[Title 7 CFR ]
[Code of Federal Regulations (annual edition) - January 1, 2011 Edition]
[From the U.S. Government Printing Office]



[[Page i]]

          

          Title 7


          Parts 210 to 299

                         Revised as of January 1, 2011


          Agriculture
          



________________________

          Containing a codification of documents of general 
          applicability and future effect

          As of January 1, 2011
                    Published by the Office of the Federal Register 
                    National Archives and Records Administration as a 
                    Special Edition of the Federal Register
                    A Special Edition of the Federal Register

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                            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:
      Table of CFR Titles and Chapters........................    1055
      Alphabetical List of Agencies Appearing in the CFR......    1075
      List of CFR Sections Affected...........................    1085

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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, 2011), 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 
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Register page number of the latest amendment of any given rule.

EFFECTIVE AND EXPIRATION DATES

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Register since the last revision of that volume of the Code. Source 
citations for the regulations are referred to by volume number and page 
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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 
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OBSOLETE PROVISIONS

    Provisions that become obsolete before the revision date stated on 
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``[RESERVED]'' TERMINOLOGY

    The term ``[Reserved]'' is used as a place holder within the Code of 
Federal Regulations. An agency may add regulatory information at a 
``[Reserved]'' location at any time. Occasionally ``[Reserved]'' is used 
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INCORPORATION BY REFERENCE

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established by statute and allows Federal agencies to meet the 
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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.
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    An index to the text of ``Title 3--The President'' is carried within 
that volume.

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    The Federal Register Index is issued monthly in cumulative form. 
This index is based on a consolidation of the ``Contents'' entries in 
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the revision dates of the 50 CFR titles.

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    Raymond A. Mosley,
    Director,
    Office of the Federal Register.
    January 1, 2011.







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                               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, 1600-1759, 1760-1939, 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, 2011.

    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.

    For this volume, Robert J. Sheehan, III was Chief Editor. The Code 
of Federal Regulations publication program is under the direction of 
Michael L. White, assisted by Ann Worley.


[[Page 1]]



                          TITLE 7--AGRICULTURE




                  (This book contains parts 210 to 299)

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

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

                                                                    Part

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

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  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 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...........          71
220             School Breakfast Program....................          89
225             Summer Food Service Program.................         125
226             Child and Adult Care Food Program...........         172
227             Nutrition Education and Training Program....         278
235             State administrative expense funds..........         287
240             Cash in lieu of donated foods...............         299
245             Determining eligibility for free and reduced 
                    price meals and free milk in schools....         305
246             Special Supplemental Nutrition Program for 
                    Women, Infants and Children.............         339
247             Commodity Supplemental Food Program.........         449
248             WIC Farmers' Market Nutrition Program (FMNP)         472
249             Senior Farmers' Market Nutrition Program 
                    (SFMNP).................................         493
    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........         521
251             The Emergency Food Assistance Program.......         572
252             National Commodity Processing Program.......         584
253             Administration of the Food Distribution 
                    Program for households on Indian 
                    reservations............................         593
254             Administration of the Food Distribution 
                    Program for Indian households in 
                    Oklahoma................................         623
         SUBCHAPTER C--FOOD STAMP AND FOOD DISTRIBUTION PROGRAM
271             General information and definitions.........         626

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272             Requirements for participating State 
                    agencies................................         644
273             Certification of eligible households........         701
274             Issuance and use of program benefits........         886
275             Performance reporting system................         908
276             State agency liabilities and Federal 
                    sanctions...............................         947
277             Payments of certain administrative costs of 
                    State agencies..........................         955
278             Participation of retail food stores, 
                    wholesale food concerns and insured 
                    financial institutions..................         989
279             Administrative and judicial review--food 
                    retailers and food wholesalers..........        1015
280             Emergency food assistance for victims of 
                    disasters...............................        1019
281             Administration of the Food Stamp Program on 
                    Indian reservations.....................        1019
282             Demonstration, research, and evaluation 
                    projects................................        1025
283             Appeals of quality control (``QC'') claims..        1026
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.....        1045
                    SUBCHAPTER D--GENERAL REGULATIONS
295             Availability of information and records to 
                    the public..............................        1049
296-299         [Reserved]

