:
    (1) The amount by weight of dry alternate protein product in the 
package;
    (2) Hydration instructions; and
    (3) instructions on how to combine the mix with meat or other meat 
alternates.

   B. How Are Alternate Protein Products Used in the School Breakfast 
                                Program?

    1. Schools, institutions, and service institutions may use alternate 
protein products to fulfill all or part of the meat/meat alternate 
component discussed in Sec. 220.8. The following terms and conditions 
apply:
    a. The alternate protein product may be used alone or in combination 
with other food ingredients. Examples of combination items are beef 
patties, beef crumbles, pizza topping, meat loaf, meat sauce, taco 
filling, burritos, and tuna salad.
    b. Alternate protein products may be used in the dry form 
(nonhydrated), partially hydrated or fully hydrated form. The moisture 
content of the fully hydrated alternate protein product (if prepared 
from a dry concentrated form) must be such that the mixture will have a 
minimum of 18 percent protein by weight or equivalent amount for the dry 
or partially hydrated form (based on the level that would be provided if 
the product were fully hydrated).

 C. How Are Commercially Prepared Products Used in the School Breakfast 
                                Program?

    Schools, institutions, and service institutions may use a 
commercially prepared meat or other meat alternate products combined 
with alternate protein products or use a

[[Page 113]]

commercially prepared product that contains only alternate protein 
products.


(Secs. 804, 816, 817, and 819, Pub. L. 97-35, 95 Stat. 521-535 (42 
U.S.C. 1753, 1756, 1759, 1771, 1773 and 1785))

[Amdt. 18, 39 FR 11249, Mar. 27, 1974, as amended at 40 FR 37027, Aug. 
25, 1975; Amdt. 45, 48 FR 195, Jan. 4, 1983; Amdt. 57, 54 FR 13048, Mar. 
30, 1989; 60 FR 31222, June 13, 1995; 65 FR 12436, Mar. 9, 2000; 65 FR 
26923, May 9, 2000]

Appendix B to Part 220--Categories of Foods of Minimal Nutritional Value

    (1) Soda Water--A class of beverages made by absorbing carbon 
dioxide in potable water. The amount of carbon dioxide used is not less 
than that which will be absorbed by the beverage at a pressure of one 
atmosphere and at a temperature of 60 deg. F. It either contains no 
alcohol or only such alcohol, not in excess of 0.5 percent by weight of 
the finished beverage, as is contributed by the flavoring ingredient 
used. No product shall be excluded from this definition because it 
contains artificial sweeteners or discrete nutrients added to the food 
such as vitamins, minerals and protein.
    (2) Water ices. As defined by 21 CFR 135.160 Food and Drug 
Administration Regulations except that water ices which contain fruit or 
fruit juices are not included in this definition.
    (3) Chewing gum. Flavored products from natural or synthetic gums 
and other ingredients which form an insoluble mass for chewing.
    (4) Certain candies. Processed foods made predominantly from 
sweeteners or artificial sweeteners with a variety of minor ingredients 
which characterize the following types: (a) Hard candy. A product made 
predominantly from sugar (sucrose) and corn syrup which may be flavored 
and colored, is characterized by a hard, brittle texture, and includes 
such items as sour balls, fruit balls, candy sticks, lollipops, 
starlight mints, after dinner mints, sugar wafers, rock candy, cinnamon 
candies, breath mints, jaw breakers and cough drops.
    (b) Jellies and gums. A mixture of carbohydrates which are combined 
to form a stable gelatinous system of jelly-like character, and are 
generally flavored and colored, and include gum drops, jelly beans, 
jellied and fruit-flavored slices.
    (c) Marshmallow candies. An aerated confection composed of sugar, 
corn syrup, invert sugar, 20% water and gelatin or egg white to which 
flavors and colors may be added.
    (d) Fondant. A product consisting of microscopic-sized sugar 
crystals which are separated by a thin film of sugar and/or invert sugar 
in solution such as candy corn, soft mints.
    (e) Licorice. A product made predominantly from sugar and corn syrup 
which is flavored with an extract made from the licorice root.
    (f) Spun candy. A product that is made from sugar that has been 
boiled at high temperature and spun at a high speed in a special 
machine.
    (g) Candy coated popcorn. Popcorn which is coated with a mixture 
made predominantly from sugar and corn syrup.

                    Schedule for Amending Appendix B
------------------------------------------------------------------------
                                                Publication
     Actions for publication     ---------------------------------------
                                          May              November
------------------------------------------------------------------------
Deadline for receipt of           Nov. 15...........  May 15.
 petitions by USDA.
USDA to notify petitioners of     Feb. 1............  Aug. 1.
 results of Departmental review
 and publish proposed rule (if
 applicable).
60 Day Comment Period...........  Feb 1 through Apr.  Aug. 1 through
                                   1.                  Oct. 1.
Public Notice of Amendment of     May 1.............  Nov. 1.
 Appendix B by.
------------------------------------------------------------------------

Written petitions should be sent to the Chief, Technical Assistance 
Branch, Nutrition and Technical Services Divisions, FNS, USDA, 
Alexandria, Virginia 22302 on or before November 15 or May 15 of each 
year. Petitions must include all information specified in 
Sec. 210.15b(b) (1) or (2), and Sec. 220.12(b) (1) or (2) as 
appropriate.

(Sec. 17, Pub. L. 95-166, 91 Stat. 1345 (42 U.S.C. 1779); secs. 804, 
816, 817 and 819, Pub. L. 97-35, 95 Stat. 521-535 (42 U.S.C. 1753, 1756, 
1759, 1771, 1773 and 1785))

[Amdt. 32, 45 FR 6772, Jan. 29, 1980, as amended at 45 FR 72081, Oct. 
31, 1980; 45 FR 76937, Nov. 21, 1980; Amdt. 45, 48 FR 195, Jan. 4, 1983; 
54 FR 18466, May 1, 1989]

      Appendix C to Part 220--Child Nutrition (CN) Labeling Program

    1. The Child Nutrition (CN) Labeling Program is a voluntary 
technical assistance program administered by the Food and Nutrition 
Service (FNS) in conjunction with the Food Safety and Inspection Service 
(FSIS), and Agricultural Marketing Service (AMS) of the U.S. Department 
of Agriculture (USDA), and National Marine Fisheries Service of the U.S. 
Department of Commerce (USDC) for the Child Nutrition Programs. This 
program essentially involves the review of a manufacturer's recipe or 
product formulation to determine the contribution a serving of a 
commercially prepared product makes toward meal pattern requirements

[[Page 114]]

and a review of the CN label statement to ensure its accuracy. CN 
labeled products must be produced in accordance with all requirements 
set forth in this rule.
    2. Products eligible for CN labels are as follows:
    (a) Commercially prepared food products that contribute 
significantly to the meat/meat alternate component of meal pattern 
requirements of 7 CFR 210.10 or 210.10a, whichever is applicable, 
225.21, and 226.20 and are served in the main dish.
    (b) Juice drinks and juice drink products that contain a minimum of 
50 percent full-strength juice by volume.
    3. For the purpose of this appendix the following definitions apply:
    (a) ``CN label'' is a food product label that contains a CN label 
statement and CN logo as defined in paragraph 3 (b) and (c) below.
    (b) The ``CN logo'' (as shown below) is a distinct border which is 
used around the edges of a ``CN label statement'' as defined in 
paragraph 3(c).
[GRAPHIC] [TIFF OMITTED] TC17SE91.003

    (c) The ``CN label statement'' includes the following:
    (1) The product identification number (assigned by FNS),
    (2) The statement of the product's contribution toward meal pattern 
requirements of 7 CFR 210.10 or 210.10a, whichever is applicable, 220.8, 
225.21, and 226.20. The statement shall identify the contribution of a 
specific portion of a meat/meat alternate product toward the meat/meat 
alternate, bread/bread alternate, and/or vegetable/fruit component of 
the meal pattern requirements. For juice drinks and juice drink products 
the statement shall identify their contribution toward the vegetable/
fruit component of the meal pattern requirements,
    (3) Statement specifying that the use of the CN logo and CN 
statement was authorized by FNS, and
    (4) The approval date.
    For example:
    [GRAPHIC] [TIFF OMITTED] TC17SE91.004
    
    (d) Federal inspection means inspection of food products by FSIS, 
AMS or USDC.
    4. Food processors or manufacturers may use the CN label statement 
and CN logo as defined in paragraph 3 (b) and (c) under the following 
terms and conditions:
    (a) The CN label must be reviewed and approved at the national level 
by the Food and Nutrition Service and appropriate USDA or USDC Federal 
agency responsible for the inspection of the product.
    (b) The CN labeled product must be produced under Federal inspection 
by USDA or USDC. The Federal inspection must be performed in accordance 
with an approved partial or total quality control program or standards 
established by the appropriate Federal inspection service.
    (c) The CN label statement must be printed as an integral part of 
the product label along with the product name, ingredient listing, the 
inspection shield or mark for the appropriate inspection program, the 
establishment number where appropriate, and the manufacturer's or 
distributor's name and address.
    (1) The inspection marking for CN labeled non-meat, non-poultry, and 
non-seafood

[[Page 115]]

products with the exception of juice drinks and juice drink products is 
established as follows:
[GRAPHIC] [TIFF OMITTED] TC17SE91.005

    (d) Yields for determining the product's contribution toward meal 
pattern requirements must be calculated using the Food Buying Guide for 
Child Nutrition Programs (Program Aid Number 1331).
    5. In the event a company uses the CN logo and CN label statement 
inappropriately, the company will be directed to discontinue the use of 
the logo and statement and the matter will be referred to the 
appropriate agency for action to be taken against the company.
    6. Products that bear a CN label statement as set forth in paragraph 
3(c) carry a warranty. This means that if a food service authority 
participating in the child nutrition programs purchases a CN labeled 
product and uses it in accordance with the manufacturer's directions, 
the school or institution will not have an audit claim filed against it 
for the CN labeled product for noncompliance with the meal pattern 
requirements of 7 CFR 210.10 or 210.10a, whichever is applicable, 220.8, 
225.21, and 226.20. If a State or Federal auditor finds that a product 
that is CN labeled does not actually meet the meal pattern requirements 
claimed on the label, the auditor will report this finding to FNS. FNS 
will prepare a report of the findings and send it to the appropriate 
divisions of FSIS and AMS of the USDA, National Marine Fisheries 
Services of the USDC, Food and Drug Administration, or the Department of 
Justice for action against the company.
    Any or all of the following courses of action may be taken:
    (a) The company's CN label may be revoked for a specific period of 
time;
    (b) The appropriate agency may pursue a misbranding or mislabeling 
action against the company producing the product;
    (c) The company's name will be circulated to regional FNS offices;
    (d) FNS will require the food service program involved to notify the 
State agency of the labeling violation.
    7. FNS is authorized to issue operational policies, procedures, and 
instructions for the CN Labeling Program.
    To apply for a CN label and to obtain additional information on CN 
label application procedures write to: CN Labels, U.S. Department of 
Agriculture, Food and Nutrition Service, Nutrition and Technical 
Services Division, 3101 Park Center Drive, Alexandria, Virginia 22302.

(National School Lunch Act, secs. 9, 13, 17; 42 U.S.C. 1758, 1761, 1766; 
7 CFR 210.10, 220.8, 225.21, 226.20)

[49 FR 18457, May 1, 1984; 49 FR 45109, Nov. 15, 1984; 60 FR 31222, June 
13, 1995; 65 FR 26923, May 9, 2000]



PART 225--SUMMER FOOD SERVICE PROGRAM--Table of Contents




                           Subpart A--General

Sec.
225.1  General purpose and scope.
225.2  Definitions.
225.3  Administration.

                   Subpart B--State Agency Provisions

225.4  Program management and administration plan.
225.5  Payments to State agencies and use of Program funds.
225.6  State agency responsibilities.
225.7  Program monitoring and assistance.
225.8  Records and reports.
225.9  Program assistance to sponsors.
225.10  Audits and management evaluations.
225.11  Corrective action procedures.
225.12  Claims against sponsors.
225.13  Appeal procedures.

                 Subpart C--Sponsor and Site Provisions

225.14  Requirements for sponsor participation.
225.15  Management responsibilities of sponsors.
225.16  Meal service requirements.

              Subpart D--General Administrative Provisions

225.17  Procurement standards.
225.18  Miscellaneous administrative provisions.
225.19  Regional office addresses.
225.20  Information collection/recordkeeping--OMB assigned control 
          numbers.

Appendix A to Part 225--Alternate Foods for Meals
Appendix B to Part 225 [Reserved]
Appendix C to Part 225--Child Nutrition (CN) Labeling Program

    Authority: Secs. 9, 13 and 14, National School Lunch Act, as amended 
(42 U.S.C. 1758, 1761 and 1762a).

    Source: 54 FR 18208, Apr. 27, 1989, unless otherwise noted.

[[Page 116]]



                           Subpart A--General



Sec. 225.1  General purpose and scope.

    This part establishes the regulations under which the Secretary will 
administer a Summer Food Service Program. Section 13 of the Act 
authorizes the Secretary to assist States through grants-in-aid to 
conduct nonprofit food service programs for children during the summer 
months and at other approved times. The primary purpose of the Program 
is to provide food service to children from needy areas during periods 
when area schools are closed for vacation.



Sec. 225.2  Definitions.

    Act means the National School Lunch Act, as amended.
    Administrative costs means costs incurred by a sponsor related to 
planning, organizing, and managing a food service under the Program, and 
excluding interest costs and operating costs.
    Adult means, for the purposes of the collection of social security 
numbers as a condition of eligibility for Program meals, any individual 
21 years of age or older.
    Advance payments means financial assistance made available to a 
sponsor for its operating costs and/or administrative costs prior to the 
end of the month in which such costs will be incurred.
    Areas in which poor economic conditions exist means:
    (a) The local areas from which an open site and restricted open site 
draw their attendance in which at least 50 percent of the children are 
eligible for free or reduced-price school meals under the National 
School Lunch Program and the School Breakfast Program, as determined:
    (1) By information provided from departments of welfare and 
education, zoning commissions, census tracts, and organizations 
determined by the State agency to be migrant organizations;
    (2) By the number of free and reduced-price lunches or breakfasts 
served to children attending public and nonprofit private schools 
located in the areas of Program sites; or
    (3) From other appropriate sources; or
    (b) A closed enrolled site.
    Camps means residential summer camps and nonresidential day camps 
which offer a regularly scheduled food service as part of an organized 
program for enrolled children. Nonresidential camp sites shall offer a 
continuous schedule of organized cultural or recreational programs for 
enrolled children between meal services.
    Children means (a) persons 18 years of age and under, and (b) 
persons over 18 years of age who are determined by a State educational 
agency or a local public educational agency of a State to be mentally or 
physically handicapped and who participate in a public or nonprofit 
private school program established for the mentally or physically 
handicapped.
    Closed enrolled site means a site which is open only to enrolled 
children, as opposed to the community at large, and in which at least 50 
percent of the enrolled children at the site are eligible for free or 
reduced price school meals under the National School Lunch Program and 
the School Breakfast Program, as determined by approval of applications 
in accordance with Sec. 225.15(f).
    Continuous school calendar means a situation in which all or part of 
the student body of a school is (a) on a vacation for periods of 15 
continuous school days or more during the period October through April 
and (b) in attendance at regularly scheduled classes during most of the 
period May through September.
    Costs of obtaining food means costs related to obtaining food for 
consumption by children. Such costs may include, in addition to the 
purchase price of agricultural commodities and other food, the cost of 
processing, distributing, transporting, storing, or handling any food 
purchased for, or donated to, the Program.
    Current income means income, as defined in Sec. 225.15(f)(4)(vi), 
received during the month prior to application for free meals. If such 
income does not accurately reflect the household's annual income, income 
must be based on the projected annual household income. If the prior 
year's income provides an accurate reflection of the household's current 
annual income, the prior year may be used as a base for the projected 
annual income.

[[Page 117]]

    Department means the U.S. Department of Agriculture.
    Disclosure means individual children's program eligibility 
information obtained through the free and reduced price meal eligibility 
process that is revealed or used for a purpose other than for the 
purpose for which the information was obtained. The term refers to 
access, release, or transfer of personal data about children by means of 
print, tape, microfilm, microfiche, electronic communication or any 
other means.
    Documentation means:
    (a) The completion of the following information on a free meal 
application:
    (1) Names of all household members;
    (2) Income received by each household member, identified by source 
of income (such as earnings, wages, welfare, pensions, support payments, 
unemployment compensation, social security and other cash income);
    (3) The signature of an adult household member; and
    (4) The social security number of the adult household member who 
signs the application, or an indication that he/she does not possess a 
social security number; or
    (b) For a child who is a member of a household receiving food stamp, 
FDPIR, or TANF benefits, ``documentation'' means completion of only the 
following information on a free meal application:
    (1) The name(s) and appropriate food stamp, FDPIR, or TANF case 
number(s) for the child(ren); and
    (2) the signature of an adult member of the household.
    Experienced site means a site which, as determined by the State 
agency, has successfully participated in the Program in the prior year.
    Experienced sponsor means a sponsor which, as determined by the 
State agency, has successfully participated in the Program in the prior 
year.
    Family means a group of related or nonrelated individuals who are 
not residents of an institution or boarding house but who are living as 
one economic unit.
    FDPIR household means any individual or group of individuals which 
is currently certified to receive assistance as a household under the 
Food Distribution Program on Indian Reservations.
    Fiscal year means the period beginning October 1 of any calendar 
year and ending September 30 of the following calendar year.
    FNS means the Food and Nutrition Service of the Department.
    FNSRO means the appropriate FNS Regional Office.
    Food service management company means any commercial enterprise or 
nonprofit organization with which a sponsor may contract for preparing 
unitized meals, with or without milk, for use in the Program, or for 
managing a sponsor's food service operations in accordance with the 
limitations set forth in Sec. 225.15. Food service management companies 
may be: (a) Public agencies or entities; (b) private, nonprofit 
organizations; or (c) private, for-profit companies.
    Food stamp household means any individual or group of individuals 
which is currently certified to receive assistance as a household under 
the Food Stamp Program.
    Household means ``family,'' as defined in this section.
    Income accruing to the program means all funds used by a sponsor in 
its food service program, including but not limited to all monies, other 
than program payments, received from Federal, State and local 
governments, from food sales to adults, and from any other source 
including cash donations or grants. Income accruing to the Program will 
be deducted from combined operating and administrative costs.
    Income standards means the family-size and income standards 
prescribed annually by the Secretary for determining eligibility for 
reduced price meals under the National School Lunch Program and the 
School Breakfast Program.
    Meals means food which is served to children at a food service site 
and which meets the nutritional requirements set out in this part.
    Medicaid means the State medical assistance program under title XIX 
of the Social Security Act (42 U.S.C. 1396 et seq.).
    Milk means whole milk, lowfat milk, skim milk, and buttermilk. All 
milk must be fluid and pasteurized and must

[[Page 118]]

meet State and local standards for the appropriate type of milk. Milk 
served may be flavored or unflavored. In Alaska, Hawaii, American Samoa, 
Guam, Puerto Rico, the Trust Territory of the Pacific Islands, the 
Northern Mariana Islands, and the Virgin Islands of the United States, 
if a sufficient supply of such types of fluid milk cannot be obtained, 
reconstituted or recombined milk may be used. All milk should contain 
Vitamins A and D at the levels specified by the Food and Drug 
Administration and at levels consistent with State and local standards 
for such milk.
    Needy children means children from families whose incomes are equal 
to or below the Secretary's Guidelines for Determining Eligibility for 
Reduced Price School Meals.
    New site means a site which did not participate in the Program in 
the prior year, or, as determined by the State agency, a site which has 
experienced significant staff turnover from the prior year.
    New sponsor means a sponsor which did not participate in the Program 
in the prior year, or, as determined by the State agency, a sponsor 
which has experienced significant staff turnover from the prior year.
    NYSP means the National Youth Sports Program administered by the 
National Collegiate Athletic Association.
    NYSP feeding site means a site at which all of the children 
receiving Program meals are enrolled in the NYSP and which qualifies for 
Program participation on the basis of documentation that the site meets 
the definition of ``areas in which poor economic conditions exist'' as 
provided in this section.
    OIG means the Office of the Inspector General of the Department.
    Open site means a site at which meals are made available to all 
children in the area and which is located in an area in which at least 
50 percent of the children are from households that would be eligible 
for free or reduced price school meals under the National School Lunch 
Program and the School Breakfast Program, as determined in accordance 
with paragraph (a) of the definition of Areas in which poor economic 
conditions exist.
    Operating costs means the cost of operating a food service under the 
Program,
    (a) Including the (1) cost of obtaining food, (2) labor directly 
involved in the preparation and service of food, (3) cost of nonfood 
supplies, (4) rental and use allowances for equipment and space, and (5) 
cost of transporting children in rural areas to feeding sites in rural 
areas, but
    (b) Excluding (1) the cost of the purchase of land, acquisition or 
construction of buildings, (2) alteration of existing buildings, (3) 
interest costs, (4) the value of in-kind donations, and (5) 
administrative costs.
    Private nonprofit means tax exempt under the Internal Revenue Code 
of 1986, as amended.
    Private nonprofit organization means an organization (other than 
private nonprofit residential camps, school food authorities, or 
colleges or universities participating in the NYSP) which meets the 
definition of ``private nonprofit'' in this section and which:
    (a) Administers the Program:
    (1) At no more than 25 sites, with not more than 300 children being 
served at any approved meal service at any one site; or
    (2) With a waiver granted by the State in accordance with 
Sec. 225.6(b)(ii), not more than 500 children being served at any 
approved meal service at any one site;
    (b) Operates in areas where a school food authority has not 
indicated that it will operate the Program in the current year;
    (c) Exercises full control and authority over the operation of the 
Program at all sites under its sponsorship;
    (d) Provides ongoing year-round activities for children or families;
    (e) Demonstrates that it possesses adequate management and the 
fiscal capacity to operate the Program; and
    (f) Meets applicable State and local health, safety, and sanitation 
standards.
    Program means the Summer Food Service Program for Children 
authorized by Section 13 of the Act.
    Program funds means Federal financial assistance made available to 
State

[[Page 119]]

agencies for the purpose of making Program payments.
    Program payments means financial assistance in the form of start-up 
payments, advance payments, or reimbursement paid to sponsors for 
operating and administrative costs.
    Restricted open site means a site which is initially open to broad 
community participation, but at which the sponsor restricts or limits 
attendance for reasons of security, safety or control. Site eligibility 
for a restricted open site shall be documented in accordance with 
paragraph (a) of the definition of Areas in which poor economic 
conditions exist.
    Rural means (a) any area in a county which is not a part of a 
Metropolitan Statistical Area or (b) any ``pocket'' within a 
Metropolitan Statistical Area which, at the option of the State agency 
and with FNSRO concurrence, is determined to be geographically isolated 
from urban areas.
    School food authority means the governing body which is responsible 
for the administration of one or more schools and which has the legal 
authority to operate a lunch program in those schools. In addition, for 
the purpose of determining the applicability of food service management 
company registration and bid procedure requirements, ``school food 
authority'' also means any college or university which participates in 
the Program.
    Secretary means the Secretary of Agriculture.
    Self-preparation sponsor means a sponsor which prepares the meals 
that will be served at its site(s) and does not contract with a food 
service management company for unitized meals, with or without milk, or 
for management services.
    Session means a specified period of time during which an enrolled 
group of children attend camp.
    Site means a physical location at which a sponsor provides a food 
service for children and at which children consume meals in a supervised 
setting.
    Special account means an account which a State agency may require a 
vended sponsor to establish with the State agency or with a Federally 
insured bank. Operating costs payable to the sponsor by the State agency 
are deposited in the account and disbursement of monies from the account 
must be authorized by both the sponsor and the food service management 
company.
    Sponsor means a public or private nonprofit school food authority, a 
public or private nonprofit residential summer camp, a unit of local, 
municipal, county or State government, a public or private nonprofit 
college or university currently participating in the NYSP, or a private 
nonprofit organization which develops a special summer or other school 
vacation program providing food service similar to that made available 
to children during the school year under the National School Lunch and 
School Breakfast Programs and which is approved to participate in the 
Program. Sponsors are referred to in the Act as ``service 
institutions''.
    Start-up payments means financial assistance made available to a 
sponsor for administrative costs to enable it to effectively plan a 
summer food service, and to establish effective management procedures 
for such a service. These payments shall be deducted from subsequent 
administrative cost payments.
    State means any of the 50 States, the District of Columbia, the 
Commonwealth of Puerto Rico, the Virgin Islands of the United States, 
Guam, American Samoa, the Trust Territory of the Pacific Islands, and 
the Northern Mariana Islands.
    State agency means the State educational agency or an alternate 
agency that has been designated by the Governor or other appropriate 
executive or legislative authority of the State and which has been 
approved by the Department to administer the Program within the State, 
or, in States where FNS administers the Program, FNSRO.
    State Children's Health Insurance Program (SCHIP) means the State 
medical assistance program under title XXI of the Social Security Act 
(42 U.S.C. 1397aa et seq.).
    TANF means the State funded program under part A of title IV of the 
Social Security Act that the Secretary determines complies with 
standards established by the Secretary that ensure that the standards 
under the State program are comparable to or more restrictive than those 
in effect on June 1,

[[Page 120]]

1995. This program is commonly referred to as Temporary Assistance for 
Needy Families, although States may refer to the program by another 
name.
    Unit of local, municipal, county or State government means an entity 
which is so recognized by the State constitution or State laws, such as 
the State administrative procedures act, tax laws, or other applicable 
State laws which delineate authority for government responsibility in 
the State.
    Vended sponsor means a sponsor which purchases from a food service 
management company the unitized meals, with or without milk, which it 
will serve at its site(s), or a sponsor which purchases management 
services, subject to the limitations set forth in Sec. 225.15, from a 
food service management company.
    Yogurt means commercially prepared coagulated milk products obtained 
by the fermentation of specific bacteria, that meet milk fat or milk 
solid requirements and to which flavoring foods or ingredients may be 
added. These products are covered by the Food and Drug Administration's 
Standard of Identity for yogurt, lowfat yogurt, and nonfat yogurt, (21 
CFR 131.200), (21 CFR 131.203), (21 CFR 131.206), respectively.

[54 FR 18208, Apr. 27, 1989, as amended at 54 FR 27153, June 28, 1989; 
55 FR 13466, Apr. 10, 1990; 61 FR 25553, May 22, 1996; 64 FR 72483, Dec. 
28, 1999; 64 FR 72895, Dec. 29, 1999; 66 FR 2202, Jan. 11, 2001]



Sec. 225.3  Administration.

    (a) Responsibility within the Department. FNS shall act on behalf of 
the Department in the administration of the Program.
    (b) State administered programs. Within the State, responsibility 
for the administration of the Program shall be in the State agency. Each 
State agency must notify the Department by November 1 of the fiscal year 
regarding its intention to administer the Program. Each State agency 
desiring to take part in the Program shall enter into a written 
agreement with FNS for the administration of the Program in accordance 
with the provisions of this part. The agreement shall cover the 
operation of the Program during the period specified therein and may be 
extended by written consent of both parties. The agreement shall contain 
an assurance that the State agency will comply with the Department's 
nondiscrimination regulations (7 CFR part 15) issued under title VI of 
the Civil Rights Act of 1964, and any Instructions issued by FNS 
pursuant to those regulations, title IX of the Education Amendments of 
1972, and section 504 of the Rehabilitation Act of 1973. However, if a 
State educational agency is not permitted by law to disburse funds to 
any of the nonpublic schools in the State, the Secretary shall disburse 
the funds directly to such schools within the State for the same 
purposes and subject to the same conditions as the disbursements to 
public schools within the State by the State educational agency.
    (c) Regional office administered programs. The Secretary shall not 
administer the Program in the States, except that if a FNSRO has 
continuously administered the Program in any State since October 1, 
1980, FNS shall continue to administer the Program in that State. In 
States in which FNSRO administers the Program, it shall have all of the 
responsibilities of a State agency and shall earn State administrative 
and Program funds as set forth in this part. A State in which FNS 
administers the Program may, upon request to FNS, assume administration 
of the Program.

[54 FR 18208, Apr. 27, 1989, as amended at 55 FR 13466, Apr. 10, 1990; 
64 FR 72483, Dec. 28, 1999]



                   Subpart B--State Agency Provisions



Sec. 225.4  Program management and administration plan.

    (a) Not later than February 15 of each year, each State agency shall 
submit to FNSRO a Program management and administration plan for that 
fiscal year.
    (b) Each plan shall be acted on or approved by March 15 or, if it is 
submitted late, within 30 calendar days of receipt of the plan. If the 
plan initially submitted is not approved, the State agency and FNS shall 
work together to ensure that changes to the plan, in the form of 
amendments, are submitted so that the plan can be approved within 60

[[Page 121]]

calendar days following the initial submission of the plan. Upon 
approval of the plan, the State agency shall be notified of the level of 
State administrative funding which it is assured of receiving under 
Sec. 225.5(a)(3).
    (c) Approval of the Plan by FNS shall be a prerequisite to the 
withdrawal of Program funds by the State from the Letter of Credit and 
to the donation by the Department of any commodities for use in the 
State's Program.
    (d) The Plan must include, at a minimum, the following information:
    (1) The State's administrative budget for the fiscal year, and the 
State's plan to comply with any standards prescribed by the Secretary 
for the use of these funds;
    (2) The State's plan for use of Program funds and funds from within 
the State to the maximum extent practicable to reach needy children;
    (3) The State's plans for providing technical assistance and 
training to eligible sponsors;
    (4) The State's plans for monitoring and inspecting sponsors, 
feeding sites, and food service management companies and for ensuring 
that such companies do not enter into contracts for more meals than they 
can provide effectively and efficiently;
    (5) The State's plan for timely and effective action against Program 
violators;
    (6) The State's plan for ensuring the fiscal integrity of sponsors 
not subject to auditing requirements prescribed by the Secretary;
    (7) The State's plan for ensuring compliance with the food service 
managment company procurement monitoring requirements set forth at 
Sec. 225.6(h); and
    (8) An estimate of the State's need, if any, for monies available to 
pay for the cost of conducting health inspections and meal quality 
tests.

[54 FR 18208, Apr. 27, 1989, as amended at 55 FR 13466, Apr. 10, 1990; 
64 FR 72483, Dec. 28, 1999]



Sec. 225.5  Payments to State agencies and use of Program funds.

    (a) State administrative funds. (1) Administrative funding formula. 
For each fiscal year, FNS shall pay to each State agency for 
administrative expenses incurred in the Program an amount equal to
    (i) 20 percent of the first $50,000 in Program funds properly 
payable to the State in the preceding fiscal year;
    (ii) 10 percent of the next $100,000 in Program funds properly 
payable to the State in the preceding fiscal year;
    (iii) 5 percent of the next $250,000 in Program funds properly 
payable to the State in the preceding fiscal year; and
    (iv) 2\1/2\ percent of any remaining Program funds properly payable 
to the State in the preceding fiscal year,

Provided, however, That FNS may make appropriate adjustments in the 
level of State administrative funds to reflect changes in Program size 
from the preceding fiscal year as evidenced by information submitted in 
the State Program management and administration plan and any other 
information available to FNS. If a State agency fails to submit timely 
and accurate reports under Sec. 225.8(c) of this part, State 
administrative funds payable under this paragraph shall be subject to 
sanction. For such failure, FNS may recover, withhold, or cancel payment 
of up to one hundred percent of the funds payable to the State agency 
under this paragraph during the fiscal year.
    (2) Use of State administrative funds. State administrative funds 
paid to any State shall be used by State agencies to employ personnel, 
including travel and related expenses, and to supervise and give 
technical assistance to sponsors in their initiation, expansion, and 
conduct of any food service for which Program funds are made available. 
State agencies may also use administrative funds for such other 
administrative expenses as are set forth in their approved Program 
management and administration plan.
    (3) Funding assurance. At the time FNS approves the State's 
management and administration plan, the State shall be assured of 
receiving State administrative funding equal to the lesser of the 
following amounts: 80 percent of the amount obtained by applying the 
formula set forth in paragraph (a)(1) of this section to the total 
amount of Program payments made within the State during the prior fiscal 
year; or, 80 percent of the amount obtained by

[[Page 122]]

applying the formula set forth in paragraph (a)(1) to the amount of 
Program funds estimated to be needed in the management and 
administration plan. The State agency shall be assured that it will 
receive no less than this level unless FNS determines that the State 
agency has failed or is failing to meet its responsibilities under this 
part.
    (4) Limitation. In no event may the total payment for State 
administrative costs in any fiscal year exceed the total amount of 
expenditures incurred by the State agency in administering the Program.
    (b) State administrative funds Letter of Credit. (1) At the 
beginning of each fiscal year, FNS shall make available to each 
participating State agency by Letter of Credit an initial allocation of 
State administrative funds for use in that fiscal year. This allocation 
shall not exceed one-third of the administrative funds provided to the 
State in the preceding fiscal year. For State agencies which did not 
receive any Program funds during the preceding fiscal year, the amount 
to be made available shall be determined by FNS.
    (2) Additional State administrative funds shall be made available 
upon the receipt and approval by FNS of the State's Program management 
and administration plan. The amount of such funds, plus the initial 
allocation, shall not exceed 80 percent of the State administrative 
funds determined by the formula set forth in paragraph (a)(1) of this 
section and based on the estimates set forth in the approved Program 
management and administration plan.
    (3) Any remaining State administrative funds shall be paid to each 
State agency as soon as practicable after the conduct of the funding 
assessment described in paragraph (c) of this section. However, 
regardless of whether such assessment is made, the remaining 
administrative funds shall be paid no later than September 1. The 
remaining administrative payment shall be in an amount equal to that 
determined to be needed during the funding evaluation or, if such 
evaluation is not conducted, the amount owed the State in accordance 
with paragraph (a)(1) of this section, less the amounts paid under 
paragraphs (b) (1) and (2) of this section.
    (c) Administrative funding evaluation. FNSRO shall conduct data on 
the need for Program and State administrative funding within any State 
agency if the funding needs estimated in a State's management and 
administration plan are no longer accurate. Based on this data, FNS may 
make adjustments in the level of State administrative funding paid or 
payable to the State agency under paragraph (b) of this section to 
reflect changes in the size of the State's Program as compared to that 
estimated in its management and administration plan. The data shall be 
based on approved Program participation levels and shall be collected 
during the period of Program operations. As soon as possible following 
this data collection, payment of any additional administrative funds 
owed shall be made to the State agency. The payment may reflect 
adjustments made to the level of State administrative funding based on 
the information collected during the funding assessment. However, FNS 
shall not decrease the amount of a State's administrative funds as a 
result of this assessment unless the State failed to make reasonable 
efforts to administer the Program as proposed in its management and 
administration plan or the State incurred unnecessary expenses.
    (d) Letter of Credit for Program payments. (1) Not later than April 
15 of each fiscal year, FNS shall make available to each participating 
State in a Letter of Credit an amount equal to 65 percent of the 
preceding fiscal year's Program payments for operating costs plus 65 
percent of the preceding fiscal year's Program payments for 
administrative costs in the State. This amount may be adjusted to 
reflect changes in reimbursement rates made pursuant to 
Sec. 225.9(d)(8). However, the State shall not withdraw funds from this 
Letter of Credit until its Program management and administration plan is 
approved by FNS.
    (2) Based on the State agency's approved management and 
administration plan, FNS shall, if necessary, adjust the State's Letter 
of Credit to ensure that 65 percent of estimated current year Program 
operating and administrative funding needs is available. Such adjustment 
shall be made no

[[Page 123]]

later than May 15, or within 90 days of FNS receipt of the State 
agency's management and administration plan, whichever date is later.
    (3) Subsequent to the adjustment provided for in paragraph (d)(2) of 
this section, FNS will, if necessary, make one additional adjustment to 
ensure that the State agency's Letter of Credit contains at least 65 
percent of the Program operating and administrative funds needed during 
the current fiscal year. Such adjustment may be based on the 
administrative funding assessment provided for in paragraph (c) of this 
section, if one is conducted, or on any additional information which 
demonstrates that the funds available in the Letter of Credit do not 
equal at least 65 percent of current year Program needs. In no case will 
such adjustments be made later than September 1. Funds made available in 
the Letter of Credit shall be used by the State agency to make Program 
payments to sponsors.
    (4) The Letter of Credit shall include sufficient funds to enable 
the State agency to make advance payments to sponsors serving areas in 
which schools operate under a continuous school calendar. These funds 
shall be made available no later than the first day of the month prior 
to the month during which the food service will be conducted.
    (5) FNS shall make available any remaining Program funds due within 
45 days of the receipt of valid claims for reimbursement from sponsors 
by the State agency. However, no payment shall be made for claims 
submitted later than 60 days after the month covered by the claim unless 
an exception is granted by FNS.
    (6) Each State agency shall release to FNS any Program funds which 
it determines are unobligated as of September 30 of each fiscal year. 
Release of funds by the State agency shall be made as soon as 
practicable, but in no event later than 30 calendar days following 
demand by FNS, and shall be accomplished by an adjustment in the State 
agency's Letter of Credit.
    (e) Adjustment to Letter of Credit. Prior to May 15 of each fiscal 
year, FNS shall make any adjustments necessary in each State's Letter of 
Credit to reflect actual expenditures in the preceding fiscal year's 
Program.
    (f) Health inspection funds. If the State agency's approved 
management and administration plan estimates a need for health 
inspection funding, FNS shall make available by letter of credit an 
amount up to one percent of Program funds estimated to be needed in the 
management and administration plan. Such amount may be adjusted, based 
on the administrative funding assessment provided for in paragraph (c) 
of this section, if such assessment is conducted. Health inspection 
funds shall be used solely to enable State or local health departments 
or other governmental agencies charged with health inspection functions 
to carry out health inspections and meal quality tests, provided that if 
these agencies cannot perform such inspections or tests, the State 
agency may use the funds to contract with an independent agency to 
conduct the inspection or meal quality tests. Funds so provided but not 
expended or obligated shall be returned to the Department by September 
30 of the same fiscal year.



Sec. 225.6  State agency responsibilities.

    (a) General responsibilities. (1) The State agency shall provide 
sufficient qualified consultative, technical, and managerial personnel 
to administer the Program, monitor performance, and measure progress in 
achieving Program goals. The State agency shall assign Program 
responsibilities to personnel to ensure that all applicable requirements 
under this part are met.
    (2) By February 1 of each fiscal year, each State agency shall 
announce the purpose, eligibility criteria, and availability of the 
Program throughout the State, through appropriate means of 
communication. As part of this effort, each State agency shall identify 
rural areas, Indian tribal territories, and areas with a concentration 
of migrant farm workers which qualify for the Program and actively seek 
eligible applicant sponsors to serve such areas. State agencies shall 
identify priority outreach areas in accordance with FNS guidance and 
target outreach efforts in

[[Page 124]]

these areas. State agencies shall identify priority outreach areas in 
accordance with FNS guidance and target outreach efforts in these areas.
    (3) Each State agency shall require applicant sponsors submitting 
Program application site information sheets, Program agreements, or a 
request for advance payments, and sponsors submitting claims for 
reimbursement to certify that the information submitted on these forms 
is true and correct and that the sponsor is aware that deliberate 
misrepresentation or withholding of information may result in 
prosecution under applicable State and Federal statutes.
    (4) In addition to the warnings specified in paragraph (a)(3) of 
this section, State agencies may include the following information on 
applications and pre-application materials distributed to prospective 
sponsors:
    (i) The criminal penalties and provisions established in section 
12(g) of the National School Lunch Act (42 U.S.C. 1760(g)) that states 
substantially: Whoever embezzles, willfully misapplies, steals, or 
obtains by fraud any funds, assets, or property that are the subject of 
a grant or other form of assistance under this Act or the Child 
Nutrition Act of 1966 (42 U.S.C. 1771 et seq.), whether received 
directly or indirectly from the United States Department of Agriculture, 
or whoever receives, conceals, or retains such funds, assets, or 
property to personal use or gain, knowing such funds, assets, or 
property have been embezzled, willfully misapplied, stolen, or obtained 
by fraud shall, if such funds, assets, or property are of the value of 
$100 or more, be fined not more than $25,000 or imprisoned not more than 
five years, or both, or, if such funds, assets, or property are of a 
value of less than $100, shall be fined not more than $1,000 or 
imprisoned for not more than one year, or both.
    (ii) The procedures for termination from Program participation of 
any site or sponsor which is determined to be seriously deficient in its 
administration of the Program. In addition, the application may also 
state that appeals of sponsor or site terminations will follow 
procedures mandated by the State agency and will also meet the minimum 
requirements of 7 CFR 225.13.
    (b) Approval of sponsor applications. (1) Each State agency must 
inform all of the previous year's sponsors which meet current 
eligibility requirements and all other potential sponsors of the 
deadline date for submitting a written application for participation in 
the Program. The State agency must require that all applicant sponsors 
submit written applications for Program participation to the State 
agency by June 15. However, the State agency may establish an earlier 
deadline for the Program application submission.Sponsors applying for 
participation in the Program due to an unanticipated school closure 
during the period from October through April (or at any time of the year 
in an area with a continuous school calendar) shall be exempt from the 
application submission deadline.
    (2) Each State agency shall inform potential sponsors of the 
procedure for applying for advance operating and administrative costs 
payments as provided for in Sec. 225.9(c). Where applicable, each State 
agency shall inform sponsors of the procedure for applying for start-up 
payments provided for in Sec. 225.9(a).
    (3) Within 30 days of receiving a complete and correct application, 
the State agency shall notify the applicant of its approval or 
disapproval. If an incomplete application is received, the State agency 
shall so notify the applicant within 15 days and shall provide technical 
assistance for the purpose of completing the application. Any 
disapproved applicant shall be notified of its right to appeal under 
Sec. 225.13.
    (4) The State agency shall determine the eligibility of sponsors 
applying for participation in the Program in accordance with the 
applicant sponsor eligibility criteria outlined in Sec. 225.14. However, 
State agencies may approve the application of an otherwise eligible 
applicant sponsor which does not provide a year-round service to the 
community which it proposes to serve under the Program only if it meets 
one or more of the following criteria: It is a residential camp; it 
proposes to provide a food service for the children of migrant workers; 
a failure to do so would deny the Program to an area in which poor

[[Page 125]]

economic conditions exist; a significant number of needy children will 
not otherwise have reasonable access to the Program; or it proposes to 
serve an area affected by an unanticipated school closure during the 
period from October through April (or at any time of the year in an area 
with a continuous school calendar). In addition, the State agency may 
approve a sponsor for participation during an unanticipated school 
closure without a prior application if the sponsor participated in the 
program at any time during the current year or in either of the prior 
two calendar years.
    (5) The State agency must use the following priority system in 
approving applicants to operate sites that propose to serve the same 
area or the same enrolled children:
    (i) Public or nonprofit private school food authorities;
    (ii) Public agencies and private nonprofit organizations that have 
demonstrated successful program performance in a prior year;
    (iii) New public agencies; and
    (iv) New private nonprofit organizations.
    (v) If two or more sponsors that qualify under paragraph (b)(5)(ii) 
of this section apply to serve the same area, the State agency must 
determine on a case-by-case basis which sponsor or sponsors it will 
select to serve the needy children in the area. The State agency should 
consider the resources and capabilities of each applicant.
    (6) The following limitations apply on the number of sites and 
children that may be served per day:
    (i) The State agency must not approve any school food authority or 
public agency to operate more than 200 sites or to serve more than an 
average of 50,000 children per day. However, the State agency may 
approve exceptions if the applicant can demonstrate that it has the 
capability of managing a program larger than these limits.
    (ii) The State agency must not approve any private nonprofit 
organization to operate more than 25 sites. In addition, the State 
agency must not approve any private nonprofit organization to serve more 
than 300 children at any one site for any approved meal service. 
However, the State agency may grant a waiver to allow up to 500 children 
served at any one site operated by a private nonprofit organization. To 
be approved for the waiver, the private nonprofit organization must 
demonstrate that it is fully capable of managing a site with more than 
300 children and that there are no other sponsors capable of serving the 
children in excess of 300.
    (7) The State agency shall review each applicant's administrative 
budget as a part of the application approval process in order to assess 
the applicant's ability to operate in compliance with these regulations 
within its projected reimbursement. In approving the applicant's 
administrative budget, the State agency shall take into consideration 
the number of sites and children to be served, as well as any other 
relevant factors. A sponsor's administrative budget shall be subject to 
review for adjustments by the State agency if the sponsor's level of 
site participation or the number of meals served to children changes 
significantly.
    (8) Applicants which qualify as camps shall be approved for 
reimbursement only for meals served free to enrolled children who meet 
the Program's eligibility standards.
    (9) The State agency shall 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. 225.11(c). However, the State agency may approve the 
application of a sponsor which has been disapproved or terminated in 
prior years in accordance with this paragraph if the applicant 
demonstrates to the satisfaction of the State agency that it has taken 
appropriate corrective actions to prevent recurrence of the 
deficiencies.
    (10) If the sponsor's application to participate is denied, the 
official making the determination of denial must notify the applicant 
sponsor in writing stating all of the grounds on which the State agency 
based the denial. Pending the outcome of a review of a denial, the State 
agency shall proceed to approve other applicants in accordance with its 
responsibilities under paragraph (b)(5)

[[Page 126]]

of this section, without regard to the application under review.
    (11) The State agency shall not approve the application of any 
applicant sponsor which submits fraudulent information or documentation 
when applying for Program participation or which knowingly withholds 
information that may lead to the disapproval of its application. 
Complete information regarding such disapproval of an applicant shall be 
submitted by the State agency through FNSRO to OIG.
    (c) Content of sponsor application.
    (1) Application forms. The applicant shall submit a written 
application to the State agency for participation in the Program as a 
sponsor. Sponsors proposing to serve an area affected by an 
unanticipated school closure during the period from October through 
April (or at any time of the year in an area with a continuous school 
calendar) may be exempt, at the discretion of the State agency, from 
submitting a new application if they have participated in the program at 
any time during the current year or in either of the prior two calendar 
years. The State agency may use the application form developed by FNS, 
or it may develop an application form, for use in the Program. 
Application shall be made on a timely basis in accordance with the 
deadline date established under Sec. 225.6(b)(1).
    (2) Requirements for new sponsors, new sites, and, as determined by 
the State agency, sponsors and sites which have experienced significant 
operational problems in the prior year.--(i) Site information sheets. At 
a minimum, the application submitted by new sponsors and by sponsors 
which, in the determination of the State agency, have experienced 
significant operational problems in the prior year shall include a site 
information sheet, as developed by the State agency, for each site where 
a food service operation is proposed. The site information sheet for new 
sponsors and new sites, and for sponsors and sites which, in the 
determination of the State agency, have experienced significant 
operational problems in the current year must demonstrate or describe 
the following:
    (A) An organized and supervised system for serving meals to 
attending children;
    (B) The estimated number and types of meals to be served and the 
times of service;
    (C) Arrangements, within standards prescribed by the State or local 
health authorities, for delivery and holding of meals until time of 
service, and arrangements for storing and refrigerating any leftover 
meals until the next day;
    (D) Arrangements for food service during periods of inclement 
weather;
    (E) Access to a means of communication for making necessary 
adjustments in the number of meals delivered in accordance with the 
number of children attending daily at each site;
    (F) Whether the site is rural, as defined in Sec. 225.2, or non-
rural, and whether the site's food service will be self-prepared or 
vended;
    (G) For open sites and restricted open sites, documentation 
supporting the eligibility of each site as serving an area in which poor 
economic conditions exist. However, for sites that a sponsor proposes to 
serve during an unanticipated school closure during the period from 
October through April (or at any time of the year in an area with a 
continuous school calendar), any site which has participated in the 
Program at any time during the current year or in either of the prior 
two calendar years shall be considered eligible without new 
documentation;
    (H) For closed enrolled sites, the projected number of children 
enrolled and the projected number of children eligible for free and 
reduced price meals for each of these sites;
    (I) For NYSP sites, certification from the sponsor that all of the 
children who will receive Program meals are enrolled participants in the 
NYSP;
    (J) For camps, the number of children enrolled in each session who 
meet the Program's income standards. If such information is not 
available at the time of application, it shall be submitted as soon as 
possible thereafter and in no case later than the filing of the camp's 
claim for reimbursement for each session;
    (K) For those sites at which applicants will serve children of 
migrant workers, certification from a migrant organization which attests 
that the site serves children of migrant worker

[[Page 127]]

families. If the site also serves non-migrant children, the sponsor 
shall certify that the site predominantly serves migrant children; and
    (L) For a site that serves homeless children, information sufficient 
to demonstrate that the site is not a residential child care 
institution, as defined in paragraph (c) of the definition of school in 
Sec. 210.2 of this chapter. If cash payments, food stamps, or any in-
kind service are required of any meal recipient at these sites, sponsors 
must describe the method(s) used to ensure that no such payments or 
services are received for any Program meal served to children. In 
addition, sponsors must certify that such sites employ meal counting 
methods which ensure that reimbursement is claimed only for meals served 
to children.
    (ii) Other application requirements. New sponsors and sponsors which 
in the determination of the State agency have experienced significant 
operational problems in the prior year shall also include in their 
applications:
    (A) Information in sufficient detail to enable the State agency to 
determine whether the applicant meets the criteria for participation in 
the Program as set forth in Sec. 225.14; the extent of Program payments 
needed, including a request for advance payments and start-up payments, 
if applicable; and a staffing and monitoring plan;
    (B) A complete administrative and operating budget for State agency 
review and approval. The administrative budget shall contain the 
projected administrative expenses which a sponsor expects to incur 
during the operation of the Program, and shall include information in 
sufficient detail to enable the State agency to assess the sponsor's 
ability to operate the Program within its estimated reimbursement. A 
sponsor's approved administrative budget shall be subject to subsequent 
review by the State agency for adjustments in projected administrative 
costs;
    (C) A summary of how meals will be obtained (e.g., self-prepared at 
each site, self-prepared and distributed from a central kitchen, 
purchased from a school food authority, competitively procured from a 
food service management company, etc.). If an invitation for bid is 
required under Sec. 225.15(g), sponsors shall also submit a schedule for 
bid dates, and a copy of their invitation for bid; and
    (D) For each applicant which seeks approval under Sec. 225.14(b)(3) 
as a unit of local, municipal, county or State government, or under 
Sec. 225.14(b)(5) as a private nonprofit organization, certification 
that it will directly operate the Program in accordance with 
Sec. 225.14(d)(3).
    (3) Requirements for experienced sponsors and experienced sites.--
(i) Site information sheets. At a minimum, the application submitted by 
experienced sponsors shall include a site information sheet, as 
developed by the State agency, for each site where a food service 
operation is proposed. The site information sheet for experienced 
sponsors and experienced sites must demonstrate or describe the 
information below. The State agency also may require experienced 
sponsors and experienced sites to provide any of the information 
required in paragraph (c)(2) of this section.
    (A) The estimated number and types of meals to be served and the 
times of service;
    (B) For open sites and restricted open sites, new documentation 
supporting the eligibility of each site as serving an area in which poor 
economic conditions exist shall be submitted. Such documentation shall 
be submitted every three years when school data are used. When census 
data are used, such documentation shall be submitted when new census 
data are available, or earlier if the State agency believes that an 
area's socioeconomic status has changed significantly since the last 
census. For sites that a sponsor proposes to serve during an 
unanticipated school closure during the period from October through 
April (or at any time of the year in an area with a continuous school 
calendar), any site which has participated in the Program at any time 
during the current year or in either of the prior two calendar years 
shall be considered eligible without new documentation of serving an 
area in which poor economic conditions exist;
    (C) For closed enrolled sites, the projected number of children 
enrolled and

[[Page 128]]

the projected number of children eligible for free and reduced price 
school meals for each of these sites; and
    (D) For camps, the number of children enrolled in each session who 
meet the Program's income standards. If such information is not 
available at the time of application, it shall be submitted as soon as 
possible thereafter and in no case later than the filing of the camp's 
claim for reimbursement for each session.
    (ii) Other application requirements. Experienced sponsors shall also 
include on their applications:
    (A) The extent of Program payments needed, including a request for 
advance payments and start-up payments, if applicable, and a staffing 
and monitoring plan;
    (B) A complete administrative and operating budget for State agency 
review and approval. The administrative budget shall contain the 
projected administrative expenses which a sponsor expects to incur 
during the operation of the Program, and shall include information in 
sufficient detail to enable the State agency to assess the sponsor's 
ability to operate the Program within its estimated reimbursement. A 
sponsor's approved administrative budget shall be subject to subsequent 
review by the State agency for adjustments in projected administrative 
costs; and
    (C) If an invitation for bid is required under Sec. 225.15(g), a 
schedule for bid dates. Sponsors shall also submit a copy of the 
invitation for bid if it is changed from the previous year. If the 
method of procuring meals is changed, sponsors shall submit a summary of 
how meals will be obtained (e.g., self-prepared at each site, self-
prepared and distributed from a central kitchen, purchased from a school 
food authority, competitively procured from a food service management 
company, etc.).
    (4) Free meal policy statement.
    (i) Each applicant must submit a statement of nondiscrimination in 
its policy for serving meals to children. The statement must consist of 
an assurance that all children are served the same meals and that there 
is no discrimination in the course of the food service. A school sponsor 
must submit the policy statement only once, with the initial application 
to participate as a sponsor. However, if there is a substantive change 
in the school's free and reduced price policy, a revised policy 
statement must be provided at the State agency's request. In addition to 
the policy of service/nondiscrimination statement described in paragraph 
(c)(3) of this section, all applicants except camps must include a 
statement that the meals served are free at all sites.
    (ii) In addition to the policy of service/nondiscrimination 
statement described in paragraph (c)(3) of this section, all applicants 
that are camps that charge separately for meals must include the 
following:
    (A) A statement that the eligibility standards conform to the 
Secretary's family size and income standards for reduced price school 
meals;
    (B) A description of the method or methods to be used in accepting 
applications from families for Program meals. Such methods must ensure 
that households are permitted to apply on behalf of children who are 
members of households receiving food stamp, FDPIR, or TANF benefits 
using the categorical eligibility procedures described in 
Sec. 225.15(f);
    (C) A description of the method used by camps for collecting 
payments from children who pay the full price of the meal while 
preventing the overt identification of children receiving a free meal;
    (D) An assurance that the camp will establish a hearing procedure 
for families wishing to appeal a denial of an application for free 
meals. Such hearing procedures shall meet the requirements set forth in 
paragraph (c)(5) of this section;
    (E) An assurance that, if a family requests a hearing, the child 
shall continue to receive free meals until a decision is rendered; and
    (F) An assurance that there will be no overt identification of free 
meal recipients and no discrimination against any child on the basis of 
race, color, national origin, sex, age, or handicap.
    (5) Hearing procedures statement.Each applicant that is a camp shall 
submit with its application a copy of its hearing procedures. At a 
minimum, these procedures shall provide:

[[Page 129]]

    (i) That a simple, publicly announced method will be used for a 
family to make an oral or written request for a hearing;
    (ii) That the family will have the opportunity to be assisted or 
represented by an attorney or other person;
    (iii) That the family will have an opportunity to examine the 
documents and records supporting the decision being appealed both before 
and during the hearing;
    (iv) That the hearing will be reasonably prompt and convenient for 
the family;
    (v) That adequate notice will be given to the family of the time and 
place of the hearing;
    (vi) That the family will have an opportunity to present oral or 
documentary evidence and arguments supporting its position;
    (vii) That the family will have an opportunity to question or refute 
any testimony or other evidence and to confront and cross-examine any 
adverse witnesses;
    (viii) That the hearing shall be conducted and the decision made by 
a hearing official who did not participate in the action being appealed;
    (ix) That the decision shall be based on the oral and documentary 
evidence presented at the hearing and made a part of the record;
    (x) That the family and any designated representative shall be 
notified in writing of the decision;
    (xi) That a written record shall be prepared for each hearing which 
includes the action being appealed, any documentary evidence and a 
summary of oral testimony presented at the hearing, the decision and the 
reasons for the decision, and a copy of the notice sent to the family; 
and
    (xii) That the written record shall be maintained for a period of 
three years following the conclusion of the hearing, during which it 
shall be available for examination by the family or its representatives 
at any reasonable time and place.
    (d) Approval of sites. (1) When evaluating a proposed food service 
site, the State agency shall ensure that:
    (i) If not a camp, the proposed site serves an area in which poor 
economic conditions exist, as defined by Sec. 225.2;
    (ii) The area which the site proposes to serve is not or will not be 
served in whole or in part by another site, unless it can be 
demonstrated to the satisfaction of the State agency that each site will 
serve children not served by any other site in the same area for the 
same meal;
    (iii) The site is approved to serve no more than the number of 
children for which its facilities are adequate and;
    (iv) If it is a site proposed to operate during an unanticipated 
school closure, it is a non-school site.
    (2) When approving the application of a site which will serve meals 
prepared by a food service management company, the State agency shall 
establish for each meal service an approved level for the maximum number 
of children's meals which may be served under the Program. These 
approved levels shall be established in accordance with the following 
provisions:
    (i) The initial maximum approved level shall be based upon the 
historical record of attendance at the site if such a record has been 
established in prior years and the State agency determines that it is 
accurate. The State agency shall develop a procedure for establishing 
initial maximum approved levels for sites when no accurate record from 
prior years is available.
    (ii) The maximum approved level shall be adjusted, if warranted, 
based upon information collected during site reviews. If attendance at 
the site on the day of the review is significantly below the site's 
approved level, the State agency should consider making a downward 
adjustment in the approved level with the objective of providing only 
one meal per child.
    (iii) The sponsor may seek an upward adjustment in the approved 
level for its sites by requesting a site review or by providing the 
State agency with evidence that attendance exceeds the sites' approved 
levels.
    (iv) Whenever the State agency establishes or adjusts approved 
levels of meal service for a site, it shall document the action in its 
files, and it shall provide the sponsor with immediate written 
confirmation of the approved level.

[[Page 130]]

    (v) Upon approval of its application or any adjustment to its 
maximum approved levels, the sponsor shall inform the food service 
management company with which it contracts of the approved level for 
each meal service at each site served by the food service management 
company. This notification of any adjustments in approved levels shall 
take place within the time frames set forth in the contract for 
adjusting meal orders. Whenever the sponsor notifies the food service 
management company of the approved levels or any adjustments to these 
levels for any of its sites, the sponsor shall clearly inform the food 
service management company that an approved level of meal service 
represents the maximum number of meals which may be served at a site and 
is not a standing order for a specific number of meals at that site. 
When the number of children attending is below the site's approved 
level, the sponsor shall adjust meal orders with the objective of 
serving only one meal per child as required under Sec. 225.15(b)(3).
    (e) State-Sponsor Agreement. A sponsor approved for participation in 
the Program must enter into a written agreement with the State agency. 
If the sponsor is a school food authority that operates more than one 
child nutrition program (e.g., the National School Lunch Program, the 
School Breakfast Program, or the Child and Adult Care Food Program) 
under a single State agency, a single permanent agreement that includes 
all the child nutrition programs must be executed with the State agency, 
as described in Sec. 210.9(b) of this chapter. All sponsors must agree 
in writing to:
    (1) Operate a nonprofit food service during the period specified, as 
follows:
    (i) From May through September for children on school vacation;
    (ii) At any time of the year, in the case of sponsors administering 
the Program under a continuous school calendar system; or
    (iii) During the period from October through April, if it serves an 
area affected by an unanticipated school closure due to a natural 
disaster, major building repairs, court orders relating to school safety 
or other issues, labor-management disputes, or, when approved by the 
State agency, a similar cause.
    (2) For school food authorities, offer meals which meet the 
requirements and provisions set forth in Sec. 225.16 during times 
designated as meal service periods by the sponsor, and offer the same 
meals to all children;
    (3) For all other sponsors, serve meals which meet the requirements 
and provisions set forth in Sec. 225.16 during times designated as meal 
service periods by the sponsor, and serve the same meals to all 
children;
    (4) Serve meals without cost to all children, except that camps may 
charge for meals served to children who are not served meals under the 
Program;
    (5) Issue a free meal policy statement in accordance with 
Sec. 225.6(c);
    (6) Meet the training requirement for its administrative and site 
personnel, as required under Sec. 225.15(d)(1);
    (7) Claim reimbursement only for the type or types of meals 
specified in the agreement and served without charge to children at 
approved sites during the approved meal service period, except that 
camps shall claim reimbursement only for the type or types of meals 
specified in the agreement and served without charge to children who 
meet the Program's income standards. The agreement shall specify the 
approved levels of meal service for the sponsor's sites if such levels 
are required under Sec. 225.6(d)(2). No permanent changes may be made in 
the serving time of any meal unless the changes are approved by the 
State agency;
    (8) Submit claims for reimbursement in accordance with procedures 
established by the State agency, and those stated in Sec. 225.9;
    (9) In the storage, preparation and service of food, maintain proper 
sanitation and health standards in conformance with all applicable State 
and local laws and regulations;
    (10) Accept and use, in quantities that may be efficiently utilized 
in the Program, such foods as may be offered as a donation by the 
Department;
    (11) Have access to facilities necessary for storing, preparing, and 
serving food;

[[Page 131]]

    (12) Maintain a financial management system as prescribed by the 
State agency;
    (13) Maintain on file documentation of site visits and reviews in 
accordance with Sec. 225.15(d) (2) and (3);
    (14) Upon request, make all accounts and records pertaining to the 
Program available to State, Federal, or other authorized officials for 
audit or administrative review, at a reasonable time and place. The 
records shall be retained for a period of 3 years after the end of the 
fiscal year to which they pertain, unless audit or investigative 
findings have not been resolved, in which case the records shall be 
retained until all issues raised by the audit or investigation have been 
resolved;
    (15) Maintain children on site while meals are consumed; and
    (16) Retain final financial and administrative responsibility for 
its program.
    (f) Special Account. In addition, the State agency may require any 
vended sponsor to enter into a special account agreement with the State 
agency. The special account agreement shall stipulate that the sponsor 
shall establish a special account with a State agency or Federally 
insured bank for operating costs payable to the sponsor by the State. 
The agreement shall also stipulate that any disbursement of monies from 
the account must be authorized by both the sponsor and the food service 
management company. The special account agreement may contain such other 
terms, agreed to by both the sponsor and the food service management 
company, which are consistent with the terms of the contract between the 
sponsor and the food service management company. A copy of the special 
account agreement shall be submitted to the State agency and another 
copy maintained on file by the sponsor. Any charges made by the bank for 
the account described in this section shall be considered an allowable 
sponsor administrative cost.
    (g) Food service management company registration. A State agency may 
require each food service management company, operating within the 
State, to register based on State procedures. A State agency may further 
require the food service management company to certify that the 
information submitted on its application for registration is true and 
correct and that the food service management company is aware that 
misrepresentation may result in prosecution under applicable State and 
Federal statutes.
    (h) Monitoring of food service management company procurements. (1) 
The State agency shall ensure that sponsors' food service management 
company procurements are carried out in accordance with Secs. 225.15(g) 
and 225.17 of this part.
    (2) Each State agency shall develop a standard form of contract for 
use by sponsors in contracting with food service management companies. 
Sponsors which are public entities, sponsors with exclusive year-round 
contracts with a food service management company, and sponsors whose 
food service management company contract(s) do not exceed $10,000 in 
aggregate value may use their existing or usual form of contract, 
provided that such form of contract has been submitted to and approved 
by the State agency. The standard contract developed by the State agency 
shall expressly and without exception provide that:
    (i) All meals prepared by a food service management company shall be 
unitized, with or without milk or juice, unless the State agency has 
approved, pursuant to paragraph (h)(3) of this section, a request for 
exceptions to the unitizing requirement for certain components of a 
meal;
    (ii) A food service management company entering into a contract with 
a sponsor under the Program shall not subcontract for the total meal, 
with or without milk, or for the assembly of the meal;
    (iii) The sponsor shall provide to the food service management 
company a list of State agency approved food service sites, along with 
the approved level for the number of meals which may be claimed for 
reimbursement for each site, established under Sec. 225.6(d)(2), and 
shall notify the food service management company of all sites which have 
been approved, cancelled, or terminated subsequent to the submission of 
the initial approved site list and of any changes in the approved level 
of meal service for a site. Such notification

[[Page 132]]

shall be provided within the time limits mutually agreed upon in the 
contract;
    (iv) The food service management company shall maintain such records 
(supported by invoices, receipts, or other evidence) as the sponsor will 
need to meet its responsibilities under this part, and shall submit all 
required reports to the sponsor promptly at the end of each month, 
unless more frequent reports are required by the sponsor;
    (v) The food service management company must have State or local 
health certification for the facility in which it proposes to prepare 
meals for use in the Program. It must ensure that health and sanitation 
requirements are met at all times. In addition, the food service 
management company must ensure that meals are inspected periodically to 
determine bacteria levels present in the meals and that the bacteria 
levels found to be present in the meals conform with the standards set 
by local health authorities. The results of the inspections must be 
submitted promptly to the sponsor and to the State agency.
    (vi) The meals served under the contract shall conform to the cycle 
menus and meal quality standards and food specifications approved by the 
State agency and upon which the bid was based;
    (vii) The books and records of the food service management company 
pertaining to the sponsor's food service operation shall be available 
for inspection and audit by representatives of the State agency, the 
Department and the U.S. General Accounting Office at any reasonable time 
and place for a period of 3 years from the date of receipt of final 
payment under the contract, except that, if audit or investigation 
findings have not been resolved, such records shall be retained until 
all issues raised by the audit or investigation have been resolved;
    (viii) The sponsor and the food service management company shall 
operate in accordance with current Program regulations;
    (ix) The food service management company shall be paid by the 
sponsor for all meals delivered in accordance with the contract and this 
part. However, neither the Department nor the State agency assumes any 
liability for payment of differences between the number of meals 
delivered by the food service management company and the number of meals 
served by the sponsor that are eligible for reimbursement;
    (x) Meals shall be delivered in accordance with a delivery schedule 
prescribed in the contract;
    (xi) Increases and decreases in the number of meals ordered shall be 
made by the sponsor, as needed, within a prior notice period mutually 
agreed upon;
    (xii) All meals served under the Program shall meet the requirements 
of Sec. 225.16;
    (xiii) In cases of nonperformance or noncompliance on the part of 
the food service management company, the company shall pay the sponsor 
for any excess costs which the sponsor may incur by obtaining meals from 
another source;
    (xiv) If the State agency requires the sponsor to establish a 
special account for the deposit of operating costs payments in 
accordance with the conditions set forth in Sec. 225.6(f), the contract 
shall so specify;
    (xv) The food service management company shall submit records of all 
costs incurred in the sponsor's food service operation in sufficient 
time to allow the sponsor to prepare and submit the claim for 
reimbursement to meet the 60-day submission deadline; and
    (xvi) The food service management company shall comply with the 
appropriate bonding requirements, as set forth in Sec. 225.15(g) (6)-
(8).
    (3) All meals prepared by a food service management company shall be 
unitized, with or without milk or juice, unless the sponsor submits to 
the State agency a request for exceptions to the unitizing requirement 
for certain components of a meal. These requests shall be submitted to 
the State agency in writing in sufficient time for the State agency to 
respond prior to the sponsor's advertising for bids. The State agency 
shall notify the sponsor in writing of its determination in a timely 
manner.

[[Page 133]]

    (4) Each State agency shall have a representative present at all 
food service management company procurement bid openings when sponsors 
are expected to receive more than $100,000 in Program payments.
    (5) Copies of all contracts between sponsors and food service 
management companies, along with a certification of independent price 
determination, shall be submitted to the State agency prior to the 
beginning of Program operations. Sponsors shall also submit to the State 
agency copies of all bids received and their reason for selecting the 
food service management company chosen.
    (6) All bids in an amount which exceeds the lowest bid shall be 
submitted to the State agency for approval before acceptance. All bids 
totaling $100,000 or more shall be submitted to the State agency for 
approval before acceptance. State agencies shall respond to a request 
for approval of such bids within 5 working days of receipt.
    (7) Failure by a sponsor to comply with the provisions of this 
paragraph or Sec. 225.15(g)(1) shall be sufficient grounds for the State 
agency to terminate participation by the sponsor in accordance with 
Sec. 225.18(b).
    (i) Meal pattern exceptions. The State agency shall review and act 
upon requests for exceptions to the meal pattern in accordance with the 
guidelines and limitations set forth in Sec. 225.16.

[54 FR 18208, Apr. 27, 1989, as amended at 55 FR 13467, Apr. 10, 1990; ; 
64 FR 72484, Dec. 28, 1999; 64 FR 72896, Dec. 29, 1999]



Sec. 225.7  Program monitoring and assistance.

    (a) Training. Prior to the beginning of Program operations, each 
State agency shall make available training in all necessary areas of 
Program administration to sponsor personnel, food service management 
company representatives, auditors, and health inspectors who will 
participate in the Program in that State. Prior to Program operations, 
the State agency shall ensure that the sponsor's supervisory personnel 
responsible for the food service receive training in all necessary areas 
of Program administration and operations. This training shall reflect 
the fact that individual sponsors or groups of sponsors require 
different levels and areas of Program training. State agencies are 
encouraged to utilize in such training, and in the training of site 
personnel, sponsor personnel who have previously participated in the 
Program. Training should be made available at convenient locations. 
State agencies are not required to conduct this training for sponsors 
operating the Program during unanticipated school closures during the 
period from October through April (or at any time of the year in an area 
with a continuous school calendar).
    (b) Program materials. Each State agency shall develop and make 
available all necessary Program materials in sufficient time to enable 
applicant sponsors to prepare adequately for the Program.
    (c) Food specifications and meal quality standards. With the 
assistance of the Department, each State agency shall develop and make 
available to all sponsors minimum food specifications and model meal 
quality standards which shall become part of all contracts between 
vended sponsors and food service management companies.
    (d) Program monitoring and assistance. The State agency shall 
conduct Program monitoring and provide Program assistance according to 
the following provisions:
    (1) Pre-approval visits. The State agency shall conduct pre-approval 
visits of sponsors and sites, as specified below, to assess the 
applicant sponsor's or site's potential for successful Program 
operations and to verify information provided in the application. The 
State agency shall visit prior to approval:
    (i) All applicant sponsors which did not participate in the program 
in the prior year. However, if a sponsor is a school food authority, has 
been reviewed by the State agency under the National School Lunch 
Program during the preceding 12 months, and had no significant 
deficiencies noted in that review, a pre-approval visit may be conducted 
at the discretion of the State agency. In addition, pre-approval visits 
of sponsors proposing to operate the Program during unanticipated school 
closures during the period from October through April (or at any time

[[Page 134]]

of the year in an area with a continuous school calendar) may be 
conducted at the discretion of the State agency;
    (ii) All applicant sponsors which, as a result of operational 
problems noted in the prior year, the State agency has determined need a 
pre-approval visit; and
    (iii) All sites which the State agency has determined need a pre-
approval visit.
    (2) Sponsor and site reviews--(i) General. The State agency must 
review sponsors and sites to ensure compliance with Program regulations, 
the Department's non-discrimination regulations (7 CFR part 15) and any 
other applicable instructions issued by the Department. In determining 
which sponsors and sites to review, the State agency must, at a minimum, 
consider the sponsors' and sites' previous participation in the Program, 
their current and previous Program performance, and the results of 
previous reviews of the sponsor and sites. When the same school food 
authority personnel administer this Program as well as the National 
School Lunch Program (7 CFR part 210), the State agency is not required 
to conduct a review of the Program in the same year in which the 
National School Lunch Program operations have been reviewed and 
determined to be satisfactory. Reviews shall be conducted as follows:
    (ii) Frequency and number of required reviews. State agencies shall:
    (A) Conduct a review of every new sponsor at least once during the 
first year of operation;
    (B) Annually review a number of sponsors whose program 
reimbursements, in the aggregate, accounted for at least one-half of the 
total program meal reimbursements in the State in the prior year;
    (C) Annually review every sponsor which experienced significant 
operational problems in the prior year;
    (D) Review each sponsor at least once every three years; and
    (E) As part of each sponsor review, conduct reviews of at least 10 
percent of each sponsor's sites, or one site, whichever number is 
greater.
    (3) Follow-up reviews. The State agency shall conduct follow-up 
reviews of sponsors and sites as necessary.
    (4) Monitoring system. Each State agency shall develop and implement 
a monitoring system to ensure that sponsors, including site personnel, 
and the sponsor's food service management company, if applicable, 
immediately receive a copy of any review reports which indicate Program 
violations and which could result in a Program disallowance.
    (5) Records. Documentation of Program assistance and the results of 
such assistance shall be maintained on file by the State agency.
    (6) Food service management company facility visits. As a part of 
the review of any vended sponsor which contracts for the preparation of 
meals, the State agency shall inspect the food service management 
company's facilities. Each State agency shall establish an order of 
priority for visiting facilities at which food is prepared for the 
Program. The State agency shall respond promptly to complaints 
concerning facilities. If a food service management company fails to 
correct violations noted by the State agency during a review, the State 
agency shall notify the sponsor and the food service management company 
that reimbursement shall not be paid for meals prepared by the food 
service management company after a date specified in the notification. 
Funds provided for in Sec. 225.5(f) may be used for conducting food 
service management company facility inspections.
    (7) Forms for reviews by sponsors. Each State agency shall develop 
and provide monitor review forms to all approved sponsors. These forms 
shall be completed by sponsor monitors. The monitor review form shall 
include, but not be limited to, the time of the reviewer's arrival and 
departure, the site supervisor's signature, a certification statement to 
be signed by the monitor, the number of meals prepared or delivered, the 
number of meals served to children, the deficiencies noted, the 
corrective actions taken by the sponsor, and the date of such actions.
    (8) Statistical monitoring. State agencies may use statistical 
monitoring

[[Page 135]]

procedures in lieu of the site monitoring requirements prescribed in 
paragraph (d)(2) of this section to accomplish the monitoring and 
technical assistance aspects of the Program. State agencies which use 
statistical monitoring procedures may use the findings in evaluating 
claims for reimbursement. Statistical monitoring may be used for some or 
all of a State's sponsors. Use of statistical monitoring does not 
eliminate the requirements for reviewing sponsors as specified in 
paragraph (d)(2) of this section.
    (9) Corrective actions. Corrective actions which the State agency 
may take when Program violations are observed during the conduct of a 
review are discussed in Sec. 225.11. The State agency shall conduct 
follow-up reviews as appropriate when corrective actions are required.
    (e) Other facility inspections and meal quality tests. In addition 
to those inspections required by paragraph (d)(6) of this section, the 
State agency may also conduct, or arrange to have conducted: inspections 
of self-preparation and vended sponsors' food preparation facilities; 
inspections of food service sites; and meal quality tests. The 
procedures for carrying out these inspections and tests shall be 
consistent with procedures used by local health authorities. For 
inspections of food service management companies' facilities not 
conducted by State agency personnel, copies of the results shall be 
provided to the State agency. The company and the sponsor shall also 
immediately receive a copy of the results of these inspections when 
corrective action is required. If a food service management company 
fails to correct violations noted by the State agency during a review, 
the State agency shall notify the sponsor and the food service 
management company that reimbursement shall not be paid for meals 
prepared by the food service management company after a date specified 
in the notification. Funds provided for in Sec. 225.5(f) may be used for 
conducting these inspections and tests.
    (f) Financial management. Each State agency shall establish a 
financial management system, in accordance with the Department's Uniform 
Financial Assistance Regulations (7 CFR part 3015) and FNS guidance, to 
identify allowable Program costs and to establish standards for sponsor 
recordkeeping and reporting. The State agency shall provide guidance on 
these financial management standards to each sponsor.
    (g) Nondiscrimination. (1) Each State agency shall 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 (7 CFR parts 15, 15a and 15b), 
including requirements for racial and ethnic participation data 
collection, public notification of the nondiscrimination policy, and 
reviews to assure compliance with such policy, to the end that no person 
shall, on the grounds of race, color, national origin, sex, age, or 
handicap, be excluded from participation in, be denied the benefits of, 
or be otherwise subjected to discrimination under, the Program.
    (2) Complaints of discrimination filed by applicants or participants 
shall be referred to FNS or the Secretary of Agriculture, Washington, DC 
20250. A State agency which has an established grievance or complaint 
handling procedure may resolve sex and handicap discrimination 
complaints before referring a report to FNS.

[54 FR 18208, Apr. 27, 1989, as amended at 55 FR 13468, Apr. 10, 1990; 
64 FR 72485, Dec. 28, 1999; 64 FR 72898, Dec. 29, 1999]



Sec. 225.8  Records and reports.

    (a) Each State agency shall maintain complete and accurate current 
accounting records of its Program operations which will adequately 
identify funds authorizations, obligations, unobligated balances, 
assets, liabilities, income, claims against sponsors and efforts to 
recover overpayments, and expenditures for administrative and operating 
costs. These records shall be retained for a period of three years after 
the date of the submission of the final Program Operations and Financial 
Status Report (SF-269), except that, if audit findings have not been 
resolved, the affected records shall be retained beyond the three year 
period until such time as any issues raised by the audit

[[Page 136]]

findings have been resolved. The State agency shall also retain a 
complete record of each review or appeal conducted, as required under 
Sec. 225.13, for a period of three years following the date of the final 
determination on the review or appeal. Records may be kept in their 
original form or on microfilm.
    (b) Each State agency shall submit to FNS a final report on the 
Summer Food Service Program Operations (FNS-418) for each month no more 
than 90 days following the last day of the month covered by the report. 
States shall not receive Program funds for any month for which the final 
report is not postmarked and/or submitted within this time limit unless 
FNS grants an exception. Upward adjustments to a State's report shall 
not be made after 90 days from the month covered by the report unless 
authorized by FNS. Downward adjustments shall always be made without FNS 
authorization, regardless of when it is determined that such adjustments 
need to be made. Adjustments to a State's report shall be reported to 
FNS in accordance with procedures established by FNS. Each State agency 
shall also submit to FNS a quarterly Financial Status Report (SF-269) on 
the use of Program funds. Such reports shall be submitted no later than 
30 days after the end of each fiscal year quarter. Obligations shall be 
reported only for the fiscal year in which they occur. Action may be 
taken against the State agency, in accordance with Sec. 225.5(a)(1), for 
failure to submit accurate and timely reports.
    (c) The State agency must submit to FNS a final Financial Status 
Report no later than 120 days after the end of the fiscal year, on a 
form (SF-269) provided by FNS. Any requested increase in reimbursement 
levels for a fiscal year resulting from corrective action taken after 
submission of the final Program Operations and Financial Status Reports 
shall be submitted to FNS for approval. The request shall be accompanied 
by a written explanation of the basis for the adjustment and the actions 
taken to minimize the need for such adjustments in the future. If FNS 
approves such an increase, it will make payment, subject to availability 
of funds. Any reduction in reimbursement for that fiscal year resulting 
from corrective action taken after submission of the final fiscal year 
Program Operations and Financial Status Reports shall be handled in 
accordance with the provisions of Sec. 225.12(d), except that amounts 
recovered may not be used to make Program payments.
    (d)(1) By May 1 of each year, State agencies must submit to the 
appropriate FNSRO a list of potential private nonprofit organization 
sponsors. The list must include the following information for each 
applicant sponsor:
    (i) Name and address;
    (ii) Geographical area(s) proposed to be served;
    (iii) Proposed number of sites; and
    (iv) Any available details of each proposed site including address, 
dates of operation, and estimated daily attendance.
    (2) State agencies must also notify the appropriate FNSRO within 5 
working days after they approve each private nonprofit organization to 
participate as a SFSP sponsor. When State agencies notify the FNSRO of 
sponsor approval, they must provide the following information:
    (i) Any changes to site locations, dates of operation, and estimated 
daily attendance that was previously provided;
    (ii) The hours and type(s) of approved meal service at each site;
    (iii) The type of site approval--open, restricted open, closed 
enrolled, or camp; and
    (iv) Any other important details about each site that would help the 
FNSRO plan reviews, including whether the site is rural or urban, or 
vended or self-preparation.

[54 FR 18208, Apr. 27, 1989, as amended at 55 FR 13469, Apr. 10, 1990; 
64 FR 72485, Dec. 28, 1999; 65 FR 82251, Dec. 28, 2000]



Sec. 225.9  Program assistance to sponsors.

    (a) Start-up payments. At their discretion, State agencies may make 
start-up payments to sponsors which have executed Program agreements. 
Start-up payments shall not be made more than two months before the 
sponsor is scheduled to begin food service operations and shall not 
exceed 20 percent of the sponsor's approved administrative budget. The 
amount of the start-

[[Page 137]]

up payment shall be deducted from the first advance payment for 
administrative costs or, if the sponsor does not receive advance 
payments, from the first administrative reimbursement.
    (b) Commodity assistance. (1) Sponsors eligible to receive 
commodities under the Program include: Self-preparation sponsors; 
sponsors which have entered into an agreement with a school or school 
food authority for the preparation of meals; and sponsors which are 
school food authorities and have competitively procured Program meals 
from the same food service management company from which they 
competitively procured meals for the National School Lunch Program 
during the last period in which school was in session. The State agency 
shall make available to these sponsors information on available 
commodities. Sponsors shall use in the Program food donated by the 
Department and accepted by sponsors.
    (2) Not later than June 1 of each year, State agencies shall prepare 
a list of the sponsors which are eligible to receive commodities and the 
average daily number of eligible meals to be served by each of these 
sponsors. If the State agency does not handle the distribution of 
commodities donated by the Department, this list shall be forwarded to 
the agency of the State responsible for the distribution of commodities. 
The State agency shall be responsible for promptly revising the list to 
reflect additions or terminations of sponsors and for adjusting the 
average daily participation data as it deems necessary.
    (c) Advance payments. At the sponsor's request, State agencies shall 
make advance payments to sponsors which have executed Program agreements 
in order to assist these sponsors in meeting operating costs and 
administrative expenses. For sponsors operating under a continuous 
school calendar, all advance payments shall be forwarded on the first 
day of each month of operation. Advance payments shall be made by the 
dates specified in paragraphs (c) (1) and (2) of this section for all 
other sponsors whose requests are received at least 30 days prior to 
those dates. Requests received less than 30 days prior to those dates 
shall be acted upon within 30 days of receipt. When making advance 
payments, State agencies shall observe the following criteria:
    (1) Operating costs. (i) State agencies shall make advance payments 
for operating costs by June 1, July 15, and August 15. Except for school 
food authorities, sponsors must conduct training sessions before 
receiving the second advance payment. Training sessions must cover 
Program duties and responsibilities for the sponsor's staff and for site 
personnel.A sponsor shall not receive advance operating cost payments 
for any month in which it will participate in the Program for less than 
ten days.
    (ii) To determine the amount of the advance payment to any sponsor, 
the State agency shall employ whichever of the following methods will 
result in the larger payment:
    (A) The total operating costs paid to the sponsor for the same 
calendar month in the preceding year; or
    (B) For vended sponsors, 50 percent of the amount determined by the 
State agency to be needed that month for meals, and, for self-
preparation sponsors, 65 percent of the amount determined by the State 
agency to be needed that month for meals.
    (2) Administrative costs. (i) State agencies shall make advance 
payments for administrative costs by June 1 and July 15. To be eligible 
for the second advance payment, the sponsor must certify that it is 
operating the number of sites for which the administrative budget was 
approved and that its projected administrative costs do not differ 
significantly from the approved budget. A sponsor shall not receive 
advance administrative costs payments for any month in which it will 
participate in the Program for less than 10 days. However, if a sponsor 
operates for less than 10 days in June but for at least 10 days in 
August, the second advance administrative costs payment shall be made by 
August 15.
    (ii) Each payment shall equal one-third of the total amount which 
the State agency determines the sponsor will need to administer its 
program. For sponsors which will operate for 10 or more days in only one 
month and, therefore, will qualify for only one advance administrative 
costs payment,

[[Page 138]]

the payment shall be no less than one-half, and no more than two-thirds, 
of the total amount which the State agency determines the sponsor will 
need to administer its program.
    (3) Advance payment estimates. When determining the amount of 
advance payments payable to the sponsor, the State agency shall make the 
best possible estimate based on the sponsor's request and any other 
available data. Under no circumstances may the amount of the advance 
payment for operating or administrative costs exceed the amount 
estimated by the State agency to be needed by the sponsor to meet 
operating or administrative costs, respectively.
    (4) Limit. The sum of the advance operating and administrative costs 
payments to a sponsor for any one month shall not exceed $40,000 unless 
the State agency determines that a larger payment is necessary for the 
effective operation of the Program and the sponsor demonstrates 
sufficient administrative and managerial capability to justify a larger 
payment.
    (5) Deductions from advance payments. The State agency shall deduct 
from either advance operating payments or advance administrative 
payments the amount of any previous payment which is under dispute or 
which is part of a demand for recovery under Sec. 225.12.
    (6) Withholding of advance payments. If the State agency has reason 
to believe that a sponsor will not be able to submit a valid claim for 
reimbursement covering the month for which advance payments have already 
been made, the subsequent month's advance payment shall be withheld 
until a valid claim is received.
    (7) Repayment of excess advance payments. Upon demand of the State 
agency, sponsors shall repay any advance Program payments in excess of 
the amount cited on a valid claim for reimbursement.
    (d) Reimbursements. Sponsors shall not be eligible for 
reimbursements for operating and administrative costs unless they have 
executed an agreement with the State agency. All reimbursements shall be 
in accordance with the terms of this agreement. Reimbursements shall not 
be paid for meals served at a site before the sponsor has received 
written notification that the site has been approved for participation 
in the Program. Income accruing to a sponsor's program shall be deducted 
from combined operating and administrative costs. The State agency may 
make full or partial reimbursement upon receipt of a claim for 
reimbursement, but shall first make any necessary adjustments in the 
amount to be paid. The following requirements shall be observed in 
submitting and paying claims:
    (1) School food authorities that operate the Program, and operate 
more than one child nutrition program under a single State agency, must 
use a common claim form (as provided by the State agency) for claiming 
reimbursement for meals served under those programs.
    (2) No reimbursement may be issued until the sponsor certifies that 
it operated all sites for which it is approved and that there has been 
no significant change in its projected administrative costs since its 
preceding claim and, for a sponsor receiving an advance payment for only 
one month, that there has been no significant change in its projected 
administrative costs since its initial advance administrative costs 
payment.
    (3) Sponsors which operate less than 10 days in the final month of 
operations shall submit a combined claim for the final month and the 
immediate preceding month within 60 days of the last day of operation.
    (4) The State agency shall forward reimbursements within 45 days of 
receiving valid claims. If a claim is incomplete or invalid, the State 
agency shall return the claim to the sponsor within 30 days with an 
explanation of the reason for disapproval. If the sponsor submits a 
revised claim, final action shall be completed within 45 days of 
receipt.
    (5) Claims for reimbursement shall report information in accordance 
with the financial management system established by the State agency, 
and in sufficient detail to justify the reimbursement claimed and to 
enable the State agency to provide the Reports of Summer Food Service 
Program Operations required under Sec. 225.8(b). In submitting a claim 
for reimbursement, each sponsor shall certify that the

[[Page 139]]

claim is correct and that records are available to support this claim. 
Failure to maintain such records may be grounds for denial of 
reimbursement for meals served and/or administrative costs claimed 
during the period covered by the records in question. The costs of meals 
served to adults performing necessary food service labor may be included 
in the claim. Under no circumstances may a sponsor claim the cost of any 
disallowed meals as operating costs.
    (6) A final Claim for Reimbursement shall be postmarked and/or 
submitted to the State agency not later than 60 days after the last day 
of the month covered by the claim. State agencies may establish shorter 
deadlines at their discretion. Claims not filed within the 60 day 
deadline shall not be paid with Program funds unless FNS determines that 
an exception should be granted. The State agency shall promptly take 
corrective action with respect to any Claim for Reimbursement as 
determined necessary through its claim review process or otherwise. In 
taking such corrective action, State agencies may make upward 
adjustments in Program funds claimed on claims filed within the 60 day 
deadline if such adjustments are completed within 90 days of the last 
day of the month covered by the claim and are reflected in the final 
Program Operations Report (FNS-418). Upward adjustments in Program funds 
claimed which are not reflected in the final FNS-418 for the month 
covered by the claim cannot be made unless authorized by FNS. Downward 
adjustments in Program funds claimed shall always be made without FNS 
authorization, regardless of when it is determined that such adjustments 
are necessary.
    (7) Payments to a sponsor for operating costs must equal the lesser 
of the following totals:
    (i) The actual operating costs incurred by the sponsor; or
    (ii) The sum of the amounts derived by multiplying the number of 
meals, by type, actually served under the sponsor's program to eligible 
children by the current rates for each meal type, as adjusted in 
accordance with paragraph (d)(9) of this section.
    (8) Payments to a sponsor for administrative costs must equal the 
lowest of the following totals:
    (i) The amount estimated in the sponsor's approved administrative 
budget (taking into account any amendments);
    (ii) The actual administrative costs incurred by the sponsor; or
    (iii) The sum of the amounts derived by multiplying the number of 
meals, by type, actually served under the sponsor's program to eligible 
children by the current administrative rates for each meal type, as 
adjusted in accordance with paragraph (d)(9) of this section. Sponsors 
must be eligible to receive additional administrative reimbursement for 
each meal served to participating children at rural or self-preparation 
sites, and the rates for such additional administrative reimbursement 
must be adjusted in accordance with paragraph (d)(9) of this section.
    (9) On each January 1, or as soon thereafter or as practicable, FNS 
will publish a notice in the Federal Register announcing any adjustment 
to the reimbursement rates described in paragraphs (d)(7)(ii) and 
(d)(8)(iii) of this section. Adjustments will be based upon changes in 
the series for food away from home of the Consumer Price Index(CPI) for 
all urban consumers since the establishment of the rates. Higher rates 
will be established for Alaska and Hawaii, based on the CPI for those 
States.
    (10) Sponsors of camps shall be reimbursed only for meals served to 
children in camps whose eligibility for Program meals is documented. 
Sponsors of NYSP sites shall only claim reimbursement for meals served 
to children enrolled in the NYSP.
    (11) If a State agency has reason to believe that a sponsor or food 
service management company has engaged in unlawful acts in connection 
with Program operations, evidence found in audits, reviews, or 
investigations shall be a basis for nonpayment of the applicable 
sponsor's claims for reimbursement.
    (e) The sponsor may claim reimbursement for any meals which are 
examined for meal quality by the State

[[Page 140]]

agency, auditors, or local health authorities and found to meet the meal 
pattern requirements.
    (f) The sponsor shall not claim reimbursement for meals served to 
children at any site in excess of the site's approved level of meal 
service, if one has been established under Sec. 225.6(d)(2). However, 
the total number of meals for which operating costs are claimed may 
exceed the approved level of meal service if the meals exceeding this 
level were served to adults performing necessary food service labor in 
accordance with paragraph (d)(5) of this section. In reviewing a 
sponsor's claim, the State agency shall ensure that reimbursements for 
second meals are limited to the percentage tolerance established in 
Sec. 225.15(b)(4).

[54 FR 18208, Apr. 27, 1989, as amended at 55 FR 13469, Apr. 10, 1990; 
64 FR 72485, Dec. 28, 1999]



Sec. 225.10  Audits and management evaluations.

    (a) Audits. State agencies shall arrange for audits of their own 
operations to be conducted in accordance with the Department's Uniform 
Federal Assistance Regulations (7 CFR part 3015). Unless otherwise 
exempt, sponsors shall arrange for audits to be conducted in accordance 
with 7 CFR part 3015. State agencies shall provide OIG with full 
opportunity to audit the State agency and sponsors. Each State agency 
shall make available its records, including records of the receipt and 
expenditure of funds, upon a reasonable request from OIG. While OIG 
shall rely to the fullest extent feasible upon State-sponsored audits of 
sponsors, it shall, when considered necessary, (1) make audits on a 
State-wide basis, (2) perform on-site test audits, and (3) review audit 
reports and related working papers of audits performed by or for State 
agencies.
    (b) Management evaluations. (1) State agencies shall provide FNS 
with full opportunity to conduct management evaluations (including 
visits to sponsors) of all operations of the State agency. Each State 
agency shall make available its records, including records of the 
receipts and expenditures of funds, upon a reasonable request by FNS.
    (2) The State agency shall fully respond to any recommendations made 
by FNSRO pursuant to the management evaluation.
    (3) FNSRO may require the State agency to submit on 20 days notice a 
corrective action plan regarding serious problems observed during any 
phase of the management evaluation.
    (c) Disregards. In conducting management evaluations or audits for 
any fiscal year, the State agency, FNS or OIG may disregard overpayment 
which does not exceed $100 or, in the case of State agency administered 
programs, does not exceed the amount established by State law, 
regulations or procedures as a minimum for which claims will be made for 
State losses generally. No overpayment shall be disregarded, however, 
when there are unpaid claims for the same fiscal year from which the 
overpayment can be deducted or when there is substantial evidence of 
violation of criminal law or civil fraud statutes.



Sec. 225.11  Corrective action procedures.

    (a) Purpose. The provisions in this section shall be used by the 
State agency to improve Program performance.
    (b) Investigations. Each State agency shall promptly investigate 
complaints received or irregularities noted in connection with the 
operation of the Program, and shall take appropriate action to correct 
any irregularities. The State agency shall maintain on file all evidence 
relating to such investigations and actions. The State agency shall 
inform the appropriate FNSRO of any suspected fraud or criminal abuse in 
the Program which would result in a loss or misuse of Federal funds. The 
Department may make investigations at the request of the State agency, 
or where the Department determines investigations are appropriate.
    (c) Denial of applications and termination of sponsors. Except as 
specified below, 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

[[Page 141]]

program. The State agency shall terminate the Program agreement with any 
sponsor which it determines to be seriously deficient. However, the 
State agency shall afford a sponsor reasonable opportunity to correct 
problems before terminating the sponsor for being seriously deficient. 
The State agency may approve the application of a sponsor which has been 
disapproved or terminated in prior years in accordance with this 
paragraph if the sponsor demonstrates to the satisfaction of the State 
agency that the sponsor has taken appropriate corrective actions to 
prevent recurrence of the deficiencies. Serious deficiencies which are 
grounds for disapproval of applications and for termination include, but 
are not limited to, any of the following:
    (1) Noncompliance with the applicable bid procedures and contract 
requirements of Federal child nutrition program regulations;
    (2) The submission of false information to the State agency;
    (3) Failure to return to the State agency any start-up or advance 
payments which exceeded the amount earned for serving meals in 
accordance with this part, or failure to submit all claims for 
reimbursement in any prior year, provided that failure to return any 
advance payments for months for which claims for reimbursement are under 
dispute from any prior year shall not be grounds for disapproval in 
accordance with this paragraph; and
    (4) Program violations at a significant proportion of the sponsor's 
sites. Such violations include, but are not limited to, the following:
    (i) Noncompliance with the meal service time restrictions set forth 
at Sec. 225.16(c);
    (ii) Failure to maintain adequate records;
    (iii) Failure to adjust meal orders to conform to variations in the 
number of participating children;
    (iv) The simultaneous service of more than one meal to any child;
    (v) The claiming of Program payments for meals not served to 
participating children;
    (vi) Service of a significant number of meals which did not include 
required quantities of all meal components;
    (vii) Excessive instances of off-site meal consumption;
    (viii) Continued use of food service management companies that are 
in violation of health codes.
    (d) Meal service restriction. With the exception for residential 
camps set forth at Sec. 225.16(b)(1)(ii), the State agency shall 
restrict to one meal service per day:
    (1) Any food service site which is determined to be in violation of 
the time restrictions for meal service set forth at Sec. 225.16(c) when 
corrective action is not taken within a reasonable time as determined by 
the State agency; and
    (2) All sites under a sponsor if more than 20 percent of the 
sponsor's sites are determined to be in violation of the time 
restrictions set forth at Sec. 225.16(c).

If this action results in children not receiving meals under the 
Program, the State agency shall make reasonable effort to locate another 
source of meal service for these children.
    (e) Meal disallowances. (1) If the State agency determines that a 
sponsor has failed to plan, prepare, or order meals with the objective 
of providing only one meal per child at each meal service at a site, the 
State agency shall disallow the number of children's meals prepared or 
ordered in excess of the number of children served.
    (2) If the State agency observes meal service violations during the 
conduct of a site review, the State agency shall disallow as meals 
served to children all of the meals observed to be in violation.
    (3) The State agency shall also disallow children's meals which are 
in excess of a site's approved level established under Sec. 225.6(d)(2).
    (f) Corrective action and termination of sites. (1) Whenever the 
State agency observes violations during the course of a site review, it 
shall require the sponsor to take corrective action. If the State agency 
finds a high level of meal service violations, the State agency shall 
require a specific immediate corrective action plan to be followed by 
the sponsor and shall either conduct a follow-up visit or in some other 
manner verify that the specified corrective action has been taken.
    (2) The State agency shall terminate the participation of a 
sponsor's site if

[[Page 142]]

the sponsor fails to take action to correct the Program violations noted 
in a State agency review report within the timeframes established by the 
corrective action plan.
    (3) The State agency shall immediately terminate the participation 
of a sponsor's site if during a review it determines that the health or 
safety of the participating children is imminently threatened.
    (4) If the site is vended, the State agency shall within 48 hours 
notify the food service management company providing meals to the site 
of the site's termination.

[54 FR 18208, Apr. 27, 1989, as amended at 55 FR 13469, Apr. 10, 1990]



Sec. 225.12  Claims against sponsors.

    (a) The State agency shall disallow any portion of a claim for 
reimbursement and recover any payment to a sponsor not properly payable 
under this part, except as provided for in Sec. 225.10(c). State 
agencies may consider claims for reimbursement not properly payable if a 
sponsor's records do not justify all costs and meals claimed. However, 
the State agency shall notify the sponsor of the reasons for any 
disallowance or demand for repayment.
    (b) Minimum State agency collection procedures for unearned payments 
shall include:
    (1) Written demand to the sponsor for the return of improper 
payments;
    (2) If after 30 calendar days the sponsor fails to remit full 
payment or agree to a satisfactory repayment schedule, a second written 
demand for the return of improper payments, sent by certified mail, 
return receipt requested;
    (3) If after 60 calendar days following the original written demand, 
the sponsor fails to remit full payment or agree to a satisfactory 
repayment schedule, a third written demand for the return of improper 
payments, sent by certified mail, return receipt requested;
    (4) If after 90 calendar days following the original written demand, 
the sponsor fails to remit full payment or agree to a satisfactory 
repayment schedule, the State agency shall refer the claim against the 
sponsor to the appropriate State or Federal authorities for pursuit of 
legal remedies.
    (c) If FNS does not concur with the State agency's action in paying 
a sponsor or in failing to collect an overpayment, FNS shall notify the 
State agency of its intention to assert a claim against the State 
agency. In all such cases, the State agency shall have full opportunity 
to submit evidence concerning the action taken. The State agency shall 
be liable to FNS for failure to collect an overpayment unless FNS 
determines that the State agency has conformed with this part in issuing 
the payment and has exerted reasonable efforts in accordance with 
paragraph (b) of this section to recover the improper payment.
    (d) The amounts recovered by the State agency from sponsors may be 
utilized to make Program payments to sponsors for the period for which 
the funds were initially available and/or to repay the State for any of 
its own funds used to make payments on claims for reimbursement. Any 
amounts recovered which are not so utilized shall be returned to FNS in 
accordance with the requirements of this part.



Sec. 225.13  Appeal procedures.

    (a) Each State agency shall establish a procedure to be followed by 
an applicant appealing: A denial of an application for participation; a 
denial of a sponsor's request for an advance payment; a denial of a 
sponsor's claim for reimbursement (except for late submission under 
Sec. 225.9(d)(5)); 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; a claim against a sponsor 
for remittance of a payment; the termination of the sponsor or a site; a 
denial of a sponsor's application for a site; a denial of a food service 
management company's application for registration, if applicable; or the 
revocation of a food service management company's registration, if 
applicable. Appeals shall not be allowed on decisions made by FNS with 
respect to late claims or upward adjustments under Sec. 225.9(d)(5).
    (b) At a minimum, appeal procedures shall provide that:
    (1) The sponsor or food service management company be advised in 
writing

[[Page 143]]

of the grounds upon which the State agency based the action. The notice 
of action, which shall be sent by certified mail, return receipt 
requested, shall also state that the sponsor or food service management 
company has the right to appeal the State's action;
    (2) The sponsor or food service management company be advised in 
writing that the appeal must be made within a specified time and must 
meet the requirements of paragraph (b)(4) of this section. The State 
agency shall establish this period of time at not less than one week nor 
more than two weeks from the date on which the notice of action is 
received;
    (3) The appellant be allowed the opportunity to review any 
information upon which the action was based;
    (4) The appellant be allowed to refute the charges contained in the 
notice of action either in person or by filing written documentation 
with the review official. To be considered, written documentation must 
be submitted by the appellant within seven days of submitting the 
appeal, must clearly identify the State agency action being appealed, 
and must include a photocopy of the notice of action issued by the State 
agency;
    (5) A hearing be held by the review official in addition to, or in 
lieu of, a review of written information submitted by the appellant only 
if the appellant so specifies in the letter appealing the action. The 
appellant may retain legal counsel or may be represented by another 
person. Failure of the appellant's representative to appear at a 
scheduled hearing shall constitute the appellant's waiver of the right 
to a personal appearance before the review official, unless the review 
official agrees to reschedule the hearing. A representative of the State 
agency shall be allowed to attend the hearing to respond to the 
appellant's testimony and written information and to answer questions 
from the review official;
    (6) If the appellant has requested a hearing, the appellant and the 
State agency shall be provided with at least 5 days advance written 
notice, sent by certified mail, return receipt requested, of the time 
and place of the hearing;
    (7) The hearing be held within 14 days of the date of the receipt of 
the request for review, but, where applicable, not before the 
appellant's written documentation is received in accordance with 
paragraphs (b) (4) and (5) of this section;
    (8) The review official be independent of the original decision-
making process;
    (9) The review official make a determination based on information 
provided by the State agency and the appellant, and on Program 
regulations;
    (10) Within 5 working days after the appellant's hearing, or within 
5 working days after receipt of written documentation if no hearing is 
held, the reviewing official make a determination based on a full review 
of the administrative record and inform the appellant of the 
determination of the review by certified mail, return receipt requested;
    (11) The State agency's action remain in effect during the appeal 
process. However, participating sponsors and sites may continue to 
operate the Program during an appeal of termination, and if the appeal 
results in overturning the State agency's decision, reimbursement shall 
be paid for meals served during the appeal process. However, such 
continued Program operation shall not be allowed if the State agency's 
action is based on imminent dangers to the health or welfare of 
children. If the sponsor or site has been terminated for this reason, 
the State agency shall so specify in its notice of action; and
    (12) The determination by the State review official is the final 
administrative determination to be afforded to the appellant.
    (c) The State agency shall send written notification of the complete 
appeal procedures and of the actions which are appealable, as specified 
in paragraph (a) of this section, to each potential sponsor applying to 
participate and to each food service management company applying to 
register in accordance with Sec. 225.6(g).
    (d) A record regarding each review shall be kept by the State 
agency, as required under Sec. 225.8(a). The record shall document the 
State agency's

[[Page 144]]

compliance with these regulations and shall include the basis for its 
decision.

[54 FR 18208, Apr. 27, 1989, as amended at 64 FR 72486, Dec. 28, 1999]



                 Subpart C--Sponsor and Site Provisions



Sec. 225.14  Requirements for sponsor participation.

    (a) Applications. Sponsors shall make written application to the 
State agency to participate in the Program. Such application shall be 
made on a timely basis in accordance with the requirements of 
Sec. 225.6(b)(1). Sponsors proposing to operate a site during an 
unanticipated school closure during the period from October through 
April (or at any time of the year in an area with a continuous school 
calendar) may be exempt, at the discretion of the State agency, from 
submitting a new application if they have participated in the program at 
any time during the current year or in either of the prior two calendar 
years.
    (b) Sponsor eligibility. Applicants eligible to sponsor the Program 
include:
    (1) Public or nonprofit private school food authorities;
    (2) Public or nonprofit private residential summer camps;
    (3) Units of local, municipal, county, or State governments;
    (4) Public or private nonprofit colleges or universities which are 
currently participating in the National Youth Sports Program; and
    (5) Private nonprofit organizations as defined in Sec. 225.2.
    (c) General requirements. No applicant sponsor shall be eligible to 
participate in the Program unless it:
    (1) Demonstrates financial and administrative capability for Program 
operations and accepts final financial and administrative responsibility 
for total Program operations at all sites at which it proposes to 
conduct a food service;
    (2) Has not been seriously deficient in operating the Program;
    (3) Will conduct a regularly scheduled food service for children 
from areas in which poor economic conditions exist, or qualifies as a 
camp;
    (4) Has adequate supervisory and operational personnel for overall 
monitoring and management of each site, including adequate personnel to 
conduct the visits and reviews required in Secs. 225.15(d) (2) and (3);
    (5) Provides an ongoing year-round service to the community which it 
proposes to serve under the Program, except as provided for in 
Sec. 225.6(b)(4);
    (6) Certifies that all sites have been visited and have the 
capability and the facilities to provide the meal service planned for 
the number of children anticipated to be served; and
    (7) Enters into a written agreement with the State agency upon 
approval of its application, as required in Sec. 225.6(e).
    (d) Requirements specific to sponsor types. (1) If the sponsor is a 
camp, it must certify that it will collect information on participants' 
eligibility to support its claim for reimbursement.
    (2) If the sponsor administers the Program at sites that provide 
summer school sessions, it must ensure that these sites are open to 
children enrolled in summer school and to all children residing in the 
area served by the site.
    (3) Sponsors which are units of local, municipal, county or State 
government, and sponsors which are private nonprofit organizations, will 
only be approved to administer the Program at sites where they have 
direct operational control. Operational control means that the sponsor 
shall be responsible for:
    (i) Managing site staff, including the hiring, terminating, and 
determining conditions of employment for site staff; and
    (ii) Exercising management control over Program operations at sites 
throughout the period of Program participation by performing the 
functions specified in Sec. 225.15.
    (4) If the sponsor administers homeless feeding sites, it must:
    (i) Document that the site is not a residential child-care 
institution as defined in paragraph (c) of the definition of 'School' 
contained in Sec. 210.2 of this chapter;
    (ii) Document that the primary purpose of the homeless feeding site 
is to provide shelter and meals to homeless families; and
    (iii) Certify that these sites employ meal counting methods to 
ensure that

[[Page 145]]

reimbursement is claimed only for meals served to homeless and non-
homeless children.
    (5) If the sponsor administers NYSP sites, it must ensure that all 
children at these sites are enrolled participants in the NYSP.
    (6) If the sponsor is a private nonprofit organization, it must 
certify that it:
    (i) Administers the Program:
    (A) At no more than 25 sites, with not more than 300 children being 
served at any approved meal service at any one site, or
    (B) With a waiver granted by the State agency in accordance with 
Sec. 225.6(b)(6)(ii), not more than 500 children being served at any 
approved meal service at any one site;
    (ii) Operates in areas where a school food authority has not 
indicated that it will operate the Program in the current year;
    (iii) Exercises full control and authority over the operation of the 
Program at all sites under its sponsorship;
    (iv) Provides ongoing year-round activities for children or 
families;
    (v) Demonstrates that it possesses adequate management and the 
fiscal capacity to operate the Program; and
    (vi) Meets applicable State and local health, safety, and sanitation 
standards.

[54 FR 18208, Apr. 27, 1989, as amended at 55 FR 13469, Apr. 10, 1990; 
64 FR 72486, Dec. 28, 1999; 64 FR 72898, Dec. 29, 1999; 65 FR 50128, 
Aug. 17, 2000]



Sec. 225.15  Management responsibilities of sponsors.

    (a) General. (1) Sponsors shall operate the food service in 
accordance with: the provisions of this part; any instructions and 
handbooks issued by FNS under this part; and any instructions and 
handbooks issued by the State agency which are not inconsistent with the 
provisions of this part.
    (2) Sponsors shall not claim reimbursement under parts 210, 215, 
220, or 226 of this chapter. In addition, the sponsor must ensure that 
records of any site serving homeless children accurately reflect 
commodity allotments received as a ``charitable institution'', as 
defined in Secs. 250.3 and 250.41 of this chapter. Commodities received 
for Program meals must be based only on the number of eligible 
children's meals served. Sponsors may use funds from other Federally-
funded programs to supplement their meal service but must, in 
calculating their claim for reimbursement, deduct such funds from total 
operating and administrative costs in accordance with the definition of 
``income accruing to the Program'' at Sec. 225.2 and with the 
regulations at Sec. 225.9(d). Sponsors which are school food authorities 
may use facilities, equipment and personnel supported by funds provided 
under this part to support a nonprofit nutrition program for the 
elderly, including a program funded under the Older Americans Act of 
1965 (42 U.S.C. 3001 et seq.).
    (3) No sponsor may contract out for the management responsibilities 
of the Program described in this section.
    (b) Meal Ordering. (1) Each sponsor shall, to the maximum extent 
feasible, utilize either its own food service facilities or obtain meals 
from a school food service facility. If the sponsor obtains meals from a 
school food service facility, the applicable requirements of this part 
shall be embodied in a written agreement between the sponsor and the 
school.
    (2) Upon approval of its application or any adjustment in the 
approved levels of meal service for its sites established under 
Sec. 225.6(d)(2), vended sponsors shall inform their food service 
management company of the approved level at each site for which the food 
service management company will provide meals.
    (3) Sponsors shall plan for and prepare or order meals on the basis 
of participation trends with the objective of providing only one meal 
per child at each meal service. The sponsor shall make the adjustments 
necessary to achieve this objective using the results from its 
monitoring of sites. For sites for which approved levels of meal service 
have been established in accordance with Sec. 225.6(d)(2), the sponsor 
shall adjust the number of meals ordered or prepared with the objective 
of providing only one meal per child whenever the number of children 
attending the site is below the approved level. The sponsor shall not 
order or prepare meals for children at any site in excess

[[Page 146]]

of the site's approved level, but may order or prepare meals above the 
approved level if the meals are to be served to adults performing 
necessary food service labor in accordance with Sec. 225.9(d)(4). 
Records of participation and of preparation or ordering of meals shall 
be maintained to demonstrate positive action toward meeting this 
objective.
    (4) In recognition of the fluctuation in participation levels which 
makes it difficult to estimate precisely the number of meals needed and 
to reduce the resultant waste, sponsors may claim reimbursement for a 
number of second meals which does not exceed two percent of the number 
of first meals served to children for each meal type (i.e., breakfasts, 
lunches, supplements, or suppers) during the claiming period. The State 
agency shall disallow all claims for second meals if it determines that 
the sponsor failed to plan and prepare or order meals with the objective 
of providing only one meal per child at each meal service. Second meals 
shall be served only after all participating children at the site's meal 
service have been served a meal.
    (c) Records and claims. (1) Sponsors shall maintain accurate records 
which justify all costs and meals claimed. Failure to maintain such 
records may be grounds for denial of reimbursement for meals served and/
or administrative costs claimed during the period covered by the records 
in question. The sponsor's records shall be available at all times for 
inspection and audit by representatives of the Secretary, the 
Comptroller General of the United States, and the State agency for a 
period of three years following the date of submission of the final 
claim for reimbursement for the fiscal year.
    (2) Sponsors shall submit claims for reimbursement in accordance 
with this part. All final claims must be submitted to the State agency 
within 60 days following the last day of the month covered by the claim.
    (d) Training and monitoring. (1) Each sponsor shall hold Program 
training sessions for its administrative and site personnel and shall 
allow no site to operate until personnel have attended at least one of 
these training sessions. The State agency may waive these training 
requirements for operation of the Program during unanticipated school 
closures during the period from October through April (or at any time of 
the year in an area with a continuous school calendar). Training of site 
personnel shall, at a minimum, include: the purpose of the Program; site 
eligibility; recordkeeping; site operations; meal pattern requirements; 
and the duties of a monitor. Each sponsor shall ensure that its 
administrative personnel attend State agency training provided to 
sponsors, and sponsors shall provide training throughout the summer to 
ensure that administrative personnel are thoroughly knowledgeable in all 
required areas of Program administration and operation and are provided 
with sufficient information to enable them to carry out their Program 
responsibilities. Each site shall have present at each meal service at 
least one person who has received this training.
    (2) Sponsors shall visit each of their sites at least once during 
the first week of operation under the Program and shall promptly take 
such actions as are necessary to correct any deficiencies.
    (3) Sponsors shall review food service operations at each site at 
least once during the first four weeks of Program operations, and 
thereafter shall maintain a reasonable level of site monitoring. 
Sponsors shall complete a monitoring form developed by the State agency 
during the conduct of these reviews.
    (e) Media Release. Each sponsor shall annually announce in the media 
serving the area from which it draws its attendance the availability of 
free meals. Camps and other programs not eligible under Sec. 225.2 
(paragraph (a) of ``areas in which poor economic conditions exist'') 
shall annually announce to all participants the availability of free 
meals for eligible children. All media releases issued by camps and 
other programs not eligible under Sec. 225.2 (paragraph (a) of ``areas 
in which poor economic conditions exist'') shall include: the 
Secretary's family-size and income standards for reduced price school 
meals labelled ``SFSP Income Eligibility Standards''; a statement that 
children

[[Page 147]]

who are members of households receiving food stamp, FDPIR, or TANF 
benefits are automatically eligible to receive free meal benefits at 
eligible program sites; and a statement that meals are available without 
regard to race, color, national origin, sex, age, or handicap.
    (f) Application for free Program meals.--(1) Purpose of application 
form. The application is used to determine the eligibility of children 
attending camps and the eligibility of sites that are not open sites as 
defined in paragraph (a) of the definition of ``areas in which poor 
economic conditions exist'', in Sec. 225.2. In these situations, parents 
or guardians of children enrolled in camps or these other sites must be 
given application forms to provide information described in paragraph 
(f)(2) or (f)(3) of this section, as applicable. Applications are not 
necessary if other information sources are available and can be used to 
determine eligibility of individual children in camps or sites.
    (2) Application procedures based on household income. The household 
member completing the application on behalf of the child enrolled in the 
Program must provide the following information:
    (i) The names of all children for whom application is made;
    (ii) The names of all other household members;
    (iii) The social security number of the adult household member who 
signs the application or an indication that the household member does 
not have a social security number;
    (iv) The income received by each household member identified by 
source of income;
    (v) The signature of an adult household member;
    (vi) The date the application is completed and signed.
    (3) Application based on the household's receipt of food stamp, 
FDPIR, or TANF benefits. Households may apply on the basis of receipt of 
food stamp, FDPIR, or TANF benefits by providing the following 
information:
    (i) The name(s) and food stamp, FDPIR, or TANF case number(s) of the 
child(ren) who are enrolled in the Program; and
    (ii) The signature of an adult household member.
    (4) Information or notices required on application forms. 
Application forms or descriptive materials given to households about 
applying for free meals must contain the following information:
    (i) The family-size and income levels for reduced price school meal 
eligibility with an explanation that households with incomes less than 
or equal to these values are eligible for free Program meals (Note: The 
income levels for free school meal eligibility must not be included on 
the application or in other materials given to the household).
    (ii) A statement that a child who is a member of a household that 
receives food stamp, FDPIR, or TANF benefits is automatically eligible 
to receive free meals in the Program;
    (iii) A statement that reads, ``In certain cases, foster children 
are eligible for free meals regardless of household income. If such 
children are living with you and you wish to apply for such meals, 
please contact us.'';
    (iv) The following statement that provides notice to the household 
member whose social security number is disclosed: ``Unless you include 
your child's case number for the Food Stamp Program, the Food 
Distribution Program on Indian Reservations (or other identifier for the 
Food Distribution Program on Indian Reservations) or the Temporary 
Assistance for Needy Families Program, you must include the social 
security number of the adult household member signing the application or 
indicate that the household member does not have a social security 
number. This is required by section 9 of the National School Lunch Act. 
The social security number is not mandatory, but the application cannot 
be approved if a social security number is not given or an indication is 
not made that the signer does not have a social security number. The 
social security number will be used in the administration and 
enforcement of the program.''
    (v) The statement used to inform the household about the use of 
social security numbers must comply with the Privacy Act of 1974 (Pub. 
L. 93-579). If a State or local agency plans to use the

[[Page 148]]

social security numbers for uses not described in paragraph (f)(4)(iv) 
of this section, the notice must be revised to explain those uses.
    (vi) Examples of income that should be provided on the application, 
including: Earnings, wages, welfare benefits, pensions, support 
payments, unemployment compensation, social security, and other cash 
income;
    (vii) A notice placed immediately above the signature block stating 
that the person signing the application certifies that all information 
provided is correct, that the household is applying for Federal benefits 
in the form of free Program meals, that Program officials may verify the 
information on the application, and that purposely providing untrue or 
misleading statements may result in prosecution under State or Federal 
criminal laws; and
    (viii) A statement that if food stamp, FDPIR, or TANF case numbers 
are provided, they may be used to verify the current food stamp, FDPIR, 
or TANF certification for the children for whom free meals benefits are 
claimed.
    (5) Verifying information on Program applications. Households 
selected to verify information on their Program applications must be 
notified in writing. State agencies must ensure that the notice of 
information about the use of social security numbers provided on 
applications complies with section 7 of Pub. L. 93-579 (Privacy Act of 
1974). Households must be informed of the following:
    (i) They must provide a social security number for each adult 
household member, or indicate that an adult household member does not 
have a social security number, or provide proof that they are receiving 
food stamp, FDPIR, or TANF benefits;
    (ii) They will lose Program benefits or be terminated from 
participation if they do not cooperate with the verification process;
    (iii) Social security numbers may be used to determine the 
correctness of information on applications and continued eligibility for 
Program benefits;
    (iv) They will be given the name and phone number of an official who 
can assist in the verification process;
    (v) Verification may occur during program reviews, audits, and 
investigations;
    (vi) Verification may include contacting employers, food stamp or 
welfare offices, or State employment offices to determine the accuracy 
of statements on the application about income, receipt of food stamp, 
FDPIR, TANF, or unemployment benefits; and
    (vii) They may lose benefits or face claims or legal action if 
incorrect information is reported on the application.
    (g) Disclosure of program eligibility information to State Medicaid 
(Medicaid) and the State Children's Health Insurance Program (SCHIP). 
Program eligibility information about children eligible for free and 
reduced price meals may be disclosed to Medicaid and SCHIP as described 
in this section.
    (1) Who decides whether to disclose program eligibility information 
to Medicaid and/or SCHIP? The State agency may elect to allow sponsors 
to disclose children's free and reduced price meal eligibility 
information to Medicaid and SCHIP. Sponsors may then elect to do so. 
Children's program eligibility information may only be disclosed to 
Medicaid or SCHIP when both the State agency and the sponsor so elect, 
the parent/guardian does not decline to have their eligibility 
information disclosed as described in paragraph (g)(5), and the 
requirements in this paragraph (g) are met. y
    (2) What information may we disclose for use by Medicaid and SCHIP? 
The State agency or sponsor, as appropriate, may disclose children's 
names, eligibility status (whether they are eligible for free or reduced 
price meals), and any other eligibility information obtained through the 
free and reduced price meal application or obtained through direct 
certification to persons directly connected with the administration of 
Medicaid or SCHIP.
    (3) Who are persons ``directly connected'' with the administration 
of Medicaid and SCHIP? State employees and persons authorized under 
Federal and State Medicaid and SCHIP requirements to carry out initial 
processing of Medicaid or SCHIP applications or to make eligibility 
determinations are

[[Page 149]]

persons directly connected with the administration of Medicaid and SCHIP 
for purposes of disclosure of children's free and reduced price meal 
eligibility information.
    (4) What are the restrictions on how Medicaid and SCHIP use 
children's free and reduced price meal eligibility information? Medicaid 
and SCHIP agencies and health insurance program operators receiving 
children's free and reduced price meal eligibility information may only 
use the information to enroll children in Medicaid or SCHIP. The 
Medicaid and SCHIP enrollment process may include targeting and 
identifying children from low-income households who are potentially 
eligible for Medicaid or SCHIP for the purpose of seeking to enroll them 
in Medicaid or SCHIP.
    (5) What are the requirements for notifying households of potential 
disclosure to Medicaid or SCHIP? The State agency or sponsor, as 
appropriate, must notify parents/guardians that their children's free or 
reduced price meal eligibility information will be disclosed to Medicaid 
and/or SCHIP unless the parent/guardian elects not to have their 
information disclosed. Additionally, the State agency or sponsor, as 
appropriate, must give parents/guardians an opportunity to elect not to 
have their information disclosed to Medicaid or SCHIP. Only the parent 
or guardian who is a member of the household or family for purposes of 
the free and reduced price meal or free milk application may decline the 
disclosure of eligibility information. The notification must inform 
parents/guardians that they are not required to consent to the 
disclosure, that the information, if disclosed, will be used to identify 
children eligible for and seek to enroll children in a health insurance 
program, and that their decision will not affect their children's 
eligibility for free or reduced price meals. The notification may be 
included in the letter/notice to parents/guardians that accompanies the 
free and reduced price application, on the application itself or in a 
separate notice provided to parents/guardians. The notice must give 
parents/guardians adequate time to respond. For children determined 
eligible through direct certification, the notice of potential 
disclosure may be included in the document informing parents/guardians 
of their children's eligibility for free meals through direct 
certification.
    (6) May social security numbers be disclosed? The State agency or 
sponsor, as appropriate, may disclose social security numbers to any 
programs or persons authorized to receive all program eligibility 
information under this paragraph (g), provided parents/guardians have 
not declined to have their information disclosed. However, State 
agencies and sponsors that plan to disclose social security numbers must 
give notice of the planned use of the social security number. This 
notice must be in accordance with section 7(b) of the Privacy Act of 
1974 (5 U.S.C. 552a note). The application must include substantially 
the following language for disclosures of social security numbers to 
Medicaid or SCHIP: ``The social security number may also be disclosed to 
Medicaid and the State Children's Health Insurance Program for the 
purpose of identifying and seeking to enroll eligible children in one of 
these health insurance programs.'' This language is in addition to the 
notice required in paragraph (f)(4)(iv) of this section. State agencies 
and sponsors are responsible for drafting the appropriate notice for 
disclosures of social security numbers.
    (7) Are agreements required before disclosing program eligibility 
information? The State agency or sponsor, as appropriate, must have a 
written agreement with the State or local agency or agencies 
administering Medicaid or SCHIP prior to disclosing children's free and 
reduced price eligibility information. At a minimum, the agreement must:
    (i) Identify the health insurance program or health agency receiving 
children's eligibility information;
    (ii) Describe the information that will be disclosed;
    (iii) Require that the Medicaid or SCHIP agency use the information 
obtained and specify that the information must only be used to seek to 
enroll children in Medicaid or SCHIP;
    (iv) Describe how the information will be protected from 
unauthorized uses and disclosures;
    (v) Describe the penalties for unauthorized disclosure; and

[[Page 150]]

    (vi) Be signed by both the Medicaid or SCHIP program or agency and 
the State agency or sponsor, as appropriate.
    (8) What are the penalties for unauthorized disclosure or misuse of 
information? In accordance with section 9(b)(2)(C)(v) of the Richard B. 
Russell National School Lunch Act (42 U.S.C. 1758(b)(2)(C)(v)), any 
individual who publishes, divulges, discloses or makes known in any 
manner, or to any extent not authorized by statute or this section, any 
information obtained under this paragraph (g) will be fined not more 
than $1,000 or imprisoned for up to 1 year, or both.
    (9) What are the State agency's responsibilities regarding 
disclosures? State agencies that elect to allow disclosure of children's 
free and reduced price meal eligibility information to Medicaid or 
SCHIP, as provided in this paragraph (g), must ensure that any sponsor 
acting in accordance with that option:
    (i) Has a written agreement with the State or local agency or 
agencies administering health insurance programs for children under 
titles XIX and XXI of the Social Security Act (42 U.S.C. 1396 et seq. 
and 1397aa et seq.) that requires the health agencies to use children's 
free and reduced price meal eligibility information to seek to enroll 
children in those health insurance programs; and
    (ii) Notifies each household of the information that will be 
disclosed, that the information disclosed will be used only to seek to 
enroll children in Medicaid or SCHIP and provides each parent/guardian 
with an opportunity to elect not to have the information disclosed.
    (h) Food service management companies. (1) Failure by a sponsor to 
comply with the provisions of this section shall be sufficient grounds 
for the State agency to terminate that sponsor's participation in 
accordance with Sec. 225.18.
    (2) Any sponsor may contract with a food service management company 
to manage the sponsor's food service operations and/or for the 
preparation of unitized meals with or without milk or juice. Exceptions 
to the unitizing requirement may only be made in accordance with the 
provisions set forth at Sec. 225.6(h)(3).
    (3) Any vended sponsor shall be responsible for ensuring that its 
food service operation is in conformity with its agreement with the 
State agency and with all the applicable provisions of this part.
    (4) In addition to any applicable State or local laws governing bid 
procedures, and with the exceptions identified in this paragraph, each 
sponsor which contracts with a food service management company shall 
comply with the competitive bid procedures described in this paragraph. 
Sponsors which are schools or school food authorities and which have an 
exclusive contract with a food service management company for year-round 
service, and sponsors whose total contracts with food service management 
companies will not exceed $10,000, shall not be required to comply with 
these procedures. These exceptions do not relieve the sponsor of the 
responsibility to ensure that competitive procurement procedures are 
followed in contracting with any food service management company. Each 
sponsor whose proposed contract is subject to the specific bid 
procedures set forth in this paragraph shall ensure, at a minimum, that:
    (i) All proposed contracts are publicly announced at least once, not 
less than 14 calendar days prior to the opening of bids, and the 
announcement includes the time and place of the bid opening;
    (ii) The bids are publicly opened;
    (iii) The State agency is notified, at least 14 calendar days prior 
to the opening of the bids, of the time and place of the bid opening;
    (iv) The invitation to bid does not specify a minimum price;
    (v) The invitation to bid contains a cycle menu approved by the 
State agency upon which the bid is based;
    (vi) The invitation to bid contains food specifications and meal 
quality standards approved by the State agency upon which the bid is 
based;
    (vii) The invitation to bid does not specify special meal 
requirements to meet ethnic or religious needs unless such special 
requirements are necessary to meet the needs of the children to be 
served;

[[Page 151]]

    (viii) Neither the invitation to bid nor the contract provides for 
loans or any other monetary benefit or term or condition to be made to 
sponsors by food service management companies;
    (ix) Nonfood items are excluded from the invitation to bid, except 
where such items are essential to the conduct of the food service;
    (x) Copies of all contracts between sponsors and food service 
management companies, along with a certification of independent price 
determination, are submitted to the State agency prior to the beginning 
of Program operations;
    (xi) Copies of all bids received are submitted to the State agency, 
along with the sponsor's reason for choosing the successful bidder; and
    (xii) All bids in an amount which exceeds the lowest bid and all 
bids totaling $100,000 or more are submitted to the State agency for 
approval before acceptance. State agencies shall respond to a request 
for approval of such bids within 5 working days of receipt.
    (5) Each food service management company which submits a bid over 
$100,000 shall obtain a bid bond in an amount not less than five (5) 
percent nor more than ten (10) percent, as determined by the sponsor, of 
the value of the contract for which the bid is made. A copy of the bid 
bond shall accompany each bid.
    (6) Each food service management company which enters into a food 
service contract for over $100,000 with a sponsor shall obtain a 
performance bond in an amount not less than ten (10) percent nor more 
than twenty-five (25) percent of the value of the contract, as 
determined by the State agency, of the value of the contract for which 
the bid is made. Any food service management company which enters into 
more than one contract with any one sponsor shall obtain a performance 
bond covering all contracts if the aggregate amount of the contracts 
exceeds $100,000. Sponsors shall require the food service management 
company to furnish a copy of the performance bond within ten days of the 
awarding of the contract.
    (7) Food service management companies shall obtain bid bonds and 
performance bonds only from surety companies listed in the current 
Department of the Treasury Circular 570. No sponsor or State agency 
shall allow food service management companies to post any 
``alternative'' forms of bid or performance bonds, including but not 
limited to cash, certified checks, letters of credit, or escrow 
accounts.
    (i) Other responsibilities. Sponsors shall comply with all of the 
meal service requirements set forth in Sec. 225.16.