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                  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 Nutrition standards and menu planning approaches for lunches and 
          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:

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    7 CFR part 3015 means the Uniform Federal Assistance Regulations 
published by the Department to implement certain policies applicable to 
all Department programs. The applicable provisions deal with competition 
for discretionary grants and cooperative agreements, costs requiring 
prior approval, acknowledgement of Department support in publications 
and audiovisuals produced under Department programs, intergovernmental 
review of Department programs under Executive Order 12372, and certain 
miscellaneous Department requirements.
    7 CFR part 3016 means the Department's Uniform Administrative 
Requirements for Grants and Cooperative Agreements to State and Local 
Governments. 7 CFR part 3016 covers requirements for awards and 
subawards to State and local governmental organizations under Department 
programs.
    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 3019 means the Department's Uniform Administrative 
Requirements for Grants and Agreements with Institutions of Higher 
Education, Hospitals, and Other Non-Profit Organizations. 7 CFR part 
3019 covers requirements for awards and subawards to nongovernmental, 
nonprofit organizations under Department programs.
    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.)
    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.
    Applicable credits shall have the meaning established in Office of 
Management and Budget Circulars A-87, C(4) and A-122, Attachment A, 
A(5), respectively. For availability of OMB circulars referenced in this 
definition see 5 CFR 1310.3.
    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 
paragraph (c) 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

[[Page 9]]

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).
    Contractor means a commercial enterprise, public or nonprofit 
private organization or individual that enters into a contract with a 
school food authority.
    Cost reimbursable contract means a contract that provides for 
payment of incurred costs to the extent prescribed in the contract, with 
or without a fixed fee.
    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.
    Fixed fee means an agreed upon amount that is fixed at the inception 
of the contract. In a cost reimbursable contract, the fixed fee includes 
the contractor's direct and indirect administrative costs and profit 
allocable to the contract.
    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 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.
    Local educational agency means a public board of education or other 
public or private nonprofit authority legally constituted within a State 
for either administrative control or direction of, or to perform a 
service function for, public or private nonprofit elementary schools or 
secondary schools in a city, county, township, school district, or other 
political subdivision of a State, or for a combination of school 
districts or counties that is recognized in a State as an administrative 
agency for its public or private nonprofit elementary schools or 
secondary schools. The term also includes any other public or private 
nonprofit institution or agency having administrative control and 
direction of a public or private nonprofit elementary school or 
secondary school, including residential child care institutions, Bureau 
of Indian Affairs schools, and educational service agencies and 
consortia of those agencies, as well as the State educational agency in 
a State or territory in which the State educational agency is the sole 
educational agency for all public or private nonprofit schools.
    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

[[Page 10]]

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 means, when applied to schools or institutions eligible 
for the Program, exempt from income tax under section 501(c)(3) of the 
Internal Revenue Code of 1986.
    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.
    Nonprofit school food service account means the restricted account 
in which all of the revenue from all food service operations conducted 
by the school food authority principally for the benefit of school 
children is retained and used only for the operation or improvement of 
the nonprofit school food service.
    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.
    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.

[[Page 11]]

    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.
    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.
    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,

[[Page 12]]

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; 71 FR 39515, July 13, 2006; 72 FR 10892, Mar. 12, 
2007; 72 FR 61490, Oct. 31, 2007; 72 FR 63790, Nov. 13, 2007]



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; parts 235 and 245 of this chapter; 
parts 15, 15a, 15b, 3015 and 3016 of this title; 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; 
part 245 of this chapter; parts 15, 15a, 15b, and 3016 or 3019, as 
applicable, of this title; and FNS instructions.

[53 FR 29147, Aug. 2, 1988, as amended at 71 FR 39515, July 13, 2006]



 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

[[Page 13]]

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:
    (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

[[Page 14]]

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 3016. 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 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. Sec.210.7 and 
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

[[Page 15]]

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 3016.