[54 FR 18208, Apr. 27, 1989, as amended at 55 FR 13470, Apr. 10, 1990; 
61 FR 25553, May 22, 1996; 64 FR 72486, Dec. 28, 1999; 64 FR 72898, Dec. 
29, 1999; 65 FR 82251, Dec. 28, 2000; 66 FR 2202, Jan. 11, 2001]



Sec. 225.16  Meal service requirements.

    (a) Sanitation. Sponsors shall ensure that in storing, preparing, 
and serving food, proper sanitation and health standards are met which 
conform with all applicable State and local laws and regulations. 
Sponsors shall ensure that adequate facilities are available to store 
food or hold meals. Within two weeks of receiving notification of their 
approval, but in any case prior to commencement of Program operation, 
sponsors shall submit to the State agency a copy of their letter 
advising the appropriate health department of their intention to provide 
a food service during a specific period at specific sites.
    (b) Meal services. The meals which may be served under the Program 
are breakfast, lunch, supper, and supplements, referred to from this 
point as ``snacks''. No sponsor may be approved to provide more than two 
snacks per day. A sponsor may only be reimbursed for meals served in 
accordance with this section.
    (1) Camps. Sponsors of camps shall only be reimbursed for meals 
served in camps to children from families which meet the eligibility 
standards for this Program. The sponsor shall maintain a copy of the 
documentation establishing the eligibility of each child receiving meals 
under the Program. Meal service at camps shall be subject to the 
following provisions:
    (i) Each day a camp may serve up to three meals or two meals and one 
snack;

[[Page 152]]

    (ii) Residential camps are not subject to the time restrictions for 
meal service set forth at paragraphs (c) (1) and (2) of this section; 
and
    (iii) A camp shall be approved to serve these meals only if it has 
the administrative capability to do so; if the service period of the 
different meals does not coincide or overlap; and, where applicable, if 
it has adequate food preparation and holding facilities.
    (2) NYSP Sites. Sponsors of NYSP sites shall only be reimbursed for 
meals served to enrolled NYSP participants at these sites.
    (3) Restrictions on the number and type of meals served. Food 
service sites other than camps and sites that primarily serve migrant 
children may serve either:
    (i) One meal each day, a breakfast, a lunch, or snack; or
    (ii) Two meals each day, if one is a lunch and the other is a 
breakfast or a snack.
    (4) Sites which serve children of migrant families. Food service 
sites that primarily serve children from migrant families may be 
approved to serve each day up to three meals or two meals and one snack. 
These sites shall serve children in areas where poor economic conditions 
exist as defined in Sec. 225.2. A sponsor which operates in accordance 
with this part shall receive reimbursement for all meals served to 
children at these sites. A site which primarily serves children from 
migrant families shall only be approved to serve more than one meal each 
day if it has the administrative capability to do so; if the service 
period of the different meals does not coincide or overlap; and, where 
applicable, if it has adequate food preparation and holding facilities.
    (c) Time restrictions for meal service. (1) Three hours must elapse 
between the beginning of one meal service, including snacks, and the 
beginning of another, except that 4 hours must elapse between the 
service of a lunch and supper when no snack is served between lunch and 
supper. The service of supper shall begin no later than 7 p.m., unless 
the State agency has granted a waiver of this requirement due to 
extenuating circumstances. These waivers shall be granted only when the 
State agency and the sponsor ensure that special arrangements shall be 
made to monitor these sites. In no case may the service of supper extend 
beyond 8 p.m. The time restrictions in this paragraph shall not apply to 
residential camps.
    (2) The duration of the meal service shall be limited to two hours 
for lunch or supper and one hour for all other meals.
    (3) Meals served outside of the period of approved meal service 
shall not be eligible for Program payments.
    (4) Any permanent or planned changes in meal service periods must be 
approved by the State agency.
    (5) Meals which are not prepared at the food service site shall be 
delivered no earlier than one hour prior to the beginning of the meal 
service (unless the site has adequate facilities for holding hot or cold 
meals within the temperatures required by State or local health 
regulations) and no later than the beginning of the meal service.
    (6) The sponsor shall claim for reimbursement only the type(s) of 
meals for which it is approved under its agreement with the State 
agency.
    (d) Meal patterns. The meal requirements for the Program are 
designed to provide nutritious and well-balanced meals to each child. 
Sponsors shall ensure that meals served meet all of the requirements. 
Except as otherwise provided in this section, the following tables 
present the minimum requirements for meals served to children in the 
Program. Children age 12 and up may be served larger portions based on 
the greater food needs of older boys and girls.
    (1) Breakfast. The minimum amount of food components to be served as 
breakfast are as follows:

------------------------------------------------------------------------
           Food components                      Minimum amount
------------------------------------------------------------------------
                          Vegetables and Fruits
------------------------------------------------------------------------
Vegetable(s) and/or fruit(s) or.....  \1/2\ cup.\1\
Full-strength vegetable or fruit      \1/2\ cup (4 fluid ounces).
 juice or an equivalent quantity of
 any combination of vegetable(s),
 fruits(s), and juice.
------------------------------------------------------------------------

[[Page 153]]

 
                     Bread and Bread Alternates \2\
------------------------------------------------------------------------
Bread or............................  1 slice.
Cornbread, biscuits, rolls, muffins,  1 serving.\3\
 etc. or.
Cold dry cereal or..................  \3/4\ cup or 1 ounce.\4\
Cooked cereal or cereal grains or...  \1/2\ cup.
Cooked pasta or noodle products or    \1/2\ cup.
 an equivalent quantity of any
 combination of bread/bread
 alternate.
------------------------------------------------------------------------
                                Milk \5\
------------------------------------------------------------------------
Milk, fluid.........................  1 cup (\1/2\ pint, 8 fluid
                                       ounces).
------------------------------------------------------------------------
                   Meat and Meat Alternates (Optional)
------------------------------------------------------------------------
Lean meat or poultry or fish or.....  1 ounce.
Alternate protein product \6\ or....  1 ounce.
Cheese or...........................  1 ounce.
Egg (large) or......................  \1/2\.
Cooked dry beans or peas or.........  \1/4\ cup.
Peanut butter or an equivalent        2 tablespoons.
 quantity of any combination of meat/
 meat alternate or.
Yogurt, plain or flavored,            4 ounces or \1/2\ cup.
 unsweetened or sweetened.
------------------------------------------------------------------------
\1\ For the purposes of the requirement outlined in this table, a cup
  means a standard measuring cup.
\2\ Bread, pasta or noodle products, and cereal grains (such as rice,
  bulgur, or corn grits) shall be whole-grain or enriched; cornbread,
  biscuits, rolls, muffins, etc., shall be made with whole-grain or
  enriched meal or flour; cereal shall be whole-grain, enriched or
  fortified.
\3\ Serving sizes and equivalents will be in guidance materials to be
  distributed by FNS to State agencies.
\4\ Either volume (cup) or weight (ounces), whichever is less.
\5\ Milk shall be served as a beverage or on cereal or used in part for
  each purpose.
\6\ Must meet the requirements in appendix A of this part.

(2) Lunch or supper. The minimum amounts of food components to be served 
as lunch or supper are as follows:

------------------------------------------------------------------------
           Food components                      Minimum amount
------------------------------------------------------------------------
                        Meat and Meat Alternates
------------------------------------------------------------------------
Lean meat or poultry or fish or.....  2 ounces.
Alternate protein products \1\ or...  2 ounces.
Cheese or...........................  2 ounces.
Egg (large) or......................  1.
Cooked dry beans or peas or.........  \1/2\ cup.\2\
Peanut butter or soynut butter or     4 tablespoons.
 other nut or seed butters or.
Peanuts or soynuts or tree nuts or    1 ounce=50%.\4\
 seed \3\ or.
Yogurt, plain or flavored,            8 ounces or 1 cup.
 unsweetened or sweetened or an
 equivalent quantity of any
 combination of the above meat/meat
 alternates.
------------------------------------------------------------------------
                          Vegetables and Fruits
------------------------------------------------------------------------
Vegetable(s) and/or fruit(s) \5\....  \3/4\ cup total.
------------------------------------------------------------------------
                    Bread and Bread Alternatives \6\
------------------------------------------------------------------------
Bread or............................  1 slice.
Cornbread, biscuits, rolls, muffins,  1 serving.\7\
 etc. or.
Cooked pasta or noodle products or..  \1/2\ cup.
Cooked cereal grains or an            \1/2\ cup.
 equivalent quantity of any
 combination of bread/bread
 alternate.
------------------------------------------------------------------------
                                  Milk
------------------------------------------------------------------------
Milk, fluid, served as a beverage...  1 cup (\1/2\ pint, 8 fluid
                                       ounces).
------------------------------------------------------------------------
\1\ Must meet the requirements of appendix A of this part.
\2\ For the purposes of the requirement outlined in this table, a cup
  means a standard measuring cup.
\3\ Tree nuts and seeds that may be used as meat alternate are listed in
  program guidance.
\4\ No more than 50% of the requirement shall be met with nuts or seeds.
  Nuts or seeds shall be combined with another meat/meat alternate to
  fulfill the requirement. For purposes of determining combinations, 1
  ounce of nuts or seeds is equal to 1 ounce of cooked lean meat,
  poultry or fish.
\5\ Serve 2 or more kinds of vegetable(s) and/or fruits or a combination
  of both. Full strength vegetable or fruit juice may be counted to meet
  not more than one-half of this requirement.
\6\ Bread, pasta or noodle products, and cereal grains (such as rice,
  bulgur, or corn grits) shall be whole-grain or enriched; cornbread,
  biscuits, rolls, muffins, etc., shall be made with whole-grain or
  enriched meal or flour; cereal shall be whole-grain, enriched or
  fortified.
\7\ Serving sizes and equivalents will be in guidance materials to be
  distributed by FNS to State agencies.


[[Page 154]]

(3) Snacks. The minimum amounts of food components to be served as 
snacks are as follows. Select two of the following four components. 
(Juice may not be served when milk is served as the only other 
component.)

------------------------------------------------------------------------
           Food components                      Minimum amount
------------------------------------------------------------------------
                        Meat and Meat Alternates
------------------------------------------------------------------------
Lean meat or poultry or fish or.....  1 ounce.
Alternate protein products \1\ or...  1 ounce.
Cheese or...........................  1 ounce.
Egg (large) or......................  \1/2\.
Cooked dry beans or peas or.........  \1/4\ cup \2\.
Peanut butter or soynut butter or     2 tablespoons.
 other nut or seed butters or.
Peanuts or soynuts or tree nuts or    1 ounce.
 seeds \3\ or.
Yogurt, plain or flavored,            4 ounce or \1/2\ cup.
 unsweetened or sweetened or an
 equivalent quantity of any
 combination of the above meat/meat
 alternates.
------------------------------------------------------------------------
                          Vegetables and Fruits
------------------------------------------------------------------------
Vegetable(s) and/or fruit(s) or.....  \3/4\ cup.
Full-strength vegetable or fruit      \3/4\ cup (6 fluid ounces).
 juice or an equivalent quantity or
 any combination of vegetable(s),
 fruits(s) and juice.
------------------------------------------------------------------------
                     Bread and Bread Alternates \4\
------------------------------------------------------------------------
Bread or............................  1 slice.
Cornbread, biscuits, rolls, muffins,  1 serving.\5\
 etc. or.
Cold dry cereal or..................  \3/4\ cup or 1 ounce.\6\
Cooked cereal or....................  \1/2\ cup.
Cooked cereal grains or an            \1/2\ cup.
 equivalent quantity of any
 combination of bread/bread
 alternate.
------------------------------------------------------------------------
                                Milk \7\
------------------------------------------------------------------------
Milk, fluid.........................  1 cup (\1/2\ pint, 8 fluid
                                       ounces).
------------------------------------------------------------------------
\1\ Must meet the requirements in appendix A of this part.
\2\ For the purposes of the requirement outlined in this table, a cup
  means a standard measuring cup.
\3\ Tree nuts and seeds that may be used as meat alternates are listed
  in program guidance.
\4\ Bread, pasta or noodle products, and cereal grains (such as rice,
  bulgur, or corn grits) shall be whole-grain or enriched; cornbread,
  biscuits, rolls, muffins, etc., shall be made with whole-grain or
  enriched meal or flour; cereal shall be whole-grain, enriched or
  fortified.
\5\ Serving sizes and equivalents will be in guidance materials to be
  distributed by FNS to State agencies.
\6\ Either volume (cup) or weight (ounces), whichever is less.
\7\ Milk should be served as a beverage or on cereal, or used in part
  for each purpose.

    (e) Meat or meat alternate. Meat or meat alternates served under the 
Program are subject to the following requirements and recommendations.
    (1) The required quantity of meat or meat alternate shall be the 
quantity of the edible portion as served. These foods must be served in 
a main dish, or in a main dish and one other menu item.
    (2) Cooked dry beans or peas may be used as a meat alternate or as a 
vegetable, but they may not be used to meet both component requirements 
in a meal.
    (3) Enriched macaroni with fortified protein may be used to meet 
part but not all of the meat/meat alternate requirement. The Department 
will provide guidance to State agencies on the part of the meat/meat 
alternate requirement which these foods may be used to meet. If enriched 
macaroni with fortified protein is served as a meat alternate it shall 
not be counted toward the bread requirement.
    (4) If the sponsor believes that the recommended portion size of any 
meat or meat alternate is too large to be appealing to children, the 
sponsor may reduce the portion size of that meat or meat alternate and 
supplement it with another meat or meat alternate to meet the full 
requirement.
    (5) Nuts and seeds and their butters listed in program guidance are 
nutritionally comparable to meat or other meat alternates based on 
available nutritional data. Acorns, chestnuts, and coconuts shall not be 
used as meat alternates due to their low protein content. Nut and seed 
meals or flours shall not be used as a meat alternate except as defined 
in this section under paragraph (e)(3) and in this part under Appendix 
A: Alternate Foods for Meals.

[[Page 155]]

As noted in paragraph (d)(2) of this section, nuts or seeds may be used 
to meet no more than one-half of the meat/meat alternate requirement for 
lunch or supper. Therefore, nuts or seeds must be combined with another 
meat/meat alternate to fulfill the requirement. For the supplemental 
food pattern, nuts or seeds may be used to fulfill all of the meat/meat 
alternate requirement.
    (f) Exceptions to and variations from the meal pattern.--(1) Meals 
provided by school food authorities.--(i) Meal pattern substitution. 
School food authorities that are Program sponsors and that participate 
in the National School Lunch or School Breakfast Program during any time 
of the year may substitute the meal pattern requirements of the 
regulations governing those programs (Parts 210 and 220 of this chapter, 
respectively) for the meal pattern requirements in this section.
    (ii) Offer versus serve. School food authorities that are Program 
sponsors may permit a child to refuse one or more items that the child 
does not intend to eat. The school food authority must apply this 
``offer versus serve'' option under the rules followed for the National 
School Lunch Program, as described in part 210 of this chapter. The 
reimbursements to school food authorities for Program meals served under 
the ``offer versus serve'' must not be reduced because children choose 
not to take all components of the meals that are offered.
    (2) Children under 6. The State agency may authorize the sponsor to 
serve food in smaller quantities than are indicated in paragraph (d) of 
this section to children under six years of age if the sponsor has the 
capability to ensure that variations in portion size are in accordance 
with the age levels of the children served. Sponsors wishing to serve 
children under one year of age shall first receive approval to do so 
from the State agency. In both cases, the sponsor shall follow the age-
appropriate meal pattern requirements contained in the Child and Adult 
Care Food Program regulations (7 CFR part 226).
    (3) Statewide substitutions. In American Samoa, Puerto Rico, Guam, 
the Virgin Islands, the Trust Territory of the Pacific Islands, and the 
Northern Mariana Islands, the following variations from the meal 
requirements are authorized: A serving of a starchy vegetable--such as 
ufi, tanniers, yams, plantains, or sweet potatoes--may be substituted 
for the bread requirements.
    (4) Individual substitutions. Substitutions may be made by sponsors 
in food listed in paragraph (d) of this section if individual 
participating children are unable, because of medical or other special 
dietary needs, to consume such foods. Such substitutions shall be made 
only when supported by a statement from a recognized medical authority 
which includes recommended alternate foods. Such statement shall be kept 
on file by the sponsor.
    (5) Special variations. FNS may approve variations in the food 
components of the meals on an experimental or a continuing basis for any 
sponsor where there is evidence that such variations are nutritionally 
sound and are necessary to meet ethnic, religious, economic, or physical 
needs.
    (6) Temporary unavailability of milk. If emergency conditions 
prevent a sponsor normally having a supply of milk from temporarily 
obtaining milk deliveries, the State agency may approve the service of 
breakfasts, lunches or suppers without milk during the emergency period.
    (7) Continuing unavailability of milk. The inability of a sponsor to 
obtain a supply of milk on a continuing basis shall not bar it from 
participation in the Program. In such cases, the State agency may 
approve service of meals without milk, provided that an equivalent 
amount of canned, whole dry or nonfat dry milk is used in the 
preparation of the milk components set forth in paragraph (d) of this 
section. In addition, the State agency may approve the use of nonfat dry 
milk in meals served to children participating in activities which make 
the service of fluid milk impracticable, and in locations which are 
unable to obtain fluid milk. Such authorization shall stipulate that 
nonfat dry milk be reconstituted at normal dilution and under sanitary 
conditions consistent with State and local health regulations.

[[Page 156]]

    (8) Additional foods. To improve the nutrition of participating 
children, additional foods may be served with each meal.

[54 FR 18208, Apr. 27, 1989, as amended at 54 FR 27153, June 28, 1989; 
Amdt. 2, 55 FR 1377, Jan. 14, 1990; 55 FR 13470, Apr. 10, 1990; 61 FR 
37672, July 19, 1996; 62 FR 10191, Mar. 6, 1997; 64 FR 72487, Dec. 28, 
1999; 64 FR 72487, Dec. 28, 1999; 65 FR 12437, Mar. 9, 2000; 65 FR 
82251, Dec. 28, 2000]



              Subpart D--General Administrative Provisions



Sec. 225.17  Procurement standards.

    (a) State agencies and sponsors shall comply with the standards 
prescribed in the Department's Uniform Federal Assistance Regulations at 
7 CFR part 3015, subpart S, in the procurement of food, supplies, goods, 
and other services with Program payments.
    (b) The State agency shall make available to sponsors information on 
7 CFR part 3015.
    (c) Sponsors may use their own procurement procedures which reflect 
applicable State and local laws and regulations, provided that 
procurements made with Program funds conform with provisions of this 
section, as well as with procurement requirements which may be 
established by the State agency, with approval of FNS, to prevent fraud, 
waste, and Program abuse.
    (d) The State agency shall ensure that all sponsors are aware of the 
following practices specified in 7 CFR part 3015, with respect to 
minority business enterprises:
    (1) Including qualified minority business enterprises on 
solicitation lists,
    (2) Soliciting minority business enterprises whenever they are 
potential sources,
    (3) When economically feasible, dividing total requirements into 
smaller tasks or quantities so as to permit maximum participation by 
minority business enterprises,
    (4) Establishing delivery schedules which will assist minority 
business enterprises to meet deadlines, and
    (5) Using the services and assistance of the Small Business 
Administration, and the Office of Minority Business Enterprise of the 
Department of Commerce as required.



Sec. 225.18  Miscellaneous administrative provisions.

    (a) Grant closeout procedures. Grant closeout procedures for the 
Program shall be in accordance with the Department's Uniform Federal 
Assistance Regulations (7 CFR part 3015), subpart N.
    (b) Termination for cause. (1) FNS may terminate a State agency's 
participation in the Program in whole, or in part, whenever it is 
determined that the State agency has failed to comply with the 
conditions of the Program. FNS shall promptly notify the State agency in 
writing of the termination and reason for the termination, together with 
the effective date, and shall allow the State 30 calendar days to 
respond. In instances where the State does respond, FNS shall inform the 
State of its final determination no later than 30 calendar days after 
the State responds.
    (2) A State agency shall terminate a sponsor's participation in the 
Program by written notice whenever it is determined by the State agency 
that the sponsor has failed to comply with the conditions of the 
Program.
    (3) When participation in the Program has been terminated for cause, 
any funds paid to the State agency or a sponsor or any recoveries by FNS 
from the State agency or by the State agency from a sponsor shall be in 
accordance with the legal rights and liabilities of the parties.
    (c) Termination for convenience. FNS and the State agency may agree 
to terminate the State agency's participation in the Program in whole, 
or in part, when both parties agree that the continuation of the Program 
would not produce beneficial results commensurate with the further 
expenditure of funds. The two parties shall agree upon the termination 
conditions, including the effective date, and in the case of partial 
termination, the portion to be terminated. The State agency shall not 
incur new obligations for the terminated portion after the effective 
date, and shall cancel as many outstanding obligations as possible. The 
Department shall allow full credit to the State agency for the Federal 
share of the noncancellable obligation properly incurred by the State 
agency prior to

[[Page 157]]

termination. A State agency may terminate a sponsor's participation in 
the manner provided for in this paragraph.
    (d) Maintenance of effort. Expenditure of funds from State and local 
sources for the maintenance of food programs for children shall not be 
diminished as a result of funds received under the Act and a 
certification to this effect shall become part of the agreement provided 
for in Sec. 225.3(c).
    (e) Program benefits. The value of benefits and assistance available 
under the Program shall not be considered as income or resources of 
recipients and their families for any purpose under Federal, State or 
local laws, including, but not limited to, laws relating to taxation, 
welfare, and public assistance programs.
    (f) State requirements. Nothing contained in this part shall prevent 
a State agency from imposing additional operating requirements which are 
not inconsistent with the provisions of this part, provided that such 
additional requirements shall not deny the Program to an area in which 
poor economic conditions exist, and shall not result in a significant 
number of needy children not having access to the Program. Prior to 
imposing any additional requirements, the State agency must receive 
approval from FNSRO.
    (g) Fraud penalty. Whoever embezzles, willfully misapplies, steals, 
or obtains by fraud any funds, assets, or property that are the subject 
of a grant or other form of assistance under this part, whether received 
directly or indirectly from the Department, or whoever receives, 
conceals, or retains such funds, assets, or property to his use or gain, 
knowing such funds, assets, or property have been embezzled, willfully 
misapplied, stolen or obtained by fraud shall, if such funds, assets, or 
property are of the value of $100 or more, be fined not more than 
$100,000 or imprisoned not more than five years, or both, or if such 
funds, assets, or property are of a value of less than $100, shall be 
fined not more than $1,000 or imprisoned for not more than one year, or 
both.
    (h) Claims adjustment authority. The Secretary shall have the 
authority to determine the amount of, to settle, and to adjust any claim 
arising under the Program, and to compromise or deny such claim or any 
part thereof. The Secretary shall also have the authority to waive such 
claims if the Secretary determines that to do so would serve the 
purposes of the Program. This provision shall not diminish the authority 
of the Attorney General of the United States under section 516 of title 
28, U.S. Code, to conduct litigation on behalf of the United States.

[54 FR 18208, Apr. 27, 1989, as amended at 55 FR 13471, Apr. 10, 1990; 
64 FR 72488, Dec. 28, 1999]



Sec. 225.19  Regional office addresses.

    Persons desiring information concerning the Program may write to the 
appropriate State agency or Regional Office of FNS as indicated below:
    (a) In the States of Connecticut, Maine, Massachusetts, New 
Hampshire, New York, Rhode Island, and Vermont: Northeast Regional 
Office, FNS, U.S. Department of Agriculture, 10 Causeway Street, Room 
501, Boston, MA 02222-1065.
    (b) In the States of Delaware, District of Columbia, Maryland, New 
Jersey, Pennsylvania, Puerto Rico, Virginia, Virgin Islands, and West 
Virginia: Mid-Atlantic Regional Office, FNS, U.S. Department of 
Agriculture, Mercer Corporate Park, 300 Corporate Boulevard, 
Robbinsville, NJ 08691-1598.
    (c) In the States of Alabama, Florida, Georgia, Kentucky, 
Mississippi, North Carolina, South Carolina, and Tennessee: Southeast 
Regional Office, FNS, U.S. Department of Agriculture, 61 Forsyth Street, 
SW., Room 8T36, Atlanta, GA 30303-3415.
    (d) In the States of Illinois, Indiana, Michigan, Minnesota, Ohio, 
and Wisconsin: Midwest Regional Office, FNS, U.S. Department of 
Agriculture, 77 West Jackson Boulevard, 20th Floor, Chicago, IL 60604-
3507.
    (e) In the States of Arkansas, Louisiana, New Mexico, Oklahoma and 
Texas: Southwest Regional Office, FNS, U.S. Department of Agriculture, 
1100 Commerce Street, Room 5-C-30, Dallas, TX 75242-9980.
    (f) In the States of Colorado, Iowa, Kansas, Missouri, Montana, 
Nebraska, North Dakota, South Dakota, Utah and Wyoming: Mountain Plains 
Regional

[[Page 158]]

Office, FNS, U.S. Department of Agriculture, 1244 Speer Boulevard, Suite 
903, Denver, CO 80204-3581.
    (g) In the States of Alaska, American Samoa, Arizona, California, 
Guam, Hawaii, Idaho, Nevada, Oregon, the Commonwealth of the Northern 
Mariana Islands, and Washington: Western Regional Office, FNS, U.S. 
Department of Agriculture, 550 Kearney Street, Room 400, San Francisco, 
CA 94108-2518.

[54 FR 18208, Apr. 27, 1989, as amended at 55 FR 13471, Apr. 10, 1990; 
65 FR 12439, Mar. 9, 2000; 65 FR 82251, Dec. 28, 2000]



Sec. 225.20  Information collection/recordkeeping--OMB assigned control numbers.

------------------------------------------------------------------------
                                                             Current OMB
       7 CFR section where requirements are described        control No.
------------------------------------------------------------------------
225.3-225.4................................................    0584-0280
225.6-225.10...............................................    0584-0280
225.12-225.13..............................................    0584-0280
225.15-225.18..............................................    0584-0280
------------------------------------------------------------------------


[61 FR 25554, May 22, 1996]

            Appendix A to Part 225--Alternate Foods for Meals

                       Alternate Protein Products

  A. What Are the Criteria for Alternate Protein Products Used in the 
                      Summer Food Service Program?

    1. An alternate protein product used in meals planned under the 
provisions in Sec. 225.16 must meet all of the criteria in this section.
    2. An alternate protein product whether used alone or in combination 
with meat or other meat alternates must meet the following criteria:
    a. The alternate protein product must be processed so that some 
portion of the non-protein constituents of the food is removed. These 
alternate protein products must be safe and suitable edible products 
produced from plant or animal sources.
    b. The biological quality of the protein in the alternate protein 
product must be at least 80 percent that of casein, determined by 
performing a Protein Digestibility Corrected Amino Acid Score (PDCAAS).
    c. The alternate protein product must contain at least 18 percent 
protein by weight when fully hydrated or formulated. (``When hydrated or 
formulated'' refers to a dry alternate protein product and the amount of 
water, fat, oil, colors, flavors or any other substances which have been 
added).
    d. Manufacturers supplying an alternate protein product to 
participating schools or institutions must provide documentation that 
the product meets the criteria in paragraphs A. 2. a through c of this 
appendix.
    e. Manufacturers should provide information on the percent protein 
contained in the dry alternate protein product and on an as prepared 
basis.
    f. For an alternate protein product mix, manufacturers should 
provide information on:
    (1) The amount by weight of dry alternate protein product in the 
package;
    (2) Hydration instructions; and
    (3) Instructions on how to combine the mix with meat or other meat 
alternates.

 B. How Are Alternate Protein Products Used in the Summer Food Service 
                                Program?

    1. Schools, institutions, and service institutions may use alternate 
protein products to fulfill all or part of the meat/meat alternate 
component discussed in Sec. 225.20.
    2. The following terms and conditions apply:
    a. The alternate protein product may be used alone or in combination 
with other food ingredients. Examples of combination items are beef 
patties, beef crumbles, pizza topping, meat loaf, meat sauce, taco 
filling, burritos, and tuna salad.
    b. Alternate protein products may be used in the dry form 
(nonhydrated), partially hydrated or fully hydrated form. The moisture 
content of the fully hydrated alternate protein product (if prepared 
from a dry concentrated form) must be such that the mixture will have a 
minimum of 18 percent protein by weight or equivalent amount for the dry 
or partially hydrated form (based on the level that would be provided if 
the product were fully hydrated).

   C. How Are Commercially Prepared Products Used in the Summer Food 
                            Service Program?

    Schools, institutions, and service institutions may use a 
commercially prepared meat or meat alternate products combined with 
alternate protein products or use a commercially prepared product that 
contains only alternate protein products.

[65 FR 12439, Mar. 9, 2000]

                    Appendix B to Part 225 [Reserved]

      Appendix C to Part 225--Child Nutrition (CN) Labeling Program

    1. The Child Nutrition (CN) Labeling Program is a voluntary 
technical assistance program administered by the Food and Nutrition 
Service (FNS) in conjunction with the Food Safety and Inspection Service 
(FSIS) and Agricultural Marketing Service (AMS) of the U.S. Department 
of Agriculture (USDA), and National Marine Fisheries Service of the U.S. 
Department of Commerce (USDC) for the Child Nutrition Programs.

[[Page 159]]

This program essentially involves the review of a manufacturer's recipe 
or product formulation to determine the contribution a serving of a 
commercially prepared product makes toward meal pattern requirements and 
a review of the CN label statement to ensure its accuracy. CN labeled 
products must be produced in accordance with all requirements set forth 
in this rule.
    2. Products eligible for CN labels are as follows:
    (a) Commercially prepared food products that contribute 
significantly to the meat/meat alternate component of meal pattern 
requirements of 7 CFR 210.10, 225.16, and 226.20 and are served in the 
main dish.
    (b) Juice drinks and juice drink products that contain a minimum of 
50 percent full strength juice by volume.
    3. For the purpose of this appendix the following definitions apply:
    (a) CN label is a food product label that contains a CN label 
statement and CN logo as defined in paragraph 3(b) and (c) below.
    (b) The CN logo (as shown below) is a distinct border which is used 
around the edges of a ``CN label statement'' as defined in paragraph 
3(c).
[GRAPHIC] [TIFF OMITTED] TC17SE91.006

    (c) The CN label statement includes the following:
    (1) The product identification number (assigned by FNS);
    (2) The statement of the product's contribution toward meal pattern 
requirements of 7 CFR 210.10, 220.8, 225.16, and 226.20. The statement 
shall identify the contribution of a specific portion of a meat/meat 
alternate product toward the meat/meat alternate, bread/bread alternate, 
and/or vegetable/fruit component of the meal pattern requirements. For 
juice drinks and juice drink products the statement shall identify their 
contribution toward the vegetable/fruit component of the meal pattern 
requirements.
    (3) Statement specifying that the use of the CN logo and CN 
statement was authorized by FNS, and
    (4) The approval date.
    For example:
    [GRAPHIC] [TIFF OMITTED] TC17SE91.007
    
    (d) Federal inspection means inspection of food products by FSIS, 
AMS or USDC.
    4. Food processors or manufacturers may use the CN label statement 
and CN logo as defined in paragraph 3 (b) and (c) under the following 
terms and conditions:
    (a) The CN label must be reviewed and approved at the national level 
by the Food and Nutrition Service and appropriate USDA or USDC Federal 
agency responsible for the inspection of the product.
    (b) The CN labeled product must be produced under Federal inspection 
by USDA or USDC. The Federal inspection must be performed in accordance 
with an approved partial or total quality control program or standards 
established by the appropriate Federal inspection service.
    (c) The CN label statement must be printed as an integral part of 
the product label along with the product name, ingredient listing, the 
inspection shield or mark for the appropriate inspection program, the 
establishment number where appropriate and the

[[Page 160]]

manufacturer's or distributor's name and address.
    (1) The inspection marking for CN labeled non-meat, non-poultry, and 
non-seafood products with the exception of juice drinks and juice drink 
products is established as follows:
[GRAPHIC] [TIFF OMITTED] TC17SE91.008

    (d) Yields for determining the product's contribution toward meal 
pattern requirements must be calculated using the Food Buying Guide for 
Child Nutrition Programs (Program Aid Number 1331).
    5. In the event a company uses the CN logo and CN label statement 
inappropriately, the company will be directed to discontinue the use of 
the logo and statement and the matter will be referred to the 
appropriate agency for action to be taken against the company.
    6. Products that bear a CN label statement as set forth in paragraph 
3(c) carry a warranty. This means that if a food service authority 
participating in the child nutrition programs purchases a CN labeled 
product and uses it in accordance with the manufacturer's directions, 
the school or institution will not have an audit claim filed against it 
for the CN labeled product for noncompliance with the meal pattern 
requirements of 7 CFR 210.10, 220.8, 225.16, and 226.20. If a State or 
Federal auditor finds that a product that is CN labeled does not 
actually meet the meal pattern requirements claimed on the label, the 
auditor will report this finding to FNS. FNS will prepare a report on 
the findings and send it to the appropriate divisions of FSIS and AMS of 
the USDA, National Marine Fisheries Service of the USDC, Food and Drug 
Administration, or the Department of Justice for action against the 
company. Any or all of the following courses of action may be taken: (a) 
The company's CN label may be revoked for a specific period of time; (b) 
The appropriate agency may pursue a misbranding or mislabeling action 
against the company producing the product; (c) The company's name will 
be circulated to regional FNS offices; and (d) FNS will require the food 
service program involved to notify the State agency of the labeling 
violation.
    7. FNS is authorized to issue operational policies, procedures, and 
instructions for the CN Labeling Program. To apply for a CN label and to 
obtain additional information on CN label application procedures, write 
to: CN Labels, U.S. Department of Agriculture, Food and Nutrition 
Service, Nutrition and Technical Services Division, 3101 Park Center 
Drive, Alexandria, Virginia 22302.



PART 226--CHILD AND ADULT CARE FOOD PROGRAM--Table of Contents




                           Subpart A--General

Sec.
226.1  General purpose and scope.
226.2  Definitions.
226.3  Administration.

                     Subpart B--Assistance to States

226.4  Payments to States and use of funds.
226.5  Donation of commodities.

                   Subpart C--State Agency Provisions

226.6  State agency administrative responsibilities.
226.7  State agency responsibilities for financial management.
226.8  Audits.

                      Subpart D--Payment Provisions

226.9  Assignment of rates of reimbursement for centers.
226.10  Program payment procedures.
226.11  Program payments for child care centers, adult day care centers 
          and outside-school-hours care centers.
226.12  Administrative payments to sponsoring organizations for day care 
          homes.
226.13  Food service payments to sponsoring organizations for day care 
          homes.
226.14  Claims against institutions.

                    Subpart E--Operational Provisions

226.15  Institution provisions.
226.16  Sponsoring organization provisions.
226.17  Child care center provisions.
226.18  Day care home provisions.
226.19  Outside-school-hours care center provisions.
226.19a  Adult day care center provisions.
226.20  Requirements for meals.
226.21  Food service management companies.
226.22  Procurement standards.
226.23  Free and reduced-price meals.

              Subpart F--Food Service Equipment Provisions

226.24  Property management requirements.

                       Subpart G--Other Provisions

226.25  Other provisions.
226.26  Program information.
226.27  Information collection/recordkeeping--OMB assigned control 
          numbers.

Appendix A to Part 226--Alternate Foods for Meals
Appendix B to Part 226 [Reserved]
Appendix C to Part 226--Child Nutrition (CN) Labeling Program


[[Page 161]]


    Authority: Secs. 9, 11, 14, 16, and 17, National School Lunch Act, 
as amended (42 U.S.C. 1758, 1759a, 1762a, 1765 and 1766).

    Source: 47 FR 36527, Aug. 20, 1982, unless otherwise noted.



                           Subpart A--General



Sec. 226.1  General purpose and scope.

    This part announces the regulations under which the Secretary of 
Agriculture will carry out the Child and Adult Care Food Program. 
Section 17 of the National School Lunch Act, as amended, authorizes 
assistance to States through grants-in-aid and other means to initiate, 
maintain, and expand nonprofit food service programs for children or 
adult participants in nonresidential institutions which provide care. 
The Program is intended to enable such institutions to integrate a 
nutritious food service with organized care services for enrolled 
participants. Payments will be made to State agencies or FNS Regional 
Offices to enable them to reimburse institutions for food service to 
enrolled participants.

[53 FR 52587, Dec. 28, 1988, as amended by Amdt. 22, 55 FR 1377, Jan. 
14, 1990]



Sec. 226.2  Definitions.

    AFDC assistance unit means any individual or group of individuals 
which is currently certified to receive assistance under the Aid to 
Families with Dependent Children Program in a State where the standard 
of eligibility for AFDC benefits does not exceed the income eligibility 
guidelines for free meals under this part.
    Act means the National School Lunch Act, as amended.
    Administrative costs means costs incurred by an institution related 
to planning, organizing, and managing a food service under the Program, 
and allowed by the State agency financial management instruction. These 
administrative costs may include administrative expenses associated with 
outreach and recruitment of unlicensed family or group day care homes 
and the allowable licensing-related expenses of such homes.
    Adult means, for the purposes of the collection of social security 
numbers as a condition of eligibility for free or reduced-price meals, 
any individual 21 years of age or older.
    Adult day care center means any public or private nonprofit 
organization or any proprietary title XIX or title XX center (as defined 
in this section) which (a) is licensed or approved by Federal, State or 
local authorities to provide nonresidential adult day care services to 
functionally impaired adults (as defined in this section) or persons 60 
years of age or older in a group setting outside their homes or a group 
living arrangement on a less than 24-hour basis and (b) provides for 
such care and services directly or under arrangements made by the agency 
or organization whereby the agency or organization maintains 
professional management responsibility for all such services. Such 
centers shall provide a structured, comprehensive program that provides 
a variety of health, social and related support services to enrolled 
adult participants through an individual plan of care.
    Adult day care facility means a licensed or approved adult day care 
center under the auspices of a sponsoring organization.
    Adult participant means a person enrolled in an adult day care 
center who is functionally impaired (as defined in this section) or 60 
years of age or older.
    Advanced payments means financial assistance made available to an 
institution for its Program costs prior to the month in which such costs 
will be incurred.
    CACFP child care standards means the Child and Adult Care Food 
Program child care standards developed by the Department for alternate 
approval of child care centers, outside-school-hours care centers, and 
day care homes by the State agency under the provisions of 
Sec. 226.6(d)(2) and (3).
    Child care center means any public or private nonprofit 
organization, or any proprietary title XX center, as defined in this 
section (``Proprietary title XX center''), licensed or approved to 
provide nonresidential child care services to enrolled children, 
primarily of preschool age, including but not limited to day care 
centers, settlement houses, neighborhood centers, Head Start centers and 
organizations providing day

[[Page 162]]

care services for children with handicaps. Child care centers may 
participate in the Program as independent centers or under the auspices 
of a sponsoring organization.
    Child care facility means a licensed or approved child care center, 
day care home, or outside-school-hours care center under the auspices of 
a sponsoring organization.
    Children means (a) persons 12 years of age and under, (b) children 
of migrant workers 15 years of age and under, and (c) persons with 
mental or physical handicaps, as defined by the State, enrolled in an 
institution or a child care facility serving a majority of persons 18 
years of age and under.
    Claiming percentage means the ratio of the number of enrolled 
participants in an institution in each reimbursement category (free, 
reduced-price or paid) to the total of enrolled participants in the 
institution.
    Current income means income received during the month prior to 
application for free or reduced-price meals. If such income does not 
accurately reflect the household's annual income, income shall be based 
on the projected annual household income. If the prior year's income 
provides an accurate reflection of the household's current annual 
income, the prior year may be used as a base for the projected annual 
income.
    Day care home means an organized nonresidential child care program 
for children enrolled in a private home, licensed or approved as a 
family or group day care home and under the auspices of a sponsoring 
organization.
    Department means the U.S. Department of Agriculture.
    Disclosure means individual children's program eligibility 
information obtained through the free and reduced price meal eligibility 
process that is revealed or used for a purpose other than for the 
purpose for which the information was obtained. The term refers to 
access, release, or transfer of personal data about children by means of 
print, tape, microfilm, microfiche, electronic communication or any 
other means.
    Documentation means:
    (a) The completion of the following information on a free and 
reduced-price application:
    (1) Names of all household members;
    (2) Income received by each household member, identified by source 
of income (such as earnings, wages, welfare, pensions, support payments, 
unemployment compensation, social security and other cash income);
    (3) The signature of an adult household member; and
    (4) The social security number of the adult household member who 
signs the application, or an indication that he/she does not possess a 
social security number; or
    (b) For a child who is a member of a food stamp or FDPIR household 
or an AFDC assistance unit, ``documentation'' means the completion of 
only the following information on a free and reduced price application:
    (1) The name(s) and appropriate food stamp, FDPIR or AFDC case 
number(s) for the child(ren); and
    (2) The signature of an adult member of the household; or
    (c) For a child in a tier II day care home who is a member of a 
household participating in a Federally or State supported child care or 
other benefit program with an income eligibility limit that does not 
exceed the eligibility standard for free or reduced price meals:
    (1) The name(s), appropriate case number(s) (if the program utilizes 
case numbers), and name(s) of the qualifying program(s) for the 
child(ren), and the signature of an adult member of the household; or
    (2) If the sponsoring organization or day care home possesses it, 
official evidence of the household's participation in a qualifying 
program (submission of a free and reduced price application by the 
household is not required in this case); or
    (d) For an adult participant who is a member of a food stamp or 
FDPIR household or is an SSI or Medicaid participant, as defined in this 
section, ``documentation'' means the completion of only the following 
information on a free and reduced price application:
    (1) The name(s) and appropriate food stamp or FDPIR case number(s) 
for the

[[Page 163]]

participant(s) or the adult participant's SSI or Medicaid identification 
number, as defined in this section; and
    (2) The signature of an adult member of the household; or
    (e) For a child who is a Head Start participant, the Head Start 
statement of income eligibility issued upon initial enrollment in the 
Head Start Program or, if such statement is unavailable, other 
documentation from Head Start officials that the child's family meets 
the Head Start Program's low-income criteria.
    Enrolled child means a child whose parent or guardian has submitted 
to an institution a signed document which indicates that the child is 
enrolled for child care. In addition, for the purposes of calculations 
made by sponsoring organizations of family day care homes in accordance 
with Secs. 226.13(d)(3)(ii) and 226.13(d)(3)(iii), ``enrolled child'' 
(or ``child in attendance'') means a child whose parent or guardian has 
submitted a signed document which indicates that the child is enrolled 
for child care; who is present in the day care home for the purpose of 
child care; and who has eaten at least one meal during the claiming 
period.
    Enrolled participant means an ``Enrolled child'' (as defined in this 
section) or ``Adult participant'' (as defined in this section).
    Expansion payments means financial assistance made available to a 
sponsoring organization for its administrative expenses associated with 
expanding a food service program to day care homes located in low-income 
or rural areas. These expansion payments may include administrative 
expenses associated with outreach and recruitment of unlicensed family 
or group day care homes and the allowable licensing-related expenses of 
such homes.
    Family means, in the case of children, a group of related or 
nonrelated individuals, who are not residents of an institution or 
boarding house, but who are living as one economic unit or, in the case 
of adult participants, the adult participant, and if residing with the 
adult participant, the spouse and dependent(s) of the adult participant.
    FDPIR household means any individual or group of individuals which 
is currently certified to receive assistance as a household under the 
Food Distribution Program on Indian Reservations.
    Fiscal Year means a period of 12 calendar months beginning October 1 
of any year and ending with September 30 of the following year.
    FNS means the Food and Nutrition Service of the Department.
    FNSRO means the appropriate Regional Office of the Food and 
Nutrition Service.
    Food service equipment assistance means Federal financial assistance 
formerly made available to State agencies to assist institutions in the 
purchase or rental of equipment to enable institutions to establish, 
maintain or expand food service under the Program.
    Food service management company means an organization other than a 
public or private nonprofit school, with which an institution may 
contract for preparing and, unless otherwise provided for, delivering 
meals, with or without milk for use in the Program.
    Food Stamp household means any individual or group of individuals 
which is currently certified to receive assistance as a household under 
the Food Stamp Program.
    Free meal means a meal served under the Program to a participant 
from a family which meets the income standards for free school meals; or 
to a child who is automatically eligible for free meals by virtue of 
food stamp, FDPIR, or AFDC recipiency; or to a child who is a Head Start 
participant; or to an adult participant who is automatically eligible 
for free meals by virtue of food stamp or FDPIR recipiency or is a SSI 
or Medicaid participant. Regardless of whether the participant qualified 
for free meals by virtue of meeting one of the criteria of this 
definition, neither the participant nor any member of their family shall 
be required to pay or to work in the food service program in order to 
receive a free meal.
    Functionally impaired adult means chronically impaired disabled 
persons 18 years of age or older, including victims of Alzheimer's 
disease and related disorders with neurological and organic brain 
dysfunction, who are physically or mentally impaired to the extent that 
their capacity for independence and their ability to carry out 
activities

[[Page 164]]

of daily living is markedly limited. Activities of daily living include, 
but are not limited to, adaptive activities such as cleaning, shopping, 
cooking, taking public transportation, maintaining a residence, caring 
appropriately for one's grooming or hygiene, using telephones and 
directories, or using a post office. Marked limitations refer to the 
severity of impairment, and not the number of limited activities, and 
occur when the degree of limitation is such as to seriously interfere 
with the ability to function independently.
    Group living arrangement means residential communities which may or 
may not be subsidized by federal, State or local funds but which are 
private residences housing an individual or a group of individuals who 
are primarily responsible for their own care and who maintain a presence 
in the community but who may receive on-site monitoring.
    Household means ``family'', as defined in Sec. 226.2 (``Family'').
    Head Start participant means a child currently receiving assistance 
under a Federally-funded Head Start Program who is categorically 
eligible for free meals in the CACFP by virtue of meeting Head Start's 
low-income criteria.
    Income standards means the family-size and income standards 
prescribed annually by the Secretary for determining eligibility for 
free and reduced-price meals under the National School Lunch Program and 
the School Breakfast Program.
    Income to the program means any funds used in an institution's food 
service program, including, but not limited to all monies, other than 
Program payments, received from other Federal, State, intermediate, or 
local government sources; participant's payments for meals and food 
service fees; income from any food sales to adults; and other income, 
including cash donations or grants from organizations or individuals.
    Independent center means a child care center, outside-school-hours 
care center or adult day care center which enters into an agreement with 
the State agency to assume final administrative and financial 
responsibility for Program operations.
    Infant cereal means any iron-fortified dry cereal specially 
formulated for and generally recognized as cereal for infants that is 
routinely mixed with breast milk or iron-fortified infant formula prior 
to consumption.
    Infant formula means any iron-fortified formula intended for dietary 
use solely as a food for normal, healthy infants; excluding those 
formulas specifically formulated for infants with inborn errors of 
metabolism or digestive or absorptive problems. Infant formula, as 
served, must be in liquid state at recommended dilution.
    Institution means a sponsoring organization, child care center, 
outside-school-hours care center or adult day care center which enters 
into an agreement with the State agency to assume final administrative 
and financial responsibility for Program operations.
    Key Element Reporting System (KERS) means a comprehensive national 
system for reporting critical key element performance data on the 
operation of the program in institutions.
    Low-income area means a geographical area in which at least 50 
percent of the children are eligible for free or reduced price school 
meals under the National School Lunch Program and the School Breakfast 
Program, as determined in accordance with paragraphs (b) and (c), 
definition of tier I day care home.
    Meals means food which is served to enrolled participants at an 
institution, child care facility or adult day care facility and which 
meets the nutritional requirements set forth in this part.
    Medicaid means Title XIX of the Social Security Act.
    Medicaid participant means an adult participant who receives 
assistance under title XIX of the Social Security Act, the Grant to 
States for Medical Assistance Programs--Medicaid.
    Milk means pasteurized fluid types of unflavored or flavored whole 
milk, lowfat milk, skim milk, or cultured buttermilk which meet State 
and local standards for such milk, except that, in the meal pattern for 
infants (0 to 1 year of age), milk means breast milk or iron-fortified 
infant formula. In Alaska, Hawaii, American Samoa,

[[Page 165]]

Guam, Puerto Rico, the Trust Territory of the Pacific Islands, the 
Northern Mariana Islands, and the Virgin Islands if a sufficient supply 
of such types of fluid milk cannot be obtained, ``milk'' shall include 
reconstituted or recombined milk. All milk should contain vitamins A and 
D at levels specified by the Food and Drug Administration and be 
consistent with State and local standards for such milk.
    Nonpricing program means an institution in which there is no 
separate identifiable charge made for meals served to participants.
    Nonprofit food service means all food service operations conducted 
by the institution principally for the benefit of enrolled participants, 
from which all of the Program reimbursement funds are used solely for 
the operations or improvement of such food service.
    Nonresidential means that the same participants are not maintained 
in care for more than 24 hours on a regular basis.
    OIG means the Office of the Inspector General of the Department.
    Operating costs means expenses incurred by an institution in serving 
meals to participants under the Program, and allowed by the State agency 
financial management instruction.
    Outside-school-hours care center means a public or private nonprofit 
organization, or a proprietary title XX center, as defined in this 
section (``Proprietary title XX center''), licensed or approved to 
provide organized nonresidential child care services to enrolled 
children outside of school hours. Outside-school-hours care centers may 
participate in the Program as independent centers or under the auspices 
of a sponsoring organization.
    Participants means ``Children'' or ``Adult participants'' as defined 
in this section.
    Personal property means property of any kind except real property. 
It may be tangible--having physical existence--or intangible--having no 
physical existence such as patents, inventions, and copyrights.
    Pricing program means an institution in which a separate 
identifiable charge is made for meals served to participants.
    Program means the Child and Adult Care Food Program authorized by 
section 17 of the National School Lunch Act, as amended.
    Program payments means financial assistance in the form of start-up 
payments, expansion payments, advance payments, or reimbursement paid or 
payable to institutions for operating costs and administrative costs.
    Proprietary title XIX center means any private, for profit center 
(a) providing nonresidential adult day care services for which it 
receives compensation from amounts granted to the States under title XIX 
of the Social Security Act and (b) in which title XIX beneficiaries were 
not less than 25 percent of enrolled eligible participants in the 
calendar month preceding initial application or annual reapplication for 
Program participation.
    Proprietary title XX center means any private, for profit center:
    (a) Providing nonresidential child care services for which it 
receives compensation from amounts granted to the States under title XX 
of the Social Security Act, and in which title XX child care 
beneficiaries constitute no less than 25 percent of enrolled eligible 
participants or licensed capacity, whichever is less, during the 
calendar month preceding initial application or annual reapplication for 
Program participation; or,
    (b) Providing nonresidential adult day care services for which it 
receives compensation from amounts granted to the States under title XX 
of the Social Security Act and in which adult beneficiaries were not 
less than 25 percent of enrolled eligible participants during the 
calendar month preceding initial application or annual reapplication for 
Program participation.
    Reduced-price meal means a meal served under the Program to a 
participant from a family which meets the income standards for reduced-
price school meals. Any separate charge imposed shall be less than the 
full price of the meal, but in no case more than 40 cents for a lunch or 
supper, 30 cents for a breakfast, and 15 cents for a supplement, and for 
which neither the participant nor any member of his family is required 
to work in the food service program.