[53 FR 29147, Aug. 2, 1988, as amended at 54 FR 12580, Mar. 28, 1989; 56 
FR 32939, July 17, 1991; 71 FR 39516, July 13, 2006]



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 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

[[Page 16]]

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 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

[[Page 17]]

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 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

[[Page 18]]

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 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

[[Page 19]]

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 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

[[Page 20]]

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 and 7 CFR part 3016, or 
7 CFR part 3019, as applicable);
    (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 local educational agency 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 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, and comply with the 
food safety requirements of Sec.210.13;
    (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

[[Page 21]]

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;
    (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; 70 FR 34630, June 15, 2005; 71 FR 39516, July 13, 2006; 72 FR 
63791, Nov. 13, 2007; 74 FR 66216, Dec. 15, 2009]

[[Page 22]]



Sec.210.10  Nutrition standards and menu planning approaches for lunches and 

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:
    (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.

[[Page 23]]

    (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:
    [GRAPHIC] [TIFF OMITTED] TR09MY00.001
    

[[Page 24]]


    (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:
[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

[[Page 25]]

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) Exceptions and variations allowed in reimbursable meals--(1) 
Exceptions for disability reasons. Schools must make substitutions in 
lunches and afterschool snacks for students who are considered to have a 
disability under 7 CFR 15b.3 and whose disability restricts their diet. 
Substitutions must be made on a case by case basis only when supported 
by a written statement of the need for substitutions that includes 
recommended alternate foods, unless otherwise exempted by FNS. Such 
statement must be signed by a licensed physician.
    (2) Exceptions for non-disability reasons. Schools may make 
substitutions for students without disabilities 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 written statement of the need for substitutions that 
includes recommended alternate foods, unless otherwise exempted by FNS. 
Except with respect to substitutions for fluid milk, such a statement 
must be signed by a recognized medical authority.
    (i) Milk substitutions for non-disability reasons. Schools may make 
substitutions for fluid milk for non-disabled students who cannot 
consume fluid milk due to medical or special dietary needs. A school 
that selects this option may offer the nondairy beverage(s) of its 
choice, provided the beverage(s) meets the nutritional standards 
established under paragraph (m) of this section. Expenses incurred when 
providing substitutions for fluid milk that exceed program 
reimbursements must be paid by the school food authority.
    (ii) Requisites for milk substitutions. (A) A school food authority 
must inform the State agency if any of its schools choose to offer fluid 
milk substitutes other than for students with disabilities; and
    (B) A medical authority or the student's parent or legal guardian 
must submit a written request for a fluid milk substitute identifying 
the medical or other special dietary need that restricts the student's 
diet.
    (iii) Substitution approval. The approval for fluid milk 
substitution must remain in effect until the medical authority or the 
student's parent or legal guardian revokes such request in writing, or 
until such time as the school changes its substitution policy for non-
disabled students.
    (3) 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 sound and needed to meet ethnic, 
religious, or economic needs.
    (4) 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

[[Page 26]]

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 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.

[[Page 27]]

    (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, 2009, 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.
    (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

[[Page 28]]

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 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

[[Page 29]]

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. 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

[[Page 30]]

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 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.

[[Page 31]]

    (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 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

[[Page 32]]

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;
    (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;

[[Page 33]]

    (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. Sec.210.18 and 
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, 2009, 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 students, schools must offer 
students fluid milk in a variety of fat contents. Schools may offer 
flavored or unflavored milk and lactose-free fluid 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:
    (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.
    (3) Milk substitutes. If a school chooses to offer one or more 
substitutes for fluid milk for non-disabled students with medical or 
special dietary needs,

[[Page 34]]

the nondairy beverage(s) must provide the nutrients listed in the 
following table. Milk substitutes must be fortified in accordance with 
fortification guidelines issued by the Food and Drug Administration. A 
school need only offer the nondairy beverage(s) that it has identified 
as allowable fluid milk substitutes according to this paragraph (m)(3).