[[Page 166]]

    Reimbursement means Federal financial assistance paid or payable to 
institutions for Program costs within the rates assigned by the State 
agency.
    Rural area means any geographical area in a county which is not a 
part of a Metropolitan Statistical Area or any ``pocket'' within a 
Metropolitan Statistical Area which, at the option of the State agency 
and with FNSRO concurrence, is determined to be geographically isolated 
from urban areas.
    SSI participant means an adult participant who receives assistance 
under title XVI of the Social Security Act, the Supplemental Security 
Income (SSI) for the Aged, Blind and Disabled Program.
    School year means a period of 12 calendar months beginning July 1 of 
any year and ending June 30 of the following year.
    Sponsoring organization means a public or nonprofit private 
organization which is entirely responsible for the administration of the 
food program in: (a) One or more day care homes; (b) a child care 
center, outside-school-hours care centers, or adult day care center 
which is a legally distinct entity from the sponsoring organization; (c) 
two or more child care centers, outside-school-hours care centers, or 
adult day care centers; or (d) any combination of child care centers, 
adult day care centers, day care homes, and outside-school-hours care 
centers. The term ``sponsoring organization'' also includes a for-profit 
organization which is entirely responsible for administration of the 
Program in any combination of two or more child care centers, adult day 
care centers and outside-school-hours care centers which are part of the 
same legal entity as the sponsoring organization, and which are 
proprietary title XIX or XX centers, as defined in this section 
(``Proprietary Title XIX center'', ``Proprietary Title XX center'').
    Start-up payments means financial assistance made available to a 
sponsoring organization for its administrative expenses associated with 
developing or expanding a food service program in day care homes and 
initiating successful Program operations. These start-up payments may 
include administrative expenses associated with outreach and recruitment 
of unlicensed family or group day care homes and the allowable 
licensing-related expenses of such homes.
    State means any of the 50 States, the District of Columbia, the 
Commonwealth of Puerto Rico, the Virgin Islands, Guam, American Samoa, 
the Trust Territory of the Pacific Islands, and the Northern Mariana 
Islands.
    State agency means the State educational agency or any other State 
agency that has been designated by the Governor or other appropriate 
executive, or by the legislative authority of the State, and has been 
approved by the Department to administer the Program within the State or 
in States in which FNS administers the Program, FNSRO. This also may 
include a State agency other than the existing CACFP State Agency, when 
such agency is designated by the Governor of the State to administer 
only the adult day care component of the CACFP.
    State Children's Health Insurance Program (SCHIP) means the State 
medical assistance program under title XXI of the Social Security Act ( 
42 U.S.C. 1397aa et seq.).
    Tier I day care home means (a) a day care home that is operated by a 
provider whose household meets the income standards for free or reduced-
price meals, as determined by the sponsoring organization based on a 
completed free and reduced price application, and whose income is 
verified by the sponsoring organization of the home in accordance with 
Sec. 226.23(h)(6);
    (b) A day care home that is located in an area served by a school 
enrolling elementary students in which at least 50 percent of the total 
number of children enrolled are certified eligible to receive free or 
reduced price meals; or
    (c) A day care home that is located in a geographic area, as defined 
by FNS based on census data, in which at least 50 percent of the 
children residing in the area are members of households which meet the 
income standards for free or reduced price meals.
    Tier II day care home means a day care home that does not meet the 
criteria for a Tier I day care home.
    Title XVI means Title XVI of the Social Security Act which 
authorizes the Supplemental Security Income for the

[[Page 167]]

Aged, Blind, and Disabled Program--SSI.
    Title XIX means Title XIX of the Social Security Act which 
authorizes the Grants to States for Medical Assistance Programs--
Medicaid.
    Title XX means Title XX of the Social Security Act.
    Uniform Federal Assistance Regulations means the Department's 
regulations, 7 CFR part 3015, establishing Department-wide policies and 
standards for administration of grants and cooperative agreements.
    Verification means a review of the information reported by 
institutions to the State agency regarding the eligibility of 
participants for free or reduced-price meals, and, in addition, for a 
pricing program, confirmation of eligibility for free or reduced-price 
benefits under the program. Verification for a pricing program shall 
include confirmation of income eligibility and, at State discretion, any 
other information required on the application which is defined as 
documentation in Sec. 226.2. Such verification may be accomplished by 
examining information (e.g., wage stubs, etc.) provided by the household 
or other sources of information as specified in Sec. 226.23(h)(2)(iv). 
However, if a food stamp, FDPIR or AFDC case number is provided for a 
child, verification for such child shall include only confirmation that 
the child is included in a currently certified food stamp or FDPIR 
household or AFDC assistance unit. If a Head Start statement of income 
eligibility is provided for a child, verification for such child shall 
include only confirmation that the child is a Head Start participant. 
For an adult participant, if a food stamp or FDPIR case number or SSI or 
Medicaid assistance identification number is provided, verification for 
such participant shall include only confirmation that the participant is 
included in a currently certified food stamp or FDPIR household or is a 
current SSI or Medicaid participant.
    Yogurt means commercially coagulated milk products obtained by the 
fermentation of specific bacteria, that meet milk fat or milk solid 
requirements to which flavoring foods or ingredients may be added. These 
products are covered by the Food and Drug Administration's Standard of 
Identity for yogurt, lowfat yogurt, and nonfat yogurt, (21 CFR 131.200), 
(21 CFR 131.203), (21 CFR 131.206), respectively.

[47 FR 36527, Aug. 20, 1982; 47 FR 46072, Oct. 15, 1982, as amended at 
48 FR 21529, May 13, 1983; 48 FR 41142, Sept. 14, 1983; 50 FR 19310, May 
8, 1985; 51 FR 31316, Sept. 3, 1986; 52 FR 36906, Oct. 2, 1987; 53 FR 
52587, Dec. 28, 1988; 54 FR 27153, June 28, 1989; Amdt. 22, 55 FR 1377, 
Jan. 14, 1990; 61 FR 25554, May 22, 1996; 62 FR 901, Jan. 7, 1997; 62 FR 
23617, May 1, 1997; 63 FR 9104, Feb. 24, 1998; 63 FR 9727, Feb. 26, 
1998; 64 FR 61775, Nov. 15, 1999; 66 FR 2203, Jan. 11, 2001]



Sec. 226.3  Administration.

    (a) Within the Department, FNS shall act on behalf of the Department 
in the administration of the Program.
    (b) Within the States, responsibility for the administration of the 
Program shall be in the State agency, except that if FNS has 
continuously administered the Program in any State since October 1, 
1980, FNS shall continue to administer the Program in that State. A 
State in which FNS administers the Program may, upon request to FNS, 
assume administration of the Program.
    (c) Each State agency desiring to take part in the Program shall 
enter into a written agreement with the Department for the 
administration of the Program in the State in accordance with the 
provisions of this part. This agreement shall cover the operation of the 
Program during the period specified therein and may be extended by 
consent of both parties.
    (d) FNSRO shall, in each State in which it administers the Program, 
have available all funds and assume all responsibilities of a State 
agency as set forth in this part.



                     Subpart B--Assistance to States



Sec. 226.4  Payments to States and use of funds.

    (a) Availability of funds. For each fiscal year based on funds 
provided to the Department, FNS shall make funds available to each State 
agency to reimburse institutions for their costs in connection with food 
service operations, including administrative expenses, under this part. 
Funds shall be made available in an amount no less than the sum of the 
totals obtained

[[Page 168]]

under paragraphs (b), (c), (d), (e) and (h) of this section. However, in 
any fiscal year, the aggregate amount of assistance provided to a State 
under this part shall not exceed the sum of the Federal funds provided 
by the State to participating institutions within the State for that 
fiscal year and any funds used by the State under paragraphs (h) and (j) 
of this section.
    (b) Center funds. For meals served to participants in child care 
centers, adult day care centers and outside-school-hours care centers, 
funds shall be made available to each State agency in an amount no less 
than the sum of the products obtained by multiplying:
    (1) The number of breakfasts served in the Program within the State 
to participants from families that do not satisfy the eligibilty 
standards for free and reduced-price school meals enrolled in 
institutions by the national average payment rate for breakfasts for 
such participants under section 4 of the Child Nutrition Act of 1966;
    (2) The number of breakfasts served in the Program within the State 
to participants from families that satisfy the eligibilty standards for 
free school meals enrolled in institutions by the national average 
payment rate for free breakfasts under section 4 of the Child Nutrition 
Act of 1966;
    (3) The number of breakfasts served to participants from families 
that satisfy the eligibilty standard for reduced-price school meals 
enrolled in institutions by the national average payment rate for 
reduced-price school breakfasts under section 4 of the Child Nutrition 
Act of 1966;
    (4) The number of lunches and suppers served in the Program within 
the State by the national average payment rate for lunches under section 
4 of the National School Lunch Act. (All lunches and suppers served in 
the State are funded under this provision);
    (5) The number of lunches and suppers served in the Program within 
the State to participants from families that satisfy the eligibilty 
standard for free school meals enrolled in institutions by the national 
average payment rate for free lunches under section 11 of the National 
School Lunch Act;
    (6) The number of lunches and suppers served in the Program within 
the State to participants from families that satisfy the eligibilty 
standard for reduced-price school meals enrolled in institutions by the 
national average payment rate for reduced-price lunches under section 11 
of the National School Lunch Act;
    (7) The number of supplements served in the Program within the State 
to participants from families that do not satisfy the eligibilty 
standards for free and reduced-price school meals enrolled in 
institutions by 2.75 cents;
    (8) The number of supplements served in the Program within the State 
to participants from families that satisfy the eligibilty standard for 
free school meals enrolled in institutions by 30 cents;
    (9) The number of supplements served in the Program within the State 
to participants from families that satisfy the eligibilty standard for 
reduced-price school meals enrolled in institutions by 15 cents.
    (c) Day care home funds. For meals served to children in day care 
homes, funds shall be made available to each State agency in an amount 
no less than the sum of products obtained by multiplying:
    (1) The number of breakfasts served in the Program within the State 
to children enrolled in tier I day care homes by the current tier I day 
care home rate for breakfasts;
    (2) The number of breakfasts served in the Program within the State 
to children enrolled in tier II day care homes that have been determined 
eligible for free or reduced price meals by the current tier I day care 
home rate for breakfasts;
    (3) The number of breakfasts served in the Program within the State 
to children enrolled in tier II day care homes that do not satisfy the 
eligibility standards for free or reduced price meals, or to children 
from whose households applications were not collected, by the current 
tier II day care home rate for breakfasts;
    (4) The number of lunches and suppers served in the Program within 
the State to children enrolled in tier I day care homes by the current 
tier I day care home rate for lunches/suppers;
    (5) The number of lunches and suppers served in the Program within 
the

[[Page 169]]

State to children enrolled in tier II day care homes that have been 
determined eligible for free or reduced price meals by the current tier 
I day care home rate for lunches/suppers;
    (6) The number of lunches and suppers served in the Program within 
the State to children enrolled in tier II day care homes that do not 
satisfy the eligibility standards for free or reduced price meals, or to 
children from whose households applications were not collected, by the 
current tier II day care home rate for lunches/suppers;
    (7) The number of supplements served in the Program within the State 
to children enrolled in tier I day care homes by the current tier I day 
care home rate for supplements;
    (8) The number of supplements served in the Program within the State 
to children enrolled in tier II day care homes that have been determined 
eligible for free or reduced price meals by the current tier I day care 
home rate for supplements; and
    (9) The number of supplements served in the Program within the State 
to children enrolled in tier II day care homes that do not satisfy the 
eligibility standards for free or reduced price meals, or to children 
from whose households applications were not collected, by the current 
tier II day care home rate for supplements.
    (d) Administrative funds. For administrative payments to day care 
home sponsoring organizations, funds shall be made available to each 
State agency in an amount not less than the product obtained each month 
by multiplying the number of day care homes participating under each 
sponsoring organization within the State by the applicable rates 
specified in Sec. 226.12(a)(3).
    (e) Start-up and expansion funds. For start-up and expansion 
payments to eligible sponsoring organizations, funds shall be made 
available to each State agency in an amount equal to the total amount of 
start-up and expansion payments made in the most recent period for which 
reports are available for that State or on the basis of estimates by 
FNS.
    (f) Funding assurance. FNS shall ensure that, to the extent funds 
are appropriated, each State has sufficient Program funds available for 
providing start-up, expansion and advance payments in accordance with 
this part.
    (g) Rate adjustments. FNS shall publish a notice in the Federal 
Register to announce each rate adjustment. FNS shall adjust the 
following rates on the specified dates:
    (1) The rates for meals served in tier I and tier II day care homes 
shall be adjusted annually, on July 1 (beginning July 1, 1997), on the 
basis of changes in the series for food at home of the Consumer Price 
Index for All Urban Consumers published by the Department of Labor. Such 
adjustments shall be rounded to the nearest lower cent based on changes 
measured over the most recent twelve-month period for which data are 
available. The adjustments shall be computed using the unrounded rate in 
effect for the preceding school year.
    (2) The rate for supplements served in child care centers, adult day 
care centers and outside-school-hours care centers shall be adjusted 
annually, on July 1, on the basis of changes in the series for food away 
from home of the Consumer Price Index for All Urban Consumers published 
by the Department of Labor. Such adjustments shall be made to the 
nearest $.0025 based on changes measured over the most recent twelve-
month period for which data are available.
    (3) The rate for administrative payments to day care home sponsoring 
organizations shall be adjusted annually, on July 1, on the basis of 
changes in the series for all items of the Consumer Price Index for All 
Urban Consumers published by the Department of Labor. Such adjustments 
shall be made to the nearest dollar based on changes measured over the 
most recent twelve-month period for which data are available.
    (h) Audit funds. For the expense of conducting audits and reviews 
under Sec. 226.8, funds shall be made available to each State agency in 
an amount equal to two percent of the Program reimbursement provided to 
institutions within the State during the second fiscal year preceding 
the fiscal year for which these funds are to be made available. The 
amount of assistance provided to a State under this paragraph in any 
fiscal year may not exceed the

[[Page 170]]

State's expenditures under Sec. 226.8 during such fiscal year.
    (i) Method of funding. FNS shall authorize funds for State agencies 
in accordance with the Uniform Federal Assistance Regulations.
    (j) Special developmental projects. The State agency may use in 
carrying out special developmental projects an amount not to exceed one 
percent of Program funds used in the second prior fiscal year. Special 
developmental projects shall conform to FNS guidance and be approved in 
writing by FNS.

[47 FR 36527, Aug. 20, 1982, as amended at 52 FR 36906, Oct. 2, 1987; 53 
FR 52588, Dec. 28, 1988; 62 FR 902, Jan. 7, 1997; 63 FR 9728, Feb. 26, 
1998]



Sec. 226.5  Donation of commodities.

    (a) USDA foods available under section 6 of this Act, section 416 of 
the Agricultural Act of 1949 (7 U.S.C. 1431) or purchased under section 
32 of the Act of August 24, 1935 (7 U.S.C. 1431), section 709 of the 
Food and Agriculture Act of 1965 (7 U.S.C. 1446a-1), or other authority, 
and donated by the Department shall be made available to each State.
    (b) The value of such commodities donated to each State for each 
school year shall be, at a minimum, the amount obtained by multiplying 
the number of reimbursable lunches and suppers served in participating 
institutions in that State during the preceding school year by the rate 
for commodities established under section 6(e) of the Act for the 
current school year. Adjustments shall be made at the end of each school 
year to reflect the difference between the number of reimbursable 
lunches and suppers served during the preceding year and the number 
served during the current year, and subsequent commodity entitlement 
shall be based on the adjusted meal counts. At the discretion of FNS, 
current-year adjustments may be made for significant variations in the 
number of reimbursable meals served. Such current-year adjustments will 
not be routine and will only be made for unusual problems encountered in 
a State, such as a disaster that necessitates institutional closures for 
a prolonged period of time. CACFP State agencies electing to receive 
cash-in-lieu of commodities will receive payments based on the number of 
reimbursable meals actually served during the current school year.

[47 FR 36527, Aug. 20, 1982, as amended at 62 FR 23618, May 1, 1997]



                   Subpart C--State Agency Provisions



Sec. 226.6  State agency administrative responsibilities.

    (a) State agency personnel. Each State agency shall provide 
sufficient consultative, technical and managerial personnel to 
administer the Program, provide sufficient training and technical 
assistance to institutions and monitor performance to facilitate 
expansion and effective operation of the Program.
    (b) Application approval. Each State agency shall establish an 
application procedure to determine the eligibility under this part of 
applicant institutions, and facilities for which applications are 
submitted by sponsoring organizations. State agencies, by written 
consent of the State agency and the institutions, shall renew agreements 
with institutions not less frequently than annually. A State agency may 
not execute an agreement to be effective during two fiscal years but may 
nevertheless establish an ongoing renewal process for the purpose of 
reviewing and approving applications from participating institutions 
throughout the fiscal year. As a minimum, such application approval 
process shall include:
    (1) Renewal of the Program agreement;
    (2) For child care centers, adult day care centers and outside-
school-hours care centers, submission of current eligibility information 
on enrolled participants.
    (3) For sponsoring organizations of day care homes, submission of 
the current total number of children enrolled, and an assurance that day 
care home providers' children enrolled in the Program are eligible for 
free or reduced-price meals;
    (4) Issuance of a nondiscrimination policy statement and media 
release;
    (5) For sponsoring organizations, submission of a management plan;
    (6) Submission of an administrative budget;

[[Page 171]]

    (7) Submission of documentation that all child care centers, adult 
day care centers, outside-school-hours care centers, and day care homes 
for which application is made are in compliance with Program licensing/
approval provisions;
    (8) For proprietary title XX child care centers, submission of 
documentation that they are currently providing nonresidential day care 
services for which they receive compensation under title XX of the 
Social Security Act, and certification that not less than 25 percent of 
enrolled children or 25 percent of licensed capacity, whichever number 
is less, in each such center during the most recent calendar month were 
title XX beneficiaries. In the case of title XIX or title XX adult day 
care centers, submission of documentation that they are currently 
providing nonresidential day care services for which they receive 
compensation under title XIX or title XX of the Social Security Act, and 
certification that not less than 25 percent of enrolled adult 
participants in each such center during the most recent calendar month 
were title XIX or title XX beneficiaries;
    (9) Statement of institutional preference to receive commodities or 
cash-in-lieu of commodities;
    (10) Institutional choice to receive all, part, or none of advance 
payment. Any institution applying for participation in the Program shall 
be notified of approval or disapproval by the State agency in writing 
within 30 calendar days of filing a complete and correct application. If 
an institution submits an incomplete application, the State agency shall 
notify the institution within 15 calendar days of receipt of the 
application and shall provide technical assistance, if necessary, to the 
institution for the purpose of completing its application. Any 
disapproved applicant shall be notified of its right to appeal under 
paragraph (j) of this section.
    (c) Denial of applications and termination of institutions. The 
State agency shall not enter into an agreement with any applicant 
institution which the State agency determines to have been seriously 
deficient at any time in its operation of any Federal child nutrition 
program. However, the State agency may enter into an agreement with such 
an institution when with FNS concurrence it determines that the 
deficiencies have been corrected. The State agency shall terminate the 
program agreement with any institution which it determines to be 
seriously deficient. However, the State agency shall afford an 
institution every reasonable opportunity to correct problems before 
terminating the institution for being seriously deficient. The State 
agency shall notify FNS whenever it has denied an application from or 
terminated the participation of a seriously deficient institution. This 
notification shall be made within 15 days of the review official's 
decision upholding the State's action or, if the institution elects not 
to appeal the decision, within 15 days of the expiration of the appeal 
right. FNS will maintain a list of these institutions and will notify 
all other State agencies of these institutions' ineligibility to 
participate in the program. FNS may determine independently that an 
institution has been seriously deficient in its operation of any Federal 
child nutrition program and include such institution on the list of 
ineligible institutions if appropriate corrective action is not taken. 
State agencies shall not enter into an agreement with any institution 
included on this list of ineligible institutions and shall terminate any 
participating institution included on the list within 30 days of the 
receipt of notification by FNS of the institution's ineligible status. 
Once included on this list, an institution shall be ineligible to 
participate in the program until such time as FNS, in consultation with 
the appropriate State agency, determines that the serious deficiency 
which resulted in the ineligible status has been corrected. Any 
institution which is identifiable with a seriously deficient institution 
through its corporate organization, officers, employees, or otherwise 
shall also be considered to be ineligible unless it is demonstrated to 
the satisfaction of the State agency, with FNS concurrence, that good 
cause exists for considering the institution distinct from the seriously 
deficient institution. Denial or termination actions taken on the basis 
of FNS notification of ineligible status shall not be subject to 
administrative

[[Page 172]]

review as provided in Sec. 226.6(k). However, an institution which FNS 
has determined to be seriously deficient and which has not taken 
acceptable corrective action may request an administrative review of 
this determination by an FNS review official in accordance with the 
appeal procedures set forth in Sec. 226.6(k) and will not be included on 
the list of ineligible institutions unless FNS' determination is upheld 
by the review official. Serious deficiencies, which are grounds for 
disapproval of applications and for termination include, but are not 
limited to, any of the following:
    (1) Noncompliance with the applicable bid procedures and contract 
requirements of Federal child nutrition program regulations;
    (2) The submission of false information to the State agency;
    (3) Failure to return to the State agency any advance payments which 
exceeded the amount earned for serving eligible meals, or failure to 
return disallowed start-up or expansion payments;
    (4) Failure to maintain adequate records;
    (5) Failure to adjust meal orders to conform to variations in the 
number of participants;
    (6) The claiming of Program payments for meals not served to 
participants;
    (7) Service of a significant number of meals which did not include 
required quantities of all meal components;
    (8) Continued use of food service management companies that are in 
violation of health codes;
    (9) Failure of a sponsoring organization to disburse payments to its 
facilities in accordance with its management plan;
    (10) A history of administrative or financial mismanagement in any 
Federal child nutrition program;
    (11) The claiming of Program payment for meals served by a 
proprietary title XX child care center during a calendar month in which 
less than 25 percent of enrolled children or 25 percent of licensed 
capacity, whichever number is less, were title XX beneficiaries. In the 
case of an adult day care center, the claiming of Program payment for 
meals served by a proprietary title XIX or title XX center during a 
calendar month in which less than 25 percent of enrolled adult 
participants were title XIX or title XX beneficiaries.
    (d) Licensing/approval for child care centers, outside-school-hours 
care centers and day care homes. This section prescribes State agency 
responsibilities to ensure that child care centers and day care homes 
meet the licensing/approval criteria set forth in this part. Sponsoring 
organizations shall submit to the State agency documentation that 
facilities under their jurisdiction are in compliance with licensing/
approval requirements. Independent centers shall submit such 
documentation to the State agency on their own behalf.
    (1) General. Each State agency shall establish procedures to 
annually review information submitted by institutions to ensure that all 
participating child care centers, day care homes, and outside-school-
hours care centers either:
    (i) Are licensed or approved by Federal, State, or local 
authorities, provided that institutions which are approved for Federal 
programs on the basis of State or local licensing shall not be eligible 
for the Program if their licenses lapse or are terminated; or
    (ii) Are complying with applicable procedures to renew licensing or 
approval in situations where the State agency has no information that 
licensing or approval will be denied; or
    (iii) Receive Title XX funds for providing child care, if licensing 
or approval is not available; or
    (iv) Demonstrate compliance with applicable State or local child 
care standards to the State agency, if licensing is not available and 
title XX funds are not received; or
    (v) Demonstrate compliance with CACFP child care standards to the 
State agency, if licensing or approval is not available and Title XX 
funds are not received.
    (2) CACFP child care standards. (i) When licensing or approval is 
not available, independent child care centers, and sponsoring 
organizations on behalf of their child care centers or day care homes, 
may elect to demonstrate compliance, annually, with the following CACFP 
child care standards or

[[Page 173]]

other standards specified in paragraph (d)(3) of this section:
    (A) Staff/child ratios. (1) Day care homes provide care for no more 
than 12 children at any one time. One home caregiver is responsible for 
no more than 6 children ages 3 and above, or no more than 5 children 
ages 0 and above. No more than 2 children under the age of 3 are in the 
care of 1 caregiver. The home provider's own children who are in care 
and under the age of 14 are counted in the maximum ratios of caregivers 
to children.
    (2) Child care centers and outside-school-hours care centers do not 
fall below the following staff/child ratios:
    (i) For children under 6 weeks of age--1:1
    (ii) For children ages 6 weeks up to 3 years--1:4
    (iii) For children ages 3 years up to 6 years--1:6
    (iv) For children ages 6 years up to 10 years--1:15
    (v) For children ages 10 and above--1:20
    (B) Nondiscrimination. Day care services are available without 
discrimination on the basis of race, color, national origin, sex, age, 
or handicap.
    (C) Safety and sanitation. (1) A current health/sanitation permit or 
satisfactory report of an inspection conducted by local authorities 
within the past 12 months shall be submitted.
    (2) A current fire/building safety permit or satisfactory report of 
an inspection conducted by local authorities within the past 12 months 
shall be submitted.
    (3) Fire drills are held in accordance with local fire/building 
safety requirements.
    (D) Suitability of facilities. (1) Ventilation, temperature, and 
lighting are adequate for children's safety and comfort.
    (2) Floors and walls are cleaned and maintained in a condition safe 
for children.
    (3) Space and equipment, including rest arrangements for preschool 
age children, are adequate for the number of age range of participating 
children.
    (E) Social services. Independent centers, and sponsoring 
organizations in coordination with their facilities, have procedures for 
referring families of children in care to appropriate local health and 
social service agencies.
    (F) Health services. (1) Each child is observed daily for 
indications of difficulties in social adjustment, illness, neglect, and 
abuse, and appropriate action is initiated.
    (2) A procedure is established to ensure prompt notification of the 
parent or guardian in the event of a child's illness or injury, and to 
ensure prompt medical treatment in case of emergency.
    (3) Health records, including records of medical examinations and 
immunizations, are maintained for each enrolled child. (Not applicable 
to day care homes.)
    (4) At least one full-time staff member is currently qualified in 
first aid, including artificial respiration techniques. (Not applicable 
to day care homes.)
    (5) First aid supplies are available.
    (6) Staff members undergo initial and periodic health assessments.
    (G) Staff training. The institution provides for orientation and 
ongoing training in child care for all caregivers.
    (H) Parental involvement. Parents are afforded the opportunity to 
observe their children in day care.
    (I) Self-evaluation. The institution has established a procedure for 
periodic self-evaluation on the basis of CACFP child care standards.
    (ii) When licensing or approval is not available, independent 
outside-school-hours care centers, and sponsoring organizations on 
behalf of their outside-school-hours care centers, may elect to 
demonstrate compliance with child care standards developed by the State 
agency which shall include, as a minimum, information on: (A) Fire/
safety, (B) sanitation, (C) organized activities, (D) kitchen and 
restroom facilities, (E) appropriateness of games and materials, (F) 
availability of emergency medical care, and (G) child-staff ratios as 
indicated in Sec. 226.6(d)(2)(i)(A). For items (A) and (B), of this 
paragraph, appropriate State or local permits are required.
    (3) Alternate approval procedures. Each State agency shall establish 
procedures to review information submitted by institutions for centers 
or homes for which licensing or approval is not

[[Page 174]]

available in order to establish eligibility for the Program. Licensing 
or approval is not available when (i) no Federal, State, or local 
licensing/approval standards have been established for child care 
centers, outside-school-hours care centers, or day care homes; or (ii) 
no mechanism exists to determine compliance with licensing/approval 
standards. In these situations, independent centers, and sponsoring 
organizations on behalf of their facilities, may choose to demonstrate 
compliance with either CACFP child care standards, applicable State 
child care standards, or applicable local child care standards. State 
agencies shall provide information about applicable State child care 
standards and CACFP child care standards to institutions, but may 
require institutions electing to demonstrate compliance with applicable 
local child care standards to identify and submit these standards. The 
State agency may permit independent centers, and sponsoring 
organizations on behalf of their facilities, to submit self-
certification forms, and may grant approval without first conducting a 
compliance review at the center or facility. But the State agency shall 
require submission of health/sanitation and fire/safety permits or 
certificates for all independent centers and facilities seeking 
alternate child care standards approval. Compliance with applicable 
child care standards are subject to review in accordance with 
Sec. 226.6(n).
    (e) Licensing/approval for adult day care centers. This paragraph 
prescribes State agency responsibilities to ensure that adult day care 
centers meet the licensing/approval criteria set forth in this part. 
Sponsoring organizations shall submit to the State agency documentation 
that facilities under their jurisdiction are in compliance with 
licensing/approval requirements. Independent adult day care centers 
shall submit such documentation to the State agency on their own behalf. 
Each State agency shall establish procedures to annually review 
information submitted by institutions to ensure that all participating 
adult day care centers either:
    (1) Are licensed or approved by Federal, State or local authorities, 
provided that institutions which are approved for Federal programs on 
the basis of State or local licensing shall not be eligible for the 
Program if their licenses lapse or are terminated; or
    (2) Are complying with applicable procedures to renew licensing or 
approval in situations where the State agency has no information that 
licensing or approval will be denied.
    (f) Annual requirements. State agencies shall require institutions 
to comply with applicable provisions of this part. Each State agency 
shall annually:
    (1) Enter into and execute a written Program agreement with each 
institution, or renew such agreement with the written concurrence of the 
institution. The Program agreement shall provide that the institution 
shall accept final financial and administrative responsibility for 
management of an effective food service, comply with all requirements 
under this part, and 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 (7 CFR parts 15, 15a and 15b), including requirements 
for racial and ethnic participation data collection, public notification 
of the nondiscrimination policy, and reviews to assure compliance with 
such policy, to the end that no person shall, on the grounds of race, 
color, national origin, sex, age, or handicap be excluded from 
participation in, be denied the benefits of, or be otherwise subjected 
to discrimination under the Program.
    (2) Require each sponsoring organization to submit a management plan 
with its application for review and approval. Such a plan shall include: 
detailed information on the organizational administrative structure; the 
staff assigned to Program management and monitoring; administrative 
budget; procedures which will be used by the sponsoring organization to 
administer the Program in and disburse payments to the child care 
facilities under its jurisdiction; and, for sponsoring organizations of 
day care homes, a description of the system for making tier I

[[Page 175]]

day care home determinations, and a description of the system of 
notifying tier II day care homes of their options for reimbursement. For 
initial implementation of the two-tiered reimbursement structure for day 
care homes, by April 1, 1997, each sponsoring organization of day care 
homes shall submit an amendment to its plan, subject to review and 
approval by the State agency, describing its systems for making tier I 
day care home determinations and for notifying tier II day care homes of 
their options for reimbursement.
    (3) Require each institution to submit an administrative budget. 
Each sponsoring organization shall be required to incorporate this 
budget into its management plan.
    (4) Determine that all meal procurements with food service 
management companies are in conformance with the bid and contractual 
requirements of Sec. 226.22.
    (5) Inquire as to the preference of institutions for commodities or 
cash-in-lieu of commodities.
    (6) Provide institutions with information on foods available in 
plentiful supply, based on information provided by the Department.
    (7) Inform institutions with separate meal charges of their 
responsibility to ensure that free and reduced-price meals are served to 
participants unable to pay the full price and provide to all 
institutions a copy of the income standards to be used by institutions 
for determining the eligibility of participants for free and reduced-
price meals under the Program.
    (8) Perform verification of the eligibility of participants for free 
and reduced-price meals in participating institutions in accordance with 
the procedures outlined in Sec. 226.23(h). State agencies verifying the 
information on free and reduced-price applications shall ensure that 
verification activities are applied without regard to race, color, 
national origin, sex, age, or handicap.
    (9) Coordinate with the State agency which administers the National 
School Lunch Program to ensure the receipt of a list of elementary 
schools in the State in which at least one-half of the children enrolled 
are certified eligible to receive free or reduced price meals. The State 
agency shall provide the list to sponsoring organizations by April 1, 
1997, and by February 15 of each year thereafter, unless the State 
agency that administers the National School Lunch Program has elected to 
base data for the list on a month other than October, in which case the 
State agency shall provide the list to sponsoring organizations within 
15 calendar days of its receipt from the State agency that administers 
the National School Lunch Program. The State agency also shall provide 
each sponsoring organization with census data, as provided to the State 
agency by FNS upon its availability on a decennial basis, showing areas 
in the State in which at least 50 percent of the children are from 
households meeting the income standards for free or reduced price meals. 
In addition, the State agency shall ensure that the most recent 
available data is used if the determination of a day care home's 
eligibility as a tier I day care home is made using school or census 
data. Determinations of a day care home's eligibility as a tier I day 
care home shall be valid for one year if based on a provider's household 
income, three years if based on school data, or until more current data 
are available if based on census data. However, a sponsoring 
organization, the State agency, or FNS may change the determination if 
information becomes available indicating that a home is no longer in a 
qualified area. The State agency shall not routinely require annual 
redeterminations of the tiering status of tier I day care homes based on 
updated elementary school data.
    (10) Provide all sponsoring organizations of day care homes in the 
State with a listing of State-funded programs, participation in which by 
a parent or child will qualify a meal served to a child in a tier II 
home for the tier I rate of reimbursement.
    (11) Require each sponsoring organization of day care homes to 
submit the total number of tier I and tier II day care homes that it 
sponsors; a breakdown showing the total number of children enrolled in 
tier I day care homes; the total number of children enrolled in tier II 
day care homes; and the number of children in tier II day care

[[Page 176]]

homes that have been identified as eligible for free or reduced price 
meals.
    (g) Program expansion. Each State agency shall take action to expand 
the availability of benefits under this Program. At a minimum, the State 
shall annually notify each nonparticipating child care center, outside-
school-hours care center, and day care home within the State that is 
licensed, approved, registered, or receiving funds under title XX and 
each nonparticipating adult day care center that is licensed or 
approved, of the availability of the Program, the requirements for 
Program participation, and the application procedures to be followed in 
the Program. The State agency shall make the list of child care centers, 
adult day care centers, outside-school-hours care centers, and day care 
homes notified each year available to the public upon request.
    (h) Commodity distribution. The State shall annually inquire as to 
the preference of each institution for commodities or cash-in-lieu of 
commodities. Each institution electing cash-in-lieu of commodities shall 
receive such payments. Each institution which elects to receive 
commodities shall have commodities provided to it unless the State 
agency, after consultation with the State commodity distribution agency, 
demonstrates to FNS that distribution of commodities to the number of 
such institutions would be impracticable. The State agency may then, 
with the concurrence of FNS, provide cash-in-lieu of commodities for all 
institutions. A State agency request for cash-in-lieu of all commodities 
shall be submitted to FNS not later than May 1 of the school year 
preceding the school year for which the request is made. The State 
agency shall, by June 1 of each year, submit a list of institutions 
which have elected to receive commodities to the State commodity 
distribution agency, unless FNS has approved a request for cash-in-lieu 
of commodities for all institutions. The list shall be accompanied by 
information on the average daily number of lunches and suppers to be 
served to participants by each such institution.
    (i) Standard contract. Each State agency shall develop a standard 
contract in accordance with Sec. 226.21 and provide for its use between 
institutions and food service management companies. The contract shall 
expressly and without exception stipulate:
    (1) The institution shall provide the food service management 
company with a list of the State agency approved child care centers, day 
care homes, adult day care centers, and outside-school-hours care 
centers to be furnished meals by the food service management company, 
and the number of meals, by type, to be delivered to each location;
    (2) The food service management company shall maintain such records 
(supported by invoices, receipts or other evidence) as the institution 
will need to meet its responsibilities under this part, and shall 
promptly submit invoices and delivery reports to the institution no less 
frequently than monthly;
    (3) The food service management company shall have Federal, State or 
local health certification for the plant in which it proposes to prepare 
meals for use in the Program, and it shall ensure that health and 
sanitation requirements are met at all times. In addition, the State 
agency may require the food service management company to provide for 
meals which it prepares to be periodically inspected by the local health 
department or an independent agency to determine bacteria levels in the 
meals being prepared. These bacteria levels shall conform to the 
standards which are applied by the local health authority with respect 
to the level of bacteria which may be present in meals prepared or 
served by other establishments in the locality. Results of these 
inspections shall be submitted to the institution and to the State 
agency;
    (4) The meals served under the contract shall conform to the cycle 
menus upon which the bid was based, and to menu changes agreed upon by 
the institution and food service management company;
    (5) The books and records of the food service management company 
pertaining to the institution's food service operation shall be 
available for inspection and audit by representatives of the State 
agency, of the Department,

[[Page 177]]

and of the U.S. General Accounting Office at any reasonable time and 
place, for a period of 3 years from the date of receipt of final payment 
under the contract, or in cases where an audit requested by the State 
agency or the Department remains unresolved, until such time as the 
audit is resolved;
    (6) The food service management company shall operate in accordance 
with current Program regulations;
    (7) The food service management company shall not be paid for meals 
which are delivered outside of the agreed upon delivery time, are 
spoiled or unwholesome at the time of delivery, or do not otherwise meet 
the meal requirements contained in the contract;
    (8) Meals shall be delivered in accordance with a delivery schedule 
prescribed in the contract;
    (9) Increases and decreases in the number of meal orders may be made 
by the institution, as needed, within a prior notice period mutually 
agreed upon in the contract;
    (10) All meals served under the Program shall meet the requirements 
of Sec. 226.20;
    (11) All breakfasts, lunches, and suppers delivered for service in 
outside-school-hours care centers shall be unitized, with or without 
milk, unless the State agency determines that unitization would impair 
the effectiveness of food service operations. For meals delivered to 
child care centers and day care homes, the State agency may require 
unitization, with or without milk, of all breakfasts, lunches, and 
suppers only if the State agency has evidence which indicates that this 
requirement is necessary to ensure compliance with Sec. 226.20.
    (j) Procurement provisions. State agencies shall require 
institutions to adhere to the procurement provisions set forth in 
Sec. 226.22.
    (k) Institution appeal procedures. Except as provided in 
Sec. 226.8(g), each State agency shall establish an appeal procedure to 
be followed by an institution requesting a review of a denial of an 
institution's application for participation, a denial of an application 
submitted by a sponsoring organization on behalf of a facility, a 
termination of the participation of an institution or facility, a 
suspension of an institution's agreement, a denial of an institution's 
application for start-up or expansion payments, a denial of an advance 
payment, a denial of all or a part of the claim for reimbursement, 
(except for late submission under Sec. 226.10(e)), a denial by the State 
agency to forward to FNS an exception request by the institution or 
sponsoring organization for payment of a late claim or a request for an 
upward adjustment to a claim, demand for the remittance of an 
overpayment, and any other action of the State agency affecting the 
participation of an institution in the Program or the institution's 
claim for reimbursement. State agencies may use their own State appeal 
procedures provided the same procedures are applied to all appellants in 
the State and the procedures meet the following requirements: Appellants 
are assured of a fair and impartial hearing before an independent 
official at which they may be represented by legal counsel; decisions 
are rendered in a timely manner not to exceed 120 days from the date of 
the receipt of the request for review; appellants are afforded the right 
to either a review of the record with the right to file written 
information, or a hearing which they may attend in person; and adequate 
notice is given of the place, date and procedures of the hearing. The 
appeal procedures adopted by the State agency shall be made available in 
writing each year to all institutions at the time of application for 
participation in the Program and upon request. If the State has not 
established its own appeal procedures or the procedures do not meet the 
above listed criteria, the State agency shall observe the following 
procedures at a minimum:
    (1) The institution shall be advised in writing of the grounds on 
which the State agency based its action. The notice of action, which 
shall be sent by certified mail, return receipt requested, shall also 
include a statement indicating that the institution has the right to 
appeal the action;
    (2) The written request for review shall be filed by the appellant 
not later than 15 calendar days from the date the appellant received the 
notice of action, and the State shall acknowledge the

[[Page 178]]

receipt of the request for appeal within 10 calendar days;
    (3) The appellant may refute the charges contained in the notice of 
action in person and by written documentation to the review official. In 
order to be considered, written documentation must be filed with the 
review official not later than 30 calendar days after the appellant 
received the notice of action. The appellant may retain legal counsel, 
or may be represented by another person. A hearing shall be held by the 
review official in addition to, or in lieu of, a review of written 
information submitted by the appellant only if the appellant so 
specifies in the letter of request for review. Failure of the appellant 
institution's representative to appear at a scheduled hearing shall 
constitute the appellant institution's waiver of the right to a personal 
appearance before the review official, unless the review official agrees 
to reschedule the hearing. A representative of the State agency shall be 
allowed to attend the hearing to respond to the appellant's testimony 
and to answer questions posed by the review official;
    (4) If the appellant has requested a hearing, the appellant and the 
State agency shall be provided with at least 10 calendar days advance 
written notice, sent by certified mail, return receipt requested, of the 
time and place of the hearing;
    (5) Any information on which the State agency's action was based 
shall be available to the appellant for inspection from the date of 
receipt of the request for review;
    (6) The review official shall be an independent and impartial 
official other than, and not accountable to, any person authorized to 
make decisions that are subject to appeal under the provisions of this 
section;
    (7) The review offficial shall make a determination based on 
information provided by the State agency and the appellant, and on 
Program regulations;
    (8) Within 60 calendar days of the State agency's receipt of the 
request for review, the review official shall inform the State agency 
and the appellant of the determination of the review;
    (9) The State agency's action shall remain in effect during the 
appeal process. However, participating institutions and facilities may 
continue to operate under the Program during an appeal of termination, 
unless the action is based on imminent dangers to the health or welfare 
of participants. If the institution or facility has been terminated for 
this reason, the State agency shall so specify in its notice of action. 
Institutions electing to continue operating while appealing terminations 
shall not be reimbursed for any meals served during the period of the 
appeal if the State agency's action is upheld; and
    (10) The determination by the State review official is the final 
administrative determination to be afforded to the appellant.
    (11) Appeals shall not be allowed on decisions made by FNS on 
requests for exceptions to the claims submission deadlines stated in 
Sec. 226.10(e) or requests for upward adjustments to claims.
    (12) In cases where an appeal results in the dismissal of a claim 
against an institution which was asserted by the State agency based upon 
Federal audit findings, FNS may assert a claim against the State agency 
in accordance with the procedures outlined in Sec. 226.14(c).
    (l) Program assistance. Each State agency shall provide technical 
and supervisory assistance to institutions and facilities to facilitate 
effective Program operations, monitor progress toward achieving Program 
goals, and ensure compliance with the Department's nondiscrimination 
regulations (part 15 of this title) issued under title VI of the Civil 
Rights Act of 1964. Documentation of supervisory assistance activities, 
including reviews conducted, corrective actions prescribed, and follow-
up efforts, shall be maintained on file by the State agency. Program 
reviews shall assess institutional compliance with the provisions of 
this part and with any applicable instructions of FNS and the 
Department. Program reviews shall include State agency evaluation of the 
documentation used by sponsoring organizations to classify their day 
care homes as tier I day care homes. State agencies shall

[[Page 179]]

annually review 33.3 percent of all institutions. State agencies shall 
also ensure that each institution is reviewed according to the following 
schedule.
    (1) Independent centers, sponsoring organizations of centers, and 
sponsoring organizations of day care homes with 1 to 200 homes shall be 
reviewed at least once every four years. Reviews of sponsoring 
organizations shall include reviews of 15 percent of their child care, 
adult day care and outside-school-hours care centers and 10 percent of 
their day care homes.
    (2) Sponsoring organizations with more than 200 homes shall be 
reviewed at least once every two years. Reviews of such sponsoring 
organizations shall include reviews of 5 percent of the first 1,000 
homes and 2.5 percent of all homes in excess of 1,000.
    (3) Reviews shall be conducted for newly participating sponsoring 
organizations with five or more child care facilities or adult day care 
facilities within the first 90 days of program operations.
    (m) Program irregularities. Each State agency shall promptly 
investigate complaints received or irregularities noted in connection 
with the operation of the Program, and shall take appropriate action to 
correct any irregularities. State agencies shall maintain on file 
evidence of such investigations and actions. FNS and OIG may make 
investigations at the request of the State agency, or whenever FNS or 
OIG determines that investigations are appropriate.
    (n) Child care standards compliance. The State agency shall, when 
conducting administrative reviews of child care centers, outside-school-
hours 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 violations are corrected and the State shall 
ensure that the institution has corrected all violations. If violations 
are not corrected within 60 calendar days of written notification to the 
institution, the State agency shall terminate the Program participation 
of the violating institution or facility. However, if the health or 
safety of the children is imminently threatened, the State agency may 
immediately terminate participation of the institution or facility. If, 
during an administrative review of a child care center, outside-school-
hours care center, or day care home not approved by the State agency 
under paragraph (d)(3) of this section, the State agency observes 
violations of applicable health, safety, or staff-child ratio standards, 
or attendance in excess of licensed capacity, the State agency shall 
promptly refer such violations to the appropriate authority. The State 
agency may deny reimbursement for meals served to attending children in 
excess of authorized capacity.
    (o) Sponsoring organization agreement. Each State agency shall 
develop and provide for the use of a standard form of agreement between 
each day care home sponsoring organization and all day care homes 
participating in the Program under such organization. However, the State 
agency may, at the request of the sponsor, approve an agreement 
developed by the sponsor. State agencies may develop a similar form for 
use between sponsoring organizations and other types of facilities.
    (p) Following its reviews of institutions and facilities under 
Secs. 226.6(l) and 226.23(h) conducted prior to July 1, 1988, the State 
agency shall report data on key elements of program operations on a form 
designated by FNS. These key elements include but are not limited to the 
program areas of meal requirements, determination of eligibility for 
free and reduced price meals, and the accuracy of reimbursement claims. 
These forms shall be submitted within 90 days of the completion of the 
data collection for the institutions except that, if the State has 
elected to conduct reviews of verification separate from its 
administrative reviews, the State shall retain data until all key 
elements have been reviewed and shall report all data for each 
institution on one form within 90 days of the completion of the data 
collection for all key elements for that institution. States shall 
ensure that all key element data for an institution is collected during 
a 12-month period.

[47 FR 36527, Aug. 20, 1982]

    Editorial Note: For Federal Register citations affecting Sec. 226.6, 
see the List of CFR

[[Page 180]]

Sections Affected, which appears in the Finding Aids section of the 
printed volume and on GPO Access.



Sec. 226.7  State agency responsibilities for financial management.

    (a) This section prescribes standards of financial management 
systems in administering Program funds by the State agency and 
institutions.
    (b) Each State agency shall maintain an acceptable financial 
management system, adhere to financial management standards and 
otherwise carry out financial management policies as delineated in the 
Uniform Federal Assistance Regulations, at 7 CFR part 3015. State 
agencies or FNSRO's, where applicable, shall also have a system in place 
for monitoring and reviewing the institutions' documentation of their 
nonprofit status to ensure that all Program reimbursement funds are 
used: (1) Solely for the conduct of the food service operation; or (2) 
to improve such food service operations, principally for the benefit of 
the participants.
    (c) Management evaluations and audits. State agencies shall provide 
FNS with full opportunity to conduct management evaluations (including 
visits to institutions and facilities) of all operations of the State 
agency under the Program and shall provide OIG with full opportunity to 
conduct audits (including visits to institutions and facilities) of all 
operations of the State agency under the Program. Within 60 calendar 
days of receipt of each management evaluation report, the State agency 
shall submit to FNSRO a written plan for correcting serious 
deficiencies, including specific timeframes for accomplishing corrective 
actions and initiating follow-up efforts. If a State agency makes a 
showing of good cause, however, FNS may allow more than 60 days in which 
to submit a plan. Each State agency shall make available its records, 
including records of the receipt and expenditure of funds, upon request 
by FNS or OIG. OIG shall also have the right to make audits of the 
records and operation of any institution.
    (d) Reports. Each State agency shall submit to FNS the final Report 
of the Child and Adult Care Food Program (FNS 44) for each month which 
shall be limited to claims submitted in accordance with Sec. 226.10(e) 
and which shall be postmarked and/or submitted no later than 90 days 
following the last day of the month covered by the report. States shall 
not receive Program funds for any month for which the final report is 
not submitted within this time limit unless FNS grants an exception. 
Upward adjustments to a State agency's report shall not be made after 90 
days from the month covered by the report unless authorized by FNS. 
Downward adjustments shall always be made, without FNS authorization, 
regardless of when it is determined that such adjustments are necessary. 
Adjustments shall be reported to FNS in accordance with procedures 
established by FNS. Each State agency shall also submit to FNS a 
quarterly Financial Status Report (SF-269) on the use of Program funds. 
Such reports shall be postmarked and/or submitted no later than 30 days 
after the end of each fiscal year quarter. Obligations shall be reported 
only for the fiscal year in which they occur. A final Financial Status 
Report for each fiscal year shall be postmarked and/or submitted to FNS 
within 120 days after the end of the fiscal year. FNS shall not be 
responsible for reimbursing unpaid Program obligations reported later 
than 120 days after the close of the fiscal year in which they were 
incurred.
    (e) Annual plan. Each State shall submit to the Secretary for 
approval by August 15 of each year an annual plan for the use of State 
administrative expense funds, including a staff formula for State 
personnel.
    (f) Rate assignment. Each State agency shall require institutions 
(other than sponsoring organizations for day care homes) to submit, not 
less frequently than annually, information necessary to assign rates of 
reimbursement as outlined in Sec. 226.9.
    (g) Administrative budget approval. The State agency shall approve 
institution administrative budgets, and shall limit allowable 
administrative costs claimed by each sponsoring organization for day 
care homes to administrative costs approved in its annual budget. The

[[Page 181]]

State agency may establish such administrative costs limits for other 
institutions. Administrative budget levels may be adjusted to reflect 
changes in Program activities.
    (h) Start-up and expansion payments. Each State agency shall 
establish procedures for evaluating requests for start-up and expansion 
payments, issuing these payments to eligible sponsoring organizations, 
and monitoring the use of these payments.
    (i) Advance payments. Each State agency shall establish procedures 
for issuing advance payments by the first day of each month and 
comparing these payments with earned reimbursement on a monthly basis. 
The State agency shall maintain on file a statement of the State's law 
and policy governing the use of interest earned on advanced funds by 
sponsors, institutions, child care facilities and adult day care 
facilities.
    (j) Recovery of overpayments. Each State agency shall establish 
procedures to recover outstanding start-up, expansion and advance 
payments from institutions which, in the opinion of the State agency, 
will not be able to earn these payments.
    (k) Claims processing. Each State agency shall establish procedures 
for institutions to properly submit claims for reimbursement. All valid 
claims shall be paid within 45 calendar days of receipt. Within 15 
calendar days of receipt of any incomplete or incorrect claim which must 
be revised for payment, the State agency shall notify the institution as 
to why and how such claim must be revised. If the State agency disallows 
partial or full payment for a claim for reimbursement, it shall notify 
the institution which submitted the claim of its right to appeal under 
Sec. 226.6(k). State agencies may permit disallowances to be appealed 
separately from claims for reimbursement.
    (l) Participation controls. The State agency may establish control 
procedures to ensure that payment is not made for meals served to 
participants attending in excess of the authorized capacity of each 
independent center, adult day care facility or child care facility.
    (m) Financial management system. Each State agency shall establish a 
financial management system in accordance with the Uniform Federal 
Assistance Regulations, 7 CFR part 3015, and FNS guidance to identify 
allowable Program costs and establish standards for institutional 
recordkeeping and reporting. These standards shall (1) prohibit claiming 
reimbursement for meals provided by a participant's family, except as 
authorized by Sec. 226.18(e) and (2) allow the cost of meals served to 
adults who perform necessary food service labor under the Program, 
except in day care homes. The State agency shall provide guidance on 
financial management requirements to each institution.

[47 FR 36527, Aug. 20, 1982, as amended at 48 FR 21530, May 13, 1983; 
Amdt. 5, 49 FR 18988, May 4, 1984; 50 FR 8580, Mar. 4, 1985; 50 FR 
26975, July 1, 1985; 53 FR 52589, Dec. 28, 1988; Amdt. 22, 55 FR 1378, 
Jan. 14, 1990; 63 FR 9728, Feb. 26, 1998]



Sec. 226.8  Audits.

    (a) Unless otherwise exempt, audits at the State and institution 
levels shall be conducted in accordance with the Office of Management 
and Budget's Circulars A-128 and A-110 and the Department's Uniform 
Federal Assistance Regulations (7 CFR part 3015). Title XIX and title XX 
proprietary institutions not subject to organization-wide audits shall 
be audited by the State agency at least once every two years.
    (b) The funds provided to the State agency under Sec. 226.4(h) may 
be made available to institutions to fund a portion of organization-wide 
audits, provided that the organization-wide audit includes tests of the 
CACFP in accordance with section 10.558 of the Compliance Supplement to 
OMB Circular A-128. The funds provided to an institution for an 
organization-wide audit shall not exceed the portion of the audit's cost 
equal to the CACFP's portion of the total Federal grant.
    (c) Funds provided under Sec. 226.4(h) may be used by the State 
agency to conduct program-specific audits of institutions not subject to 
organization-wide audits, or for which the State agency considers 
program specific audits to be needed. The State agency may use any funds 
remaining after all

[[Page 182]]

required program-specific audits have been performed to conduct 
administrative reviews of institutions.
    (d) Funds provided under Sec. 226.4(h) may only be obligated during 
the fiscal year for which those funds are allocated. If funds provided 
under Sec. 226.4(h) are not sufficient to meet the requirements of this 
section, the State agency may then use available State administrative 
expense funds to conduct audits, provided that the State agency is 
arranging for the audits and has not passed the responsibility down to 
the institution.
    (e) In conducting management evaluations or audits for any fiscal 
year, FNS or OIG may disregard any overpayment which does not exceed 
$100. In conducting State agency sponsored audits in State administered 
programs, the State agency may disregard any overpayment which does not 
exceed the amount established by State law, regulations or procedures as 
a minimum for which claims will be made for State losses generally. No 
overpayment shall be disregarded, however, where there are unpaid claims 
of the same fiscal year from which the overpayment can be deducted, or 
where there is evidence of violation of criminal law or civil fraud 
statutes.
    (f) While OIG shall rely to the fullest extent feasible upon State 
sponsored audits, OIG may, whenever it considers necessary:
    (1) Make audits on a statewide basis;
    (2) Perform on-site test audits;
    (3) Review audit reports and related working papers of audits 
performed by or for State agencies.
    (g) State agencies are not required to provide a hearing to an 
institution for State actions taken on the basis of a Federal audit 
determination. If a State agency does not provide a hearing in such 
situations, FNS will provide a hearing, upon request, in accordance with 
procedures set forth in Sec. 226.6(j) of this part.

[47 FR 36527, Aug. 20, 1982, as amended at 50 FR 8580, Mar. 4, 1985; 51 
FR 4295, Feb. 4, 1986; 52 FR 5526, Feb. 25, 1987; 53 FR 52590, Dec. 28, 
1988; Amdt. 22, 55 FR 1378, Jan. 14, 1990]



                      Subpart D--Payment Provisions



Sec. 226.9  Assignment of rates of reimbursement for centers.

    (a) The State agency shall assign rates of reimbursement, not less 
frequently than annually, on the basis of family-size and income 
information reported by each institution. Assigned rates of 
reimbursement may be changed more frequently than annually if warranted 
by changes in family-size and income information. Assigned rates of 
reimbursement shall be adjusted annually to reflect changes in the 
national average payment rates.
    (b) The State agency shall either:
    (1) Require that institutions submit each month's figures for meals 
served daily to participants from families meeting the eligibility 
standards for free meals, to participants from families meeting the 
eligibility standards for reduced-price meals, and to participants from 
families not meeting such guidelines; or
    (2) Establish claiming percentages, not less frequently that 
annually, for each institution on the basis of the number of enrolled 
participants eligible for free, reduced-price, and paid meals; or
    (3) Determine a blended per-meal rate of reimbursement, not less 
frequently than annually, by adding the products obtained by multiplying 
the applicable national average payment rate of reimbursement for each 
category (free, reduced-price, paid) by the claiming percentage for that 
category.
    (c) States have two methods of reimbursing institutions. The method 
chosen by the State agency must be applied to all institutions 
participating in the Program in that State. These methods are:
    (1) Meals times rates payment, which involves reimbursing an 
institution for meals served at the assigned rate for each meal. This 
method entails no comparison to the costs incurred by the institution 
for the meal service; and,
    (2) Meals times rates or actual costs, whichever is the lesser, 
which involves reimbursing an institution for meals served at the 
assigned rate for each

[[Page 183]]

meal or at the level of the costs actually incurred by the institution 
for the meal service. This method does entail a comparison of the costs 
incurred to the meal rates, with the costs being a limiting factor on 
the level of reimbursement an institution may receive.
    (d) In those States where the State agency has chosen the option to 
implement a meals times rates payment system State-wide, the State 
agency may elect to pay an institution's final claim for reimbursement 
for the fiscal year at higher reassigned rates of reimbursement for 
lunches and suppers; however, the reassigned rates may not exceed the 
applicable maximum rates of reimbursement established under 
Sec. 210.11(b) of the National School Lunch Program regulations. In 
those States which use the method of comparing meals times rates or 
actual costs, whichever is lesser, the total payments made to an 
institution shall not exceed the total net costs incurred for the fiscal 
year.

[47 FR 36527, Aug. 20, 1982, as amended at 48 FR 21530, May 13, 1983; 53 
FR 52590, Dec. 28, 1988; Amdt. 22, 55 FR 1378, Jan. 14, 1990]



Sec. 226.10  Program payment procedures.

    (a) By the first day of each month of operation, the State agency 
shall provide an advance payment to each institution electing to receive 
such payments, in accordance with Sec. 226.6(b)(10). Advance payments 
shall equal the full level of claims estimated by the State agency to be 
submitted in accordance with paragraph (c) of this section, considering 
prior reimbursement claims and other information such as fluctuations in 
enrollment. The institution may decline to receive all or any part of 
the advance.
    (b) For each fiscal year, the amount of payment made, including 
funds advanced to an institution, shall not exceed the amount of valid 
reimbursement claimed by that institution. To ensure that institutions 
do not receive excessive advance payments, the State agency shall 
observe the following procedures:
    (1) After three advance payments have been made to an institution, 
the State agency shall ensure that no subsequent advance is made until 
the State agency has validated the institution's claim for reimbursement 
for the third month prior to the month for which the next advance is to 
be paid.
    (2) If the State agency has audit or monitoring evidence of 
extensive program deficiencies or other reasons to believe that an 
institution will not be able to submit a valid claim for reimbursement, 
advance payments shall be withheld until the claim is received or the 
deficiencies are corrected.
    (3) Each month the State agency shall compare incoming claims 
against advances to ensure that the level of funds authorized under 
paragraph (a) of this section does not exceed the claims for 
reimbursement received from the institution. Whenever this process 
indicates that excessive advances have been authorized, the State agency 
shall either demand full repayment or adjust subsequent payments, 
including advances.
    (4) If, as a result of year end reconciliation as required by the 
Department's Uniform Federal Assistance Regulations (7 CFR part 3015), 
the State agency determines that reimbursement earned by an institution 
during a fiscal year is less than the amount paid, including funds 
advanced to that institution, the State agency shall demand repayment of 
the outstanding balance or adjust subsequent payments.
    (c) Claims for Reimbursement shall report information in accordance 
with the financial management system established by the State agency, 
and in sufficient detail to justify the reimbursement claimed and to 
enable the State agency to provide the final Report of the Child and 
Adult Care Food Program (FNS 44) required under Sec. 226.7(d). In 
submitting a Claim for Reimbursement, each institution shall certify 
that the claim is correct and that records are available to support that 
claim. Independent proprietary title XX child care centers shall submit 
the number and percentage of the enrolled participants, or the licensed 
capacity receiving title XX benefits for the month claimed for months in 
which not less than 25 percent of the enrolled children or 25 percent of 
licensed capacity, whichever is less, were title XX beneficiaries. 
Sponsoring organizations of such child care centers shall submit

[[Page 184]]

the number and percentage of the enrolled children or licensed capacity, 
whichever is less, receiving title XX benefits for each center for the 
claim. Sponsoring organizations of such centers shall not submit claims 
for child care centers in which less than 25 percent of the enrolled 
children and licensed capacity were title XX beneficiaries for the month 
claimed. Independent proprietary title XIX or title XX adult day care 
centers shall submit the percentages of enrolled adult participants 
receiving title XIX or title XX benefits for the month claimed for 
months in which not less than 25 percent of enrolled adult participants 
were title XIX or title XX beneficiaries. Sponsoring organizations of 
such adult day care centers shall submit the percentage of enrolled 
adult participants receiving title XIX or title XX benefits for each 
center for the claim. Sponsoring organizations of such centers shall not 
submit claims for adult day care centers in which less than 25 percent 
of enrolled adult participants were title XIX or title XX beneficiaries 
for the month claimed.
    (d) All records to support the claim shall be retained for a period 
of three years after the date of submission of the final claim for the 
fiscal year to which they pertain, except that if audit findings have 
not been resolved, the records shall be retained beyond the end of the 
three year period as long as may be required for the resolution of the 
issues raised by the audit. All accounts and records pertaining to the 
Program shall be made available, upon request, to representatives of the 
State agency, of the Department, and of the U.S. General Accounting 
Office for audit or review, at a reasonable time and place.
    (e) Unless otherwise approved by FNS, the Claim for Reimbursement 
for any month shall cover only Program operations for that month except 
if the first or last month of Program operations in any fiscal year 
contains 10 operating days or less, such month may be added to the Claim 
for Reimbursement for the appropriate adjacent month; however, Claims 
for Reimbursement may not combine operations occurring in two fiscal 
years. A final Claim for Reimbursement shall be postmarked and/or 
submitted to the State agency not later than 60 days following the last 
day of the full month covered by the claim. State agencies may establish 
shorter deadlines at their discretion. Claims not postmarked and/or 
submitted within 60 days shall not be paid with Program funds unless FNS 
determines that an exception should be granted. The State agency shall 
promptly take corrective action with respect to any Claim for 
Reimbursement as determined necessary through its claim review process 
or otherwise. In taking such corrective action, State agencies may make 
upward adjustments in Program funds claimed on claims filed within the 
60 day deadline if such adjustments are completed within 90 days of the 
last day of the claim month and are reflected in the final Report of the 
Child and Adult Care Food Programs (FNS-44) for the claim month which is 
required under 226.7(d). Upward adjustments in Program funds claimed 
which are not reflected in the final FNS-44 for the claim month shall 
not be made unless authorized by FNS. Downward adjustments in Program 
funds claimed shall always be made without FNS authorization regardless 
of when it is determined that such adjustments are necessary.
    (f) If a State agency has reason to believe that an institution or 
food service management company has engaged in unlawful acts with 
respect to Program Operations, evidence found in audits, investigations 
or other reviews shall be a basis for non-payment of claims for 
reimbursement.

[47 FR 36527, Aug. 20, 1982, as amended by Amdt. 5, 49 FR 18988, May 4, 
1984; 50 FR 26975, July 1, 1985; 53 FR 52590, Dec. 28, 1988; Amdt. 22, 
55 FR 1378, Jan. 14, 1990; 62 FR 23618, May 1, 1997]



Sec. 226.11  Program payments for child care centers, adult day care centers and outside-school-hours care centers.

    (a) Payments shall be made only to institutions operating under an 
agreement with the State agency for the meal types specified in the 
agreement served at approved child care centers, adult day care centers 
and outside-school-hours care centers. A State

[[Page 185]]

agency may make payment for meals served in accordance with provisions 
of the Program in the calendar month preceding the calendar month in 
which the agreement is executed.
    (b) Each child care institution shall report each month to the State 
agency the total number of meals, by type (breakfasts, lunches, suppers, 
and supplements), served to children, except that such reports shall be 
made for a proprietary title XX center only for calendar months during 
which not less than 25 percent of enrolled children, or 25 percent of 
licensed capacity, whichever is less, were title XX beneficiaries. Each 
adult day care institution shall report each month to the State agency 
the total number of meals, by type (breakfasts, lunches, suppers, and 
supplements), served to adult participants, except that such reports 
shall be made for a proprietary title XIX or title XX center only for 
calendar months during which no less than 25 percent of enrolled adult 
participants were title XIX or title XX beneficiaries.
    (c) Each State agency shall base reimbursement to each child care 
institution on the number of meals, by type, served to children 
multiplied by the assigned rates of reimbursement, except that 
reimbursement shall be payable to proprietary title XX child care 
centers only for calendar months during which not less than 25 percent 
of enrolled children, or 25 percent of licensed capacity, whichever is 
less, were title XX beneficiaries. Each State agency shall base 
reimbursement to each adult day care institution on the number of meals, 
by type, served to adult participants multiplied by the assigned rates 
of reimbursement, except that reimbursement shall be payable to 
proprietary title XIX and title XX adult day care centers only for 
calendar months during which not less than 25 percent of enrolled adult 
participants were title XIX or Title XX beneficiaries. In computing 
reimbursement, the State agency shall either:
    (1) Base reimbursement to institutions on actual daily counts of 
meals served, and multiply the number of meals, by type, served to 
participants eligible to receive free meals, served to participants 
eligible to receive reduced-price meals, and served to participants from 
families not meeting such standards by the applicable national average 
payment rate; or
    (2) Apply the applicable claiming percentage or percentages to the 
total number of meals, by type, served to participants and multiply the 
product or products by the assigned rate of reimbursement for each meal 
type; or
    (3) Multiply the assigned blended per meal rate of reimbursement by 
the total number of meals, by type, served to participants.
    (d) If the State agency elects to reimburse its institutions 
according to the lesser of rates or actual costs, total Program payments 
to an institution during any fiscal year, including any cash payments in 
lieu of commodities, shall not exceed allowable Program operating and 
administrative costs, less income to the Program. The State agency may 
limit payments for administrative costs to the amount approved in the 
annual administrative budget of the institution. The State agency may 
prohibit an institution from using payments for operating costs to pay 
for administrative expenses.
    (e) Each institution shall maintain records as prescribed by the 
State agency's financial management system.

[47 FR 36527, Aug. 20, 1982, as amended at 48 FR 21530, May 13, 1983; 52 
FR 36907, Oct. 2, 1987; 53 FR 52590, Dec. 28, 1988; 62 FR 23618, May 1, 
1997]



Sec. 226.12  Administrative payments to sponsoring organizations for day care homes.

    (a) General. Sponsoring organizations for day care homes shall 
receive payments for administrative costs. During any fiscal year, 
administrative costs payments to a sponsoring organization may not 
exceed the lesser of (1) actual expenditures for the costs of 
administering the Program less income to the Program, or (2) the amount 
of administrative costs approved by the State agency in the sponsoring 
organization's budget, or (3) the sum of the products obtained by 
multiplying each month the sponsoring organization's:
    (i) Initial 50 day care homes by 42 dollars;
    (ii) Next 150 day care homes by 32 dollars;

[[Page 186]]

    (iii) Next 800 day care homes by 25 dollars; and
    (iv) Additional day care homes by 22 dollars.

During any fiscal year, administrative payments to a sponsoring 
organization may not exceed 30 percent of the total amount of 
administrative payments and food service payments for day care home 
operations.

    (b) Start-up and expansion payments. (1) Prospective sponsoring 
organizations of day care homes, participating sponsoring organizations 
of child care centers or outside-school-hours care centers, independent 
centers, and participating sponsoring organizations of less than 50 
homes which meet the criteria in paragraph (b)(2) of this section shall 
be entitled to receive start-up payments to develop or expand successful 
Program operations in day care homes. Participating sponsoring 
organizations of day care homes which meet the criteria in paragraph 
(b)(2) of this section shall be entitled to receive expansion payments 
to initiate or expand Program operations in day care homes in low-income 
or rural areas. The State agency shall approve start-up payments only 
once for any eligible sponsoring organization, but may approve expansion 
payments for any eligible sponsoring organization more than once, 
provided that: the request must be for expansion into an area(s) other 
than that specified in their initial or prior request; and 12 months has 
elapsed since the sponsoring organization has satisfied all obligations 
under its initial or prior expansion agreement. Eligible sponsoring 
organizations which have received start-up payments shall be eligible to 
apply for expansion payments at a date no earlier than 12 months after 
it has satisfied all its obligations under its start-up agreement with 
the State agency.
    (2) Sponsoring organizations which apply for start-up or expansion 
payments shall evidence:
    (i) Public or tax-exempt status, or moving toward compliance with 
the requirements for IRS tax-exempt status, in accordance with 
Sec. 226.15(a);
    (ii) An organizational history of managing funds and ongoing 
activities (i.e., administering public or private programs);
    (iii) An acceptable and realistic plan for recruiting day care homes 
to participate in the Program (such as the method of contacting 
providers), which may be based on estimates of the number of day care 
homes to be recruited and information supporting their existence, and in 
the case of sponsoring organizations applying for expansion payments, 
documentation that the day care homes to be recruited are located in 
low-income or rural areas; and
    (iv) An acceptable preliminary sponsoring organization management 
plan including, but not limited to, plans for preoperational visits and 
training.
    (3) The State agency shall deny start-up and expansion payments to 
applicant sponsoring organizations which fail to meet the criteria of 
paragraph (b)(2) of this section or which have not been financially 
responsible in the operation of other programs funded by Federal, State, 
or local governments. The State agency shall notify the sponsoring 
organization of the reasons for denial and allow the sponsoring 
organization full opportunity to submit evidence on appeal as provided 
for in Sec. 226.6(k). Any sponsoring organization applying for start-up 
or expansion funds shall be notified of approval or disapproval by the 
State agency in writing within 30 calendar days of filing a complete and 
correct application. If a sponsoring organization submits an incomplete 
application, the State agency shall notify the sponsoring organization 
within 15 calendar days of receipt of the application and shall provide 
technical assistance, if necessary, to the sponsoring organization for 
the purpose of completing its application.
    (4) Sponsoring organizations which apply for and meet the criteria 
for start-up or expansion payments shall enter into an agreement with 
the State agency. The agreement shall specify:
    (i) Activities which the sponsoring organization will undertake to 
initiate or expand Program operations in day care homes;
    (ii) The amount of start-up or expansion payments to be issued to 
the sponsoring organization, together with an administrative budget 
detailing the costs which the sponsoring organization shall incur, 
document, and claim;

[[Page 187]]

    (iii) The time allotted to the sponsoring organization for the 
initiation or expansion of Program operations in family day care homes;
    (iv) The responsibility of the applicant sponsoring organization to 
repay, upon demand by the State agency, start-up or expansion payments 
not expended in accordance with the agreement.
    (5) Upon execution of the agreement, the State agency shall issue a 
start-up or expansion payment to the sponsoring organization in an 
amount equal to not less than one, but not more than two month's 
anticipated administrative reimbursement to the sponsoring organization 
as determined by the State agency. However, no sponsoring organization 
may receive start-up or expansion payments for more than 50 day care 
homes. Eligible sponsoring organizations with fewer than 50 homes under 
their jurisdiction at the time of application for start-up payments may 
receive such payments for up to 50 homes, less the number of homes under 
their jurisdiction. Eligible sponsoring organizations applying for 
expansion funds may receive at a maximum such payments for up to 50 
homes at the currently assigned administrative payment for the first 50 
homes. In determining the amount of start-up or expansion payments to be 
made to a sponsoring organization, the State agency shall consider the 
anticipated level of start-up or expansion costs to be incurred by the 
sponsoring organization and alternate sources of funds available to the 
sponsoring organization.
    (6) Upon expiration of the time allotted to the sponsoring 
organization for initiating or expanding Program operations in day care 
homes, the State agency shall obtain and review documentation of 
activities performed and costs incurred by the sponsoring organization 
under the terms of the start-up or expansion agreement. If the 
sponsoring organization has not made every reasonable effort to carry 
out the activities specified in the agreement, the State agency shall 
demand repayment of all or part of the payment. The sponsoring 
organization may retain start-up or expansion payments for all day care 
homes which initiate Program operations. However, no sponsoring 
organization may retain any start-up or expansion payments in excess of 
its actual costs for the expenditures specified in the agreement.

[47 FR 36527, Aug. 20, 1982; 47 FR 46072, Oct. 15, 1982, as amended at 
53 FR 52590, Dec. 28, 1988; 63 FR 9728, Feb. 26, 1998]



Sec. 226.13  Food service payments to sponsoring organizations for day care homes.

    (a) Payments shall be made only to sponsoring organizations 
operating under an agreement with the State agency for the meal types 
specified in the agreement served to enrolled nonresident children and 
eligible enrolled children of day care home providers, at approved day 
care homes.
    (b) Each sponsoring organization shall report each month to the 
State agency the total number of meals, by type (breakfasts, lunches, 
suppers, and supplements) and by category (tier I and tier II), served 
to children enrolled in approved day care homes.
    (c) Each sponsoring organization shall receive payment for meals 
served to children enrolled in approved day care homes at the tier I and 
tier II reimbursement rates, as applicable, and as established by law 
and adjusted in accordance with Sec. 226.4. However, the rates for 
lunches and suppers shall be reduced by the value of commodities 
established under Sec. 226.5(b) for all sponsoring organizations for day 
care homes which have elected to receive commodities. For tier I day 
care homes, the full amount of food service payments shall be disbursed 
to each day care home on the basis of the number of meals served, by 
type, to enrolled children. For tier II day care homes, the full amount 
of food service payments shall be disbursed to each day care home on the 
basis of the number of meals served to enrolled children by type, and by 
category (tier I and tier II) as determined in accordance with 
paragraphs (d)(2) and (d)(3) of this section. However, the sponsoring 
organization may withhold from Program payments to each home an amount 
equal to costs incurred for the provision of Program foodstuffs or meals 
by the sponsoring organization on behalf

[[Page 188]]

of the home and with the home provider's written consent.
    (d) As applicable, each sponsoring organization for day care homes 
shall:
    (1) Require that tier I day care homes submit the number of meals 
served, by type, to enrolled children.
    (2) Require that tier II day care homes in which the provider elects 
not to have the sponsoring organization identify enrolled children who 
are eligible for free or reduced price meals submit the number of meals 
served, by type, to enrolled children.
    (3) Not more frequently than annually, select one of the methods 
described in paragraphs (d)(3) (i)-(iii) of this section for all tier II 
day care homes in which the provider elects to have the sponsoring 
organization identify enrolled children who are eligible for free or 
reduced price meals. In such homes, the sponsoring organization shall 
either:
    (i) Require that such day care homes submit the number and types of 
meals served each day to each enrolled child by name. The sponsoring 
organization shall use the information submitted by the homes to produce 
an actual count, by type and by category (tier I and tier II), of meals 
served in the homes; or
    (ii) Establish claiming percentages, not less frequently than 
semiannually, for each such day care home on the basis of one month's 
data concerning the number of enrolled children determined eligible for 
free or reduced-price meals. Sponsoring organizations shall obtain one 
month's data by collecting either enrollment lists (which show the name 
of each enrolled child in the day care home), or attendance lists (which 
show, by days or meals, the rate of participation of each enrolled child 
in the day care home). The State agency may require a sponsoring 
organization to recalculate the claiming percentage for any of its day 
care homes before the required semiannual calculation if the State 
agency has reason to believe that a home's percentage of income-eligible 
children has changed significantly or was incorrectly established in the 
previous calculation. Under this system, day care homes shall be 
required to submit the number of meals served, by type, to enrolled 
children; or
    (iii) Determine a blended per-meal rate of reimbursement, not less 
frequently than semiannually, for each such day care home by adding the 
products obtained by multiplying the applicable rates of reimbursement 
for each category (tier I and tier II) by the claiming percentage for 
that category, as established in accordance with paragraph (d)(3)(ii) of 
this section. The State agency may require a sponsoring organization to 
recalculate the blended rate for any of its day care homes before the 
required semiannual calculation if the State agency has reason to 
believe that a home's percentage of income-eligible children has changed 
significantly or was incorrectly established in the previous 
calculation. Under this system, day care homes shall be required to 
submit the number of meals served, by type, to enrolled children.

[47 FR 36527, Aug. 20, 1982, as amended at 62 FR 903, Jan. 7, 1997; 62 
FR 5519, Feb. 6, 1997; 63 FR 9105, Feb. 24, 1998]



Sec. 226.14  Claims against institutions.

    (a) State agencies shall disallow any portion of a claim for 
reimbursement and recover any payment to an institution not properly 
payable under this part. State agencies may consider claims for 
reimbursement not properly payable if an institution does not comply 
with the recordkeeping requirements contained in this part. In addition, 
except with approval from the appropriate FNSRO, State agencies shall 
consider claims for reimbursement not payable when an institution fails 
to comply with the recordkeeping requirements that pertain to records 
directly supporting claims for reimbursement. Records that directly 
support claims for reimbursement include, but are not limited to, daily 
meal counts, menu records, and enrollment and attendance records, as 
required by Sec. 226.15(e). State agencies shall assert overclaims 
against any sponsoring organization of day care homes which 
misclassifies a day care home as a tier I day care home unless the 
misclassification is determined to be inadvertent under guidance issued 
by FNS. However, the State agency shall notify the institution of the 
reasons for

[[Page 189]]

any disallowance or demand for repayment, and allow the institution full 
opportunity to submit evidence on appeal as provided for in 
Sec. 226.6(k). Miminum State agency collection procedures for unearned 
payments shall include:
    (1) Written demand to the institution for the return of improper 
payments; (2) if, after 30 calendar days, the institution fails to remit 
full payment or agree to a satisfactory repayment schedule, a second 
written demand for the return of improper payments sent by certified 
mail return receipt requested; and (3) if, after 60 calendar days, the 
institution fails to remit full payment or agree to a satisfactory 
repayment schedule, the State agency shall refer the claim against the 
institution to appropriate State or Federal authorities for pursuit of 
legal remedies.
    (b) In the event that the State agency finds that an institution 
which prepares its own meals is failing to meet the meal requirements of 
Sec. 226.20, the State agency need not disallow payment or collect an 
overpayment arising out of such failure if the institution takes such 
other action as, in the opinion of the State agency, will have a 
corrective effect. However, the State agency shall not disregard any 
overpayments or waive collection action arising from the findings of 
Federal audits.
    (c) If FNS does not concur with the State agency's action in paying 
an institution or in failing to collect an overpayment, FNS shall notify 
the State agency of its intention to assert a claim against the State 
agency. In all such cases, the State agency shall have full opportunity 
to submit evidence concerning the action taken. The State agency shall 
be liable to FNS for failure to collect an overpayment, unless FNS 
determines that the State agency has conformed with this part in issuing 
the payment and has exerted reasonable efforts to recover the improper 
payment.

[47 FR 36527, Aug. 20, 1982; 47 FR 46072, Oct. 15, 1982, as amended at 
50 FR 8580, Mar. 4, 1985; 53 FR 52590, Dec. 28, 1988; 62 FR 903, Jan. 7, 
1997; 64 FR 72260, Dec. 27, 1999]



                    Subpart E--Operational Provisions



Sec. 226.15  Institution provisions.

    (a) Tax-exempt status. Except for proprietary title XIX and title XX 
centers, and sponsoring organizations of such centers, institutions 
shall be public, or have tax-exempt status under the Internal Revenue 
Code of 1986, or be moving toward compliance with the requirements for 
tax-exempt status, or be currently operating another Federal program 
requiring nonprofit status. An institution which has applied to IRS for 
tax-exempt status may participate in the program while its application 
is pending review by IRS. It shall, however, be the responsibility of 
the institution to document that it has complied with all requirements 
of IRS and has provided all information requested. If IRS denies the 
application for tax-exempt status, the institution shall immediately 
notify the State agency of such denial. The State agency shall then 
terminate the participation of the institution. If IRS certification of 
tax-exempt status has not been received within 12 months of filing the 
application with IRS, and IRS indicates that the institution has failed 
to provide all required information, the State agency shall terminate 
the participation of the institution until such time as IRS tax-exempt 
status is obtained.
    (b) Applications. Each institution shall submit to the State agency 
all information required for its approval. As a minimum, such 
information shall include:
    (1) Except for proprietary title XIX and title XX centers and 
sponsoring organizations or proprietary title XIX and title XX centers, 
evidence of nonprofit status, in accordance with Sec. 226.15(a).
    (2) An application for participation, or application renewal 
materials, accompanied by all necessary supporting documentation;
    (3) An administrative budget;
    (4) If an independent child care center or independent outside-
school-hours care center, documentation that it meets the licensing/
approval requirements of Sec. 226.6(d)(1); or, if an independent adult 
day care center, the licensing/approval requirements of 
Sec. 226.19a(b)(3).

[[Page 190]]

    (5) A nondiscrimination and free and reduced-price policy statement, 
and information regarding a public release, in accordance with 
Sec. 226.23; and
    (6) For each proprietary title XX child care center, documentation 
that it provides nonresidential day care services for which it receives 
compensation under title XX of the Social Security Act, and 
certification that not less than 25 percent of the enrolled children, or 
25 percent of the licensed capacity, whichever is less, during the most 
recent calendar month were title XX beneficiaries. For each proprietary 
title XIX or title XX adult day care center, documentation that it 
provides nonresidential day care services for which it receives 
compensation under title XIX or title XX of the Social Security Act, and 
certification that not less than 25 percent of the adult participants 
enrolled during the most recent calendar month were title XIX or title 
XX beneficiaries. Sponsoring organizations shall provide documentation 
and certification for each proprietary title XIX or title XX center 
under its jurisdiction.
    (c) Responsibility. Each institution shall accept final 
administrative and financial responsibility for Program operations. No 
institution may contract out for management of the Program.
    (d) Staffing. Each institution shall provide adequate supervisory 
and operational personnel for management and monitoring of the Program.
    (e) Recordkeeping. Each institution shall establish procedures to 
collect and maintain all program records required under this part, as 
well as any records required by the State agency. Failure to maintain 
such records shall be grounds for the denial of reimbursement for meals 
served during the period covered by the records in question and for the 
denial of reimbursement for costs associated with such records. At a 
minimum, the following records shall be collected and maintained:
    (1) Copies of all applications and supporting documents submitted to 
the State agency;
    (2) Documentation of the enrollment of each participant at child 
care centers, adult day care centers and outside-school-hours care 
centers including information used to determine eligibility for free or 
reduced price meals in accordance with Sec. 226.23(e)(1).
    (3) Documentation of: The enrollment of each child at day care 
homes; information used to determine the eligibility of enrolled 
providers' children for free or reduced price meals; information used to 
classify day care homes as tier I day care homes, including official 
source documentation obtained from school officials when the 
classification is based on elementary school data; and information used 
to determine the eligibility of enrolled children in tier II day care 
homes that have been identified as eligible for free or reduced price 
meals in accordance with Sec. 226.23(e)(1).
    (4) Daily records indicating the number of participants in 
attendance and the number of meals, by type (breakfast, lunch, supper, 
and supplements), served to participants.
    (5) For child care centers and outside-school-hours care centers 
claiming reimbursement for two meals and two supplements or three meals 
and one supplement per child per day, either:
    (i) Documentation of total time-in-attendance for each child at the 
center for each day for which the fourth meal service was claimed, 
including a time-in/time-out form which records time-in-attendance for 
each child at the center; or, at the discretion of the State agency,
    (ii) Documentation which demonstrates that at least eight hours 
elapse between the end of the first meal service and the beginning of 
the fourth meal service on any day in which reimbursement is claimed for 
a fourth meal; service.
    (6) Except at day care homes, daily records indicating the number of 
meals, by type, served to adults performing labor necessary to the food 
service;
    (7) Copies of invoices, receipts, or other records required by the 
State agency financial management instruction to document:
    (i) Administrative costs claimed by the institution;
    (ii) Operating costs claimed by the institution except sponsoring 
organizations of day care homes; and
    (iii) Income to the Program.

[[Page 191]]

    (8) Copies of all claims for reimbursement submitted to the State 
agency;
    (9) Receipts for all Program payments received from the State 
agency;
    (10) If applicable, information concerning the dates and amounts of 
disbursement to each child care facility or adult day care facility 
under its auspices;
    (11) Copies of menus, and any other food service records required by 
the State agency;
    (12) If applicable, information concerning the location and dates of 
each child care or adult day care facility review, any problems noted, 
and the corrective action prescribed and effected;
    (13) Information on training session date(s) and location(s), as 
well as topics presented and names of participants; and
    (14) Documentation of nonprofit food service to ensure that all 
Program reimbursement funds are used: (i) Solely for the conduct of the 
food service operation; or (ii) to improve such food service operations, 
principally for the benefit of the enrolled participants.
    (f) Day care home classifications. Each sponsoring organization of 
day care homes shall determine which of the day care homes under its 
sponsorship are eligible as tier I day care homes. A sponsoring 
organization may use current school or census data provided by the State 
agency or free and reduced price applications collected from day care 
home providers in making a determination for each day care home. When 
using elementary school or census data for making tier I day care home 
determinations, a sponsoring organization shall first consult school 
data, except in cases in which busing or other bases of attendance, such 
as magnet or charter schools, result in school data not being 
representative of an attendance area's household income levels. In these 
cases, census data should generally be consulted instead of school data. 
A sponsoring organization may also use census data if, after reasonable 
efforts are made, as defined by the State agency, the sponsoring 
organization is unable to obtain local elementary school attendance area 
information. A sponsoring organization may also consult census data 
after having consulted school data which fails to support a tier I day 
care home determination for rural areas with geographically large 
elementary school attendance areas, for other areas in which an 
elementary school's free and reduced price enrollment is above 40 
percent, or in other cases with State agency approval. However, if a 
sponsoring organization believes that a segment of an otherwise eligible 
elementary school attendance area is above the criteria for free or 
reduced price meals, then the sponsoring organization shall consult 
census data to determine whether the homes in that area qualify as tier 
I day care homes based on census data. If census data does not support a 
tier I classification, then the sponsoring organization shall reclassify 
homes in segments of such areas as tier II day care homes unless the 
individual providers can document tier I eligibility on the basis of 
their household income. When making tier I day care home determinations 
based on school data, a sponsoring organization shall use attendance 
area information that it has obtained, or verified with appropriate 
school officials to be current, within the last school year. 
Determinations of a day care home's eligibility as a tier I day care 
home shall be valid for one year if based on a provider's household 
income, three years if based on school data, or until more current data 
are available if based on census data. However, a sponsoring 
organization, State agency, or FNS may change the determination if 
information becomes available indicating that a home is no longer in a 
qualified area. The State agency shall not routinely require annual 
redeterminations of the tiering status of tier I day care homes based on 
updated elementary school data.
    (g) Claims submission. Each institution shall submit claims for 
reimbursement to the State agency in accordance with Sec. 226.10.
    (h) Program agreement. Each institution shall enter into a Program 
agreement with the State agency in accordance with Sec. 226.6(f)(1).
    (i) Commodities. Each institution receiving commodities shall ensure 
proper commodity utilization.
    (j) Special Milk Program. No institution may participate in both the 
Child

[[Page 192]]

and Adult Care Food Program and the Special Milk Program at the same 
time.
    (k) Elderly feeding programs. Institutions which are school food 
authorities (as defined in part 210 of this chapter) may use facilities, 
equipment and personnel supported by funds provided under this part to 
support a nonprofit nutrition program for the elderly, including a 
program funded under the Older Americans Act of 1965 (42 U.S.C. 3001 et 
seq.).

[47 FR 36527, Aug. 20, 1982, as amended at 48 FR 21530, May 13, 1983; 50 
FR 8580, Mar. 4, 1985; 52 FR 15298, Apr. 28, 1987; 52 FR 36907, Oct. 2, 
1987; 53 FR 52590, Dec. 28, 1988; 54 FR 26724, June 26, 1989; Amdt. 22, 
55 FR 1378, Jan. 14, 1990; 56 FR 58174, Nov. 16, 1991; 61 FR 25554, May 
22, 1996; 62 FR 903, Jan. 7, 1997; 62 FR 23619, May 1, 1997; 63 FR 9105, 
Feb. 24, 1998; 64 FR 72260, Dec. 27, 1999]



Sec. 226.16  Sponsoring organization provisions.

    (a) Each sponsoring organization shall comply with all provisions of 
Sec. 226.15.
    (b) Each sponsoring organization shall submit to the State agency 
all information required for its approval and the approval of all child 
care and adult day care facilities under its jurisdiction, including:
    (1) A sponsoring organization management plan, in accordance with 
Sec. 226.6(f)(2);
    (2) An application for participation, or renewal materials, for each 
child care and adult day care facility accompanied by all necessary 
supporting documentation; and
    (3) Timely information concerning the eligibility status of child 
care and adult day care facilities (such as licensing/approval actions).
    (c) Each sponsoring organization shall accept final administrative 
and financial responsibility for food service operations in all child 
care and adult day care facilities under its jurisdiction.
    (d) Each sponsoring organization shall provide adequate supervisory 
and operational personnel for the effective management and monitoring of 
the program at all child care and adult day care facilities under its 
jursidiction. At a minimum, such Program assistance shall include:
    (1) Pre-approval visits to each child care and adult day care 
facility for which application is made to discuss Program benefits and 
verify that the proposed food service does not exceed the capability of 
the child care facility;
    (2) Staff training for all child care and adult day care facilities 
in Program duties and responsibilities prior to beginning Program 
operations;
    (3) Additional training sessions, to be provided not less frequently 
than annually; and
    (4) Reviews of food service operations to assess compliance with 
meal pattern, recordkeeping, and other Program requirements. Such 
reviews shall be made not less frequently than:
    (i) Three times each year at each child care center and adult day 
care center, provided at least one review is made during each child care 
or adult day care center's first six weeks of Program operations and not 
more than six months elapse between reviews;
    (ii) Three times each year at each day care home, provided at least 
one review is made during each day care home's first four weeks of 
Program operations and not more than six months elapse between reviews. 
However, based on case-by-case findings by the State agency that 
improved efficiency and more effective management will result and 
subject to FNSRO approval, State agencies may allow some or all of their 
sponsors to conduct reviews an average of three times each year per day 
care home, provided that each day care home is reviewed at least twice 
each year, at least one review is made during each day care home's first 
four weeks of Program operations, and no more than six months elapse 
between reviews; and
    (iii) Six times each year for each outside-school-hours care center, 
provided at least one review is made during each outside-school-hours 
care center's first four weeks of Program operations and not more than 
three months elapse between reviews.
    (e) Each sponsoring organization shall comply with the recordkeeping 
requirements established in Sec. Sec. 226.10(d) and 226.15(e) and any 
recordkeeping requirements established by the State agency in order to 
justify the administrative payments made in accordance

[[Page 193]]

with Sec. 226.12(a). Failure to maintain such records shall be grounds 
for the denial of reimbursement.
    (f) The State agency may require a sponsoring organization to enter 
into separate agreements for the administration of separate types of 
facilities (child care centers, day care homes, adult day care centers, 
and outside-school-hours care centers).
    (g) Each sponsoring organization electing to receive advance 
payments of program funds for day care homes shall disburse the full 
amount of such payments within five working days of receipt from the 
State agency. If the sponsor requests the full operating advance to 
which it is entitled, the advances to day care homes shall be the full 
amount which the sponsor expects the home to earn based on the number of 
meals projected to be served to enrolled children during the period 
covered by the advance multiplied by the applicable payment rate as 
specified in Sec. 226.13(c). If a sponsor elects to receive only a part 
of the operating advance to which it is entitled, or if the full 
operating advance is insufficient to provide a full advance to each 
home, the advance shall be disbursed to its homes in a manner and an 
amount the sponsor deems appropriate. Each sponsor shall disburse any 
reimbursement payments for food service due to each day care home within 
five working days of receipt from the State agency. Such payment shall 
be based on the number of meals served to enrolled children at each day 
care home, less any payments advanced to such home. However, the 
sponsoring organization may withhold from Program payments to each home 
an amount equal to food service operating costs incurred by the 
sponsoring organization in behalf of the home and with the home 
provider's written consent. If payments from the State agency are not 
sufficient to provide all day care homes under the sponsoring 
organization's jurisdiction with advance payments and reimbursement 
payments, available monies shall be used to provide all due 
reimbursement payments before advances are disbursed.
    (h) Sponsoring organizations shall make payments of program funds to 
child care centers, adult day care centers or outside-school-hours care 
centers within five working days of receipt from the State agency, on 
the basis of the management plan approved by the State agency, and may 
not exceed the Program costs documented at each facility during any 
fiscal year; except in those States where the State agency has chosen 
the option to implement a meals times rates payment system. In those 
States which implement this optional method of reimbursement, such 
disbursements may not exceed the rates times the number of meals 
documented at each facility during any fiscal year.
    (i) Disbursements of advance payments may be withheld from child and 
adult day care facilities which fail to submit reports required by 
Sec. 226.15(e).
    (j) A for-profit organization shall be eligible to serve as a 
sponsoring organization for proprietary title XIX or title XX centers 
which have the same legal identity as the organization, but shall not be 
eligible to sponsor proprietary title XIX or title XX centers which are 
legally distinct from the organization, day care homes, or public or 
private nonprofit centers.
    (k) Before sponsoring organizations expend administrative funds to 
assist family day care homes in becoming licensed, they shall obtain the 
following information from each such home: a completed free and reduced 
price application which documents that the provider meets the Program's 
income standards; evidence of its application for licensing and official 
documentation of the defects that are impeding its licensing approval; 
and a completed CACFP application. These funding requests are limited to 
$300 per home and are only available to each home once.

[47 FR 36527, Aug. 20, 1982; 47 FR 46072, Oct. 15, 1982, as amended at 
48 FR 21530, May 13, 1983; 50 FR 8580, Mar. 4, 1985; 50 FR 26975, July 
1, 1985; 53 FR 52591, Dec. 28, 1988; 63 FR 9729, Feb. 26, 1998; 64 FR 
72260, Dec. 27, 1999]



Sec. 226.17  Child care center provisions.

    (a) Child care centers may participate in the Program either as 
independent centers or under the auspices of a sponsoring organization; 
provided, however, that public and private nonprofit centers shall not 
be eligible to participate in the Program under the

[[Page 194]]

auspices of a for-profit sponsoring organization. Child care centers 
participating as independent centers shall comply with the provisions of 
Sec. 226.15.
    (b) All child care centers, independent or sponsored, shall meet the 
following requirements
    (1) Child care centers shall have Federal, State, or local licensing 
or approval to provide day care services to children. Child care centers 
which are complying with applicable procedures to renew licensing or 
approval may participate in the Program during the renewal process, 
unless the State agency has information which indicates that renewal 
will be denied. If licensing or approval is not available, a center may 
participate if:
    (i) It receives title XX funds for child care; or
    (ii) It demonstrates compliance with the CACFP child care standards 
or any applicable State or local child care standards to the State 
agency.
    (2) Except for proprietary title XX centers, child care centers 
shall be public, or have tax exempt status under the Internal Revenue 
Code of 1986, or be moving toward compliance with the requirements for 
tax-exempt status, or be currently operating another Federal program 
requiring nonprofit status. A child care center which has applied to the 
Internal Revenue Service (IRS) for tax-exempt status may participate in 
the Program while its application is pending review by IRS. If IRS 
denies the application for tax-exempt status, the child care center 
shall immediately notify the State agency of such denial and the State 
agency shall terminate the participation of the child care center. If 
IRS certification of nonprofit status has not been received within 12 
months of filing the application with IRS, and IRS indicates that the 
child care center has failed to provide all required information, the 
State agency shall terminate the participation of the child care center 
until such time as IRS tax-exempt status is obtained.
    (3) Each child care center participating in the Program shall serve 
one or more of the following meal types: (i) Breakfast, (ii) lunch, 
(iii) supper, and (iv) supplemental food. Reimbursement shall not be 
claimed for more than two meals and one supplement provided daily to 
each child, except that reimbursement may be claimed for two meals and 
two supplements or three meals and one supplement served to a child for 
each day in which that child is maintained in care for eight or more 
hours.
    (4) Each child care center participating in the Program shall claim 
only the meal types specified in its approved application in accordance 
with the meal pattern requirements specified in Sec. 226.20. 
Reimbursement may not be claimed for meals served to children who are 
not enrolled, or for meals served to children at any one time in excess 
of the child care center's authorized capacity, or for any meal served 
at a proprietary title XX center during a calendar month when less than 
25 percent of enrolled children or 25 percent of licensed capacity, 
whichever is less, were title XX beneficiaries. Menus and any other 
nutritional records required by the State agency shall be maintained to 
document compliance with such requirements.
    (5) A child care center with pre-school children may also be 
approved to serve a breakfast, supplement, and supper to school-age 
children enrolled in an outside-school-hours care program meeting the 
criteria of Sec. 226.19(b) which is distinct from its day care program 
for preschool-age children. The State agency may authorize the service 
of lunch to such enrolled children who attend a school which does not 
offer a lunch program provided the limit of not more than two meals and 
one supplement per child per day is not exceeded. If the majority of 
children served by the center are participating in an outside-school-
hours care program, the center shall comply with reporting requirements 
of Sec. 226.19 and, if it is a facility, shall be monitored by the 
sponsoring organization at the frequency specified in 
Sec. 226.16(d)(4)(iii).
    (6) A child care center may utilize existing school food service 
facilities or obtain meals from a school food service facility, and the 
pertinent requirements of this part shall be embodied in a written 
agreement between the child care center and school. The center shall 
maintain responsibility for all Program requirements set forth in this 
part.

[[Page 195]]

    (7) Child care centers shall collect and maintain documentation of 
the enrollment of each child, including information used to determine 
eligibility for free and reduced price meals in accordance with 
Sec. 226.23(e)(1). In addition, Head Start participants need only have a 
Head Start statement of income eligibility, or a statement of Head Start 
enrollment from an authorized Head Start representative, to be eligible 
for free meal benefits under the CACFP.
    (8) Each child care center shall maintain daily records of the 
number of meals by type (breakfast, lunch, supper, and supplements) 
served to enrolled children, and to adults performing labor necessary to 
the food service.
    (c) Each child care center shall comply with the recordkeeping 
requirements established in Sec. 226.10(d), in paragraph (b) of this 
section and, if applicable, in Sec. 226.15(e). Failure to maintain such 
records shall be grounds for the denial of reimbursement.

[47 FR 36527, Aug. 20, 1982, as amended at 52 FR 36907, Oct. 2, 1987; 53 
FR 52591, Dec. 28, 1988; 54 FR 26724, June 26, 1989; Amdt. 22, 55 FR 
1378, Jan. 14, 1990; 61 FR 25554, May 22, 1996; 62 FR 23619, May 1, 
1997; 63 FR 9729, Feb. 26, 1998; 64 FR 72261, Dec. 27, 1999]



Sec. 226.18  Day care home provisions.

    (a) Day care homes shall have current Federal, State or local 
licensing or approval to provide day care services to children. Day care 
homes which cannot obtain their license because they lack the funding to 
comply with licensing standards may request a total limit per home of 
$300 in administrative funds from a sponsoring organization to assist 
them in obtaining their license. Day care homes that, at the option of 
their sponsoring organization, receive administrative funds for 
licensing-related expenses must complete documentation requested by 
their sponsor as described in Sec. 226.16(k) prior to receiving any 
funds. Day care homes which are complying with applicable procedures to 
renew licensing or approval may participate in the Program during the 
renewal process, unless the State agency has information which indicates 
that renewal will be denied. If licensing or approval is not available, 
a day care home may participate in the Program if:
    (1) It receives title XX funds for providing child care; or
    (2) It demonstrates compliance with CACFP child care standards or 
applicable State or local child care standards to the State agency.
    (b) Day care homes participating in the program shall operate under 
the auspices of a public or private nonprofit sponsoring organization. 
Sponsoring organizations shall enter into a written agreement with each 
sponsored day care home which specifies the rights and responsibilities 
of both parties. This agreement shall be developed by the State agency, 
unless the State agency elects, at the request of the sponsor, to 
approve an agreement developed by the sponsor. At a minimum, the 
agreement shall embody:
    (1) The right of the sponsoring organization, the State agency, and 
the Department to visit the day care home and review its meal service 
and records during its hours of child care operations;
    (2) The responsibility of the sponsoring organization to train the 
day care home's staff in program requirements;
    (3) The responsibility of the day care home to prepare and serve 
meals which meet the meal patterns specified in Sec. 226.20;
    (4) The responsibility of the day care home to maintain records of 
menus, and of the number of meals, by type, served to enrolled children;
    (5) The responsibility of the day care home to promptly inform the 
sponsoring organization about any change in the number of children 
enrolled for care or in its licensing or approval status;
    (6) The meal types approved for reimbursement to the day care home 
by the State agency;
    (7) The right of the day care home to receive in a timely manner the 
full food service rate for each meal served to enrolled children for 
which the sponsoring organization has received payment from the State 
agency. However, if, with the home provider's consent, the sponsoring 
organization will incur costs for the provision of program foodstuffs or 
meals in behalf of the home,

[[Page 196]]

and subtract such costs from Program payments to the home, the 
particulars of this arrangement shall be specified in the agreement;
    (8) The right of the sponsoring organization or the day care home to 
terminate the agreement for cause or, subject to stipulations by the 
State agency, convenience; and
    (9) A prohibition of any sponsoring organization fee to the day care 
home for its Program administrative services.
    (10) If the State agency has approved a time limit for submission of 
meal records by day care homes, that time limit shall be stated in the 
agreement.
    (11) The responsibility of the sponsoring organization to inform 
tier II day care homes of all of their options for receiving 
reimbursement for meals served to enrolled children. These options 
include: electing to have the sponsoring organization attempt to 
identify all income-eligible children enrolled in the day care home, 
through collection of free and reduced price applications and/or 
possession by the sponsoring organization or day care home of other 
proof of a child or household's participation in a categorically 
eligible program, and receiving tier I rates of reimbursement for the 
meals served to identified income-eligible children; electing to have 
the sponsoring organization identify only those children for whom the 
sponsoring organization or day care home possess documentation of the 
child or household's participation in a categorically eligible program, 
under the expanded categorical eligibility provision contained in 
Sec. 226.23(e)(1), and receiving tier I rates of reimbursement for the 
meals served to these children; or receiving tier II rates of 
reimbursement for all meals served to enrolled children.
    (12) The responsibility of the sponsoring organization, upon the 
request of a tier II day care home, to collect applications and 
determine the eligibility of enrolled children for free or reduced price 
meals.
    (c) Each day care home shall serve one or more of the following meal 
types:
    (1) Breakfast,
    (2) Lunch,
    (3) Supper and
    (4) Supplemental food.

Reimbursement shall not be claimed for more than two meals and one 
supplement provided daily to each child.
    (d) Each day care home participating in the program shall serve the 
meal types specified in its approved application in accordance with the 
meal pattern requirements specified in Sec. 226.20. Menu records shall 
be maintained to document compliance with these requirements. Meals 
shall be served at no separate charge to enrolled children;
    (e) Each day care home shall maintain daily records of the number of 
children in attendance and the number of meals, by type, served to 
enrolled children. Each tier II day care home in which the provider 
elects to have the sponsoring organization identify enrolled children 
who are eligible for free or reduced price meals, and in which the 
sponsoring organization employs a meal counting and claiming system in 
accordance with Sec. 226.13(d)(3)(i), shall maintain and submit each 
month to the sponsoring organization daily records of the number and 
types of meals served to each enrolled child by name. Payment may be 
made for meals served to the provider's own children only when (1) such 
children are enrolled and participating in the child care program during 
the time of the meal service, (2) enrolled nonresident children are 
present and participating in the child care program and (3) providers' 
children are eligible to receive free or reduced-price meals. 
Reimbursement may not be claimed for meals served to children who are 
not enrolled, or for meals served at any one time to children in excess 
of the home's authorized capacity or for meals served to providers' 
children who are not eligible for free or reduced-price meals.
    (f) The State agency may not require a day care home or sponsoring 
organization to maintain documentation of home operating costs.
    (g) Each day care home shall comply with the recordkeeping 
requirements established in Sec. 226.10(d) and in this section. Failure 
to maintain such records

[[Page 197]]

shall be grounds for the denial of reimbursement.

[47 FR 36527, Aug. 20, 1982, as amended by Amdt. 5, 49 FR 18989, May 4, 
1984; 50 FR 8580, Mar. 4, 1985; 52 FR 36907, Oct. 2, 1987; Amdt. 22, 55 
FR 1378, Jan. 14, 1990; 61 FR 25554, May 22, 1996; 62 FR 903, Jan. 7, 
1997; 63 FR 9105, Feb. 24, 1998; 63 FR 9729, Feb. 26, 1998; 64 FR 72261, 
Dec. 27, 1999]



Sec. 226.19  Outside-school-hours care center provisions.

    (a) Outside-school-hours care centers may participate in the Program 
either as independent centers or under the auspices of a sponsoring 
organization; Provided, however, That public and private nonprofit 
centers shall not be eligible to participate in the Program under the 
auspices of a for-profit sponsoring organization. Outside-school-hours 
care centers participating as independent centers shall comply with the 
provisions of Sec. 226.15.
    (b) All outside-school-hours care centers, independent or sponsored, 
shall meet the following requirements:
    (1) Outside-school-hours care centers shall have current Federal, 
State or local licensing or approval to provide organized child care 
services to enrolled school-age children outside of school hours. The 
main purpose of the Program shall be the care and supervision of 
children. Outside-school-hours care centers which are complying with 
applicable procedures to renew licensing or approval may participate in 
the Program during the renewal process, unless the State agency has 
information which indicates the renewal will be denied. If licensing or 
approval is not available, an outside-school-hours care center may 
participate in the Program if:
    (i) It receives title XX funds for providing child care; or
    (ii) It demonstrates compliance with CACFP child care standards or 
any applicable State or local child care standards to the State agency.
    (2) Except for proprietary title XX centers, outside-school-hours 
care centers shall be public, or have tax-exempt status under the 
Internal Revenue Code of 1986, or be moving toward compliance with the 
requirements for tax-exempt status, or be currently participating in 
another Federal program requiring nonprofit status. Centers which have 
applied to IRS for tax-exempt status may participate in the Program 
while their application is pending review by IRS. If IRS denies the 
application, the center shall immediately notify the State agency of 
such denial and the State agency shall terminate the participation of 
the center. If IRS certification of nonprofit status has not been 
received within 12 months of filing the application with IRS and IRS 
indicates that the center has failed to provide all required 
information, the State agency shall terminate the participation of the 
center in the Program until such time as IRS certification is obtained.
    (3) Nonresidential public or private nonprofit schools which provide 
organized child care programs for school children may participate in the 
Program as outside-school-hours care centers if:
    (i) Children are enrolled in a regularly scheduled child care 
program which meets the criteria of paragraph (b)(1) of this section. 
The program is organized for the purpose of providing child care 
services and is distinct from any extracurricular programs organized 
primarily for scholastic, cultural, and athletic purposes; and
    (ii) Separate Program records are maintained.
    (4) Outside-school-hours care centers shall be eligible to serve one 
or more of the following meal types: breakfasts, supplements and 
suppers. In addition, outside-school-hours care centers shall be 
eligible to serve lunches to enrolled children during periods of school 
vacation, including weekends and holidays, and to enrolled children 
attending schools which do not offer a lunch program. Notwithstanding 
the eligibility of outside-school-hours care centers to serve Program 
meals to children on school vacation, including holidays and weekends, 
such centers shall not operate under the Program on weekends only.
    (5) Each outside-school-hours care center participating in the 
Program shall claim only the meal types specified in its approved 
application and served in compliance with the meal pattern requirements 
of Sec. 226.20. Reimbursement shall not be claimed for

[[Page 198]]

more than two meals and one supplement provided daily to each child, 
except that reimbursement may be claimed for two meals and two 
supplements or three meals and one supplement served to a child for each 
day in which that child is maintained in care for eight or more hours. 
In addition, reimbursement shall not be claimed for meals served to 
children who are not enrolled, for meals served to children at any one 
time in excess of authorized capacity, or for any meal served at a 
proprietary title XX center during a calendar month when less than 25 
percent of enrolled children or 25 percent of licensed capacity, 
whichever is less, were title XX beneficiaries.
    (6) Three hours shall elapse between the beginning of one meal 
service and the beginning of another, except that 4 hours shall elapse 
between the service of a lunch and supper when no supplement is served 
between lunch and supper. The service of a supper shall begin no later 
than 7 p.m. and end no later than 8 p.m. The duration of the meal 
service shall be limited to 2 hours for lunches and supper and 1 hour 
for other meals.
    (7) Each outside-school-hours care center shall ensure that each 
meal service is supervised by an adequate number of operational 
personnel trained in Program requirements. Operational personnel shall 
ensure that:
    (i) Meals are served only to children enrolled for care and adults 
who perform necessary food service labor; (ii) meals served to children 
meet the meal pattern requirements specified in Sec. 226.20; (iii) each 
meal service is consistent with the meal time requirements of paragraph 
(b)(7) of this section; (iv) meals served are consumed on the premises 
of the centers; (v) accurate records are maintained; and (vi) the number 
of meals prepared or ordered is promptly adjusted on the basis of 
participation trends.
    (8) Each outside-school-hours care center shall accurately maintain 
the following records:
    (i) Documentation of enrollment for all children, including 
information used to determine eligibility for free or reduced price 
meals in accordance with Sec. 226.23(e)(1);
    (ii) Number of meals prepared or delivered for each meal service;
    (iii) Daily menu records for each meal service;
    (iv) Number of meals served to enrolled children at each meal 
service;
    (v) Number of enrolled children in attendance during each meal 
service;
    (vi) Number of meals served to adults performing necessary food 
service labor for each meal service; and
    (vii) All other records required by the State agency financial 
management system.
    (9) An outside-school-hours care center may utilize existing school 
food service facilities or obtain meals from a school food service 
facility, and the pertinent requirements of this part shall be embodied 
in a written agreement between the outside-school-hours care center and 
the school. The center shall maintain responsibility for all Program 
requirements set forth in this part.
    (c) Each outside-school-hours care center shall comply with the 
recordkeeping requirements established in Sec. 226.10(d), in paragraph 
(b) of this section and, if applicable, in Sec. 226.15(e). Failure to 
maintain such records shall be grounds for the denial of reimbursement.

[47 FR 36527, Aug. 20, 1982, as amended at 52 FR 36907, Oct. 2, 1987; 54 
FR 26724, June 26, 1989; Amdt. 22, 55 FR 1378, Jan. 14, 1990; 56 FR 
58175, Nov. 16, 1991; 61 FR 25554, May 22, 1996; 62 FR 23619, May 1, 
1997; 64 FR 72261, Dec. 27, 1999]



Sec. 226.19a  Adult day care center provisions.

    (a) Adult day care centers may participate in the Program either as 
independent centers or under the auspices of a sponsoring organization; 
provided, however, that public and private nonprofit centers shall not 
be eligible to participate in the Program under the auspices of a for-
profit sponsoring organization. Adult day care centers participating as 
independent centers shall comply with the provisions of Sec. 226.15.
    (b) All adult day care centers, independent or sponsored, shall meet 
the following requirements:
    (1) Adult day care centers shall provide a community-based group 
program

[[Page 199]]

designed to meet the needs of functionally impaired adults through an 
individual plan of care. Such a program shall be a structured, 
comprehensive program that provides a variety of health, social and 
related support services to enrolled adult participants.
    (2) Adult day care centers shall provide care and services directly 
or under arrangements made by the agency or organization whereby the 
agency or organization maintains professional management responsibility 
for all such services.
    (3) Adult day care centers shall have Federal, State or local 
licensing or approval to provide day care services to functionally 
impaired adults (as defined in Sec. 226.2) or individuals 60 years of 
age or older in a group setting outside their home or a group living 
arrangement on a less than 24-hour basis. Adult day care centers which 
are complying with applicable procedures to renew licensing or approval 
may participate in the Program during the renewal process, unless the 
State agency has information which indicates that renewal will be 
denied.
    (4) Except for proprietary title XIX or title XX centers, adult day 
care centers shall be public, or have tax-exempt status under the 
Internal Revenue Code of 1986, or be moving toward compliance with the 
requirements for tax-exempt status, or be currently operating another 
Federal program requiring nonprofit status. An adult day care center 
which has applied to the Internal Revenue Service (IRS) for tax-exempt 
status may participate in the Program while its application is pending 
review by IRS. If IRS denies the application for tax-exempt status, the 
adult day care center shall immediately notify the State agency of such 
denial and the State agency shall terminate the participation of the 
center. If IRS certification of nonprofit status has not been received 
within 12 months of filing the application with IRS, and IRS indicates 
that the adult day care center has failed to provide all required 
information, the State agency shall terminate the participation of the 
adult day care center until such time as IRS tax-exempt status is 
obtained.
    (5) Each adult day care center participating in the Program shall 
serve one or more of the following meal types:
    (i) Breakfast,
    (ii) Lunch,
    (iii) Supper, and
    (iv) Supplemental food.

Reimbursement shall not be claimed for more than two meals and one 
supplement provided daily to each adult participant.
    (6) Each adult day care center participating in the Program shall 
claim only the meal types specified in its approved application in 
accordance with the meal pattern requirements specified in Sec. 226.20. 
Participating centers may not claim CACFP reimbursement for meals 
claimed under part C of title III of the Older Americans Act of 1965. 
Reimbursement may not be claimed for meals served to persons who are not 
enrolled, or for meals served to participants at any one time in excess 
of the center's authorized capacity, or for any meal served at a 
proprietary title XIX or title XX center during a calendar month when 
less than 25 percent of enrolled participants were title XIX or title XX 
beneficiaries. Menus and any other nutritional records required by the 
State agency shall be maintained to document compliance with such 
requirements.
    (7) An adult day care center may obtain meals from a school food 
service facility, and the pertinent requirements of this part shall be 
embodied in a written agreement between the center and school. The 
center shall maintain responsibility for all Program requirements set 
forth in this part.
    (8) Adult day care centers shall collect and maintain documentation 
of the enrollment of each adult participant including information used 
to determine eligibility for free and reduced price meals in accordance 
with Sec. 226.23(e)(1).
    (9) Each adult day care center shall maintain daily records of the 
number of meals by type (breakfast, lunch, supper, and supplements) 
served to enrolled participants, and to adults performing labor 
necessary to the food service.
    (10) Each adult day care center shall maintain records on the age of 
each enrolled person. In addition, each adult day care center shall 
maintain records

[[Page 200]]

which demonstrate that each enrolled person under the age of 60 meets 
the functional impairment eligibility requirements established under the 
definition of ``functionally impaired adult'' contained in this part. 
Finally, each adult day care center shall maintain records which 
document that qualified adult day care participants reside in their own 
homes (whether alone or with spouses, children or guardians) or in group 
living arrangements as defined in Sec. 226.2.
    (c) Each adult day care center shall comply with the recordkeeping 
requirements established in Sec. 226.10(d), in paragraph (b) of this 
section and, if applicable, in Sec. 226.15(e). Failure to maintain such 
records shall be grounds for the denial of reimbursement.

[53 FR 52591, Dec. 28, 1988, as amended by Amdt. 22, 55 FR 1378, Jan. 
14, 1990; 61 FR 25554, May 22, 1996; 62 FR 23619, May 1, 1997; 64 FR 
72261, Dec. 27, 1999]



Sec. 226.20  Requirements for meals.

    (a) Except as otherwise provided in this section, each meal served 
in the Program shall contain, as a minimum, the indicated food 
components:
    (1) A breakfast shall contain: (i) Fluid milk as a beverage or on 
cereal, or used in part for each purpose;
    (ii) Vegetable(s) or fruit(s) or full-strength vegetable or fruit 
juice, or any combination of these foods;
    (iii) Whole-grain or enriched bread; or cornbread, biscuits, rolls, 
muffins, etc., made with whole-grain or enriched meal or flour; or 
whole-grain or enriched or fortified cereal; or cooked whole-grain or 
enriched pasta or noodle products such as macaroni, or cereal grains 
such as rice, bulgur, or corn grits; or any combination of these foods.
    (2) Lunch shall contain: (i) Fluid milk as a beverage;
    (ii)(A) Lean meat, poultry or fish; alternate protein products; or 
cheese; or an egg; or cooked dry beans or peas; or peanut butter; or any 
combination of these foods. These foods must be served in a main dish, 
or in a main dish and one other menu item, to meet this requirement. 
Cooked dry beans or dry peas may be used as the meat alternate or as 
part of the vegetable/fruit component but not as both food components in 
the same meal;
    (B) Nuts and seeds and their butters listed in program guidance are 
nutritionally comparable to meat or other meat alternates based on 
available nutritional data. Acorns, chestnuts, and coconuts shall not be 
used as meat alternates due to their low protein content. Nut or seed 
meals or flours may be used as an ingredient in a bread/bread alternate, 
but shall not be used as a meat alternate except as defined in this part 
under Appendix A: Alternate Foods for Meals, and in program guidance 
materials. As noted in paragraph (c)(2) of this section, nuts or seeds 
may be used to meet no more than one-half of the meat/meat alternate 
requirements. Therefore, nuts or seeds must be combined with another 
meat/meat alternate to fulfill the requirement;
    (C) Yogurt may be used to meet all or part of the meat/meat 
alternate requirement. Yogurt served may be either plain or flavored, 
unsweetened or sweetened. Noncommercial and/or nonstandardized yogurt 
products, such as frozen yogurt, homemade yogurt, yogurt flavored 
products, yogurt bars, yogurt covered fruit and/or nuts or similar 
products shall not be credited. Four ounces (weight) or \1/2\ cup 
(volume) of yogurt fulfills the equivalent of one ounce of the meat/meat 
alternate requirement in the meal pattern.
    (iii) Two or more vegetables or fruits, or a combination of both. 
Full-strength vegetable or fruit juice may be counted to meet not more 
than one-half of this requirement;
    (iv) Whole-grain or enriched bread; or cornbread, biscuits, rolls, 
muffins, etc., made with whole-grain or enriched meal or flour; or 
whole-grain or enriched pasta or noodle products such as macaroni, or 
cereal grains such as rice, bulgur, or corn grits; or any combination of 
these foods.
    (3) Supper shall contain the food components and servings listed for 
lunch in Sec. 226.20(a)(2), except that, for adult participants in adult 
day care centers, it does not require a serving of fluid milk.
    (4) Supplemental food shall contain two of the following four 
components:

[[Page 201]]

    (i) Fluid milk as a beverage, or on cereal, or used in part for each 
purpose;
    (ii) Meat or meat alternate. Nuts and seeds and their butters listed 
in program guidance are nutritionally comparable to meat or other meat 
alternates based on available nutritional data. Acorns, chestnuts, and 
coconuts are excluded and shall not be used as meat alternates due to 
their low protein content. Nut or seed meals or flours shall not be used 
as a meat alternate except as defined in this part under Appendix A: 
Alternate Foods for Meals;
    (iii) Vegetable(s) or fruit(s) or full-strength vegetable or fruit 
juice, or any combination of these foods. For children, juice may not be 
served when milk is served as the only other component;
    (iv) Whole-grain or enriched bread; or cornbread, biscuits, rolls, 
muffins, etc., made with whole-grain or enriched meal or flour; or 
cooked whole-grain or enriched pasta or noodle products such as 
macaroni, or cereal grains such as rice, bulgar, or corn grits; or any 
combination of these foods.
    (b) Infant meal pattern. When infants from birth through 11 months 
of age participate in the Program, an infant meal shall be offered. 
Foods within the infant meal pattern shall be of texture and consistency 
appropriate for the particular age group being served, and shall be 
served during a span of time consistent with the infant's eating habits. 
For infants 4 through 7 months of age, solid foods are optional and 
should be introduced only if the infant is developmentally ready. 
Whenever possible the child care facility should consult with the 
infant's parent in making the decision to introduce solid foods. Solid 
foods should be introduced one at a time on a gradual basis with the 
intent of ensuring health and nutritional well-being. For infants 8 
through 11 months of age, the total amount of food authorized in the 
meal patterns set forth below must be provided in order to qualify for 
reimbursement. Additional foods may be served to infants 4 months of age 
and older with the intent of improving their overall nutrition. Breast 
milk, provided by the infant's mother, may be served in place of infant 
formula from birth through 11 months of age. Either breast milk or iron-
fortified infant formula shall be served for the entire first year. For 
some breastfed infants who regularly consume less than the minimum 
amount of breast milk per feeding, a serving of less than the minimum 
amount of breast milk may be offered. In these situations, additional 
breast milk must be offered if the infant is still hungry. Juice should 
not be offered to infants until they are ready to drink from a cup, in 
order to develop behaviors that may prevent baby bottle tooth decay. The 
infant meal pattern shall contain, as a minimum, each of the following 
components in the amounts indicated for the appropriate age group:
    (1) Birth through 3 months. (i) Breakfast--4 to 6 fluid ounces of 
breast milk or iron-fortified infant formula;
    (ii) Lunch or supper--4 to 6 fluid ounces of iron-fortified infant 
formula;
    (iii) Supplemental food--4 to 6 fluid ounces of iron-fortified 
infant formula.
    (2) 4 through 7 months. (i) Breakfast--4 to 8 fluid ounces of breast 
milk or iron-fortified infant formula; and 0 to 3 tablespoons of iron-
fortified dry infant cereal (optional);
    (ii) Lunch or supper--4 to 8 fluid ounces of iron-fortified infant 
formula; and 0 to 3 tablespoons of iron-fortified dry infant cereal 
(optional); and 0 to 3 tablespoons of fruit or vegetable of appropriate 
consistency or a combination of both (optional);
    (iii) Supplemental food--4 to 6 fluid ounces of iron-fortified 
infant formula.
    (3) 8 through 11 months. (i) Breakfast--6 to 8 fluid ounces of 
breast milk or iron-fortified infant formula; 2 to 4 tablespoons of 
iron-fortified dry infant cereal; and 1 to 4 tablespoons of fruit or 
vegetable of appropriate consistency or a combination of both;
    (ii) Lunch or supper--6 to 8 fluid ounces of breast milk or iron-
fortified infant formula; 2 to 4 tablespoons of iron-fortified dry 
infant cereal and/or 1 to 4 tablespoons of meat, fish, poultry, egg 
yolk, or cooked dry beans or peas, or \1/2\ to 2 ounces (weight) of 
cheese or 1 to 4 ounces (weight or volume) of cottage cheese or cheese 
food or cheese spread of appropriate consistency; and 1 to 4 tablespoons 
of fruit or vegetable

[[Page 202]]

of appropriate consistency or a combination of both;
    (iii) Supplemental food--2 to 4 fluid ounces of iron-fortified 
infant formula, breast milk, or full strength fruit juice and 0 to \1/2\ 
slice of crusty bread (optional) or 0 to 2 cracker type products 
(optional) made from whole-grain or enriched meal or flour and which are 
suitable for an infant for use as a finger food.
    (4) The minimum amount of food components to be served as breakfast, 
lunch, supper or supplement as set forth in paragraphs (b), (1), (2), 
and (3) of this section are as follows:

                                         Child Care Infant Meal Pattern
----------------------------------------------------------------------------------------------------------------
                                        Birth through 3 months     4 through 7 months      8 through 11 months
----------------------------------------------------------------------------------------------------------------
Breakfast............................  4-6 fl.oz. formula 1 or  4-8 fl.oz. formula 1 or  6-8 fl.oz. formula 1 or
                                        breast milk 2, 3.        breast milk 2, 3;.       breast milk 2, 3; and
                                                                0-3 Tbsp. Infant cereal  2-4 Tbsp. Infant cereal
                                                                 1, 4.                    1; and
                                                                                         1-4 Tbsp. Fruit and/or
                                                                                          vegetable
----------------------------------------------------------------------------------------------------------------
Lunch or supper......................  4-6 fl.oz. formula 1 or  4-8 fl.oz. formula 1 or  6-8 fl.oz. formula 1 or
                                        breast milk 2, 3.        breast milk 2, 3;.       breast milk 2, 3; and
                                                                0-3 Tbsp. Infant cereal  2-4 Tbsp. Infant cereal
                                                                 1, 4;.                   1; and/or
                                                                0-3 Tbsp. Fruit and/or   1-4 Tbsp. Meat, fish,
                                                                 vegetable 4.             poultry, egg yolk,
                                                                                          cooked dry beans, or
                                                                                          peas; or
                                                                                         \1/2\-2 oz. Cheese; or
                                                                                         1-4 ounces. Cottage
                                                                                          cheese, cheese food,
                                                                                          or cheese spread; and
                                                                                         1-4 Tbsp. Fruit and/or
                                                                                          vegetable
----------------------------------------------------------------------------------------------------------------
Supplement (snack)...................  4-6 fl.oz. formula 1 or  4-6 fl.oz. formula 1 or  2-4 fl.oz. formula 1,
                                        breast milk 2, 3.        breast milk 2, 3.        breast milk 2, 3, or
                                                                                          fruit juice 5;
                                                                                         0-\1/2\ bread 4, 6 or 0-
                                                                                          2 crackers 4, 6
----------------------------------------------------------------------------------------------------------------
\1\ Infant formula and dry infant cereal shall be iron-fortified.
\2\ It is recommended that breast milk be served in place of formula from birth through 11 months.
\3\ For some breastfed infants who regularly consume less than the minimum amount of breast milk per feeding, a
  serving of less than the minimum amount of breast milk may be offered, with additional breast milk offered if
  the infant is still hungry.
\4\ A serving of this component shall be optional.
\5\ Fruit juice shall be full-strength.
\6\ Bread and bread alternates shall be made from whole-grain or enriched meal or flour.