------------------------------------------------------------------------
                 Nutrient                             Per cup
------------------------------------------------------------------------
Calcium..................................  276 mg.
Protein..................................  8 g.
Vitamin A................................  500 IU.
Vitamin D................................  100 IU.
Magnesium................................  24 mg.
Phosphorus...............................  222 mg.
Potassium................................  349 mg.
Riboflavin...............................  0.44 mg.
Vitamin B-12.............................  1.1 mcg.
------------------------------------------------------------------------

    (4) Restrictions on the sale of milk. A school participating in the 
Program, or a person approved by a school participating in the Program, 
must not directly or indirectly restrict the sale or marketing of fluid 
milk (as described in paragraph (m)(1)(ii) of this section) at any time 
or in any place on school premises or at any school-sponsored event.
    (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) Snacks served to infants ages birth through 11 months must meet 
the requirements described in paragraph (n)(3)(iv) of this section. 
Foods included in the snack must be of a texture and a consistency that 
are appropriate for the age of the infant being served. The foods must 
be served during a span of time consistent with the infant's eating 
habits. For those infants whose dietary needs are more individualized, 
exceptions to the meal pattern must be made in accordance with the 
requirements found in paragraph (g)(1) of this section.
    (i) Breastmilk and iron-fortified formula. Either breastmilk or 
iron-fortified infant formula, or portions of both, must be served for 
the entire first year. Snacks containing breastmilk and snacks 
containing iron-fortified infant formula supplied by the school are 
eligible for reimbursement. However, infant formula provided by a parent 
(or guardian) and breastmilk fed directly by the infant's mother, during 
a visit to the school, contribute to a reimbursable snack only when the 
school supplies at least one component of the infant's snack.
    (ii) Fruit juice. Juice should not be offered to infants until they 
are 6 months of age and ready to drink from a cup. Feeding fruit juice 
only from a cup will help develop behaviors that may prevent early 
childhood caries. Fruit juice served as part of the meal pattern for 
infants 8 through 11 months must be full-strength.

[[Page 35]]

    (iii) Solid foods. Solid foods of an appropriate texture and 
consistency are required only when the infant is developmentally ready 
to accept them. The school should consult with the infant's parent (or 
guardian) 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 the infant's health and nutritional well-being.
    (iv) Infant meal pattern. Infant snacks must have, at a minimum, 
breastmilk or iron-fortified infant formula, or portions of both, in the 
appropriate amount indicated for the infant's age. For some breastfed 
infants who regularly consume less than the minimum amount of breastmilk 
per feeding, a serving of less than the minimum amount of breastmilk may 
be offered. In these situations, additional breastmilk must be offered 
if the infant is still hungry. Some infants may be developmentally ready 
to accept an additional food component. Snacks are reimbursable when 
schools provide all of the components in the meal pattern that the 
infant is developmentally ready to accept.
    (A) Birth through 3 months. 4 to 6 fluid ounces of breastmilk or 
iron-fortified infant formula--only breastmilk or iron-fortified formula 
is required to meet the infant's nutritional needs.
    (B) 4 through 7 months. 4 to 6 fluid ounces of breastmilk or iron-
fortified infant formula--only breastmilk or iron-fortified formula is 
required to meet the infant's nutritional needs.
    (C) 8 through 11 months. 2 to 4 fluid ounces of breastmilk, iron-
fortified infant formula, or full strength fruit juice; and 0 to \1/2\ 
slice of crusty bread (if developmentally ready) or 0 to 2 cracker type 
products (if developmentally ready), which are made from whole-grain or 
enriched meal or flour, and suitable as a finger food for an infant.
    (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.)