    (c) Meal patterns for children age one through 12 and adult 
participants. When individuals over age one participate in the Program, 
the total amount of food authorized in the meal patterns set forth below 
shall be provided in order to qualify for reimbursement.
    (1) Breakfast. The minimum amount of food components to be served as 
breakfast as set forth in paragraph (a)(1) of this section are as 
follows:

[[Page 203]]



--------------------------------------------------------------------------------------------------------------------------------------------------------
          Food components                    Age 1 and 2                 Age 3 through 5            Age 6 through 12 \1\          Adult participants
--------------------------------------------------------------------------------------------------------------------------------------------------------
Milk, fluid.......................  \1/2\ cup \2\...............  \3/4\ cup...................  1 cup......................  1 cup.\2\
Vegetables and Fruits or..........  \1/4\ cup...................  \1/2\ cup...................  \1/2\ cup..................  \1/2\ cup.
Full-strength vegetable or fruit    \1/4\ cup...................  \1/2\ cup...................  \1/2\ cup..................  \1/2\ cup.
 juice or an equivalent quantity
 of any combination of
 vegetable(s), fruit(s), and juice.
 
  Bread and Bread Alternates \3\
 
Bread or..........................  \1/2\ slice.................  \1/2\ slice.................  1 slice....................  2 slices (servings).
Cornbread, biscuits, rolls,         \1/2\ serving...............  \1/2\ serving...............  1 serving..................  2 servings.
 muffins, etc.\4\ or.
Cold dry cereal \5\ or............  \1/4\ cup or \1/3\ ounce....  \1/3\ cup or \1/2\ ounce....  \3/4\ cup or 1 ounce.......  1\1/2\ cup or 2 ounces.
Cooked cereal or..................  \1/4\ cup...................  \1/4\ cup...................  \1/2\ cup..................  1 cup.
Cooked pasta or noodle products or  \1/4\ cup...................  \1/4\ cup...................  \1/2\ cup..................  1 cup.
Cooked cereal grains or an          \1/4\ cup...................  \1/4\ cup...................  \1/2\ cup..................  1 cup.
 equivalent quantity of any
 combination of bread/bread
 alternate.
--------------------------------------------------------------------------------------------------------------------------------------------------------
\1\ Children age 12 and up may be served adult size portions based on the greater food needs of older boys and girls, but shall be served not less than
  the minimum quantities specified in this section for children age 6 up to 12.
\2\ For purposes of the requirements outlined in this subsection, a cup means a standard measuring cup.
\3\ Bread, pasta or noodle products, and cereal grains, shall be whole grain or enriched; cornbread, biscuits, rolls, muffins, etc., shall be made with
  whole grain or enriched meal or flour; cereal shall be whole grain or enriched or fortified.
\4\ Serving sizes and equivalents to be published in guidance materials by FNS.
\5\ Either volume (cup) or weight (ounces) whichever is less.


[[Page 204]]

(2) Lunch. The minimum amount of food components to be served as lunch 
as set forth in paragraph (a)(2) of this section are as follows:

[[Page 205]]



--------------------------------------------------------------------------------------------------------------------------------------------------------
          Food components                    Age 1 and 2                 Age 3 through 5            Age 6 through 12 \1\          Adult participants
--------------------------------------------------------------------------------------------------------------------------------------------------------
Milk, fluid.......................  \1/2\ cup \2\...............  \3/4\ cup...................  1 cup......................  1 cup \2\.
     Vegetables and Fruits \3\
 
Vegetables(s) and/or fruit(s).....  \1/4\ cup total.............  \1/2\ cup total.............  \3/4\ cup total............  1 cup total.
 
  Bread and Bread Alternates \4\
 
Bread or..........................  \1/2\ slice.................  \1/2\ slice.................  1 slice....................  2 slices (servings).
Cornbread, biscuits, rolls,         \1/2\ serving...............  \1/2\ serving...............  1 serving..................  2 servings.
 muffins, etc.\5\ or.
Cooked pasta or noodle products or  \1/4\ cup...................  \1/4\ cup...................  \1/2\ cup..................  1 cup.
Cooked cereal grains or an          \1/4\ cup...................  \1/4\ cup...................  \1/2\ cup..................  1 cup.
 equivalent quantity of any
 combination of bread/bread
 alternate.
 
     Meat and Meat Alternates
 
Lean meat or poultry or fish \6\    1 ounce.....................  1\1/2\ ounces...............  2 ounces...................  2 ounces.
 or.
Alternate protein products \7\ or.  1 ounce.....................  1\1/2\ ounces...............  2 ounces...................  2 ounces.
Cheese or.........................  1 ounce.....................  1\1/2\ ounces...............  2 ounces...................  2 ounces.
Egg (large) or....................  \1/2\.......................  \3/4\.......................  1..........................  1.
Cooked dry beans or peas or.......  \1/4\ cup...................  \3/8\ cup...................  \1/2\ cup..................  \1/2\ cup.
Peanut butter or soynut butter or   2 tablespoons...............  3 tablespoons...............  4 tablespoons..............  4 tablespoons.
 other nut or seed butters or.
Peanuts or soynuts or tree nuts or  \1/2\ ounce \9\=50%.........  \3/4\ ounce \9\=50%.........  1 ounce \9\=50%............  1 ounce \9\=50%.
 seeds \8\ or.
Yogurt, plain or flavored,          4 ounces or \1/2\ cup.......  6 ounces or \3/4\ cup.......  8 ounces or 1 cup..........  8 ounces or 1 cup.
 unsweetened or sweetened or an
 equivalent quantity of any
 combination of the above meat/
 meat alternates.
--------------------------------------------------------------------------------------------------------------------------------------------------------
\1\ Children age 12 and up may be served adult size portions based on the greater food needs of older boys and girls, but shall be served not less than
  the minimum quantities specified in this section for children age 6 up to 12.
\2\ For purposes of the requirements outlined in this subsection, a cup means a standard measuring cup.
\3\ Serve 2 or more kinds of vegetable(s) and/or fruit(s). Full-strength vegetable or fruit juice may be counted to meet not more than one-half of this
  requirement.
\4\ Bread, pasta or noodle products, and cereal grains, shall be whole grain or enriched; cornbread, biscuits, rolls, muffins, etc., shall be made with
  whole grain or enriched meal or flour.
\5\ Serving sizes and equivalents to be published in guidance materials by FNS.
\6\ Edible portion as served.
\7\ Must meet the requirements in appendix A of this part.
\8\ Tree nuts and seeds that may be used as meat alternates are listed in program guidance.
\9\ No more than 50% of the requirement shall be met with nuts or seeds. Nuts or seeds shall be combined with another meat/meat alternate to fulfill the
  requirement. For purpose of determining combinations, 1 ounce of nuts or seeds is equal to 1 ounce of cooked lean meat, poultry, or fish.


[[Page 206]]

(3) Supper. The minimum amount of food components to be served as supper 
as set forth in paragraph (a)(3) of this section are as follows:

[[Page 207]]



--------------------------------------------------------------------------------------------------------------------------------------------------------
          Food components                    Age 1 and 2                 Age 3 through 5            Age 6 through 12 \1\          Adult participants
--------------------------------------------------------------------------------------------------------------------------------------------------------
Milk, fluid.......................  \1/2\ cup \2\...............  \3/4\ cup \2\...............  1 cup......................  None.
     Vegetables and Fruits \3\
 
Vegetables(s) and/or fruit(s).....  \1/4\cup total..............  \1/2\ cup total.............  \3/4\ cup total............  1 cup total.
 
  Bread and Bread Alternates \4\
 
Bread or..........................  \1/2\ slice.................  \1/2\ slice.................  1 slice....................  2 slices (servings).\5\
Cornbread, biscuits, rolls,         \1/2\ serving...............  \1/2\ serving...............  1 serving..................  2 servings.
 muffins, etc.\5\ or.
Cooked cereal grains or an          \1/4\ cup...................  \1/4\ cup...................  \1/2\ cup..................  1 cup.
 equivalent quantity of any
 combination of bread/bread
 alternate.
 
     Meat and Meat Alternates
 
Lean meat or poultry or fish \6\    1 ounce.....................  1\1/2\ ounces...............  2 ounces...................  2 ounces.
 or.
Alternate protein products \7\ or.  1 ounce.....................  1\1/2\ ounces...............  2 ounces...................  2 ounces.
Cheese or.........................  1 ounce.....................  1\1/2\ ounces...............  2 ounces...................  2 ounces.
Egg (large) or....................  \1/2\.......................  \3/4\.......................  1..........................  1.
Cooked dry beans or peas or.......  \1/4\ cup...................  \3/8\ cup...................  \1/2\ cup..................  \1/2\ cup.
Peanut butter or soynut butter or   2 tablespoons...............  3 tablespoons...............  4 tablespoons..............  4 tablespoons.
 other nut or seed butters or.
Peanuts or soynuts or tree nuts or  \1/2\ ounce \9\=50%.........  \3/4\ ounce \9\=50%.........  1 ounce \9\=50%............  1 ounce \9\=50%.
 seeds \8\ or.
Yogurt, plain or flavored,          4 ounces or \1/2\ cup.......  6 ounces or \3/4\ cup.......  8 ounces or 1 cup..........  8 ounces or 1 cup.
 unsweetened or sweetened or an
 equivalent quantity of any
 combination of the above meat/
 meat alternates.
--------------------------------------------------------------------------------------------------------------------------------------------------------
\1\ Children age 12 and up may be served adult size portions based on the greater food needs of older boys and girls, but shall be served not less than
  the minimum quantities specified in this section for children age 6 up to 12.
\2\ For purposes of the requirements outlined in this subsection, a cup means a standard measuring cup.
\3\ Serve 2 or more kinds of vegetable(s) and/or fruit(s). Full-strength vegetable or fruit juice may be counted to meet not more than one-half of this
  requirement.
\4\ Bread, pasta or noodle products, and cereal grains, shall be whole grain or enriched; cornbread, biscuits, rolls, muffins, etc., shall be made with
  whole grain or enriched meal or flour.
\5\ Serving sizes and equivalents to be published in guidance materials by FNS.
\6\ Edible portion as served.
\7\ Must meet the requirements in appendix A of this part.
\8\ Tree nuts and seeds that may be used as meat alternates are listed in program guidance.
\9\ No more than 50% of the requirement shall be met with nuts or seeds. Nuts or seeds shall be combined with another meat/meat alternate to fulfill the
  requirement. For purpose of determining combinations, 1 ounce of nuts or seeds is equal to 1 ounce of cooked lean meat, poultry, or fish.


[[Page 208]]

(4) Supplemental food. The minimum amount of food components to be 
served as supplemental foods as set forth in paragraph (a)(4) of this 
section are as follows. Select two of the following four components. 
(For children, juice may not be served when milk is served as the only 
other component.)

[[Page 209]]



--------------------------------------------------------------------------------------------------------------------------------------------------------
        Food Components \1\                  Age 1 and 2                 Age 3 through 5            Age 6 through 12 \2\          Adult participants
--------------------------------------------------------------------------------------------------------------------------------------------------------
Milk, fluid.......................  \1/2\ cup...................  \1/2\ cup...................  1 cup......................  1 cup.
       Vegetables and Fruits
 
Vegetables(s) and/or fruit(s) or..  \1/2\ cup...................  \1/2\ cup...................  \3/4\ cup..................  \1/2\ cup.
Full-strength vegetable or fruit    \1/2\ cup...................  \1/2\ cup...................  \3/4\ cup..................  \1/2\ cup.
 juice or an equivalent quantity
 of any combination of
 vegetable(s), fruit(s) and juice.
 
  Bread and Bread Alternates \3\
 
Bread or..........................  \1/2\ slice.................  \1/2\ slice.................  1 slice....................  1 slice (serving).
Cornbread, biscuits, rolls,         \1/2\ serving...............  \1/2\ serving...............  1 serving..................  1 serving.
 muffins, etc \4\ or.
Cold dry cereal or................  \1/4\ cup or \1/3\ ounce....  \1/3\ cup or \1/2\ ounce....  \3/4\ cup or 1 ounce.......  \3/4\ cup or 1 ounce.
Cooked cereal \5\ or..............  \1/4\ cup...................  \1/4\ cup...................  \1/2\ cup..................  \1/2\ cup.
Cooked pasta or noodle products or  \1/4\ cup...................  \1/4\ cup...................  \1/2\ cup..................  \1/2\ cup.
Cooked cereal grains or an          \1/4\ cup...................  \1/4\ cup...................  \1/2\ cup..................  \1/2\ cup.
 equivalent quantity of any
 combination of bread/bread
 alternate.
 
     Meat and Meat Alternates
 
Lean meat or poultry or fish \6\    \1/2\ ounce.................  \1/2\ ounce.................  1 ounce....................  1 ounce
 or.
Alternate protein products \7\ or.  \1/2\ ounce.................  \1/2\ ounce.................  1 ounce....................  1 ounce
Cheese or.........................  \1/2\ ounce.................  \1/2\ ounce.................  1 ounce....................  1 ounce
Egg (large) or....................  \1/2\.......................  \1/2\.......................  \1/2\......................  \1/2\.
Cooked dry beans or peas or.......  \1/8\ cup...................  \1/8\ cup...................  \1/4\ cup..................  \1/4\ cup.
Peanut butter or soynut butter or   1 tablespoon................  1 tablespoon................  2 tablespoons..............  2 tablespoons.
 other nut or seed butters or.
Peanuts or soynuts or tree nuts or  \1/2\ ounce.................  \1/2\ ounce.................  1 ounce....................  1 ounce.
 seeds \8\ or.
Yogurt, plain or flavored,          2 ounces or \1/4\ cup.......  2 ounces or \1/4\ cup.......  4 ounces or \1/2\ cup......  4 ounces or \1/2\ cup.
 unsweetened or sweetened or an
 equivalent quantity of any
 combination of the above meat/
 meat alternates.
--------------------------------------------------------------------------------------------------------------------------------------------------------
\1\ For purposes of the requirements outlined in this subsection, a cup means a standard measuring cup.
\2\ Children age 12 and up may be served adult size portions based on the greater food needs of older boys and girls, but shall be served not less than
  the minimum quantities specified in this section for children age 6 up to 12.
\3\ Bread, pasta or noodle products, and cereal grains, shall be whole grain or enriched; cornbread, biscuits, rolls, muffins, etc., shall be made with
  whole grain or enriched meal or flour; cereal shall be whole grain or enriched or fortified.
\4\ Serving sizes and equivalents to be published in guidance materials by FNS.
\5\ Either volume (cup) or weight (ounces) whichever is less.
\6\ Edible portion as served.
\7\ Must meet the requirements in Appendix A of this Part.
\8\ Tree nuts and seeds that may be used as meat alternates are listed in program guidance.


[[Page 210]]

    (d) Additional food. To improve the nutrition of participating 
children over 1 year of age additional foods may be served with each 
meal as follows:
    (1) Breakfast. Include as often as practical one-half egg; or a 1-
ounce serving (edible portion as served) of meat, poultry or fish; or 1-
ounce of cheese; or 2 tablespoons of peanut butter; or 4 oz. of yogurt; 
or an equivalent quantity of any combination of these foods. Additional 
foods may be served as desired.
    (2) Lunch, supper or supplemental food. Additional foods may be 
served as desired.
    (e) Temporary unavailability of milk. If emergency conditions 
prevent an institution normally having a supply of milk from temporarily 
obtaining milk deliveries, the State agency may approve the service of 
breakfasts, lunches, or suppers without milk during the emergency 
period.
    (f) Continuing unavailability of milk. The inability of an 
institution to obtain a supply of milk on a continuing basis shall not 
bar it from participation in the Program. In such cases, the State 
agency may approve service of meals without milk, provided that an 
equivalent amount of canned, whole dry or nonfat dry milk is used in the 
preparation of the components of the meal set forth in paragraphs 
(a)(1), (2) and (3) of this section.
    (g) Statewide substitutions. In American Samoa, Puerto Rico, Guam, 
the Virgin Islands, the Trust Territory of the Pacific Islands, and the 
Northern Mariana Islands the following variations from the meal 
requirements are authorized: A serving of a starchy vegetable, such as 
yams, plantains, or sweet potatoes may be substituted for the bread 
requirements.
    (h) Individual substitutions. Substitutions may be made in food 
listed in paragraphs (b) and (c) of this section if individual 
participants are unable, because of medical or other special dietary 
needs, to consume such foods. Substitutions because of medical needs 
shall be made only when supported by a statement from a recognized 
medical authority which includes recommended alternate foods.
    (i) Special variations. FNS may approve variations in the food 
components of the meals on an experimental or a continuing basis in any 
institution where there is evidence that such variations are 
nutritionally sound and are necessary to meet ethnic, religious, 
economic, or physical needs.
    (j) Meal planning. Institutions shall plan for and order meals on 
the basis of current participation trends, with the objective of 
providing only one meal per participant at each meal service. Records of 
participation and of ordering or preparing meals shall be maintained to 
demonstrate positive action toward this objective. In recognition of the 
fluctuation in participation levels which makes it difficult to estimate 
precisely the number of meals needed and to reduce the resultant waste, 
any excess meals that are ordered may be served to participants and may 
be claimed for reimbursement, unless the State agency determines that 
the institution has failed to plan and prepare or order meals with the 
objective of providing only one meal per participant at each meal 
service.
    (k) Sanitation. Institutions shall ensure that in storing, 
preparing, and serving food, proper sanitation and health standards are 
met which conform with all applicable State and local laws and 
regulations. Institutions shall ensure that adequate facilities are 
available to store food or hold meals.
    (l) Donated commodities. Institutions shall efficiently use in the 
Program any foods donated by the Department and accepted by the 
institution.
    (m) Plentiful foods. Institutions shall, insofar as practical, 
purchase and efficiently use in the Program foods designated as 
plentiful by the Department.
    (n) Additional provision. The State agency may allow institutions 
which serve meals prepared in schools participating in the National 
School Lunch and School Breakfast Programs to substitute the meal 
pattern requirements of the regulations governing those Programs (7 CFR 
part 210 and 7 CFR part 220, respectively) for the meal pattern 
requirements contained in this section.
    (o) Family-style meal service. Meals may be served in a family-style 
setting.

[[Page 211]]

    (p) Offer versus serve. (1) Each adult day care center shall offer 
its adult participants all of the required food servings as set forth in 
paragraph (c)(1), (c)(2) and (c)(3) of this section. However, at the 
discretion of the adult day care center, adult participants may be 
permitted to decline:
    (i) One of the four food items (one serving of milk, one serving of 
vegetable and/or fruit, and two servings of bread or bread alternate) 
required at breakfast;
    (ii) Two of the six food items (one serving of milk, two servings of 
vegetable and/or fruit, two servings of bread or bread alternate, and 
one serving of meat or meat alternate) required at lunch;
    (iii) Two of the five food items (two servings of vegetables and/or 
fruit, two servings of bread or bread alternate, and one serving of meat 
or meat alternate) required at supper.
    (2) The price of a reimbursable meal shall not be affected if an 
adult participant declines a food item.

[47 FR 36527, Aug. 20, 1982; 48 FR 40197, Sept. 16, 1983, as amended at 
50 FR 8581, Mar. 4, 1985; 51 FR 16811, May 7, 1986; 51 FR 23515, June 
30, 1986; 53 FR 25308, July 6, 1988; 53 48632, Dec. 2, 1988; 53 FR 
52592, Dec. 28, 1988; 54 FR 27153, June 28, 1989; 58 FR 37850, July 14, 
1993; 62 FR 10191, Mar. 6, 1997; 64 FR 61775, Nov. 15, 1999; 64 FR 
72261, Dec. 27, 1999; 65 FR 12439, Mar. 9, 2000; 66 FR 65597, Dec. 20, 
2001]



Sec. 226.21  Food service management companies.

    (a) Any institution may contract with a food service management 
company. An institution which contracts with a food service management 
company shall remain responsible for ensuring that the food service 
operation conforms to its agreement with the State agency. All 
procurements of meals from food service management companies shall 
adhere to the procurement standards set forth in Sec. 226.22. Public 
institutions shall follow applicable State or local laws governing bid 
procedures. In the absence of any applicable State or local laws, and in 
addition to the procurement provisions set forth in Sec. 226.22, the 
State agency may mandate that each institution with Program meal 
contracts of an aggregate value in excess of $10,000 formally advertise 
such contracts and comply with the following procedures intended to 
prevent fraud, waste, and Program abuse:
    (1) All proposed contracts shall be publicly announced at least once 
14 calendar days prior to the opening of bids. The announcement shall 
include the time and place of the bid opening;
    (2) The institution shall notify the State agency at least 14 
calendar days prior to the opening of the bids of the time and place of 
the bid opening;
    (3) The invitation to bid shall not provide for loans or any other 
monetary benefit or terms or conditions to be made to institutions by 
food service management companies;
    (4) Nonfood items shall be excluded from the invitation to bid, 
except where such items are essential to the conduct of the food 
service;
    (5) The invitation to bid shall not specify special meal 
requirements to meet ethnic or religious needs unless special 
requirements are necessary to meet the needs of the participants to be 
served;
    (6) The bid shall be publicly opened;
    (7) All bids totaling $50,000 or more shall be submitted to the 
State agency for approval before acceptance. All bids shall be submitted 
to the State agency for approval before accepting a bid which exceeds 
the lowest bid. State agencies shall respond to any request for approval 
within 10 working days of receipt;
    (8) The institutions shall inform the State agency of the reason for 
selecting the food service management company chosen. State agencies may 
require institutions to submit copies of all bids submitted under this 
section.
    (b) The institution and the food service management company shall 
enter into a standard contract as required by Sec. 226.6(i). However, 
public institutions may, with the approval of the State agency, use 
their customary form of contract if it incorporates the provisions of 
Sec. 226.6(i).
    (c) A copy of the contract between each institution and food service 
management company shall be submitted to the State agency prior to the 
beginning of Program operations under the subject contract.
    (d) Each proposed additional provision to the standard form of 
contract

[[Page 212]]

shall be submitted to the State agency for approval.
    (e) A food service management company may not subcontract for the 
total meal, with or without milk, or for the assembly of the meal.

[47 FR 36527, Aug. 20, 1982, as amended at 53 FR 52594, Dec. 28, 1988]



Sec. 226.22  Procurement standards.

    (a) This section establishes standards and guidelines for the 
procurement of foods, supplies, equipment, and other goods and services. 
These standards are furnished to ensure that such materials and services 
are obtained efficiently and economically and in compliance with the 
provisions of applicable Federal law and Executive orders.
    (b) These standards shall not relieve the institution of any 
contractual responsibilities under its contracts. The institution is 
responsible, in accordance with good administrative practice and sound 
business judgment, for the settlement of all contractual and 
administrative issues arising out of procurements entered into in 
support of the Program. These include, but are not limited to: source 
evaluation, protests of award, disputes, and claims. Violations of the 
law shall be referred to the local, State, or Federal authority having 
proper jurisdiction.
    (c) Institutions may use their own procurement procedures which 
reflect applicable State or local laws and regulations, provided that 
procurements made with Program payments conform to the standards set 
forth in this section and in Attachment O of Office of Management and 
Budget Circulars A-102 and A-110, as well as to procurement requirements 
which may be established by the State agency, with the approval of FNS 
to prevent fraud, waste, and Program abuse.
    (d) Institutions shall maintain a written code of standards of 
conduct which shall govern the performance of their officers, employees 
or agents engaged in the award and administration of contracts supported 
by Program payments. No employee, officer or agent of the grantee shall 
participate in selection, or in the award or administration of a 
contract supported by Federal funds if a conflict of interest, real or 
apparent, would be involved. Such a conflict would arise when:
    (1) The employee, officer or agent;
    (2) Any member of his immediate family;
    (3) His or her partner; or
    (4) An organization which employs, or is about to employ, any of the 
above, has a financial or other interest in the firm selected for award.

The institution's officers, employees or agents shall neither solicit 
nor accept gratuities, favors or anything of monetary value from 
contractors, potential contractors, or parties to subagreements. 
Institutions may set minimum rules where the financial interest is not 
substantial or the gift is an unsolicited item of nominal intrinsic 
value. To the extent permitted by State or local law or regulations, 
such standards of conduct shall provide for penalties, sanctions, or 
other disciplinary actions for violations of such standards by the 
institution's officers, employees, or agents, or by contractors or their 
agents.

    (e) The institution shall establish procurement procedures which 
provide that proposed procurement actions shall be reviewed by 
institution officials to avoid the purchase of unnecessary or 
duplicative items. Where appropriate, an analysis shall be made of lease 
versus purchase alternatives, and any other appropriate analysis to 
determine which approach would be the most economical.
    (f) Affirmative steps shall be taken to assure that small and 
minority businesses are utilized when possible. Affirmative steps shall 
include the following:
    (1) Including qualified small and minority businesses on 
solicitation lists;
    (2) Assuring that small and minority businesses are solicited 
whenever they are potential sources;
    (3) When economically feasible, dividing total requirements into 
smaller tasks or quantities so as to permit maximum small and minority 
business participation;
    (4) Where the requirement permits, establishing delivery schedules 
which will encourage participation by small and minority businesses;
    (5) Using the services and assistance of the Small Business 
Administration

[[Page 213]]

and the Minority Business Enterprise of the Department of Commerce as 
required;
    (6) If any subcontracts are to be let, requiring the prime 
contractor to take the affirmative steps in paragraphs (b) (1) through 
(5) of this section; and
    (7) Taking similar appropriate affirmative action in support of 
women's business enterprises.
    (g) All procurement transactions, regardless of whether by sealed 
bids or by negotiation and without regard to dollar value, shall be 
conducted in a manner that provides maximum open and free competition 
consistent with this section. Procurement procedures shall not restrict 
or eliminate competition. Examples of what is considered to be 
restrictive of competition include, but are not limited to (1) placing 
unreasonable requirements on firms in order for them to qualify to do 
business, (2) noncompetitive practices between firms, (3) organizational 
conflicts of interest, and (4) unnecessary experience and bonding 
requirements.
    (h) The institution shall have written selection procedures which 
shall provide, as a minimum, the following procedural requirements:
    (1) Solicitations of offers, whether by competitive sealed bids or 
competitive negotiation, shall:
    (i) Incorporate a clear and accurate description of the technical 
requirements for the material, product, or service to be procured. Such 
description shall not, in competitive procurements, contain features 
which unduly restrict competition. The description may include a 
statement of the qualitative nature of the material, product or service 
to be procured, and when necessary, shall set forth those minimum 
essential characteristics and standards to which it must conform if it 
is to satisfy its intended use. Detailed product specifications should 
be avoided if at all possible. When it is impractical or uneconomical to 
make a clear and accurate description of the technical requirements, a 
``brand name or equal'' description may be used as a means to define the 
performance or other salient requirements of a procurement. The specific 
features of the named brand which must be met by offerors shall be 
clearly stated; and
    (ii) Clearly set forth all requirements which offerors must fulfill 
and all other factors to be used in evaluating bids or proposals.
    (2) Awards shall be made only to responsible contractors that 
possess the potential ability to perform successfully under the terms 
and conditions of a proposed procurement. Consideration shall be given 
to such matters as contractor integrity, compliance with public policy, 
record of past performance, and financial and technical resources.
    (i) Program procurements shall be made by one of the following 
methods:
    (1) Small purchase procedures are those relatively simple and 
informal procurement methods that are sound and appropriate for the 
procurement of services, supplies or other property, costing in the 
aggregate not more than $10,000. Institutions shall comply with State or 
local small purchase dollar limits under $10,000. If small purchase 
procedures are used for a procurement under the Program, price or rate 
quotation shall be obtained from an adequate number of qualified 
sources; or
    (2) In competitive sealed bids (formal advertising), sealed bids are 
publicly solicited and a firm-fixed-price contract (lump sum or unit 
price) is awarded to the responsible bidder whose bid, conforming with 
all the material terms and conditions of the invitation for bids, is 
lowest in price.
    (i) In order for formal advertising to be feasible, appropriate 
conditions must be present, including as a minimum, the following:
    (A) A complete, adequate and realistic specification or purchase 
description is available.
    (B) Two or more responsible suppliers are willing and able to 
compete effectively for the institution's business.
    (C) The procurement lends itself to a firm-fixed price contract, and 
selection of the successful bidder can appropriately be made principally 
on the basis of price.
    (ii) If formal advertising is used for a procurement under the 
Program, the following requirements shall apply:
    (A) A sufficient time prior to the date set for opening of bids, 
bids shall be solicited from an adequate number

[[Page 214]]

of known suppliers. In addition, the invitation shall be publicly 
advertised.
    (B) The invitation for bids, including specifications and pertinent 
attachments, shall clearly define the items or services needed in order 
for the bidders to properly respond to the invitation.
    (C) All bids shall be opened publicly at the time and place stated 
in the invitation for bids.
    (D) A firm-fixed-price contract award shall be made by written 
notice to that responsible bidder whose bid, conforming to the 
invitation for bids, is lowest. Where specified in the bidding 
documents, factors such as discounts, transportation costs and life 
cycle costs shall be considered in determining which bid is lowest. 
Payment discounts may only be used to determine low bid when prior 
experience of the grantee indicates that such discounts are generally 
taken.
    (E) Any or all bids may be rejected when there are sound documented 
business reasons in the best interest of the Program.
    (3) In competitive negotiation, proposals are requested from a 
number of sources and the Request for Proposal is publicized. 
Negotiations are normally conducted with more than one of the sources 
submitting offers, and either a fixed-price or cost-reimbursable type 
contract is awarded, as appropriate. Competitive negotiation may be used 
if conditions are not appropriate for the use of formal advertising. If 
competitive negotiation is used for a procurement under a grant, the 
following requirements shall apply:
    (i) Proposals shall be solicited from an adequate number of 
qualified sources to permit reasonable competition consistent with the 
nature and requirements of the procurement. The Request for Proposals 
shall be publicized and reasonable requests by other sources to compete 
shall be honored to the maximum extent practicable:
    (ii) The Request for Proposal shall identify all significant 
evaluation factors, including price or cost where required and their 
relative importance;
    (iii) The institution shall provide mechanisms for technical 
evaluation of the proposal received, determinations of responsible 
offerors for the purpose of written or oral discussions, and selection 
for contract award; and
    (iv) Award may be made to the responsible offeror whose proposal 
will be most advantageous to the procuring party, price and other 
factors considered. Unsuccessful offerors should be notified promptly.
    (4) Noncompetitive negotiation is procurement through solicitation 
of a proposal from only one source, or after solicitation of a number of 
sources, competition is determined inadequate. Noncompetitive 
negotiation may be used when the award of a contract is infeasible under 
small purchase, competitive bidding (formal advertising), or competitive 
negotiation procedures. Circumstances under which a contract may be 
awarded by noncompetitive negotiation are limited to the following:
    (i) The item is available only from a single source;
    (ii) Public exigency or emergency when the urgency for the 
requirement will not permit a delay incident to competitive 
solicitation;
    (iii) FNS authorizes noncompetitive negotiation; or
    (iv) After solicitation of a number of sources, competition is 
determined inadequate.
    (j) The cost plus a percentage of cost method of contracting shall 
not be used. Instructions shall perform some form of cost or price 
analysis in connection with every procurement action including contract 
modifications. Costs or prices based on estimated costs for contracts 
under the Program shall be allowed only to the extent that costs 
incurred or cost estimates included in negotiated prices are consistent 
with Federal cost principles.
    (k) Institutions shall maintain records sufficient to detail the 
significant history of a procurement. These records shall include, but 
are not necessarily limited to information pertinent to the following: 
rationale for the method of procurement, selection of contract type, 
contractor selection or rejection, and the basis for the cost or price.
    (l) In addition to provisions defining a sound and complete 
procurement contract, institutions shall include the following contract 
provisions or conditions in all procurement contracts and

[[Page 215]]

subcontracts as required by the provision, Federal Law or FNS:
    (1) Contracts other than small purchases shall contain provisions or 
conditions which will allow for administrative, contractual, or legal 
remedies in instances where contractors violate or breach contract 
terms, and provide for such sanctions and penalties as may be 
appropriate;
    (2) All contracts in excess of $10,000 shall contain suitable 
provisions for termination by the institution including the manner by 
which it will be effected and the basis for settlement. In addition, 
such contracts shall describe conditions under which the contract may be 
terminated for default as well as conditions where the contract may be 
terminated because of circumstances beyond the control of the 
contractor;
    (3) All contracts awarded in excess of $10,000 by institutions and 
their contractors shall contain a provision requiring compliance with 
Executive Order 11246, entitled ``Equal Employment Opportunity,'' as 
amended by Executive Order 11375, and as supplemented in Department of 
Labor regulations (41 CFR part 60);
    (4) Where applicable, all contracts awarded by institutions in 
excess of $2,500 which involve the employment of mechanics or laborers 
shall include a provision for compliance with section 103 of the 
Contract Work Hours and Safety Standards Act (40 U.S.C. 327 through 330) 
as supplemented by Department of Labor regulations (29 CFR part 5). 
Under section 103 of the Act, each contractor shall be required to 
compute the wages of every mechanic and laborer on the basis of a 
standard work day of 8 hours and a standard work week of 40 hours. Work 
in excess of the standard work day or week is permissible provided that 
the worker is compensated at a rate of not less than 1\1/2\ times the 
basic rate of pay for all hours worked in excess of 8 hours in any 
calendar day or 40 hours in the work week. These requirements do not 
apply to the purchases of supplies or materials or articles ordinarily 
available on the open market, or contracts for transportation or 
transmission of intelligence;
    (5) The contract shall include notice of USDA requirements and 
regulations pertaining to reporting and patent rights under any contract 
involving research, developmental, experimental or demonstration work 
with respect to any discovery or invention which arises or is developed 
in the course of or under such contract, and of USDA requirements and 
regulations pertaining to copyrights and rights in data. These 
requirements are in Sec. 3015.175 of the USDA Uniform Federal Assistance 
Regulations 7 CFR part 3015. All negotiated contracts (except those 
awarded by small purchases procedures) awarded by institutions shall 
include a provision to the effect that the institution, FNS, the 
Comptroller General of the United States or any of their duly authorized 
representatives, shall have access to any books, documents, papers, and 
records of the contractor which are directly pertinent to that specific 
contract, for the purpose of making audit, examination, excerpts, and 
transcriptions. Institutions shall require contractors to maintain all 
required records for three years after institutions make final payment 
and all other pending matters are closed;
    (6) Contracts and subcontracts of amounts in excess of $100,000 
shall contain a provision which requires compliance with all applicable 
standards, orders, or requirements issued under section 306 of the Clean 
Air Act (42 U.S.C. 1837(h)), section 508 of the Clean Water Act (33 
U.S.C. 1368), Executive Order 11738, and Environmental Protection Agency 
regulations (40 CFR part 15), which prohibit the use under nonexempt 
Federal contracts, grants or loans of facilities included on the EPA 
List of Violating Facilities. The provision shall require reporting of 
violations to FNS and to the U.S. EPA Assistant Administrator for 
Enforcement (EN-329); and
    (7) Contracts shall recognize mandatory standards and policies 
relating to energy efficiency which are contained in the State energy 
efficiency conservation plan issued in compliance with the Energy Policy 
and Conservation Act (Pub. L. 94-163).

[[Page 216]]

    (m) Institutions shall maintain a contract administration system 
insuring that contractors perform in accordance with the terms, 
conditions, and specifications of their contracts or purchase orders.



Sec. 226.23  Free and reduced-price meals.

    (a) The State agency shall require each institution to submit, at 
the time the institution applies for Program participation, a written 
policy statement concerning free and reduced-price meals to be used 
uniformly in all child care and adult day care facilities under its 
jurisdiction as required in this section. Institutions shall not be 
approved for participation nor agreements renewed unless the free and 
reduced-price policy statement has been approved. Pending approval of a 
revision of a policy statement, the existing policy shall remain in 
effect.
    (b) Sponsoring organizations of day care homes (which may not serve 
meals at a separate charge to children) and other institutions which 
elect to serve meals at no separate charge, shall develop a policy 
statement consisting of an assurance to the State agency that all 
participants are served the same meals at no separate charge, regardless 
of race, color, national origin, sex, age, or handicap and that there is 
no discrimination in the course of the food service. This statement 
shall also contain an assurance that there will be no identification of 
children in day care homes in which meals are reimbursed at both the 
tier I and tier II reimbursement rates, and that the sponsoring 
organization will not make any free and reduced price eligibility 
information concerning individual households available to day care homes 
and will otherwise limit the use of such information to persons directly 
connected with the administration and enforcement of the Program.
    (c) Independent centers and sponsoring organizations of centers 
which charge separately for meals shall develop a policy statement for 
determining eligibility for free and reduced-price meals which shall 
include the following:
    (1) The specific criteria to be used in determining eligibility for 
free and reduced-price meals. The institution's standards of eligibility 
shall conform to the Secretary's income standards;
    (2) A description of the method or methods to be used in accepting 
applications from families for free and reduced-price meals. Such 
methods will ensure that applications are accepted from households on 
behalf of children who are members of AFDC assistance units or food 
stamp or FDPIR households or, for adult participants, who are members of 
a food stamp or FDPIR household or SSI or Medicaid participants;
    (3) A description of the method or methods to be used to collect 
payments from those participants paying the full or reduced price of the 
meal which will protect the anonymity of the participants receiving a 
free or reduced-price meal;
    (4) An assurance which provides that the institution will establish 
a hearing procedure for use when benefits are denied or terminated as a 
result of verification:
    (i) A simple, publicly announced method for a family to make an oral 
or written request for a hearing;
    (ii) An opportunity for the family to be assisted or represented by 
an attorney or other person in presenting its appeal;
    (iii) An opportunity to examine, prior to and during the hearing, 
the documents and records presented to support the decision under 
appeal;
    (iv) That the hearing shall be held with reasonable promptness and 
convenience to the family and that adequate notice shall be given to the 
family as to the time and place of the hearing;
    (v) An opportunity for the family to present oral or documentary 
evidence and arguments supporting its position;
    (vi) An opportunity for the family to question or refute any 
testimony or other evidence and to confront and cross-examine any 
adverse witnesses;
    (vii) That the hearing shall be conducted and the determination made 
by a hearing official who did not participate in making the initial 
decision;
    (viii) The determination of the hearing official shall be based on 
the oral and documentary evidence presented at the hearing and made a 
part of that hearing record;

[[Page 217]]

    (ix) That the family and any designated representatives shall be 
notified in writing of the decision of the hearing official;
    (x) That a written record shall be prepared with respect to each 
hearing, which shall include the decision under appeal, any documentary 
evidence and a summary of any oral testimony presented at the hearing, 
the decision of the hearing official, including the reasons therefor, 
and a copy of the notification to the family of the decision of the 
hearing official; and
    (xi) That such written record of each hearing shall be preserved for 
a period of three years and shall be available for examination by the 
family or its representatives at any reasonable time and place during 
such period;
    (5) An assurance that there will be no overt identification of free 
and reduced-price meal recipients and no discrimination against any 
participant on the basis of race, color, national origin, sex, age, or 
handicap;
    (6) An assurance that the charges for a reduced-price lunch or 
supper will not exceed 40 cents, that the charge for a reduced-price 
breakfast will not exceed 30 cents, and that the charge for a reduced-
price supplement will not exceed 15 cents.
    (d) Each institution shall annually provide the information media 
serving the area from which the institution draws its attendance with a 
public release. All media releases issued by institutions other than 
sponsoring organizations of day care homes, shall include the 
Secretary's Income Eligibility Guidelines for Free and Reduced-Price 
Meals. The release issued by all sponsoring organizations of day care 
homes, and by other institutions which elect not to charge separately 
for meals, shall announce the availability of meals at no separate 
charge. The release issued by child care institutions which charge 
separately for meals shall announce the availability of free and 
reduced-price meals to children meeting the approved eligibility 
criteria. The release issued by child care institutions shall also 
announce that children who are members of AFDC assistance units, food 
stamp or FDPIR households, or are Head Start participants are 
automatically eligible to receive free meal benefits. The release issued 
by adult day care centers which charge separately for meals shall 
announce the availability of free and reduced-price meals to 
participants meeting the approved eligibility criteria. The release 
issued by adult day care centers shall also announce that adult 
participants who are members of food stamp or FDPIR households or who 
are SSI or Medicaid participants are automatically eligible to receive 
free meal benefits. All releases shall state that meals are available to 
all participants without regard to race, color, national origin, sex, 
age or handicap.
    (e)(1) Application for free and reduced-price meals. (i) For the 
purpose of determining eligibility for free and reduced price meals, 
institutions shall distribute applications for free and reduced price 
meals to the families of participants enrolled in the institution. 
Sponsoring organizations of day care homes shall distribute applications 
for free and reduced price meals to day care home providers who wish to 
enroll their own eligible children in the Program. At the request of a 
provider in a tier II day care home, sponsoring organizations of day 
care homes shall distribute applications for free and reduced price 
meals to the households of all children enrolled in the home, except 
that applications need not be distributed to the households of enrolled 
children that the sponsoring organization determines eligible for free 
and reduced price meals under the circumstances described in paragraph 
(e)(1)(vi) of this section. These applications, and any other 
descriptive material distributed to such persons, shall contain only the 
family-size income levels for reduced price meal eligibility with an 
explanation that households with incomes less than or equal to these 
levels are eligible for free or reduced price meals. Such forms and 
descriptive materials may not contain the income standards for free 
meals. However, such forms and materials distributed by child care 
institutions other than sponsoring organizations of day care homes shall 
state that, if a child is a member of a food stamp or FDPIR household or 
AFDC assistance unit, the child is automatically eligible

[[Page 218]]

to receive free Program meal benefits, subject to the completion of the 
application as described in paragraph (e)(1)(ii) of this section; such 
forms and materials distributed by sponsoring organizations of day care 
homes shall state that, if a child or a child's parent is participating 
in or subsidized under a Federally or State supported child care or 
other benefit program with an income eligibility limit that does not 
exceed the eligibility standard for free or reduced price meals, meals 
served to the child are automatically eligible for tier I reimbursement, 
subject to the completion of the application as described in paragraph 
(e)(1)(ii) of this section, and shall list any programs identified by 
the State agency as meeting this standard; such forms and materials 
distributed by adult day care centers shall state that, if an adult 
participant is a member of a food stamp or FDPIR household or is a SSI 
or Medicaid participant, the adult participant is automatically eligible 
to receive free Program meal benefits, subject to the completion of the 
application as described in paragraph (e)(1)(iii) of this section. 
Sponsoring organizations of day care homes shall not make free and 
reduced price eligibility information concerning individual households 
available to day care homes and shall otherwise limit the use of such 
information to persons directly connected with the administration and 
enforcement of the Program. However, sponsoring organizations may inform 
tier II day care homes of the number of identified income-eligible 
enrolled children. If a State agency distributes, or chooses to permit 
its sponsoring organizations to distribute, applications to the 
households of children enrolled in tier II day care homes which include 
household confidentiality waiver statements, such applications shall 
include a statement informing households that their participation in the 
program is not dependent upon signing the waivers. Furthermore, such 
forms and materials distributed by child care institutions shall state 
that if a child is a Head Start participant, the child is automatically 
eligible to receive free Program meal benefits, subject to submission by 
Head Start officials of a Head Start statement of income eligibility or 
income eligibility documentation.
    (ii) Except as provided in paragraph (e)(1)(iv) of this section, the 
application for children shall contain a request for the following 
information:
    (A) The names of all children for whom application is made;
    (B) The names of all other household members;
    (C) The social security number of the adult household member who 
signs the application, or an indication that he/she does not possess a 
social security number;
    (D) The income received by each household member identified by 
source of income (such as earnings, wages, welfare, pensions, support 
payments, unemployment compensation, social security, and other cash 
income received or withdrawn from any other source, including savings, 
investments, trust accounts, and other resources);
    (E) A statement to the effect that ``In certain cases, foster 
children are eligible for free and reduced-price meals regardless of 
household income. If such children are living with you and you wish to 
apply for such meals, please contact us.'';
    (F) A statement that includes substantially the following 
information: ``Unless you include your child's case number for the Food 
Stamp Program, the Food Distribution Program on Indian Reservations (or 
other identifier for the Food Distribution Program on Indian 
Reservations) or the Temporary Assistance for Needy Families Program, 
you must include the social security number of the adult household 
member signing the application or indicate that the household member 
does not have a social security number. This is required by section 9 of 
the National School Lunch Act. The social security number is not 
mandatory, but the application cannot be approved if a social security 
number is not given or an indication is not made that the signer does 
not have a social security number. The social security number will be 
used in the administration and enforcement of the program.'' State 
agencies and institutions must ensure that the notice complies with 
section 7(b) of the Privacy Act of 1974 (5 U.S.C. 552a note); and

[[Page 219]]

    (G) The signature of an adult member of the household which appears 
immediately below a statement that the person signing the application 
certifies that all information furnished is true and correct; that the 
application is being made in connection with the receipt of Federal 
funds; that Program officials may verify the information on the 
application; and that the deliberate misrepresentation of any of the 
information on the application may subject the applicant to prosecution 
under applicable State and Federal criminal statutes.
    (iii) Except as provided in paragraph (e)(1)(v) of this section, the 
application for adults shall contain a request for the following 
information:
    (A) The names of all adults for whom application is made;
    (B) The names of all other household members;
    (C) The social security number of the adult household member who 
signs the application, or an indication that he/she does not possess a 
social security number;
    (D) The income received by source of income (such as earnings, 
wages, welfare, pensions, support payments, unemployment compensation, 
social security, and other cash income received or withdrawn from any 
other source, including savings, investments, trust accounts and other 
resources);
    (E) A statement which includes substantially the following 
information: ``Section 9 of the National School Lunch Act requires that, 
unless a food stamp, or FDPIR case number or SSI or Medicaid assistance 
identification number is provided for the adult for whom benefits are 
sought, you must include a social security number on the application. 
This must be the social security number of the adult household member 
signing the application. If the adult household member signing the 
application does not possess a social security number, he/she must 
indicate so on the application. Provision of a social security number is 
not mandatory, but if a social security number is not provided or an 
indication is not made that the adult household member signing the 
application does not have one, the application cannot be approved. This 
notice must be brought to the attention of the household member whose 
social security number is disclosed. The social security number may be 
used to identify the household member in carrying out efforts to verify 
the correctness of information stated on the application. These 
verification efforts may be carried out through program reviews, audits 
and investigations and may include contacting employers to determine 
income, contacting a food stamp, Indian tribal organization or welfare 
office to determine current certification for receipt of food stamps or 
FDPIR benefits, contacting the issuing office of SSI or Medicaid 
benefits to determine current certification for receipt of these 
benefits, contacting the State employment security office to determine 
the amount of benefits received, and checking the documentation produced 
by household members to provide the amount of income received. These 
efforts may result in loss or reduction of benefits, administrative 
claims or legal action if incorrect information is reported.'' State 
agencies and institutions shall ensure that the notice complies with 
section 7 of Pub. L. 93-579. If a State or local agency plans to use the 
social security numbers for CCFP verification purposes in a manner not 
described by this notice, the notice shall be altered to include a 
description of those uses; and
    (F) The signature of an adult member of the household which appears 
immediately below a statement that the person signing the application 
certifies that all information furnished is true and correct; that the 
application is being made in connection with the receipt of Federal 
funds; that Program officials may verify the information on the 
application; and that the deliberate misrepresentation of any of the 
information on the application may subject the applicant to prosecution 
under applicable State and Federal criminal statutes.
    (iv) If they so desire, households applying on behalf of children 
who are members of food stamp or FDPIR households or AFDC assistance 
units may apply under this paragraph rather than under the procedures 
described in paragraph (e)(1)(ii) of this section. In

[[Page 220]]

addition, households of children enrolled in tier II day care homes who 
are participating in a Federally or State supported child care or other 
benefit program with an income eligibility limit that does not exceed 
the eligibility standard for free and reduced price meals may apply 
under this paragraph rather than under the procedures described in 
paragraph (e)(1)(ii) of this section. Households applying on behalf of 
children who are 0members of food stamp or FDPIR households; AFDC 
assistance units; or for children enrolled in tier II day care homes, 
other qualifying Federal or State program, shall be required to provide:
    (A) For the child(ren) for whom automatic free meal eligibility is 
claimed, their names and food stamp, FDPIR, or AFDC case number; or for 
the households of children enrolled in tier II day care homes, their 
names and other program case numbers (if the program utilizes case 
numbers); and
    (B) The signature of an adult member of the household as provided 
for in paragraph (e)(1)(ii)(G) of this section. In accordance with 
paragraph (e)(1)(ii)(F) of this section, if a case number is provided, 
it may be used to verify the current certification for the child(ren) 
for whom free meal benefits are claimed. Whenever households apply for 
children not receiving food stamp, FDPIR, or AFDC benefits; or for tier 
II homes, other qualifying Federal or State program benefits, they must 
apply in accordance with the requirements set forth in paragraph 
(e)(1)(ii) of this section.
    (v) If they so desire, households applying on behalf of adults who 
are members of food stamp or FDPIR households or SSI or Medicaid 
participants may apply for free meal benefits under this paragraph 
rather than under the procedures described in paragraph (e)(1)(iii) of 
this section. Households applying on behalf of adults who are members of 
food stamp or FDPIR households or SSI or Medicaid participants shall be 
required to provide:
    (A) The names and food stamp or FDPIR case numbers or SSI or 
Medicaid assistance identification numbers of the adults for whom 
automatic free meal eligibility is claimed; and
    (B) The signature of an adult member of the household as provided in 
paragraph (e)(1)(iii)(F) of this section. In accordance with paragraph 
(e)(1)(iii)(G) of this section, if a food stamp or FDPIR case number or 
SSI or Medicaid assistance identification number is provided, it may be 
used to verify the current food stamp, FDPIR, SSI, or Medicaid 
certification for the adult(s) for whom free meal benefits are being 
claimed. Whenever households apply for benefits for adults not receiving 
food stamp, FDPIR, SSI, or Medicaid benefits, they must apply in 
accordance with the requirements set forth in paragraph (e)(1)(iii) of 
this section.
    (vi) A sponsoring organization of day care homes may identify 
enrolled children eligible for free and reduced price meals (i.e., tier 
I rates), without distributing free and reduced price applications, by 
documenting the child's or household's participation in or receipt of 
benefits under a Federally or State supported child care or other 
benefit program with an income eligibility limit that does not exceed 
the eligibility standard for free and reduced price meals. Documentation 
shall consist of official evidence, available to the tier II day care 
home or sponsoring organization, and in the possession of the sponsoring 
organization, of the household's participation in the qualifying 
program.
    (2) Letter to households. Institutions shall distribute a letter to 
households or guardians of enrolled participants in order to inform them 
of the procedures regarding eligibility for free and reduced-price 
meals. The letter shall accompany the application required under 
paragraph (e)(1) of this section and shall contain:
    (i) The income standards for reduced-price meals, with an 
explanation that households with incomes less than or equal to the 
reduced-price standards would be eligible for free or reduced-price 
meals (the income standards for free meals shall not be included in 
letters or notices to such applicants);
    (ii) How a participant's household may make application for free or 
reduced-price meals;
    (iii) An explanation that an application for free or reduced price 
benefits cannot be approved unless it contains

[[Page 221]]

complete ``documentation'' as defined in Sec. 226.2.
    (iv) The statement: ``In the operation of child feeding programs, no 
person will be discriminated against because of race, color, national 
origin, sex, age, or handicap'';
    (v) A statement to the effect that participants having family 
members who become unemployed are eligible for free or reduced-price 
meals during the period of unemployment, provided that the loss of 
income causes the family income during the period of unemployment to be 
within the eligibility standards for those meals;
    (vi) Except in the case of adult participants, a statement to the 
effect that in certain cases foster children are eligible for free or 
reduced-price meals regardless of the income of such household with whom 
they reside and that households wishing to apply for such benefits for 
foster children should contact the institution; and
    (vii) An explanation that households receiving free and reduced-
price meals must notify appropriate institution officials during the 
year of any decreases in household size or increases in income of over 
$50 per month or $600 per year or--
    (A) In the case of households of enrolled children that provide a 
food stamp, FDPIR or AFDC case number to establish a child's eligibility 
for free meals, any termination in the child's certification to 
participate in the Food Stamp, FDPIR or AFDC Programs, or
    (B) In the case of households of adult participants that provide a 
food stamp or FDPIR case number or an SSI or Medicaid assistance 
identification number to establish an adult's eligibility for free 
meals, any termination in the adult's certification to participate in 
the Food Stamp, FDPIR, SSI or Medicaid Programs.
    (3) In addition to the information listed in paragraph (e)(2) of 
this section pricing institutions must include in their letter to 
household an explanation that indicates that: (i) The information in the 
application may be verified at any time during the year; and (ii) how a 
family may appeal a decision of the institution to deny, reduce, or 
terminate benefits as described under the hearing procedure set forth in 
paragraph (c)(4) of this section.
    (4) Determination of eligibility. The institution shall take the 
income information provided by the household on the application and 
calculate the household's total current income. When a completed 
application furnished by a family indicates that the family meets the 
eligibility criteria for free or reduced-price meals, the participants 
from that family shall be determined eligible for free or reduced-price 
meals. Institutions that are pricing programs shall promptly provide 
written notice to each family informing them of the results of the 
eligibility determinations. When the information furnished by the family 
is not complete or does not meet the eligibility criteria for free or 
reduced-price meals, institution officials must consider the 
participants from that family as not eligible for free or reduced-price 
meals, and must consider the participants as eligible for ``paid'' 
meals. When information furnished by the family of participants enrolled 
in a pricing program does not meet the eligibility criteria for free or 
reduced-price meals, pricing program officials shall provide written 
notice to each family denied free or reduced-price benefits. At a 
minimum, this notice shall include:
    (i) The reason for the denial of benefits, e.g., income in excess of 
allowable limits or incomplete application;
    (ii) Notification of the right to appeal;
    (iii) Instructions on how to appeal; and
    (iv) A statement reminding the household that they may reapply for 
free or reduced-price benefits at any time during the year,

The reasons for ineligibility shall be properly documented and retained 
on file at the institution.
    (5) Appeals of denied benefits. A family that wishes to appeal the 
denial of an application in a pricing program shall do so under the 
hearing procedures established under paragraph (c)(4) of this section. 
However, prior to initiating the hearing procedures, the household may 
request a conference to provide all affected parties the opportunity to 
discuss the situation, present information

[[Page 222]]

and obtain an explanation of the data submitted on the application or 
the decision rendered. The request for a conference shall not in any way 
prejudice or diminish the right to a fair hearing. The institution shall 
promptly schedule a fair hearing, if requested.
    (f) Free, reduced-price and paid meal eligibility figures must be 
reported by institutions to State agencies at least once each year and 
shall be based on current family-size and income information of enrolled 
participants. Such information shall be no more than 12 months old.
    (g) Sponsoring organizations for family day care homes shall ensure 
that no separate charge for food service is imposed on families of 
children enrolled in participating family day care homes.
    (h) Verification of eligibility. State agencies shall conduct 
verification of eligibility for free and reduced-price meals on an 
annual basis, in accordance with the verification procedures outlined in 
paragraphs (h) (1) and (2) of this section. Verification may be 
conducted in accordance with Program assistance requirements of 
Sec. 226.6(l); however, the performance of verification for individual 
institutions shall occur no less frequently than once every four years. 
Any State may, with the written approval of FNSRO, use alternative 
approaches in the conduct of verification, provided that the results 
achieved meet the requirements of this part. If the verification process 
discloses deficiencies with the determination of eligibility and/or 
application procedures which exceed maximum levels established by FNS, 
State agencies shall conduct follow-up reviews for the purpose of 
determining that corrective action has been taken by the institution. 
These reviews shall be conducted within one year of the date the 
verification process was completed. The verification effort shall be 
applied without regard to race, color, national origin, sex, age, or 
handicap. State agencies shall maintain on file for review a description 
of the annual verification to be accomplished in order to demonstrate 
compliance with paragraphs (h) (1) and (2) of this section.
    (1) Verification procedures for nonpricing programs. Except for 
sponsoring organizations of family day care homes, State agency 
verification procedures for nonpricing programs shall consist of a 
review of all approved free and reduced price applications on file. For 
sponsoring organizations of family day care homes, State agency 
verification procedures shall consist of a review only of the approved 
free and reduced price applications (or other documentation, if vouchers 
or other documentation are used in lieu of free and reduced price 
applications) on file for those day care homes that are required to be 
reviewed when the sponsoring organization is reviewed, in accordance 
with the review requirements set forth in section 226.6(l) of this Part. 
However, the State agency shall ensure that the day care homes selected 
for review are representative of the proportion of tier I, tier II, and 
tier II day care homes with a mix of income-eligible and non-income-
eligible children in the sponsorship, and shall ensure that at least 10 
percent of all free and reduced price applications (or other 
documentation, if applicable) on file for the sponsorship are verified. 
The review of applications shall ensure that:
    (i) The application has been correctly and completely executed by 
the household;
    (ii) The institution has correctly determined and classified the 
eligibility of enrolled participants for free or reduced price meals or, 
for family day care homes, for tier I or tier II reimbursement, based on 
the information included on the application submitted by the household;
    (iii) The institution has accurately reported to the State agency 
the number of enrolled participants meeting the criteria for free or 
reduced price meal eligibility or, for day care homes, the number of 
participants meeting the criteria for tier I reimbursement, and the 
number of enrolled participants that do not meet the eligibility 
criteria for those meals; and
    (iv) In addition, the State agency may conduct further verification 
of the information provided by the household on the approved application 
for program meal eligibility. If this effort is undertaken, the State 
agency shall

[[Page 223]]

conduct this further verification for nonpricing programs in accordance 
with the procedures described in paragraph (h)(2) of this section.
    (2) Verification procedures for pricing programs. (i) For pricing 
programs, in addition to the verification procedures described in 
paragraph (h)(1) of this section, State agencies shall also conduct 
verification of the income information provided on the approved 
application for free and reduced price meals and, at State agency 
discretion, verification may also include confirmation of other 
information required on the application. However,
    (A) If a food stamp, FDPIR or AFDC case number is provided for a 
child, verification for such child shall include only confirmation that 
the child is included in a currently certified food stamp or FDPIR 
household or AFDC assistance unit; or
    (B) If a food stamp or FDPIR case number or SSI or Medicaid 
assistance identification number is provided for an adult, verification 
for such adult shall include only confirmation that the adult is 
included in a currently certified food stamp or FDPIR household or is 
currently certified to receive SSI or Medicaid benefits.
    (ii) State agencies shall perform verification on a random sample of 
no less than 3 percent of the approved free and reduced price 
applications in an institution which is a pricing program.
    (iii) Households shall be informed in writing that they have been 
selected for verification and they are required to submit the requested 
verification information to confirm their eligibility for free or 
reduced-price benefits by such date as determined by the State agency. 
Those households shall be informed of the type or types of information 
and/or documents acceptable to the State agency and the name and phone 
number of an official who can answer questions and assist the household 
in the verification effort. This information must include a social 
security number for each adult household member or an indication that 
he/she does not have one. State agencies shall inform selected 
households that:
    (A) Section 9 of the National School Lunch Act requires that, unless 
households provide the child's food stamp, FDPIR or AFDC case number, or 
the adult participant's food stamp or FDPIR case number or SSI or 
Medicaid assistance identification number, those selected for 
verification must provide the social security number of each adult 
household member;
    (B) In lieu of providing a social security number, an adult 
household member may indicate that he/she does not possess one;
    (C) Provision of a social security number is not mandatory, but if a 
social security number is not provided for each adult household member 
or an indication is not made that he/she does not possess one, benefits 
will be terminated;
    (D) The social security number may be used to identify household 
members in carrying out efforts to verify the correctness of information 
stated on the application and continued eligibility for the program. 
These verification efforts may be carried out through program reviews, 
audits, and investigations and may include contacting employers to 
determine income, contacting Federal, State or local agencies to 
determine current certification for receipt of food stamps or FDPIR, 
AFDC, SSI or Medicaid benefits, contacting the State employment security 
office to determine the amount of benefits received, and checking the 
documentation produced by household members to prove the amount of 
income received. These efforts may result in loss or reduction of 
benefits, administrative claims or legal actions if incorrect 
information was reported; and
    (E) This information must be provided to the attention of each adult 
household member disclosing his/her social security number. State 
agencies shall ensure that the notice complies with section 7 of Pub. L. 
93-579 (Privacy Act of 1974). These households shall be provided with 
the name and phone number of an official who can assist in the 
verification effort.
    (iv) Households of enrolled children selected for verification shall 
also be informed that if they are currently certified to participate in 
the Food Stamp, FDPIR, or AFDC Program they may submit proof of that 
certification in lieu of income information. In those

[[Page 224]]

cases, such proof shall consist of a current ``Notice of Eligibility'' 
for Food Stamp, FDPIR, or AFDC Program benefits or equivalent official 
documentation issued by a food stamp, Indian Tribal Organization, or 
welfare office which shows that the children are members of households 
or assistance units currently certified to participate in the Food 
Stamp, FDPIR, or AFDC Programs. An identification card for any of these 
programs is not acceptable as verification unless it contains an 
expiration date. Households of enrolled adults selected for verification 
shall also be informed that if they are currently certified to 
participate in the Food Stamp Program or FDPIR or SSI or Medicaid 
Programs, they may submit proof of that certification in lieu of income 
information. In those cases, such proof shall consist of:
    (A) A current ``Notice of Eligibility'' for Food Stamp or FDPIR 
benefits or equivalent official documentation issued by a food stamp, 
Indian Tribal Organization, or welfare office which shows that the adult 
participant is a member of a household currently certified to 
participate in the Food Stamp Program or FDPIR. An identification card 
is not acceptable as verification unless it contains an expiration date; 
or
    (B) Official documentation issued by an appropriate SSI or Medicaid 
office which shows that the adult participant currently receives SSI or 
Medicaid assistance. An identification card is not acceptable as 
verification unless it contains an expiration date. All households 
selected for verification shall be advised that failure to cooperate 
with verification efforts will result in a termination of benefits.
    (v) Sources of information for verification may include written 
evidence, collateral contacts, and/or systems of records.
    (A) Written evidence shall be used as the primary source of 
information for verification. Written evidence includes written 
confirmation of a household's circumstances, such as wage stubs, award 
letters, letters from employers, and, for enrolled children, current 
certification to participate in the Food Stamp, FDPIR or AFDC Programs, 
or, for adult participants, current certification to participate in the 
Food Stamp, FDPIR, SSI or Medicaid Programs. Whenever written evidence 
is insufficient to confirm eligibility, the State agency may use 
collateral contacts.
    (B) Collateral contact is a verbal confirmation of a household's 
circumstances by a person outside of the household. The collateral 
contact may be made in person or by phone and shall be authorized by the 
household. The verifying official may select a collateral contact if the 
household fails to designate one or designates one which is unacceptable 
to the verifying official. If the verifying official designates a 
collateral contact, the contact shall not be made without providing 
written or oral notice to the household. At the time of this notice, the 
household shall be informed that it may consent to the contact or 
provide acceptable verification in another form. The household shall be 
informed that its eligibility for free or reduced price meals shall be 
terminated if it refuses to choose one of these options. Termination 
shall be made in accordance with paragraph (h)(2)(vii) of this section. 
Collateral contacts could include employers, social service agencies, 
and migrant agencies.
    (C) Systems of records to which the State agency may have routine 
access are not considered collateral contacts. Information concerning 
income, family size, or food stamp/FDPIR/AFDC certification for enrolled 
children, or food stamp/FDPIR/SSI/Medicaidcertification for enrolled 
adults, which is maintained by other government agencies and to which a 
State agency can legally gain access may be used to confirm a 
household's eligibility for Program meal benefits. One possible source 
could be wage and benefit information maintained by the State 
unemployment agency, if that information is available. The use of any 
information derived from other agencies must be used with applicable 
safeguards concerning disclosure.
    (vi) Verification by State agencies of receipt of food stamps, 
FDPIR, AFDC, SSI or Medicaid benefits shall be limited to a review to 
determine that the period of eligibility is current. If the benefit 
period is found to have expired,

[[Page 225]]

or if the household's certification has been terminated, the household 
shall be required to document their income eligibility.
    (vii) The State agency may work with the institution to verify the 
documentation submitted by the household on the application; however, 
the responsibility to complete the verification process may not be 
delegated to the institution.
    (viii) If a household refuses to cooperate with efforts to verify, 
or the verification of income indicates that the household is ineligible 
to receive benefits or is eligible to receive reduced benefits, the 
State agency shall require the pricing program institution to terminate 
or adjust eligibility in accordance with the following procedures. 
Institution officials shall immediately notify families of the denial of 
benefits in accordance with paragraphs (e)(4) and (e)(5) of this 
section. Advance notification shall be provided to families which 
receive a reduction or termination of benefits 10 calendar days prior to 
the actual reduction or termination. The 10-day period shall begin the 
day the notice is transmitted to the family. The notice shall advise the 
household of: (A) The change; (B) the reasons for the change; (C) 
notification of the right to appeal the action and the date by which the 
appeal must be requested in order to avoid a reduction or termination of 
benefits; (D) instructions on how to appeal; and (E) the right to 
reapply at any time during the year. The reasons for ineligibility shall 
be properly documented and retained on file at the institution.
    (ix) When a household disagrees with an adverse action which affects 
its benefits and requests a fair hearing, benefits shall be continued as 
follows while the household awaits the hearing:
    (A) Households which have been approved for benefits and which are 
subject to a reduction or termination of benefits later in the same year 
shall receive continued benefits if they appeal the adverse action 
within the 10-day advance notice period; and
    (B) Households which are denied benefits upon application shall not 
received benefits.
    (3) State agencies shall inform institution officials of the results 
of the verification effort and the action which will be taken in 
response to the verification findings. This notification shall be made 
in accordance with the procedures outlined in Sec. 226.14(a).
    (4) If the verification results disclose that an institution has 
inaccurately classified or reported the number of participants eligible 
for free, reduced-price or paid meals, the State agency shall adjust 
institution rates of reimbursement retroactive to the month in which the 
incorrect eligibility figures were reported by the institution to the 
State agency.
    (5) If the verification results disclose that a household has not 
reported accurate documentation on the application which would support 
continued eligibility for free or reduced-price meals, the State agency 
shall immediately adjust institution rates of reimbursement. However, 
this rate adjustment shall not become effective until the affected 
households have been notified in accordance with the procedures of 
paragraph (h)(2)(vi) of this section and any ensuing appeals have been 
heard as specified in paragraph (h)(2)(viii) of this section.
    (6) Verification procedures for sponsoring organizations of day care 
homes. Prior to approving an application for a day care home that 
qualifies as tier I day care home on the basis of the provider's 
household income, sponsoring organizations of day care homes shall 
conduct verification of such income in accordance with the procedures 
contained in paragraph (h)(2)(i) of this section. Sponsoring 
organizations of day care homes may verify the information on 
applications submitted by households of children enrolled in day care 
homes in accordance with the procedures contained in paragraph (h)(2)(i) 
of this section.
    (i) Disclosure of program eligibility information to State Medicaid 
(Medicaid) and the State Children's Health Insurance Program (SCHIP) 
Program eligibility information about children eligible for free and 
reduced price meals may be disclosed to Medicaid and SCHIP as described 
in this section.
    (1) Who decides whether to disclose program eligibility information 
to Medicaid and/or SCHIP? The State agency may elect to allow 
institutions to disclose

[[Page 226]]

children's free and reduced price meal eligibility information to 
Medicaid and SCHIP. Institutions may then elect to do so. Children's 
program eligibility information may only be disclosed to Medicaid or 
SCHIP when both the State agency and the institution so elect, the 
parent/guardian does not decline to have their eligibility information 
disclosed as described in paragraph (i)(5), and the requirements in this 
paragraph (i) are met.
    (2) What information may we disclose for use by Medicaid and SCHIP? 
The State agency or institution, as appropriate, may disclose children's 
names, eligibility status (whether they are eligible for free or reduced 
price meals), and any other eligibility information obtained through the 
free and reduced price meal application to persons directly connected 
with the administration of Medicaid or SCHIP.
    (3) Who are persons ``directly connected'' with the administration 
of Medicaid and SCHIP? State employees and persons authorized under 
Federal and State Medicaid and SCHIP requirements to carry out initial 
processing of Medicaid or SCHIP applications or to make eligibility 
determinations are persons directly connected with the administration of 
Medicaid and SCHIP for purposes of disclosure of children's free and 
reduced price meal eligibility information.
    (4) What are the restrictions on how Medicaid and SCHIP use 
children's free and reduced price meal eligibility information? Medicaid 
and SCHIP agencies and health insurance program operators receiving 
children's free and reduced price meal eligibility information may only 
use the information to seek to enroll children in Medicaid or SCHIP. The 
Medicaid and SCHIP enrollment process may include targeting and 
identifying children from low-income households who are potentially 
eligible for Medicaid or SCHIP for the purpose of seeking to enroll them 
in Medicaid or SCHIP.
    (5) What are the requirements for notifying households of potential 
disclosure to Medicaid or SCHIP? The State agency or institution, as 
appropriate, must notify parents/guardians that children's free or 
reduced price meal eligibility information will be disclosed to Medicaid 
and/or SCHIP unless the parent/guardian elects not to have their 
information disclosed. Additionally, the State agency or institution, as 
appropriate, must give parents/guardians an opportunity to elect not to 
have their information disclosed to Medicaid or SCHIP. Only the parent 
or guardian who is a member of the household or family for purposes of 
the free and reduced price meal or free milk application may decline the 
disclosure of eligibility information. The notification must inform 
parents/guardians that they are not required to consent to the 
disclosure, that the information, if disclosed, will be used to identify 
children eligible for and to seek to enroll children in a health 
insurance program, and that their decision will not affect their 
children's eligibility for free or reduced price meals. The notification 
may be included in the letter/notice to parents/guardians that 
accompanies the free and reduced price application, on the application 
itself or in a separate notice provided to parents/guardians. The notice 
must give parents/guardians adequate time to respond. For children 
determined eligible through direct certification, the notice of 
potential disclosure may be included in the document informing parents/
guardians of their children's eligibility for free meals through direct 
certification.
    (6) May social security numbers be disclosed? The State agency or 
institution, as appropriate, may disclose social security numbers to any 
programs or persons authorized to receive all program eligibility 
information under this paragraph (i), provided parents/guardians have 
not declined to have their information disclosed. However, State 
agencies and institutions that plan to disclose social security numbers 
must give notice of the planned use of the social security numbers. This 
notice must be in accordance with section 7(b) of the Privacy Act of 
1974 (5 U.S.C. 552a note). The application must include substantially 
the following language for disclosures of social security numbers to 
Medicaid or SCHIP: ``The social security number may also be disclosed to 
Medicaid and the State Children's

[[Page 227]]

Health Insurance Program for the purpose of identifying and seeking to 
enroll eligible children in one of these health insurance programs.'' 
This language is in addition to the notice required in paragraph 
(e)(1)(i)(F) of this section. State agencies and institutions are 
responsible for drafting the appropriate notice for disclosures of 
social security numbers.
    (7) Are agreements required before disclosing program eligibility 
information? The State agency or institution, as appropriate, must have 
a written agreement with the State or local agency or agencies 
administering Medicaid or SCHIP prior to disclosing children's free and 
reduced price eligibility information. At a minimum, the agreement must:
    (i) Identify the health insurance program or health agency receiving 
children's eligibility information;
    (ii) Describe the information that will be disclosed;
    (iii) Require that the Medicaid or SCHIP agency use the information 
obtained and specify that the information must only be used to seek to 
enroll children in Medicaid or SCHIP;
    (iv) Describe how the information will be protected from 
unauthorized uses and disclosures;
    (v) Describe the penalties for unauthorized disclosure; and
    (vi) Be signed by both the Medicaid or SCHIP program or agency and 
the State agency or institution, as appropriate.
    (8) What are the penalties for unauthorized disclosure or misuse of 
information? In accordance with section 9(b)(2)(C)(v) of the Richard B. 
Russell National School Lunch Act (42 U.S.C. 1758(b)(2)(C)(v)), any 
individual who publishes, divulges, discloses or makes known in any 
manner, or to any extent not authorized by statute or this section, any 
information obtained under this paragraph (i) will be fined not more 
than $1,000 or imprisoned for up to 1 year, or both.
    (9) What are the State agency's responsibilities regarding 
disclosures? State agencies that elect to allow disclosure of children's 
free and reduced price meal eligibility information to Medicaid or 
SCHIP, as provided in this paragraph (i), must ensure that any 
institution acting in accordance with that option:
    (i) Has a written agreement with the State or local agency or 
agencies administering health insurance programs for children under 
titles XIX and XXI of the Social Security Act (42 U.S.C. 1396 et seq. 
and 1397aa et seq.) that requires the health agencies to use children's 
free and reduced price meal eligibility information to seek to enroll 
children in those health insurance programs; and
    (ii) Notifies each household of the information that will be 
disclosed, that the information disclosed will be used only to seek to 
enroll children in Medicaid or SCHIP and provides each parent/guardian 
with an opportunity to elect not to have the information disclosed.

[47 FR 36527, Aug. 20, 1982, as amended at 49 FR 14078, Apr. 10, 1984; 
50 FR 19310, May 8, 1985; 50 FR 20197, May 15, 1985; 52 FR 36907, Oct. 
2, 1987; 53 FR 52594, Dec. 28, 1988; Amdt. 22, 55 FR 1378, Jan. 14, 
1990; 61 FR 25555, May 22, 1996; 62 FR 904, Jan. 7, 1997; 62 FR 5519, 
Feb. 6, 1997; 62 FR 23619, May 1, 1997; 63 FR 9105, Feb. 24, 1998; 63 FR 
9729, Feb. 26, 1998; 66 FR 2203, Jan. 11, 2001]



              Subpart F--Food Service Equipment Provisions



Sec. 226.24  Property management requirements.

    Institutions and administering agencies shall follow the policies 
and procedures governing title, use, and disposition of equipment 
obtained by purchase, whose cost was acquired in whole or part with food 
service equipment assistance funds in accordance with the Department's 
Uniform Federal Assistance Regulations (7 CFR part 3015).

[48 FR 41142, Sept. 14, 1983]



                       Subpart G--Other Provisions



Sec. 226.25  Other provisions.

    (a) Grant closeout procedures. Grant closeout procedures for the 
Program shall be in accordance with the Uniform Federal Assistance 
Regulations.
    (b) State requirements. Nothing contained in this part shall prevent 
a State agency from imposing additional requirements for participation 
in the

[[Page 228]]

Program which are not inconsistent with the provisions of this part; 
however, any additional requirements shall be approved by FNSRO and may 
not deny the Program to an eligible institution.
    (c) Value of assistance. The value of assistance to participants 
under the Program shall not be considered to be income or resources for 
any purposes under any Federal or State laws, including, but not limited 
to laws relating to taxation, welfare, and public assistance programs.
    (d) Maintenance of effort. Expenditure of funds from State and local 
sources for the maintenance of food programs for children shall not be 
diminished as a result of funds received under the Act.
    (e) Fraud penalty. Whoever embezzles, willfully misapplies, steals, 
or obtains by fraud any funds, assets, or property that are the subject 
of a grant or other form of assistance under this part, whether received 
directly or indirectly from the Department or whoever receives, 
conceals, or retains such funds, assets, or property to his use or gain, 
knowing such funds, assets, or property have been embezzled, willfully 
misapplied, stolen, or obtained by fraud shall, if such funds, assets, 
or property are of the value of $100 or more, be fined not more than 
$10,000 or imprisoned not more than five years, or both, or, if such 
funds, assets, or property are of value of less than $100, shall be 
fined not more than $1,000 or imprisoned for not more than one year, or 
both.
    (f) Claims adjustment authority. The Secretary shall have the 
authority to determine the amount of, to settle, and to adjust any claim 
arising under the Program, and to compromise or deny such claim or any 
part thereof. The Secretary shall also have the authority to waive such 
claims if the Secretary determines that to do so would serve the 
purposes of the program. This provision shall not diminish the authority 
of the Attorney General of the United States under section 516 of title 
28, U.S. Code, to conduct litigation on behalf of the United States.
    (g) Special retroactivity provisions. Notwithstanding any other 
provisions contained in this part, the following shall apply:
    (1) State agencies shall provide reimbursement for meals served by 
any adult day care center between October 1, 1987 and the date of the 
initial Program agreement between the State agency and the center under 
the following conditions, provided that:
    (i) The center can document that, for any meals claimed:
    (A) Meals served met all requirements including items and quantities 
served;
    (B) Free and reduced-price applications were on file if 
reimbursement for free or reduced-price meals is sought;
    (C) Meal counts by category (free, reduced-price and paid) and type 
served (breakfast, lunch, supper and supplement) are available;
    (D) Appropriate food service revenue and expenditure records are 
available;
    (E) Reimbursement has not been received under title III of the Older 
Americans Act for the claimed meals and CCFP reimbursement does not 
duplicate other funding for the claimed meals; and
    (ii) The application for Program participation is postmarked or 
submitted to the State agency no later than April 17, 1989, and the 
claims for reimbursement for the meals served between October 1, 1987 
and the date of the initial agreement between the State agency and the 
center are postmarked or submitted to the State agency no later than 
April 17, 1989 or the date set by Sec. 226.10(e), whichever is later.
    (2) Alternative documentation for free meal eligibility for adult 
participants shall be based on the following:
    (i) Beginning with October 1, 1987, documentation of membership in a 
food stamp household;
    (ii) For the period October 1, 1987 through September 30, 1988, 
documentation of membership in an AFDC assistance unit; and
    (iii) Beginning October 1, 1988, documentation of receipt of 
assistance under Medicaid or SSI.
    (3) For the period October 1, 1987 through September 30, 1988, the 
family of an adult participant applying for free or reduced-price meals 
shall include a group of related or nonrelated individuals, who are not 
residents of an institution or boarding house, but who

[[Page 229]]

are living as one economic unit. However, beginning October 1, 1988, the 
family of an adult participant applying for free or reduced-price meals 
shall include only the adult participant and any spouse or dependent(s) 
residing with the adult participant.

[47 FR 36527, Aug. 20, 1982, as amended at 53 FR 52597, Dec. 28, 1988; 
54 FR 13049, Mar. 30, 1989]



Sec. 226.26  Program information.

    Persons desiring information concerning the Program may write to the 
appropriate State agency or Regional Office of FNS as indicated below:
    (a) In the States of Connecticut, Maine, Massachusetts, New 
Hampshire, New York, Rhode Island, and Vermont: Northeast Regional 
Office, FNS, U.S. Department of Agriculture, 10 Causeway Street, Room 
501, Boston, MA 02222-1065.
    (b) In the States of Delaware, District of Columbia, Maryland, New 
Jersey, Pennsylvania, Puerto Rico, Virginia, Virgin Islands, and West 
Virginia: Mid-Atlantic Regional Office, FNS, U.S. Department of 
Agriculture, 300 Corporate Boulevard, Robbinsville, NJ 08691-1598.
    (c) In the States of Alabama, Florida, Georgia, Kentucky, 
Mississippi, North Carolina, South Carolina, and Tennessee: Southeast 
Regional Office, FNS, U.S. Department of Agriculture, 61 Forsyth Street, 
SW., Room 8T36, Atlanta, GA 30303.
    (d) In the States of Illinois, Indiana, Michigan, Minnesota, Ohio 
and Wisconsin: Midwest Regional Office, FNS, U.S. Department of 
Agriculture, 77 Jackson Boulevard, 20th Floor, Chicago, IL 60604-3507.
    (e) In the States of Colorado, Iowa, Kansas, Missouri, Montana, 
Nebraska, North Dakota, South Dakota, Utah and Wyoming: Mountain Plains 
Regional Office, FNS, U.S. Department of Agriculture, 1244 Speer 
Boulevard, Suite 903, Denver, CO 80204.
    (f) In the States of Arkansas, Louisiana, New Mexico, Oklahoma and 
Texas: Southwest Regional Office, FNS, U.S. Department of Agriculture, 
1100 Commerce Street, Room 5-C-30, Dallas, TX 75242.
    (g) In the States of Alaska, American Samoa, Arizona, California, 
Guam, Hawaii, Idaho, Nevada, Oregon, the Commonwealth of the Northern 
Mariana Islands, and Washington: Western Regional Office, FNS, U.S. 
Department of Agriculture, 550 Kearney Street, Room 400, San Francisco, 
CA 94108.

[47 FR 36527, Aug. 20, 1982; 47 FR 46072, Oct. 15, 1982, as amended at 
48 FR 40197, Sept. 6, 1983; 53 FR 52598, Dec. 28, 1988; 65 FR 12442, 
Mar. 9, 2000]



Sec. 226.27  Information collection/recordkeeping--OMB assigned control numbers.

------------------------------------------------------------------------
                                                             Current OMB
       7 CFR section where requirements are described          control
                                                                number
------------------------------------------------------------------------
226.3-226.4................................................    0584-0055
226.6-226.10...............................................    0584-0055
226.14-226.16..............................................    0584-0055
226.23-226.24..............................................    0584-0055
------------------------------------------------------------------------


[50 FR 53258, Dec. 31, 1985]

            Appendix A to Part 226--Alternate Foods for Meals

                       Alternate Protein Products

  A. What are the criteria for alternate protein products used in the 
                   Child and Adult Care Food Program?

    1. An alternate protein product used in meals planned under the 
provisions in Sec. 226.20 must meet all of the criteria in this section.
    2. An alternate protein product whether used alone or in combination 
with meat or meat alternate must meet the following criteria:
    a. The alternate protein product must be processed so that some 
portion of the non-protein constituents of the food is removed. These 
alternate protein products must be safe and suitable edible products 
produced from plant or animal sources.
    b. The biological quality of the protein in the alternate protein 
product must be at least 80 percent that of casein, determined by 
performing a Protein Digestibility Corrected Amino Acid Score (PDCAAS).
    c. The alternate protein product must contain at least 18 percent 
protein by weight when fully hydrated or formulated. (``When hydrated or 
formulated'' refers to a dry alternate protein product and the amount of 
water, fat, oil, colors, flavors or any other substances which have been 
added).
    d. Manufacturers supplying an alternate protein product to 
participating schools or institutions must provide documentation that 
the product meets the criteria in paragraphs A.2. through c of this 
appendix.
    e. Manufacturers should provide information on the percent protein 
contained in the

[[Page 230]]

dry alternate protein product and on an as prepared basis.
    f. For an alternate protein product mix, manufacturers should 
provide information on:
    (1) The amount by weight of dry alternate protein product in the 
package;
    (2) Hydration instructions; and
    (3) Instructions on how to combine the mix with meat or other meat 
alternates.

 B. How are alternate protein products used in the Child and Adult Care 
                              Food Program?

    1. Schools, institutions, and service institutions may use alternate 
protein products to fulfill all or part of the meat/meat alternate 
component discussed in Sec. 226.20.
    2. The following terms and conditions apply:
    a. The alternate protein product may be used alone or in combination 
with other food ingredients. Examples of combination items are beef 
patties, beef crumbles, pizza topping, meat loaf, meat sauce, taco 
filling, burritos, and tuna salad.
    b. Alternate protein products may be used in the dry form 
(nonhydrated), partially hydrated or fully hydrated form. The moisture 
content of the fully hydrated alternate protein product (if prepared 
from a dry concentrated form) must be such that the mixture will have a 
minimum of 18 percent protein by weight or equivalent amount for the dry 
or partially hydrated form (based on the level that would be provided if 
the product were fully hydrated).
    C. How are commercially prepared products used in the Child and 
Adult Care Food Program?
    Schools, institutions, and service institutions may use a 
commercially prepared meat or meat alternate product combined with 
alternate protein products or use a commercially prepared product that 
contains only alternate protein products.

[65 FR 12442, Mar. 9, 2000]

                    Appendix B to Part 226 [Reserved]

      Appendix C to Part 226--Child Nutrition (CN) Labeling Program

    1. The Child Nutrition (CN) Labeling Program is a voluntary 
technical assistance program administered by the Food and Nutrition 
Service (FNS) in conjunction with the Food Safety and Inspection Service 
(FSIS), and Agricultural Marketing Service (AMS) of the U.S. Department 
of Agriculture (USDA), and National Marine Fisheries Service of the U.S. 
Department of Commerce (USDC) for the Child Nutrition Programs. This 
program essentially involves the review of a manufacturer's recipe or 
product formulation to determine the contribution a serving of a 
commercially prepared product makes toward meal pattern requirements and 
a review of the CN label statement to ensure its accuracy. CN labeled 
products must be produced in accordance with all requirements set forth 
in this rule.
    2. Products eligible for CN labels are as follows:
    (a) Commercially prepared food products that contribute 
significantly to the meat/meat alternate component of meal pattern 
requirements of 7 CFR 210.10, 225.21, and 226.20 and are served in the 
main dish.
    (b) Juice drinks and juice drink products that contain a minimum of 
50 percent full-strength juice by volume.
    3. For the purpose of this appendix the following definitions apply:
    (a) CN label is a food product label that contains a CN label 
statement and CN logo as defined in paragraph 3 (b) and (c) below.
    (b) The CN logo (as shown below) is a distinct border which is used 
around the edges of a ``CN label statement'' as defined in paragraph 
3(c).
[GRAPHIC] [TIFF OMITTED] TC17SE91.009

    (c) The CN label statement includes the following:
    (1) The product identification number (assigned by FNS),
    (2) The statement of the product's contribution toward meal pattern 
requirements of 7 CFR 210.10, 220.8, 225.21, and 226.20. The statement 
shall identify the contribution of

[[Page 231]]

a specific portion of a meat/meat alternate product toward the meat/meat 
alternate, bread/bread alternate, and/or vegetable/fruit component of 
the meal pattern requirements. For juice drinks and juice drink products 
the statement shall identify their contribution toward the vegetable/
fruit component of the meal pattern requirements,
    (3) Statement specifying that the use of the CN logo and CN 
statement was authorized by FNS, and
    (4) The approval date.
    For example:
    [GRAPHIC] [TIFF OMITTED] TC17SE91.010
    
    (d) Federal inspection means inspection of food products by FSIS, 
AMS or USDC.
    4. Food processors or manufacturers may use the CN label statement 
and CN logo as defined in paragraph 3 (b) and (c) under the following 
terms and conditions:
    (a) The CN label must be reviewed and approved at the national level 
by the Food and Nutrition Service and appropriate USDA or USDC Federal 
agency responsible for the inspection of the product.
    (b) The CN labeled product must be produced under Federal inspection 
by USDA or USDC. The Federal inspection must be performed in accordance 
with an approved partial or total quality control program or standards 
established by the appropriate Federal inspection service.
    (c) The CN label statement must be printed as an integral part of 
the product label along with the product name, ingredient listing, the 
inspection shield or mark for the appropriate inspection program, the 
establishment number where appropriate, and the manufacturer's or 
distributor's name and address.
    (1) The inspection marking for CN labeled non-meat, non-poultry, and 
non-seafood products with the exception of juice drinks and juice drink 
products is established as follows:
[GRAPHIC] [TIFF OMITTED] TC17SE91.011

    (d) Yields for determining the product's contribution toward meal 
pattern requirements must be calculated using the Food Buying Guide for 
Child Nutrition Programs (Program Aid Number 1331).
    5. In the event a company uses the CN logo and CN label statement 
inappropriately, the company will be directed to discontinue the use of 
the logo and statement and the matter will be referred to the 
appropriate agency for action to be taken against the company.
    6. Products that bear a CN label statement as set forth in paragraph 
3(c) carry a warranty. This means that if a food service authority 
participating in the child nutrition programs purchases a CN labeled 
product and uses it in accordance with the manufacturer's directions, 
the school or institution will not have an audit claim filed against it 
for the CN labeled product for noncompliance with the meal pattern 
requirements of 7 CFR 210.10, 220.8, 225.21, and 226.20. If a State or 
Federal auditor finds that a product that is CN labeled does not 
actually meet the meal pattern requirements claimed on the label, the 
auditor will report this finding to FNS. FNS will prepare a report of 
the findings and send it to the appropriate divisions of FSIS and AMS of 
the USDA, National Marine Fisheries Services of the USDC, Food and Drug 
Administration, or the Department of Justice for action against the 
company.
    Any or all of the following courses of action may be taken:
    (a) The company's CN label may be revoked for a specific period of 
time;
    (b) The appropriate agency may pursue a misbranding or mislabeling 
action against the company producing the product;
    (c) The company's name will be circulated to regional FNS offices;
    (d) FNS will require the food service program involved to notify the 
State agency of the labeling violation.
    7. FNS is authorized to issue operational policies, procedures, and 
instructions for the CN Labeling Program.
    To apply for a CN label and to obtain additional information on CN 
label application procedures write to: CN Labels, U.S. Department of 
Agriculture, Food and Nutrition Service, Nutrition and Technical 
Services

[[Page 232]]

Division, 3101 Park Center Drive, Alexandria, Virginia 22302.

[49 FR 18457, May 1, 1984; 49 FR 45109, Nov. 15, 1984]



PART 227--NUTRITION EDUCATION AND TRAINING PROGRAM--Table of Contents




                           Subpart A--General

Sec.
227.1  General purpose and scope.
227.2  Definitions.
227.3  Administration.
227.4  Application and agreement.
227.5  Program funding.

                   Subpart B--State Agency Provisions

227.30  Responsibilities of State agencies.
227.31  Audits, management reviews, and evaluations.

                 Subpart C--State Coordinator Provisions

227.35  Responsibilities of State coordinator.
227.36  Requirements of needs assessment.
227.37  State plan for nutrition education and training.

                        Subpart D--Miscellaneous

227.40  Program information.
227.41  Recovery of funds.
227.42  Grant closeout procedures.
227.43  Participation of adults.
227.44  Management evaluations and reviews.

Appendix to Part 227--Apportionment of Funds for Nutrition Education and 
          Training

    Authority: Sec. 15, Pub. L. 95-166, 91 Stat. 1340 (42 U.S.C. 1788), 
unless otherwise noted.

    Source: 44 FR 28282, May 15, 1979, unless otherwise noted.



                           Subpart A--General



Sec. 227.1  General purpose and scope.

    The purpose of these regulations is to implement section 19 of the 
Child Nutrition Act (added by Pub. L. 95-166, effective November 10, 
1977) which authorizes the Secretary to formulate and carry out a 
nutrition information and education program through a system of grants 
to State agencies to provide for (a) the nutritional training of 
educational and foodservice personnel, (b) the foodservice management 
training of school foodservice personnel, and (c) the conduct of 
nutrition education activities in schools and child care institutions. 
To the maximum extent possible, the Program shall fully utilize the 
child nutrition programs as a learning experience.



Sec. 227.2  Definitions.

    (a) Administrative costs means costs allowable under Federal 
Management Circular 74-4, other than program costs, incurred by a State 
agency for overall administrative and supervisory purposes, including, 
but not limited to, costs of financial management, data processing, 
recordkeeping and reporting, personnel management, and supervising the 
State Coordinator.
    (b) Child Care Food Program means the program authorized by section 
17 of the National School Lunch Act, as amended.
    (c) Child Nutrition Programs means any or all of the following: 
National School Lunch Program, School Breakfast Program, Child Care Food 
Program.
    (d) Commodity only school means a school which has entered into an 
agreement under Sec. 210.15a(b) of this subchapter to receive 
commodities donated under part 250 of this chapter for a nonprofit lunch 
program.
    (e) Department means the U.S. Department of Agriculture.
    (f) Federal fiscal year means a period of 12 calendar months 
beginning October 1 of any calendar year and ending September 30 of the 
following calendar year.
    (g) FNS means the Food and Nutrition Service of the Department.
    (h) FNSRO means the appropriate Regional Office of the Food and 
Nutrition Service of the Department.
    (i) Institution means any licensed, nonschool, public or private 
nonprofit organization providing day care services where children are 
not maintained in permanent residence, including but not limited to day 
care centers, settlement houses, after school recreation centers, 
neighborhood centers, Head Start centers, and organizations providing 
day care services for handicapped children and includes a sponsoring 
organization under the Child Care Food Program regulations.
    (j) National School Lunch Program means the lunch program authorized 
by the National School Lunch Act.

[[Page 233]]

    (k) Needs assessment means a systematic process for delineating the 
scope, extent (quantity), reach and success of any current nutrition 
education activities, including those relating to:
    (1) Methods and materials available inside and outside the 
classroom; (2) training of teachers in the principles of nutrition and 
in nutrition education strategies, methods, and techniques; (3) training 
of school foodservice personnel in the principles and practices of 
foodservice management; and (4) compilation of existing data concerning 
factors impacting on nutrition education and training such as statistics 
on child health and competency levels achieved by foodservice personnel.
    (l) Program costs means costs, other than administrative costs, 
incurred in connection with any or all of the following:
    (1) The State Coordinator's salary, and related support personnel 
costs, including fringe benefits and travel expenses; (2) applying for 
assessment and planning funds; (3) the conduct of the needs assessment; 
(4) the development of the State Plan; and (5) the implementation of the 
approved State Plan, including related support services.
    (m) Program means the Nutrition Education and Training Program 
authorized by section 19 of the Child Nutrition Act of 1966, as amended.
    (n) School means: (1) An educational unit of high school grade or 
under operating under public or nonprofit private ownership in a single 
building or complex of buildings. The term ``high school grade or 
under'' includes classes of preprimary grade when they are conducted in 
a school having classes of primary or higher grade, or when they are 
recognized as a part of the educational system in the State, regardless 
of whether such preprimary grade classes are conducted in a school 
having classes of primary or higher grade.
    (2) With the exception of residential summer camps which participate 
in the Summer Food Service Program for Children and private foster 
homes, any distinct part of a public or nonprofit private institution or 
any public or nonprofit private child care institution, which (i) 
maintains children in residence, (ii) operates principally for the care 
of children and (iii) if private, is licensed to provide residential 
child care services under the appropriate licensing code by the State or 
a subordinate level of government. The term ``child care institution'' 
includes, but is not limited to: Homes for the mentally retarded, the 
emotionally disturbed, the physically handicapped, and unmarried mothers 
and their infants; group homes; halfway houses; orphanages; temporary 
shelters for abused children and for runaway children; long term care 
facilities of chronically ill children; and juvenile detention centers.
    (3) With respect to the Commonwealth of Puerto Rico, non-profit 
child care centers certified as such by the Governor of Puerto Rico.
    (o) School Breakfast Program means the program authorized by section 
4 of the Child Nutrition Act of 1966, as amended.
    (p) Foodservice personnel means those individuals responsible for 
planning, preparing, serving and otherwise operating foodservice 
programs funded by USDA grants as provided for in the National School 
Lunch Act and the Child Nutrition Act of 1966.
    (q) State means any of the 50 States, the District of Columbia, the 
Commonwealth of Puerto Rico, the Virgin Islands, Guam, American Samoa, 
the Trust Territory of the Pacific Islands, and the Northern Mariana 
Islands.
    (r) State agency means the State educational agency.
    (s) State educational agency means, as the State legislature may 
determine:
    (1) The Chief State School Officer (such as the State Superintendent 
of Public Instruction, Commissioner of Education, or similar officer), 
or (2) a board of education controlling the State Department of 
Education.



Sec. 227.3  Administration.

    (a) Within the Department, FNS shall act on behalf of the Department 
in the administration of the Program.
    (b) Within the States, responsibility for administration of the 
Program shall be in the State agency, except that FNSRO shall administer 
the Program with respect to nonprofit private schools or institutions in 
any State where the State agency is prohibited

[[Page 234]]

by law from administering the Program in nonprofit private schools or 
institutions.



Sec. 227.4  Application and agreement.

    After the initial fiscal year of participation each State agency 
desiring to take part in the Program shall enter into a written 
agreement with the Department for the administration of the Program in 
accordance with the provisions of this part. The State agency shall 
execute Form FNS-74, which shall constitute the written agreement.

(Approved by the Office of Management and Budget under control number 
0584-0062)


(44 U.S.C. 3506)

[44 FR 28282, May 15, 1979, as amended at 47 FR 746, Jan. 2, 1982]



Sec. 227.5  Program funding.

    (a) Total grant. The total grant to each State agency for each 
fiscal year for program costs and administrative costs shall consist of 
an amount equal to 50 cents per child enrolled in schools and 
institutions within the State during such year, but in no event shall 
such grant be less than $50,000: Provided, however, That a State's total 
grant shall be reduced proportionately if the State does not administer 
the program in nonprofit private schools and institutions. If funds 
appropriated for a fiscal year are insufficient to pay the amount to 
which each State is entitled, the amount of such grant shall be ratably 
reduced to the extent necessary so that the total of the amounts paid to 
each State does not exceed the amount of appropriated funds. Each State 
agency which receives funds based on all children enrolled in public and 
nonprofit private schools and institutions shall make the Program 
available to those schools and institutions. Enrollment figures shall be 
the latest available as certified by the Department of Education.
    (b) First fiscal year participation--(1) Assessment and planning 
grant. A portion of the total grant shall be made available to each 
State agency during its first fiscal year of participation as an 
assessment and planning grant for:
    (i) Employing a State Coordinator, as provided for in Sec. 227.30, 
and related support personnel costs including fringe benefits and travel 
expenses, (ii) undertaking a needs assessment in the State, (iii) 
developing a State Plan for nutrition education and training within the 
State, and (iv) applying for the State assessment and planning grant.
    (2) Advances for the assessment and planning grant. FNS shall make 
advances to any State desiring to participate in the Program, to enable 
the State to carry out the responsibilities set forth in paragraph 
(b)(1) of this section. Advances shall be made in two phases, in 
accordance with the following procedures:
    (i) Initially, State agencies may receive an advance up to $35,000 
for the purpose of hiring a State coordinator, as provided for in 
Sec. 227.30. Application for such an advance shall be made on Form AD-
623 when the State agency applies for participation in the Program. The 
information required for this advance shall be set out in Part III, 
Budget Information, Section B, Budget Categories. The State agency shall 
there indicate the funds required for the salary, travel, and fringe 
benefits of the State Coordinator, and related personnel costs necessary 
to carry out the duties and responsibilities of the State Coordinator.
    (ii) After appointment of the State Coordinator, the State agency 
may receive an additional advance of up to 50 percent of the total grant 
to which the State agency is entitled for the first year of 
participation, after deduction of the advance made for the State 
Coordinator under Sec. 227.5(b)(2), but not to exceed $100,000, for the 
purpose of undertaking a needs assessment in the State, developing a 
State Plan for nutrition education and training, and applying for the 
assessment and planning grant. Application for such advance shall be 
made by amending Part III, Budget Information, of Form AD-623.
    (3) Funds for implementing State plan. (i) States receiving 
advances. Each State agency shall receive the remaining portion of its 
total grant in order to implement its State plan, which has been 
approved by FNS, if the State agency has carried out the 
responsibilities for which advances were received. With the submission 
of the State plan each State agency may apply for the funds remaining of 
its total grant.

[[Page 235]]

    (ii) States previously participating. Those States which previously 
participated may apply for their total grant upon submission of the 
State Plan.
    (c) Administrative costs. Each State agency may use up to 15 percent 
of its total grant for up to 50 percent of its cash expenditures for 
administrative costs.
    (d) Payment to State agencies. Approval of the State plan by FNS is 
a prerequisite to the payment of funds to the State agency. All funds 
made available for the Program shall be provided through a letter of 
credit or check, as determined by FNS.
    (e) Unobligated funds. The State agency will release to FNS any 
Federal funds made available to it under the Program which are 
unobligated by September 30 of each fiscal year.
    (f) Funds for existing programs. State agencies shall maintain their 
present level of funding for existing nutrition education and training 
programs. FNS funds for the Program shall augment current nutrition 
education and training programs and projects. Funds made available by 
FNS for this Program shall not replace such funds.

[44 FR 28282, May 15, 1979, as amended at 52 FR 8223, Mar. 17, 1987]



                   Subpart B--State Agency Provisions



Sec. 227.30  Responsibilities of State agencies.

    (a) General. Except to the extent that it would be inconsistent with 
this part, the Program shall be administered in accordance with the 
applicable provisions of the Departmental regulations 7 CFR part 3015.
    (b) Application. For the initial fiscal year of participation States 
shall make application for administration of the Program on Form and are 
responsible for amending Form AD-623 to request advance funding. In the 
initial application, in connection with the request for advance funding 
for the State Coordinator, part IV, Program Narrative, of Form AD-623 
shall indicate the State agency's procedures for hiring a State 
Coordinator and contain a justification for the dollar value of salary 
requested. The narrative shall also indicate the time frame for hiring 
the State Coordinator. In amending Form AD-623 in connection with the 
request for advance funding for the remaining portion of the assessment 
and planning grant, part IV, Program Narrative, shall set forth the 
details for areas of the assessment and planning grant, other than 
employment of the State Coordinator.
    (b-1) If any State does not apply for participation in the Program, 
by April 1 of a fiscal year by submitting Form AD 623 as required in 
Sec. 227.30(b) and Sec. 227.5(b)(2)(i), the State's share of the funds 
shall be provided to the remaining States, so long as this does not take 
the remaining States' grants above 50 cents per child enrolled in 
schools or institutions, except in those States which receive a minimum 
grant of $75,000 for a fiscal year.
    (c) State Coordinator. After execution of the agreement the State 
agency shall appoint a nutrition education specialist to serve as a 
State Coordinator for the Program who may be employed on a full-time or 
part-time basis. The State Coordinator may be a State employee who 
reports directly or indirectly to the Chief State School Officer or an 
individual under contract with the State agency to serve as the State 
Coordinator. A State agency shall not contract with an organization to 
provide for the services of a State Coordinator. The State Coordinator, 
at a minimum, shall meet both of the following requirements:
    (1) The State Coordinator shall have a Masters degree or equivalent 
experience. Equivalent experience is experience related to the position 
being filled or as defined by State civil service or personnel policies. 
If the Masters degree is not in foods and nutrition or dietetics, the 
Bachelors degree shall include academic preparations in foods and 
nutrition or dietetics.
    (2) In addition, the State Coordinator shall have recognized and 
demonstrated skills in management and education through at least three 
years experience in one or more of these areas: Elementary or secondary 
education, but not limited to classroom teaching; foodservice management 
and training for adults; community nutrition or public health programs; 
foodservice operations for children; or

[[Page 236]]

community action or assistance programs.
    (d) Needs assessment. Each State agency shall conduct an ongoing 
needs assessment in accordance with Sec. 227.36 The needs assessment 
shall be the data base utilized in formulating the State plan for each 
fiscal year. For the first year of participation a State agency may 
apply for funds in order to carry out the needs assessment in accordance 
with Sec. 227.5.
    (e) Developing and submitting the State plan. Each State agency 
shall submit to the Secretary a State plan for Nutrition Education and 
Training in accordance with Sec. 227.37 prior to the beginning of each 
fiscal year. The date of submission for the State plan shall be 
designated by the Secretary. The Secretary shall act on the submitted 
State plan within 60 days after it is received. For the first year of 
participation the State agency shall submit to the Secretary, within 
nine months after the award of the planning and assessment grant, a 
State plan for nutrition education and training in accordance with 
Sec. 227.37.
    (f) Records and reports. (1) Each State agency shall maintain full 
and complete records concerning Program operations and shall retain such 
records in accordance with OMB Circular A-102 Attachment C.
    (2) Each State agency shall submit to FNS a quarterly Financial 
Status Report, Form SF-269, as required by OMB Circular A-102, 
Attachment H.
    (3) Each State agency shall submit an annual performance report 
(Form FNS-42) to FNS within 30 days after the close of the Fiscal Year.
    (4) Each State agency shall maintain a financial management system 
in accordance with Federal Management Circular 74-4 and OMB Circular A-
102, Attachment G.
    (5) Each State agency shall comply with the requirements of OMB 
Circular A-102, Attachments N and O, and Federal Management Circular 74-
4, for property management and the procurement of supplies, equipment 
and other services with these Program funds.
    (6) Any income accruing to a State or local agency because of the 
Program shall be used in accordance with OMB Circular A-102, Attachment 
E.
    (g) Nondiscrimination. Each State agency shall ensure that Program 
operations are in compliance with the Department's nondiscrimination 
regulations (part 15 of this title) issued under title VI of the Civil 
Rights Act of 1964.

(Approved by the Office of Management and Budget under control number 
0584-0062)

(44 U.S.C. 3506; E.O. 12372, July 14, 1982, 47 FR 30959, sec. 401(b) of 
the Intergovernmental Cooperation Act of 1968 (31 U.S.C. 6506(c))

[44 FR 28282, May 15, 1979, as amended at 45 FR 14842, Mar. 7, 1980; 47 
FR 746, Jan. 7, 1982; 47 FR 22072, May 21, 1982; 48 FR 29123, June 24, 
1983; 48 FR 39213, Aug. 30, 1983]



Sec. 227.31  Audits, management reviews, and evaluations.

    (a) Audits. (1) Examinations by the State agencies in the form of 
audits or internal audits shall be performed in accord with OMB Circular 
A-102, Attachment G.
    (b) Management reviews. The State agency is responsible for meeting 
the following requirements:
    (1) The State agency shall establish management evaluation and 
review procedures to monitor compliance with the State plan for local 
educational agencies and land grant colleges, other institutions of 
higher education and public or private nonprofit educational or research 
agencies, institutions, or organizations.
    (2) The State agency shall require participating agencies to 
establish program review procedures to be used in reviewing the Agencies 
operations and those of subsidiaries or contractors.
    (c) Evaluations. The State agency shall conduct formal evaluations 
of program activities at least annually. These evaluations shall be 
aimed at assessing the effectiveness of the various activities 
undertaken by the State and local agencies. State officials shall 
analyze why some activities have proved effective while others have not 
and shall initiate appropriate improvements. The results of the 
evaluations shall be used to make adjustments in ongoing activities and 
to plan activities and programs for the next year's State plan. The 
State agency shall submit a plan for evaluation of Program

[[Page 237]]

activities as part of the State plan in accordance with 
Sec. 227.37(b)(14).

(Approved by the Office of Management and Budget under control number 
0584-0062)

(44 U.S.C. 3506; E.O. 12372 (July 14, 1982, 47 FR 30959); sec. 401(b) 
Intergovernmental Cooperation Act of 1968 (31 U.S.C. 6506(c))

[44 FR 28282, May 15, 1979, as amended at 47 FR 746, Jan. 7, 1982; 48 FR 
29123, June 24, 1983]



                 Subpart C--State Coordinator Provisions



Sec. 227.35  Responsibilities of State coordinator.

    At a minimum, the State Coordinator shall be responsible for: (a) 
Preparation of a budget, (b) the conduct of the needs assessment, (c) 
development of a State plan, (d) implementation of the approved State 
Plan, (e) evaluation of the progress and implementation of the State 
Plan, (f) coordination of the Program with the Child Nutrition Programs 
at the State and local levels, (g) coordination of the Program with 
other nutrition education and training programs conducted with Federal 
or State funds, (h) communication of needs and accomplishments of State 
nutrition education and training programs to parents and the communty at 
large, (i) use of Program funds in compliance with all regulations, 
instructions, or other guidance material provided by FNS, (j) 
coordinating the submission and preparation of the Program financial 
status report (SF-269), and (k) annual evaluation of the effectiveness 
of the State Plan.



Sec. 227.36  Requirements of needs assessment.

    (a) The needs assessment is an ongoing process which identifies the 
discrepancies between ``what should be'' and ``what is'' and shall be 
applied to each category listed below to enable State agencies to 
determine their nutrition education and training needs for each year. 
The needs assessment shall identify the following as a minimum:
    (1) Children, teachers, and food service personnel in need of 
nutrition education and training; (2) existing State or federally funded 
nutrition education and training programs including their: (i) Goals and 
objectives; (ii) source and level of funding; (iii) any available 
documentation of their relative success or failure; and (iv) factors 
contributing to their success or failure; (3) offices or agencies at the 
State and local level designated to be responsible for nutrition 
education and training of teachers and school food service personnel; 
(4) any relevant State nutrition education mandates; (5) funding levels 
at the State and local level for preservice and inservice nutrition 
education and training of food service personnel and teachers; (6) State 
and local individuals, and groups conducting nutrition education and 
training; (7) materials which are currently available for nutrition 
education and training programs, and determine for each: (i) Subject 
area and content covered; (ii) grade level; (iii) how utilized; (iv) 
acceptability by user; (v) currency of materials; (8) any major child 
nutrition related health problems in each State; (9) existing sources of 
primary and secondary data, including any data that has been collected 
for documenting the State's nutrition education and training needs; (10) 
available documentation of the competencies of teachers in the area of 
nutrition education; (11) available documentation of the competencies of 
food service personnel; (12) problems encountered by schools and 
institutions in procuring nutritious food economically and in preparing 
nutritious appetizing meals and areas where training can assist in 
alleviating these problems; (13) problems teachers encounter in 
conducting effective nutrition education activities and areas where 
inservice training or materials can assist in alleviating these 
problems; (14) problems in dietary habits of children and areas where 
nutrition education may assist in positive changes; (15) problems 
encountered in coordinating the nutrition education by teachers with the 
meal preparation and activities of the food service facility and areas 
where training might alleviate these problems.
    (b) The needs assessment should be an ongoing process and provide 
not only data on current activities but also a description of the 
problems and needs in each category and whether training

[[Page 238]]

or materials would help alleviate the identified problems.



Sec. 227.37  State plan for nutrition education and training.

    (a) General. Each fiscal year the State agency shall submit a State 
plan for Nutrition Education and Training for approval to FNS. The State 
plan shall be based on the needs identified from the ongoing needs 
assessment and evaluation of the State plans from previous years. The 
State plan shall be submitted in accordance with Sec. 227.30(e). 
Guidance for the preparation and submission of the State plan shall be 
provided by FNS.
    (b) Requirements for the State plan. The State plan shall provide 
the following:
    (1) Description of the ongoing needs assessment conducted within the 
State;
    (2) The findings of the needs assessment within the State used to 
determine the goals and objectives of the State plan and results of the 
evaluation of the previous years' State plans for:
    (i) Inservice training of food service personnel, (ii) nutrition 
education of children, (iii) inservice training in nutrition education 
for teachers;
    (3) Goals and objectives of the State plan;
    (4) Identification of the priority populations to be reached during 
the fiscal year;
    (5) Provisions for coordinating the nutrition education and training 
programs carried out with funds made available under this part with any 
related publicly supported programs being carried out within the State 
to include:
    (i) Identification of existing programs that may be utilized, (ii) 
description of how representatives of such groups are to be involved in 
the planning and implementation of the State program; (iii) criteria and 
procedure for selection of such representatives;
    (6) Plans to solicit advice and recommendations of the National 
Advisory Council on Child Nutrition, State educational or other 
appropriate agencies; the U.S. Department of Education; the U.S. 
Department of Health and Human Services; and other interested groups and 
individuals concerned with improvement of child nutrition.
    (7) Plans, including a timetable, for reaching all children in the 
State with instruction in the nutritional value of foods and the 
relationship among food, nutrition and health, for inservice training of 
food service personnel in the principles and skills of food service 
management and nutrition and for inservice instruction for teachers in 
sound principles of nutrition education;
    (8) Any plans for using, on a priority basis, the resources of the 
land-grant colleges eligible to receive funds under the Act of July 2, 
1862 (12 Stat. 503; 7 U.S.C. 301 through 305, 307, and 308) or the Act 
of August 30, 1890 (26 Stat. 417, as amended; 7 U.S.C. 312 through 326 
and 328), including the Tuskegee Institute;
    (9) A brief description of the program or activities to be 
contracted with land-grant colleges, described above, and other 
institutions of higher education, and other public or private nonprofit 
educational or research agencies, institutions or organizations for 
carrying out nutrition education and training activities;
    (10) A brief description of pilot projects, including objectives, 
subject matter and expected outcomes, to be contracted with the land-
grant colleges described above, other institutions of higher education, 
public and nonprofit educational or research agencies, institutions, or 
organizations for but not limited to projects for development, 
demonstration, testing and evaluation of curricula for use in early 
childhood, elementary, and secondary education programs;
    (11) Identification of schools, school districts, and sponsoring 
agencies which may agree to participate in the nutrition education and 
training program;
    (12) A brief description of (i) State agency sponsored pilot 
projects including objectives, subject matter and anticipated outcomes 
and (ii) nutrition education and training programs to be conducted by 
schools, school districts, and sponsoring agencies receiving funds under 
this provision including

[[Page 239]]

objectives, subject matter and expected outcomes;
    (13) Time frame and milestones for implementation of State plans;
    (14) Plans to evaluate program activities including an evaluation 
component for each objective of the State plan;
    (15) Description of staff available to perform State agency 
responsibilities of the State nutrition education and training program 
which includes:
    (i) Definition of duties and responsibilities, (ii) minimum 
professional qualifications, (iii) number and classification of 
personnel;
    (16) A description of the procedures used to comply with the 
requirements of Title VI of the Civil Rights Act of 1964, including 
racial and ethnic participation data collection, public notification 
procedures and the annual civil rights compliance review process;
    (17) Plans for the conduct of audits in accordance with Sec. 227.31;
    (18) A budget detailing the use of program funds;
    (19) Description of the financial management system in accordance 
with Sec. 227.30(e);
    (20) Description of the management evaluation and review procedures 
established in accordance with Sec. 227.31(b); and
    (21) Other components that the States determine necessary.
    (c) States eligible to receive additional funds pursuant to 
Sec. 227.30(b-1) shall submit an amendment to the State plan to the Food 
and Nutrition Service Regional Office for prior approval.

[44 FR 28282, May 15, 1979, as amended at 45 FR 14842, Mar. 7, 1980; 48 
FR 39213, Aug. 30, 1983]



                        Subpart D--Miscellaneous



Sec. 227.40  Program information.

    Persons desiring information concerning the program may write to the 
appropriate State agency or Regional Office of FNS as indicated below:
    (a) In the States of Connecticut, Maine, Massachusetts, New 
Hampshire, Rhode Island, and Vermont: New England Regional Office, FNS, 
U.S. Department of Agriculture, 33 North Avenue, Burlington, Mass. 
01803.
    (b) In the States of Delaware, District of Columbia, Maryland, New 
Jersey, New York, Pennsylvania, Puerto Rico, Virginia, Virgin Islands, 
and West Virginia: Mid-Atlantic Regional Office, FNS, U.S. Department of 
Agriculture, One Vahlsing Center, Robbinsville, N.J. 08691.
    (c) In the States of Alabama, Florida, Georgia, Kentucky, 
Mississippi, North Carolina, South Carolina, and Tennessee: Southeast 
Regional Office, FNS, U.S. Department of Agriculture, 1100 Spring Street 
NW., Atlanta, Ga. 30309.
    (d) In the States of Illinois, Indiana, Michigan, Minnesota, Ohio, 
and Wisconsin: Midwest Regional Office, FNS, U.S. Department of 
Agriculture, 536 South Clark Street, Chicago, Ill. 60605.
    (e) In the States of Colorado, Iowa, Kansas, Missouri, Montana, 
Nebraska, North Dakota, South Dakota, Utah, and Wyoming: Mountain Plains 
Regional Office, FNS, U.S. Department of Agriculture, 2420 West 26th 
Avenue, Room 430D, Denver, Colo. 80211.
    (f) In the States of Arkansas, Louisiana, New Mexico, Oklahoma, and 
Texas: Southwest Regional Office, FNS, U.S. Department of Agriculture, 
1100 Commerce Street, Room 5-C-30, Dallas, Tex. 75242.
    (g) In the States of Alaska, American Samoa, Arizona, California, 
Guam, Hawaii, Idaho, Nevada, Oregon, Trust Territory of the Pacific 
Islands, the Northern Mariana Islands, and Washington: Western Regional 
Office, FNS, U.S. Department of Agriculture, 550 Kearny Street, Room 
400, San Francisco, Calif. 94108.



Sec. 227.41  Recovery of funds.

    (a) FNS may recover funds from a State agency under any of the 
following conditions:
    (1) If FNS determines, through a review of the State agency's 
reports, program, or financial analysis, monitoring, audit or otherwise, 
that the State agency's performance is inadequate or that the State 
agency has failed to comply with this part or FNS instructions and 
guidelines.
    (2) If FNS determines that the State agency is not expending funds 
at a rate commensurate with the amount of

[[Page 240]]

funds distributed or provided for expenditure under the program.
    (3) If FNS determines that a State agency is not providing full and 
timely reports.
    (b) FNS shall effect such recoveries of funds through adjustments in 
the amount of funds provided under the program.



Sec. 227.42  Grant closeout procedures.

    The requirements of OMB Circular A-102, Attachment L, are applicable 
in the termination of any grant under this part.



Sec. 227.43  Participation of adults.

    Nothing in this part shall prohibit a State or local educational 
agency from making available or distributing to adults education 
materials, resources, activities or programs authorized by this part.



Sec. 227.44  Management evaluations and reviews.

    FNS shall establish evaluation procedures to determine whether State 
agencies carry out the purpose and provisions of this part, the State 
agency plan and FNS guidelines and instructions. To the maximum extent 
possible the State's performance shall be reviewed and evaluated by FNS 
on a regular basis including the use of public hearings.

Appendix to Part 227--Apportionment of Funds for Nutrition Education and 
                                Training

    Pursuant to sections 19(j) of the Child Nutrition Act of 1966, as 
amended (42 U.S.C. 1788), funds available for the fiscal year ending 
September 30, 1980, are apportioned among the States as follows:

                  [See footnotes at the end of Table.]

----------------------------------------------------------------------------------------------------------------
                                                                     Residential     Nonresidential
                 State                     Public      Private       child care        child care      Total \5\
                                        schools \1\  schools \2\  institutions \3\  institutions \4\
----------------------------------------------------------------------------------------------------------------
Connecticut...........................      231,069      38,488          1,260             2,866         273,683
Maine.................................       93,406       6,538            387               808         101,139
Massachusetts.........................      420,866      68,337          2,697             5,352         497,252
New Hampshire.........................       67,087       7,978            331             1,160          76,556
Rhode Island..........................       62,521      12,570            304               767          76,162
Vermont...............................       39,419       3,814            247               579          75,000
                                            914,368     137,725          5,226            11,532       1,099,792
Delaware..............................       43,210       7,277            107             1,339          75,000
District of Columbia..................       44,309       7,511            447             2,458          75,000
Maryland..............................      315,196      51,992          1,292             5,234         373,714
New Jersey............................      520,438     117,060          3,930             8,588         650,016
New York..............................    1,204,026     274,593         14,068            19,756       1,512,443
Pennsylvania..........................      796,518     182,089          9,026             7,312         994,945
Puerto Rico...........................      280,750      36,776              0                 0         317,526
Virginia..............................      410,660      34,947          6,239             6,068         457,914
Virgin Islands........................        9,783       2,452             11                 0          75,000
West Virginia.........................      154,000       4,942            770               854         160,566
                                          3,778,890     719,639         35,890            51,609       4,692,124
Alabama...............................      296,412      21,949            892            10,607         329,860
Florida...............................      589,122      57,440          2,116            19,074         667,752
Georgia \5\...........................      424,042      27,708          2,783            14,806         469,339
Kentucky..............................      269,690      27,786          3,685             3,652         304,813
Mississippi...........................      192,134      25,802            541            12,175         230,652
North Carolina........................      452,523      22,104          3,052            19,722         497,401
South Carolina \5\....................      243,200      19,225          1,255             6,559         270,239
Tennessee.............................      339,753      17,396          1,448             7,847         366,444
                                          2,806,876     219,410         15,772            94,442       3,136,500
Illinois..............................      793,671     160,491          5,343            15,971         975,476
Indiana...............................      433,267      39,967          2,814             5,279         481,327
Michigan..............................      747,374      85,655          3,069             7,817         843,915
Minnesota.............................      314,333      38,994          1,245             3,135         357,707
Ohio..................................      818,192     110,561          5,836            10,767         945,356
Wisconsin.............................      344,962      73,707          1,922             3,579         424,170
                                          3,451,799     509,375         20,229            46,548       4,027,951
Arkansas..............................      177,730       8,095            385             4,453         190,663
Louisiana.............................      317,817      64,562          1,551             6,307         390,237
New Mexico............................      108,673       5,448            235             2,619         116,975
Oklahoma..............................      229,166       3,969          1,916             8,639         243,690
Texas.................................    1,115,829      52,654          4,163            38,934       1,211,580

[[Page 241]]

 
                                          1,949,215     134,728          8,250            60,952       2,153,145
Colorado \5\..........................      217,264      15,800            937             4,399         238,400
Iowa..................................      221,255      25,957          3,204             2,631         253,047
Kansas................................      168,720      12,765            330             1,062         182,877
Missouri..............................      350,248      54,950          1,271             6,629         413,098
Montana...............................       63,950       3,425             75               677          75,000
Nebraska..............................      115,891      17,629            376             1,694         135,590
North Dakota \5\......................       47,486       4,826            309               383          75,000
South Dakota..........................       53,792       5,760            267               390          75,000
Utah..................................      126,488       1,518            541             1,325         129,872
Wyoming...............................       36,709       1,206             74               497          75,000
                                          1,401,803     143,836          7,384            19,687       1,652,884
Alaska................................       35,308         739            310               392          75,000
Samoa.................................        3,616         778              0                 0          75,000
Arizona...............................      198,407      21,871            661             4,712         225,651
California............................    1,629,801     170,376         28,777            44,277       1,873,231
Guam..................................       11,118       1,985              0                 0          75,000
Hawaii................................       66,454      13,348          1,854             3,352          85,008
Idaho.................................       79,009       1,868            119               860          81,856
Nevada................................       56,927       2,179            473             1,643          75,000
Oregon................................      183,441       9,379            859             3,703         197,382
Trust Territory.......................       11,590           0              0                 0          75,000
Washington............................      299,362      17,318          2,140             5,656         324,476
N Marianas............................        1,945           0              0                 0          75,000
                                          2,576,978     239,841         35,193            64,595       3,237,604
                                         16,879,929   2,104,554        127,944           349,365      20,000,000
----------------------------------------------------------------------------------------------------------------
\1\ Sources: (1) U.S. Department of Health, Education, and Welfare, Education Division, NCES, Statistics of
  Public Schools, Fall 1977, prepublication data, Table 5 for States and areas, except (2) Northern Marianas and
  Trust Territory, 1975-76 data from Department of Interior, adjust to include pre-school; Puerto Rico and Guam,
  Fall 1976 data.
\2\ U.S. Department of Health, Education, and Welfare, Education Division, (NCES). Digest of Education
  Statistics, 1976, Table 46, p. 47, Northern Marianas and Trust Territory 1975-76 data from Department of
  Interior, adjust to include pre-school.
\3\ U.S. Department of Agriculture, Food and Nutrition Service, Annual Report of Meal Service in Schools (Form
  FNS-47), October 1978.
\4\ U.S. Department of Health, Education, and Welfare, Day Care Centers In the U.S.; A National Profile 1976-77,
  Volume 3 of the Final Report of the National Day Care Study, Table 63.
\5\ A portion of these funds will be withheld from the States' allocations for use by FNS in administering the
  Program in nonprofit private schools or institutions.


[44 FR 70451, Dec. 7, 1979]



PART 235--STATE ADMINISTRATIVE EXPENSE FUNDS--Table of Contents




Sec.
235.1  General purpose and scope.
235.2  Definitions.
235.3  Administration.
235.4  Allocation of funds to States.
235.5  Payments to States.
235.6  Use of funds.
235.7  Records and reports.
235.8  Management evaluations and audits.
235.9  Procurement and property management standards.
235.10  [Reserved]
235.11  Other provisions.
235.12  Information collection/recordkeeping--OMB assigned control 
          numbers.

    Authority: Secs. 7 and 10 of the Child Nutrition Act of 1966, 80 
Stat. 888, 889, as amended (42 U.S.C. 1776, 1779).

    Source: 41 FR 32405, Aug. 3, 1976, unless otherwise noted.



Sec. 235.1  General purpose and scope.

    This part announces the policies and prescribes the regulations 
necessary to carry out the provisions of section 7 of the Child 
Nutrition Act of 1966, as amended. It prescribes the methods for making 
payments of funds to State agencies for use for administrative expenses 
incurred in supervising and giving technical assistance in connection 
with activities undertaken by them under the National School Lunch 
Program (7 CFR part 210), the Special Milk Program (7 CFR part 215), the 
School Breakfast Program (7 CFR part 220), the Child and Adult Care Food 
Program (7 CFR part 226) and the Food Distribution Program (7 CFR part 
250).

(Sec. 7, Pub. L. 95-627, 92 Stat. 3621 (42 U.S.C. 1776))

[44 FR 51185, Aug. 31, 1979, as amended by Amdt. 17, 55 FR 1378, Jan. 
16, 1990; 60 FR 15461, Mar. 24, 1995]

[[Page 242]]



Sec. 235.2  Definitions.

    For the purpose of this part, the term:
    (a) Act means the Child Nutrition Act of 1966, as amended.
    (b) CND means the Child Nutrition Division of the Food and Nutrition 
Service of the U.S. Department of Agriculture.
    (c) Department means the U.S. Department of Agriculture.
    (d) Distributing agency means a State agency which enters into an 
agreement with the Department for the distribution of donated foods 
pursuant to part 250 of this title.
    (e) [Reserved]
    (f) FNS means the Food and Nutrition Service of the U.S. Department 
of Agriculture.
    (g) FNSRO means the appropriate Food and Nutrition Service Regional 
Office of the Food and Nutrition Service of the U.S. Department of 
Agriculture.
    (h) Fiscal year means a period of 12 calendar months beginning 
October 1, 1976, and October 1 of each calendar year thereafter and 
ending with September 30 of the following calendar year.
    (i) Institution means a child or adult care center or a sponsoring 
organization as defined in part 226 of this chapter.
    (j)-(k) [Reserved]
    (l) OIG means the Office of the Inspector General of the Department.
    (m) [Reserved]
    (n) SAE means federally provided State administrative expense funds 
for State agencies under this part.
    (o) School means the term as defined in sections 210.2, 215.2(v), 
220.2(u), and 226.2 of this chapter, as applicable.
    (p) School Food Authority means the governing body which is 
responsible for the administration of one or more schools and which has 
the legal authority to operate a breakfast or a lunch program therein. 
The term ``School Food Authority'' also includes a nonprofit agency or 
organization to which such governing body has delegated authority to 
operate the lunch or breakfast program in schools under its 
jurisdiction, provided the governing body retains the responsibility to 
comply with breakfast or lunch program regulations.
    (q) Secretary means the Secretary of Agriculture.
    (q-1) 7 CFR part 3015 means the Uniform Federal Assistance 
Regulations published by the Department to implement OMB Circulars A-21, 
A-87, A-102, A-110, and A-122; and Executive Order 12372. (For 
availability of OMB Circulars referenced in this definition, see 5 CFR 
1310.3.)
    (q-2) 7 CFR part 3017 means the Department's regulation to implement 
Executive Order 12549, covering governmentwide rules on suspension and 
debarment as well as The Drug Free Workplace Act of 1988.
    (q-3) 7 CFR part 3018 means the Department's Common Rule regarding 
Governmentwide New Restrictions on Lobbying. Part 3018 implements the 
requirements established by section 319 of the 1990 Appropriations Act 
for the Department of Interior and Related Agencies (Pub. L. 101-121).
    (q-4) 7 CFR part 3052 means the Department's regulations 
implementing OMB Circular A-133, ``Audits of State, Local Governments, 
and Non-Profit Organizations.'' (For availability of OMB Circulars 
referenced in this definition, see 5 CFR 1310.3.)
    (r) State means any of the 50 States, District of Columbia, the 
Commonwealth of Puerto Rico, the Virgin Islands, Guam, and, as 
applicable, American Samoa and the Commonwealth of the Northern 
Marianas.
    (s) State agency means (1) the State educational agency or (2) such 
other agency of the State as has been designated by the Governor or 
other appropriate executive or legislative authority of the State and 
approved by the Department to administer programs under part 210, 215, 
220, 226 or 250 of this title. Unless otherwise indicated, ``State 
agency'' shall also mean ``distributing agency'', as defined in 
Sec. 235.2(d), when such agency is receiving funds directly from FNS 
under this part.
    (t) State educational agency means, as the State legislature may 
determine: (1) The chief State school officer (such as the State 
Superintendent of Public Instruction, Commissioner of Education, or 
similar officer), or (2) a

[[Page 243]]

board of education controlling the State department of education.

(Sec. 7, Pub. L. 95-627, 92 Stat. 3621 (42 U.S.C. 1776); sec. 205, Pub. 
L. 96-499, The Omnibus Reconciliation Act of 1980, 94 Stat. 2599; secs. 
807 and 808, Pub. L. 97-35, 95 Stat. 521-535 (42 U.S.C. 1772, 1784, 
1760); Pub. L. 79-396, 60 Stat. 231 (42 U.S.C. 1751); Pub. L. 89-642, 80 
Stat. 885-890 (42 U.S.C. 1773); Pub. L. 91-248, 84 Stat. 207 (42 U.S.C. 
1759)

[41 FR 32405, Aug. 3, 1976, as amended at 44 FR 48957, Aug. 21, 1979; 44 
FR 51185, Aug. 31, 1979; Amdt. 9, 48 FR 19355, Apr. 29, 1983; Amdt. 14, 
51 FR 27151, July 30, 1986; 54 FR 2991, Jan. 23, 1989; Amdt. 17, 55 FR 
1378, Jan. 16, 1990; 60 FR 15461, Mar. 24, 1995; 64 FR 50743, Sept. 20, 
1999]



Sec. 235.3  Administration.

    (a) Within the Department, FNS shall act on behalf of the Department 
in the administration of the program for payment to States of State 
administrative expense funds covered by this part. Within FNS, CND shall 
be responsible for administration of the program.
    (b) Each State agency desiring to receive payments under this part 
shall enter into a written agreement with the Department. Each agreement 
shall cover the operation of the Program during the period specified 
therein and may be extended at the option of the Department.

(Sec. 14, Pub. L. 95-166, 91 Stat. 1338 (42 U.S.C. 1776); sec. 7, Pub. 
L. 95-627, 92 Stat. 3621 (42 U.S.C. 1776))

[41 FR 32405, Aug. 3, 1976, as amended at 44 FR 48957, Aug. 21, 1979; 
Amdt. 14, 51 FR 27151, July 30, 1986]



Sec. 235.4  Allocation of funds to States.

    (a) Nondiscretionary SAE Funds. For each fiscal year, FNS shall 
allocate the following:
    (1) To each State which administers the National School Lunch, 
School Breakfast or Special Milk Programs an amount equal to one (1) 
percent of the funds expended by such State during the second preceding 
fiscal year under sections 4 and 11 of the National School Lunch Act, as 
amended, and sections 3, 4 and 17A of the Child Nutrition Act of 1966, 
as amended. However, the total amount allocated to any State under this 
paragraph shall not be less than $100,000 or the amount allocated to the 
State in the fiscal year ending September 30, 1981, whichever is 
greater.
    (2) To each State which administers the Child and Adult Care Food 
Program an amount equal to the sum of: Twenty percent of the first 
$50,000; ten percent of the next $100,000; five percent of the next 
$250,000; and two and one-half percent of any remaining funds expended 
within the State under section 17 of the National School Lunch Act, as 
amended, during the second preceding fiscal year. FNS may adjust the 
amount of any such allocation in accordance with changes in the size of 
the Child and Adult Care Food Program in a State.
    (b) Discretionary SAE Funds. For each fiscal year, FNS shall provide 
the following additional allocations:
    (1) Allocate $30,000 to each State which administers the Child and 
Adult Care Food Program (7 CFR part 226).
    (2) $30,000 to each State which administers the Food Distribution 
Program (part 250 of this chapter) in schools and/or institutions which 
participate in programs under parts 210, 220, 226 of this chapter.
    (3) Amounts derived by application of the following four-part 
formula to each State agency which is allocated funds under paragraph 
(a) of this section:
    (i) One equal share of forty (40) percent of the funds designated by 
FNS for the reviews conducted under Sec. 210.18 of this title.
    (ii) The ratio of the number of School Food Authorities 
participating in the National School Lunch or Commodity School Programs 
under the jurisdiction of the State agency to such School Food 
Authorities in all States times twenty (20) percent of the funds 
designated by FNS for reviews conducted under Sec. 210.18 or of this 
title.
    (iii) The ratio of the number of free and reduced price meals served 
in School Food Authorities under the jurisdiction of the State agency 
during the second preceding fiscal year to the number of free and 
reduced price meals served in all States in the second preceding fiscal 
year times twenty (20) percent of the funds designated by FNS for 
reviews conducted under Sec. 210.18 of this title.
    (iv) Equal shares of twenty (20) percent of the funds designated by 
FNS for

[[Page 244]]

reviews conducted under Sec. 210.18 of this title for each School Food 
Authority under the jurisdiction of the State agency participating in 
the National School Lunch or Commodity School Programs which has an 
enrollment of 40,000 or more; Provided, however, That for State agencies 
with fewer than two School Food Authorities with enrollments of 40,000 
or more, an equal share shall be provided to the State agency, for 
either, or both, of the two largest School Food Authorities which have 
enrollments of more than 2,000; and Provided, further, That State 
agencies with only one School Food Authority, regardless of size, shall 
be provided with one equal share. For each fiscal year, the amount of 
State Administrative Expense Funds designated by FNS for reviews 
conducted under Sec. 210.18 of this title and subject to allocation 
under this paragraph shall be equal to or greater than the amount 
designated by FNS for program management improvements for the fiscal 
year ending September 30, 1980.
    (4) Funds which remain after the allocations required in paragraphs 
(a)(1), (a)(2), (b)(1), (b)(2) and (b)(3) of this section, and after any 
payments provided for under paragraph (c) of this section, as determined 
by the Secretary, to those States which administer the Food Distribution 
Program (part 250 of this chapter) in schools and/or institutions which 
participate in programs under parts 210, 220, or 226 of this chapter and 
to those States which administer part 226 of this chapter. The amount of 
funds to be allocated to each State for the Food Distribution Program 
for any fiscal year shall bear the same ratio to the total amount of 
funds made available for allocation to the State for the Food 
Distribution Program under this paragraph as the value of USDA donated 
foods delivered to the State for schools and institutions participating 
in programs under parts 210, 220 and 226 of this chapter during the 
second preceding fiscal year bears to the value of USDA donated foods 
delivered to all the States for such schools and institutions during the 
second preceding fiscal year. The amount of funds to be allocated to 
each State which administers the Child and Adult Care Food Program for 
any fiscal year shall bear the same ratio to the total amount of funds 
made available for allocation to all such States under this paragraph as 
the amount of funds allocated to each State under paragraph (a)(2) of 
this section bears to the amount allocated to all States under that 
paragraph.
    (c) SAE Funds for the Child and Adult Care Food Program. If a State 
elects to have a separate State agency administer the adult care 
component of the Child and Adult Care Food Program, such separate State 
agency shall receive a pro rata share of the SAE funds allocated to the 
State under paragraphs (a)(2), (b)(1), and (b)(4) of this section which 
is equal to the ratio of funds expended by the State for the adult care 
component of the Child and Adult Care Food Program during the second 
preceding fiscal year to the funds expended by the State for the entire 
Child and Adult Care Food Program during the second preceding fiscal 
year. The remaining funds shall be allocated to the State agency 
administering the child care component of the Child and Adult Care Food 
Program.
    (d) SAE Start-up Cost Assistance for State Administration of Former 
ROAPs. For any State agency which agrees to assume responsibility for 
the administration of food service programs in nonprofit private schools 
or child and adult care institutions that were previously administered 
by FNS, an appropriate adjustment in the administrative funds paid under 
this part to the State shall be made by FNS not later than the 
succeeding fiscal year. Such an adjustment shall consist of an amount of 
start-up cost assistance, negotiated with the State agency, of no less 
than $10,000 and not exceeding $100,000, per State.
    (e) SAE Funding Reduction Upon State Agency Termination of a Food 
Service Program. For any State agency which terminates its 
administration of any food service program for which State 
administrative expense funds are provided under this part, a reduction 
in the amount of such funds, negotiated with the State agency, shall be 
made by FNS.
    (f) SAE Funds for ROAPs. FNS shall have available to it the 
applicable

[[Page 245]]

amounts provided for in paragraphs (a)(1), (a)(2), and (b)(1) of this 
section, and part 225 of this title, when it is responsible for the 
administration of a program or programs within a State.
    (g) Reallocation. Funds allotted to State agencies under this 
section shall be subject to the reallocation provisions of 
Sec. 235.5(d).
    (h) Withholding SAE funds. The Secretary may withhold some or all of 
the funds allocated to the State agency under this section if the 
Secretary determines that the State agency is seriously deficient in the 
administration of any program for which State administrative expense 
funds are provided under this part or in the compliance of any 
regulation issued pursuant to those programs. On a subsequent 
determination by the Secretary that State agency administration of the 
programs or compliance with regulations is no longer seriously deficient 
and is operated in an acceptable manner, the Secretary may allocate some 
or all of the funds withheld.

(Sec. 14, Pub. L. 95-166, 91 Stat. 1338 (42 U.S.C. 1776); sec. 7, Pub. 
L. 95-627, 92 Stat. 3621 (42 U.S.C. 1776); sec. 7(a), Pub. L. 95-627, 92 
Stat. 3622 (42 U.S.C. 1751); Pub. L. 96-499, secs. 201 and 204, 94 Stat. 
2599; secs. 805, 812, 814 and 819, Pub. L. 97-35, 95 Stat. 521-535 (42 
U.S.C. 1754, 1759a, 1774 and 1776); E.O. 12372 (July 14, 1982, 47 FR 
30959); sec. 401(b) Intergovernmental Cooperation Act of 1968 (31 U.S.C. 
6506(c))

[44 FR 48957, Aug. 21, 1979, as amended at 44 FR 51185, Aug. 31, 1979; 
44 FR 53489, Sept. 14, 1979; 45 FR 3566, Jan. 18, 1980; Amdt. 11, 48 FR 
27892, June 17, 1983; Amdt. 14, 51 FR 27151, July 30, 1986; Amdt. 15, 51 
FR 33862, Sept. 24, 1986; Amdt. 17, 55 FR 1378, Jan. 16, 1990; 56 FR 
32949, July 17, 1991; 58 FR 42489, Aug. 10, 1993; 60 FR 15462, Mar. 24, 
1995; 64 FR 50743, Sept. 20, 1999]



Sec. 235.5  Payments to States.

    (a) Method of payment. FNS will specify the terms and conditions of 
the State agency's annual grant of SAE funds in conjunction with the 
grant award document and will make funds available for payment by means 
of a Letter of Credit issued in favor of the State agency. The total 
amount of a State agency's grant shall be equal to the sum of the 
amounts allocated to such agency under Sec. 235.4 plus or minus any 
adjustments resulting from the reallocation provisions under paragraph 
(d) of this section plus any transfers under Sec. 235.6(a) and/or 
Sec. 235.6(c) of this part. The amount of SAE funds made available for 
payment to a State agency in any fiscal year shall be determined by FNS 
upon approval of the State agency's administrative plan under paragraph 
(b) of this section and any amendments to such plan under paragraph (c) 
of this section. Funds shall not be made available before the State 
agency's plan or amendment to such plan, as applicable, has been 
approved by FNS. However, if the plan has not been approved by October 1 
of the base year, FNS may advance SAE funds to the State agency, in 
amounts determined appropriate by FNS, pending approval of the plan.
    (b) Administrative plan. (1) Each State agency shall submit, subject 
to FNS approval, an initial State Administrative Expense plan based upon 
guidance provided by FNS. This base year plan shall include:
    (i) The staffing pattern for State level personnel;
    (ii) A budget for the forthcoming fiscal year showing projected 
amounts (combined SAE and State funds) by cost category;
    (iii) The total amount of budgeted funds to be provided from State 
sources;
    (iv) The total amount of budgeted funds to be provided under this 
part;
    (v) The State agency's estimate of the total amount of budgeted 
funds (combined SAE and State funds) attributable to administration of 
the School Nutrition Programs (National School Lunch, School Breakfast 
and Special Milk Programs), Child and Adult Care Food Program, and/or 
Food Distribution Program in schools and child and adult care 
institutions and to each of the major activity areas of the State 
agency; and
    (vi) The State agency's estimate of the total Child and Adult Care 
Food Program audit funds to be used for the forthcoming fiscal year.
    (2) These activity areas shall be defined and described by the State 
agency in accordance with guidance issued by FNS and may include such 
activities as program monitoring, technical assistance, Federal 
reporting/claims

[[Page 246]]

processing, policy implementation, and allocation of foods to recipient 
agencies.
    (3) Except in specific instances where determined necessary by FNS, 
State agencies shall not be required to maintain expenditure records by 
activity area or program. State agencies shall refer to Office of 
Management and Budget Circular A-87, Attachment B, to establish cost 
categories.
    (4) FNS shall approve a State agency's plan, or any amendment to 
such plan under paragraph (c) of this section, if it determines that the 
plan or amendment is consistent with program administrative needs and 
SAE requirements under this part.
    (5) To the extent practicable, State agencies shall implement their 
approved plans (as amended). FNS shall monitor State agency 
implementation of the plans through management evaluations, State agency 
reports submitted under this part, audits, and through other available 
means.
    (6) FNS may expand plan requirements for individual State agencies 
in order to address specific administrative deficiencies which affect 
compliance with program requirements and which have been identified by 
FNS through its monitoring activities.
    (c) Amendments to the administrative plan. A State agency may amend 
its plan at any time to reflect changes in funding or activities, except 
that, if such changes are substantive as defined in the June 5, 1997 
guidance, and any amendments or updates to this guidance, the State 
agency shall amend its plan in accordance with guidance provided by FNS. 
Plan amendments shall provide information in a format consistent with 
that provided in the State agency's plan, but shall only require FNS 
approval if it results in a substantive change as defined by FNS.
    (d) Reallocation of funds. Annually, between March 1 and May 1 on a 
date specified by FNS, of each year, each State agency shall submit to 
FNS a State Administrative Expense Funds Reallocation Report (FNS-525) 
on the use of SAE funds. At such time, a State agency may release to FNS 
any funds that have been allocated, reallocated or transferred to it 
under this part or may request additional funds in excess of its current 
grant level. Based on this information or on other available 
information, FNS shall reallocate, as it determines appropriate, any 
funds allocated to State agencies in the current fiscal year which will 
not be expended in the following fiscal year and any funds carried over 
from the prior fiscal year which will not be expended in the current 
fiscal year. Reallocated funds shall be made available for payment to a 
State agency upon approval by FNS of the State agency's amendment to the 
base year plan which covers the reallocated funds, if applicable. 
Notwithstanding any other provision of this part, a State agency may, at 
any time, release to FNS for reallocation any funds that have been 
allocated, reallocated or transferred to it under this part and are not 
needed to implement its approved plan under this section.
    (e) Return of funds. (1) In Fiscal Year 1991, up to 25 per cent of 
the SAE funds allocated to each State agency under Sec. 235.4 may remain 
available for obligation and expenditure in the second fiscal year of 
the grant. In subsequent fiscal years, up to 20 percent may remain 
available for obligation and expenditure in the second fiscal year. The 
maximum amount to remain available will be calculated at the time of the 
formula allocation by multiplying the appropriate percentage by each 
State agency's formula allocation as provided under Sec. 235.4(a) 
through (c). At the end of the first fiscal year, the amount subject to 
the retention limit is determined by subtracting the amount reported by 
the State agency as Total Federal share of outlays and unliquidated 
obligations on the fourth quarter Standard Form (SF) 269, Financial 
Status Report, from the total amount of SAE funds made available for 
that fiscal year (i.e., the formula allocation adjusted for any 
transfers or reallocations). However, funds provided under Sec. 235.4(d) 
are not subject to the retention limit. Any funds in excess of the 
amount that remains available to each State agency shall be returned to 
FNS.
    (2) At the end of the fiscal year following the fiscal year for 
which funds were allocated, each State agency shall return any funds 
made available which are unexpended.

[[Page 247]]

    (3) Return of funds by the State agency shall be made as soon as 
practicable, but in any event, not later than 30 days following demand 
by FNS.

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

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



Sec. 235.6  Use of funds.

    (a) Funds allocated under this part and 7 CFR part 225 shall be used 
for State agency administrative costs incurred in connection with the 
programs governed by 7 CFR parts 210, 215, 220, 225, 226, and 250 of 
this title. Except as provided under Sec. 235.6(c), funds allocated 
under Sec. 235.4, paragraphs (a) and (b) and 7 CFR part 225 shall be 
used for the program(s) for which allocated, except that the State 
agency may transfer funds allocated for any such program(s) to other 
such program(s). Subject to the provisions of this paragraph, a State 
agency may also transfer SAE funds that are not needed to implement its 
approved plan Sec. 235.5(b) to another State agency within the State 
that is eligible to receive SAE funds under this part. Up to 25 per cent 
of funds allocated under Sec. 235.4(a) through (c) for Fiscal Year 1991 
and up to 20 per cent of funds allocated in subsequent fiscal years to a 
State agency may, subject to the provisions of Sec. 235.5 of this part, 
remain available for obligation and expenditure by such State agency 
during the following fiscal year.
    (a-1) State administrative expense funds paid to any State may be 
used by State agencies to pay salaries, including employee benefits and 
travel expenses for administrative and supervisory personnel, for 
support services, for office equipment, and for staff development, 
particularly for monitoring and training of food service personnel at 
the local level in areas such as food purchasing and merchandizing. Such 
funds shall be used to employ additional personnel, as approved in the 
applicable State plan to supervise, improve management, and give 
technical assistance to school food authorities and to institutions in 
their initiation, expansion, and conduct of any programs for which the 
funds are made available. State agencies may also use these funds for 
their general administrative expenses in connection with any such 
programs, including travel and related expenses. Additional personnel or 
part-time personnel hired are expected to meet professional 
qualifications and to be paid at salary scales of positions of 
comparable difficulty and responsibility under the State agency. 
Personnel may be used on a staff year equivalent basis, thus permitting 
new personnel and existing staff to be cross-utilized for most effective 
and economical operation under existing and new programs.
    (a-2) State Administrative Expense Funds paid to any State agency 
under Sec. 235.4(b)(3) shall be available for reviews conducted under 
Sec. 210.18 activities associated with carrying out actions to ensure 
adherence to the program performance standards.
    (b) State administrative expense funds shall be used consistent with 
the cost principles and constraints on allowable and unallowable costs 
and indirect cost rates as prescribed in Office of Management and Budget 
Circular A-87.
    (c) In addition to State Administrative Expense funds made available 
specifically for food distribution purposes under Sec. 235.4 (b)(2) and 
(b)(4), State Administrative Expense funds allocated under Sec. 235.4 
(a)(1), (a)(2), (b)(1), (b)(3), and (d), and under (b)(4) for the Child 
and Adult Care Food Program may be used to assist in the administration 
of the Food Distribution Program (7 CFR part 250) in schools and 
institutions which participate in programs governed by parts 210, 220, 
and 226 of this title when such Food Distribution Program is 
administered within the State agency and may also be used to pay 
administrative expenses of a distributing agency, when such agency is 
other than the State agency and is responsible for administering all or 
part of such Food Distribution Program.
    (d) FNS shall allocate, for the purpose of providing grants on an 
annual basis to public entities and private nonprofit organizations 
participating in projects under section 18(c) of the National School 
Lunch Act, not more than $4,000,000 in each of Fiscal Years 1993 and 
1994. Subject to the maximum allocation for such projects for each

[[Page 248]]

fiscal year, at the beginning of each of Fiscal Years 1993 and 1994, FNS 
shall allocate, from funds available under Sec. 235.5(d) that have not 
otherwise been allocated to States, an amount equal to the estimates by 
FNS of the funds to be returned under paragraph (a) of this section, but 
not less than $1,000,000 in each fiscal year. To the extent that amounts 
returned to FNS are less than estimated or are insufficient to meet the 
needs of the projects, FNS may allocate amounts to meet the needs of the 
projects from funds available under this section that have not been 
otherwise allocated to States. FNS shall reallocate any of the excess 
funds above the minimum level in accordance with Sec. 235.5(d).
    (e) Where State Administrative Expense Funds are used to acquire 
personal property or services the provisions of Secs. 235.9 and 235.10 
must be observed.
    (f) Each State agency shall adequately safeguard all assets and 
assure that they are used solely for authorized purposes.
    (g) Whoever embezzles, willfully misapplies, steals, or obtains by 
fraud any funds, assets, or property provided under this part, whether 
received directly or indirectly from the Department, shall:
    (1) If such funds, assets, or property are of a value of $100 or 
more, be fined not more than $25,000 or imprisoned not more than five 
years or both; or
    (2) If such funds, assets, or property are of a value of less than 
$100, be fined not more than $1,000 or imprisoned not more than one year 
or both.
    (h) Whoever receives, conceals, or retains to his use or gain funds, 
assets, or property provided under this part, whether received directly 
or indirectly from the Department, knowing such funds, assets, or 
property have been embezzled, willfully misapplied, stolen, or obtained 
by fraud, shall be subject to the same penalties provided in paragraph 
(h) of this section.

(Sec. 14, Pub. L. 95-166, 91 Stat. 1338, 1339, 1340 (42 U.S.C. 1751, 
1753, 1759a, 1761, 1766, 1772-1775, 1776, 1786); sec. 7(a), Pub. L. 95-
627, 92 Stat. 3621, 3622 (42 U.S.C. 1751, 1776))

[41 FR 32405, Aug. 3, 1976, as amended at 43 FR 37172, Aug. 22, 1978; 44 
FR 37901, June 29, 1979; 44 FR 48958, Aug. 21, 1979; 44 FR 51185, Aug. 
31, 1979; 45 FR 3566, Jan. 18, 1980; Amdt. 11, 48 FR 27892, June 17, 
1983; Amdt. 14, 51 FR 27152, July 30, 1986; 56 FR 32949, July 17, 1991; 
60 FR 15462, Mar. 24, 1995; 60 FR 57148, Nov. 14, 1995; 64 FR 50744, 
Sept. 20, 1999]



Sec. 235.7  Records and reports.

    (a) Each State agency shall keep records on the expenditure of State 
administrative expense funds provided under this part and part 225 of 
this title. Such records shall conform with the applicable State plan 
for use of State administrative expense funds. The State agency shall 
make such records available, upon a reasonable request, to FNS, OIG, or 
the U.S. Comptroller General and shall maintain current accounting 
records of State administrative expense funds which shall adequately 
identify fund authorizations, obligations, unobligated balances, assets, 
liabilities, outlays and income. The records may be kept in their 
original form or on microfilm, and shall be retained for a period of 
three years after the date of the submission of the final Financial 
Status Report, subject to the exceptions noted below:
    (1) If audit findings have not been resolved, the records shall be 
retained beyond the three-year period as long as required for the 
resolution of the issues raised by the audit.
    (2) Records for nonexpendable property acquired with State 
Administrative Expense Funds shall be retained for three years after its 
final disposition.
    (b) Each State agency shall submit to FNS a quarterly Financial 
Status Report (SF-269) on the use of State administrative expense funds 
provided for

[[Page 249]]

each fiscal year under this part. Reports shall be postmarked and/or 
submitted to FNS no later than 30 days after the end of each quarter of 
the fiscal year and, in case of funds carried over under Sec. 235.6(a), 
each quarter of the following fiscal year until all such funds have been 
obligated and expended. Obligations shall be reported for the fiscal 
year in which they occur. Each State agency shall submit a final 
Financial Status Report for each fiscal year's State administrative 
expense funds. This report shall be postmarked and/or submitted to FNS 
no later than 30 days after the end of the fiscal year following the 
fiscal year for which the funds were initially made available. Based on 
guidance provided by FNS, each State agency shall also use the quarterly 
SF-269 to report on the use of State funds provided during the fiscal 
year. Each State agency shall also submit an annual report containing 
information on School Food Authorities under agreement with the State 
agency to participate in the National School Lunch or Commodity School 
programs.
    (c) State agencies operating those programs governed by parts 210, 
215, 220 and 226 and those State agencies which are distributing 
agencies eligible for SAE funds shall participate in surveys and studies 
of programs authorized under the National School Lunch Act, as amended, 
and the Child Nutrition Act of 1966, as amended, when such studies and 
surveys are authorized by the Secretary of Agriculture. The 
aforementioned State agencies shall encourage individual School Food 
Authorities, child and adult care institutions, and distributing 
agencies (as applicable) to participate in such studies and surveys. 
Distribution of State Administrative Expense funds to an individual 
State agency is contingent upon that State agency's cooperation in such 
studies and surveys.

(Sec. 14, Pub. L. 95-166, 91 Stat. 1338 (42 U.S.C. 1776); sec. 7, Pub. 
L. 95-627, 92 Stat. 3621 (42 U.S.C. 1776); 93 Stat. 837, Pub. L. 96-108 
(42 U.S.C. 1776); secs. 804, 816, 817 and 819, Pub. L. 97-35, 95 Stat. 
521-535 (42 U.S.C. 1753, 1756, 1759, 1771, 1773 and 1785); sec. 7(a), 
Pub. L. 95-627, 92 Stat. 3622, 42 U.S.C. 1751)

[41 FR 32405, Aug. 3, 1976, as amended at 43 FR 37173, Aug. 22, 1978; 44 
FR 48958, Aug. 21, 1979; 45 FR 8563, Feb. 8, 1980; Amdt. 9, 48 FR 195, 
Jan. 4, 1983; Amdt. 11, 48 FR 27892, June 17, 1983; Amdt. 12, 49 FR 
18989, May 4, 1984; Amdt. 14, 51 FR 27152, July 30, 1986; Amdt. 17, 55 
FR 1378, Jan. 16, 1990; 60 FR 15463, Mar. 24, 1995]



Sec. 235.8  Management evaluations and audits.

    (a) Each State agency shall provide for audits of State agency 
operations under this part to be made with reasonable frequency, but 
beginning in fiscal year 1978 once every two years. The audits shall 
determine the fiscal integrity of financial transactions and reports, 
and the compliance with applicable laws and regulations and with the 
administrative requirements set forth in 7 CFR part 3015. Audits may be 
made by State Auditors General, by State Controllers, or other 
comparable State audit groups, or by Certified Public Accountants or 
State licensed public accountants.
    (b) Each State agency shall develop a plan for the conduct of such 
audits which shall (1) provide a description of the State agency in 
adequate detail to demonstrate the independence of the audit 
organization, and (2) provide a systematic method to assure timely and 
appropriate resolution of audit findings and recommendations.
    (c) While OA shall rely to the fullest extent feasible upon State 
sponsored audits, it shall, whenever considered necessary, (1) perform 
on-site test audits, and (2) review audit reports and related working 
papers of audits performed by or for State agencies.
    (d) Use of audit guides available from OA is encouraged. When these 
guides

[[Page 250]]

are utilized, OA will coordinate its audits with State sponsored audits 
to form a network of intergovernmental audit systems.
    (e) Each State agency shall provide FNS with full opportunity to 
conduct management evaluations of all operations of the State agency 
under this part and shall provide OA with full opportunity to conduct 
audits of all such operations. Each State agency shall make available 
its records, including records of the receipt and expenditure of funds, 
upon a reasonable request by FNS, OA, or the U.S. Comptroller General.

(Sec. 7, Pub. L. 95-627, 92 Stat. 3621 (42 U.S.C. 1776); secs. 804, 805, 
812, 814, 816, 817 and 819, Pub. L. 97-35, 95 Stat. 521-535 (42 U.S.C. 
1753, 1754, 1756, 1759, 1759a, 1771, 1773, 1774, 1776, and 1785))

[41 FR 32405, Aug. 3, 1976, as amended at 44 FR 51186, Aug. 31, 1979; 
Amdt. 7, 47 FR 18567, Apr. 30, 1982; Amdt. 9, 48 FR 195, Jan. 4, 1983; 
54 FR 2991, Jan. 23, 1989]



Sec. 235.9  Procurement and property management standards.

    (a) Requirements. State agencies shall comply with the requirements 
of the Office of Management and Budget (OMB) Circular A-102 and the 
Department's Uniform Federal Assistance Regulations, 7 CFR part 3015, 
subpart S (46 FR 55658) concerning the procurement of supplies, 
equipment and other services with State Administrative Expense Funds. 
These requirements are adopted by FNS to ensure that such materials and 
services are obtained for the Program efficiently and economically and 
in compliance with applicable laws and executive orders.
    (b) Contractual responsibilities. The standards contained in OMB 
Circular A-102 and 7 CFR part 3015 do not relieve the State agency of 
any contractual responsibilities under its contract. The State agency is 
the responsible authority, without recourse to FNS, regarding the 
settlement and satisfaction of all contractual and administrative issues 
arising out of procurements entered into in connection with the Program. 
This includes, but is not limited to source evaluation, protests, 
disputes, claims, or other matters of a contractual nature. Matters 
concerning violation of law are to be referred to the local, State or 
Federal authority that has proper jurisdiction.
    (c) Procurement procedure. The State agency may use its own 
procurement procedures which reflect applicable State and local laws and 
regulations, provided that procurements made with Program funds adhere 
to the standards set forth in OMB Circular A-102 and 7 CFR part 3015.
    (d) Property acquired with State administrative expense funds. State 
Agencies shall comply with the requirements of OMB Circular A-102 and 7 
CFR part 3015, subpart R (46 FR 55654) in their utilization and 
disposition of property acquired in whole or in part with State 
Administrative Expense Funds.

(Pub. L. 79-396, 60 Stat. 231 (42 U.S.C. 1751); Pub. L. 89-642, 80 Stat. 
885-890 (42 U.S.C. 1773); Pub. L. 91-248, 84 Stat. 207 (42 U.S.C. 1759))

[Amdt. 9, 48 FR 19355, Apr. 29, 1983]



Sec. 235.10  [Reserved]



Sec. 235.11  Other provisions.

    (a) State funds. Expenditures of funds from State sources in any 
fiscal year for the administration of the National School Lunch Program, 
School Breakfast Program, Special Milk Program, Child and Adult Care 
Food Program shall not be less than that expended or obligated in fiscal 
year 1977. Failure of a State to maintain this level of funding will 
result in the total withdrawal of SAE funds. State agencies shall 
follow, as applicable, the provisions of Office of Management and Budget 
Circular A-102, Attachments F and G and 7 CFR part 3015, subparts G and 
H in identifying and documenting expenditures of funds from State 
revenues to meet the State funding requirement of this paragraph.
    (b) Sanctions imposed. (1) FNS may recover, withhold or cancel 
payment of up to one hundred (100) percent of the funds payable to a 
State agency under this part, whenever it is determined by FNS that the 
State agency has failed to comply with the requirements contained in 
this part and in parts 210, 215, 220 and 226 of this title and in part 
250 of this title as it applies to the operation of the Food 
Distribution Program in schools and child and adult care institutions.

[[Page 251]]

    (2) In addition to the general provisions found in paragraph (b)(1) 
of this section, FNS may, for any fiscal year, recover, withhold or 
cancel payment of up to thirty-three and one-third (33\1/3\) percent of 
the funds payable to, and to be used by, a State agency under 
Sec. 235.4(a)(1) and Sec. 235.4(b)(3) for administration of school 
nutrition programs in FNS determines that a State agency is deficient in 
one or more of the following:
    (i) Implementing the requirements in Sec. 210.18;
    (ii) Conducting the number of reviews required in Sec. 210.18 within 
the timeframes specified;
    (iii) Covering the areas of review set forth in the Sec. 210.18, 
carrying out corrective action, and assessing and recovering claims as 
prescribed in Sec. 210.18 and Sec. 210.19 of this title;
    (iv) Conducting reviews with sufficient thoroughness to identify 
violations of the areas of review identified in Sec. 210.18; and
    (v) Meeting the reporting deadlines prescribed for the forms (FNS-10 
and SF-269) required under Sec. 210.5(d) of this title.
    (3) Furthermore, FNS may for any fiscal year, recover, withhold or 
cancel payment of up to thirty-three and one-third (33\1/3\) percent of 
the funds payable to, and to be used by, a State agency under 
Sec. 235.4(a)(2), Sec. 235.4(b)(1) and Sec. 235.4(b)(4) for 
administration of the Child and Adult Care Food Program if FNS 
determines that a State agency is deficient in meeting the reporting 
deadlines prescribed for the forms (FNS-44 and SF-269) required under 
Sec. 226.7(d) of this title.
    (4) In establishing the amounts of funds to be recovered, withheld 
or cancelled under paragraph (b)(2) and (b)(3) of this section, FNS 
shall determine the current or projected rate of funds usage by the 
State agency for all funds subject to sanction, and after considering 
the severity and longevity of the cumulative deficiencies, shall apply 
an appropriate sanction percentage to the amount so determined. During 
the fiscal year under sanction, a State agency may not use funds not 
included in the determination of funds usage to replace sanctioned 
funds. The maximum sanction percentage that may be imposed against a 
State agency for failure within one or more of the five deficiency areas 
specified in paragraph (b)(2) of this section for any fiscal year shall 
be thirty-three and one-third (33\1/3\) percent of the funds payable 
under Sec. 235.4(a)(1) and Sec. 235.4(b)(3) for administration of school 
nutrition programs for such fiscal year.
    (5) Before carrying out any sanction against a State agency under 
this section, the following procedures shall be implemented:
    (i) FNS shall notify the Chief State School Officer or equivalent of 
the deficiencies found and of its intention to impose sanctions unless 
an acceptable corrective action plan is submitted and approved by FNS 
within 60 calendar days.
    (ii) The State agency shall develop a corrective action plan with 
specific timeframes to correct the deficiencies and/or prevent their 
future recurrence. The plan will include dates by which the State agency 
will accomplish such corrective action.
    (iii) FNS shall review the corrective action plan. If it is 
acceptable, FNS shall issue a letter to the Chief State School Officer 
or equivalent approving the corrective action plan, and detailing the 
technical assistance that is available to the State agency to correct 
the deficiencies. The letter shall advise the Chief State School Officer 
or equivalent of the specific sanctions to be imposed if the corrective 
action plan is not implemented within timeframes set forth in the 
approved plan.
    (iv) Upon advice from the State agency that corrective action has 
been taken, FNS shall assess such action and, if necessary, shall 
perform a follow-up review to determine if the noted deficiencies have 
been corrected. FNS shall then advise the State agency if the actions 
taken are in compliance with the corrective action plan or if additional 
corrective action is needed.
    (v) If an acceptable corrective action plan is not submitted and 
approved within 60 calendar days, or if corrective action is not 
completed within the time limits established in the corrective action 
plan, FNS may impose a sanction by assessing a claim against the State 
agency or taking action in

[[Page 252]]

accordance with 7 CFR part 3015, subpart L. FNS shall notify the Chief 
State School Officer or equivalent of any such action.
    (vi) If, subsequent to the imposition of any sanction, FNS 
determines that the noted deficiencies have been resolved and that the 
programs for which SAE funds were made available are being operated in 
an acceptable manner, FNS may return to the State agency or restore to 
the State agency's Letter of Credit (LOC) part or all of any sanctioned 
SAE funds.
    (6) In carrying out sanctions under this part for any fiscal year, 
FNS may reduce the amount of allocated SAE funds payable to a State 
agency in whole or in part during such fiscal year and during following 
fiscal years if necessary.
    (7) Any State agency which has a sanction imposed against it in 
accordance with this paragraph shall not be eligible to participate in 
any reallocation of SAE funds under Sec. 235.5(d) of this part during 
any fiscal year in which such sanction is being applied.
    (c) Termination for convenience. FNS and the State agency may 
terminate the State agency's participation under this part in whole, or 
in part, when both parties agree that continuation would not produce 
beneficial results commensurate with the further expenditure of funds. 
The two parties shall agree upon the termination conditions, including 
the effective date and, in the case of partial termination, the portion 
to be terminated. The State agency shall not incur new obligations for 
the terminated portion after the effective date, and shall cancel as 
many outstanding obligations as possible. FNS shall allow full credit to 
the State agency for the Federal share of the noncancellable 
obligations, properly incurred by the State agency prior to termination.
    (d) In taking any action under paragraphs (b) or (c) of this 
section, FNS and the State agency shall comply with the provisions of 
the Department's Uniform Federal Assistance Regulations, 7 CFR part 3015 
subpart N concerning grant suspension, termination and closeout 
procedures.
    (e) State requirements. Nothing contained in this part shall prevent 
a State agency from imposing additional operating requirements which are 
not inconsistent with the provisions of this part.
    (f) Administrative review process. When FNS asserts a sanction 
against a State agency under the provisions of paragraph (b) of this 
section, the State agency may appeal the case and be afforded a review 
by an FNS Administrative Review Officer of the record including any 
additional written submissions prepared by the State agency.
    (1) FNS shall provide a written notice and shall ensure the receipt 
of such notice when asserting a sanction against a State agency.
    (2) A State agency aggrieved by a sanction asserted against it may 
file a written request with the Director, Administrative Review Staff, 
U.S. Department of Agriculture, Food and Nutrition Service, 3101 Park 
Center Drive, Alexandria, Va. 22302 for a review of the record. Such 
request must be postmarked within 30 calendar days of the date of 
delivery of the sanction notice and the envelope containing the request 
shall be prominently marked ``REQUEST FOR REVIEW.'' If the State agency 
does not request a review within 30 calendar days of the date of 
delivery of the sanction notice, the administrative decision on the 
sanction shall be final.
    (3) Upon receipt of a request for review, FNS shall promptly provide 
the State agency with a written acknowledgment of the request. The 
acknowledgment shall include the name and address of the FNS 
Administrative Review Officer reviewing the sanction. The acknowledgment 
shall also notify the State agency that any additional information in 
support of its position must be submitted within 30 calendar days of the 
receipt of the acknowledgment.
    (4) When a review is requested, the FNS Administrative Review 
Officer shall review all available information and shall make a final 
determination within 45 calendar days after receipt of the State 
agency's additional information. The final determination shall take 
effect upon delivery of the written notice of this final decision to the 
State agency.

[[Page 253]]

    (5) The final determination of the FNS Administrative Review Officer 
will be the Department's final decision in the case and will not be 
subject to reconsideration.

(Sec. 14, Pub. L. 95-166, 91 Stat. 1338 (42 U.S.C. 1776); sec. 7, Pub. 
L. 95-627, 92 Stat. 3621 (42 U.S.C. 1776); secs. 805 and 819, Pub. L. 
97-35, 95 Stat. 521-535 (42 U.S.C. 1773); sec. 7(a), Pub. L. 95-627, 93 
Stat. 3622, 42 U.S.C. 1751)

[41 FR 32405, Aug. 3, 1976, as amended at 44 FR 48958, Aug. 21, 1979; 
Amdt. 6, 47 FR 14135, Apr. 2, 1982; Amdt. 11, 48 FR 27892, June 17, 
1983; Amdt. 12, 49 FR 18989, May 4, 1984; Amdt. 14, 51 FR 27152, July 
30, 1986; Amdt. 15, 51 FR 33862, Sept. 24, 1986; Amdt. 17, 55 FR 1378, 
Jan. 16, 1990; 56 FR 32950, July 17, 1991; 60 FR 15463, Mar. 24, 1995; 
64 FR 50744, Sept. 20, 1999]



Sec. 235.12  Information collection/recordkeeping--OMB assigned control numbers.

------------------------------------------------------------------------
                                                             Current OMB
       7 CFR section where requirements are described          control
                                                                number
------------------------------------------------------------------------
235.3(b)...................................................    0584-0067
235.4(d), (e)..............................................    0584-0067
235.7(a)...................................................    0584-0067
235.7(b)...................................................    0584-0067
235.7(c)...................................................    0584-0067
235.8(a), (b)..............................................    0584-0067
235.9(c), (d)..............................................    0584-0067
235.11(b)(2)...............................................    0584-0067
235.11(b)(5)(ii)...........................................    0584-0067
235.11(f)..................................................    0584-0067
------------------------------------------------------------------------


[64 FR 50744, Sept. 20, 1999]



PART 240--CASH IN LIEU OF DONATED FOODS--Table of Contents




Sec.
240.1  General purpose and scope.
240.2  Definitions.
240.3  Cash in lieu of donated foods for program schools.
240.4  Cash in lieu of donated foods for nonresidential child and adult 
          care institutions.
240.5  Cash in lieu of donated foods for commodity schools.
240.6  Funds for States which have phased out facilities.
240.7  Payments to States.
240.8  Payments to program schools, service institutions, nonresidential 
          child care institutions and commodity schools.
240.9  Use of funds.
240.10  Unobligated funds.
240.11  Records and reports.

    Authority: 42 U.S.C. 612c note, 1751, 1755, 1762a, 1765, 1766, 1779.

    Source: 47 FR 15982, Apr. 13, 1982, unless otherwise noted.



Sec. 240.1  General purpose and scope.

    (a) Each school year the Department programs agricultural 
commodities and other foods to States for delivery to program and 
commodity schools, nonresidential child care institutions, and service 
institutions pursuant to the regulations governing the donation of foods 
for use in the United States, its territories and possessions and areas 
under its jurisdiction (7 CFR part 250).
    (b) Section 6(b) of the Act requires that not later than June 1 of 
each school year, the Secretary shall make an estimate of the value of 
the agricultural commodities and other foods that will be delivered 
during that school year for use in lunch programs by schools 
participating in the National School Lunch Program (7 CFR part 210). If 
this estimate is less than the total level of assistance authorized 
under section 6(e) of the Act the Secretary shall pay to the State 
administering agency not later than July 1 of that school year, an 
amount of funds equal to the difference between the value of donated 
foods as then programmed for that school year and the total level of 
assistance authorized under such section.
    (c) Section 6(e)(1) of the Act requires:
    (1) That for each school year, the total commodity assistance, or 
cash in lieu thereof, available to each State for the National School 
Lunch Program shall be the amount obtained by multiplying the national 
average value of donated foods, described in paragraph (c)(2) of this 
section, by the number of lunches served in that State in the preceding 
school year; and
    (2) That the national average value of foods donated to schools 
participating in the National School Lunch Program, or cash payments 
made in lieu thereof, shall be 11 cents, adjusted on July 1, 1982, and 
each July 1 thereafter to reflect changes in the Price Index for Food 
Used in Schools and Institutions. Section 6(e)(1) further requires that 
not less than 75 percent of the assistance under that section shall be 
in the form

[[Page 254]]

of donated foods for the National School Lunch Program. After the end of 
each school year, FNS shall reconcile the number of lunches served by 
schools in each State with the number served in the preceding school 
year and, based on such reconciliation, shall increase or reduce 
subsequent commodity assistance or cash in lieu thereof provided to each 
State.
    (d) Section 12(g) of the Act provides that whoever embezzles, 
willfully misapplies, steals, or obtains by fraud any funds, assets, or 
property that are the subject of a grant or other form of assistance 
under this Act or the Child Nutrition Act of 1966, whether received 
directly or indirectly from the United States Department of Agriculture, 
or whoever receives, conceals, or retains such funds, assets, or 
property to his use or gain, knowing such funds, assets, or property 
have been embezzled, willfully misapplied, stolen, or obtained by fraud 
shall, if such funds, assets, or property are of the value of $100 or 
more, be fined not more than $10,000 or imprisoned not more than five 
years, or both, or, if such funds, assets, or property are of a value of 
less than $100, shall be fined not more than $1,000 or imprisoned for 
not more than one year, or both.
    (e) Section 14(f) of the Act provides that the value of foods 
donated to States for use in commodity schools for any school year shall 
be the sum of the national average value of donated foods established 
under section 6(e) of the Act and the national average payment 
established under section 4 of the Act. Section 14(f) also provides that 
such schools shall be eligible to receive up to five cents of such value 
in cash for processing and handling expenses related to the use of the 
donated foods.
    (f) Sections 17(h)(1) (B) and (C) of the Act provide that the value 
of commodities, or cash in lieu thereof, donated to States for use in 
nonresidential child or adult care institutions participating in the 
Child and Adult Care Food Program (7 CFR part 226) for any school year 
shall be, at a minimum, the amount obtained by multiplying the number of 
lunches and suppers served during the preceding school year by the rate 
established for lunches for that school year under section 6(e) of the 
Act. At the end of each school year, FNS shall reconcile the number of 
lunches and suppers served in participating institutions in each State 
during such school year with the number of lunches and suppers served in 
the preceding school year and, based on such reconciliation, shall 
increase or reduce subsequent commodity assistance or cash in lieu of 
commodities provided to each State.
    (g) Section 16 of the Act provides that a State which has phased out 
its food distribution facilities prior to June 30, 1974, may elect to 
receive cash payments in lieu of donated foods for the purposes of the 
applicable child nutrition programs--i.e., the National School Lunch 
Program, the Summer Food Service Program for Children (7 CFR part 225) 
and the Child Care Food Program.
    (h) These regulations prescribe the methods for determination of the 
amount of payments, the manner of disbursement and the requirements for 
accountability for funds when these respective statutory authorities 
require the Department to make cash payments in lieu of donating 
agricultural commodities and other foods.

[47 FR 15982, Apr. 13, 1982, as amended at 52 FR 7267, Mar. 10, 1987; 58 
FR 39120, July 22, 1993]



Sec. 240.2  Definitions.

    For the purpose of this part the term:
    Act means the National School Lunch Act, as amended.
    Child Care Food Program means the Program authorized by section 17 
of the Act.
    Commodity school means a school that does not participate in the 
National School Lunch Program under part 210 of this chapter but which 
operates a nonprofit lunch program under agreement with the State 
educational agency or FNSRO and receives donated foods, or donated foods 
and cash or services of a value of up to 5 cents per lunch in lieu of 
donated foods under this part for processing and handling the foods.
    Department means the U.S. Department of Agriculture.
    Distributing agencies means State, Federal or private agencies which 
enter into agreements with the Department

[[Page 255]]

for the distribution of donated foods to program schools, commodity 
schools, and nonresidential child care institutions.
    Donated-food processing and handling expenses means any expenses 
incurred by or on behalf of a commodity school for processing or other 
aspects of the preparation, delivery, and storage of donated foods for 
use in its lunch program.
    Donated foods means foods donated, or available for donation, by the 
Department under any of the legislation referred to in part 250 of this 
chapter.
    Fiscal year means the period of 12 months beginning October 1 of any 
calendar year and ending September 30 of the following calendar year.
    FNS means the Food and Nutrition Service of the Department.
    FNSRO means the appropriate Food and Nutrition Service Regional 
Office.
    National School Lunch Program means the Program authorized by 
sections 4 and 11 of the Act.
    Nonprofit means exempt from income tax under section 501(c)(3) of 
the Internal Revenue Code of 1954, as amended; or in the Commonwealth of 
Puerto Rico, certified as nonprofit by its Governor.
    Nonresidential child care institution means any child care center, 
day care home, or sponsoring organization (as those terms are defined in 
part 226 of this chapter) which participates in the Child Care Food 
Program.
    Program school means a school which participates in the National 
School Lunch Program.
    School means (1) an educational unit of high school grade or under 
except for a private school with an average yearly tuition exceeding 
$1,500 per child, operating under public or nonprofit private ownership 
in a single building or complex of buildings. The term ``high school 
grade or under'' includes classes of preprimary grade when they are 
conducted in a school having classes of primary or higher grade, or when 
they are recognized as a part of the educational system in the State, 
regardless of whether such preprimary grade classes are conducted in a 
school having classes of primary or higher grade; (2) with the exception 
of residential summer camps which participate in the Summer Food Service 
Program for Children, Job Corps centers funded by the Department of 
Labor and private foster homes, any public or nonprofit private child 
care institution, or distinct part of such institution, which (i) 
maintains children in residence, (ii) operates principally for the care 
of children, and (iii) if private, is licensed to provide residential 
child care services under the appropriate licensing code by the State or 
a subordinate level of government. The term ``child care institutions'' 
includes, but is not limited to: homes for the mentally retarded, the 
emotionally disturbed, the physically handicapped, and unma