                        Snack Pattern for Infants
------------------------------------------------------------------------
                                                         8 through 11
     Birth through 3 months       4 through 7 months        months
------------------------------------------------------------------------
4-6 fluid ounces of formula \1\   4-6 fluid ounces    2-4 fluid ounces
 or breastmilk \2,3\.              of formula \1\ or   of formula \1\,
                                   breastmilk \2,3\.   breastmilk \2,3\,
                                                       or fruit juice
                                                       \4\; and
                                                      0-\1/2\ slice of
                                                       bread \5\ or 0-2
                                                       crackers \5\.
------------------------------------------------------------------------
\1\ Infant formula must be iron-fortified.
\2\ Breastmilk or iron-fortified formula, or portions of both, may be
  served; however, it is recommended that breastmilk 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 breastmilk per feeding, a serving of less than the
  minimum amount of breastmilk may be offered, with additional
  breastmilk offered if the infant is still hungry.
\4\ Fruit juice must be full-strength.
\5\ A serving of this component must be made from whole-grain or
  enriched meal or flour. It is required only when the infant is
  developmentally ready to accept it.


                                             Supplements for Infants
----------------------------------------------------------------------------------------------------------------
                                    Birth through 3 months    4 through 7 months         8 through 11 months
----------------------------------------------------------------------------------------------------------------
Supplement (snack)................  4-6 fl. oz. breast      4-6 fl. oz. breast      2-4 fl. oz breast milk
                                     milk \2,3\ or formula   milk \2,3\ or formula   \2,3\, formula \1\, or
                                     \1\                     \1\                     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.

    (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

[[Page 36]]

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) Feeding lunches to infants. Lunches served to infants ages birth 
through 11 months must meet the requirements described in paragraph 
(o)(5) of this section. Foods included in the lunch must be of a texture 
and a consistency that are appropriate for the age of the infant being 
served. The foods must be served during a span of time consistent with 
the infant's eating habits. For those infants whose dietary needs are 
more individualized, exceptions to the meal pattern must be made in 
accordance with the requirements found in paragraph (g)(1) of this 
section.
    (3) Breastmilk and iron-fortified formula. Either breastmilk or 
iron-fortified infant formula, or portions of both, must be served for 
the entire first year. Meals containing breastmilk and meals containing 
iron-fortified infant formula supplied by the school are eligible for 
reimbursement. However, infant formula provided by a parent (or 
guardian) and breastmilk fed directly by the infant's mother, during a 
visit to the school, contribute to a reimbursable lunch only when the 
school supplies at least one component of the infant's meal.
    (4) Solid foods. For infants ages 4 through 7 months, solid foods of 
an appropriate texture and consistency are required only when the infant 
is developmentally ready to accept them. The school should consult with 
the infant's parent (or guardian) 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 the infant's health and 
nutritional well-being.
    (5) Infant meal pattern. Infant lunches must have, at a minimum, 
each of the food components indicated, in the amount that is appropriate 
for the infant's age. For some breastfed infants who regularly consume 
less than the minimum amount of breastmilk per feeding, a serving of 
less than the minimum amount of breastmilk may be offered. In these 
situations, additional breastmilk must be offered if the infant is still 
hungry. Lunches may include portions of breastmilk and iron-fortified 
infant formula as long as the total number of ounces meets, or exceeds, 
the minimum amount required of this food component. Similarly, to meet 
the component requirements for vegetables and fruit, portions of both 
may be served.
    (i) Birth through 3 months. 4 to 6 fluid ounces of breastmilk or 
iron-fortified infant formula--only breastmilk or iron-fortified formula 
is required to meet the infant's nutritional needs.
    (ii) 4 through 7 months. Breastmilk or iron-fortified formula is 
required. Some infants may be developmentally ready for solid foods of 
an appropriate texture and consistency. Lunches are reimbursable when 
schools provide all of the components in the meal pattern that the 
infant is developmentally ready to accept.
    (A) 4 to 8 fluid ounces of breastmilk or iron-fortified infant 
formula; and
    (B) 0 to 3 tablespoons of iron-fortified dry infant cereal; and
    (C) 0 to 3 tablespoons of fruit or vegetable.
    (iii) 8 through 11 months. Breastmilk or iron-fortified formula and 
solid foods of an appropriate texture and consistency are required.
    (A) 6 to 8 fluid ounces of breastmilk or iron-fortified infant 
formula; and
    (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 
(volume) of cottage cheese; or 1 to 4 ounces (weight) of cheese food or 
cheese spread; and
    (C) 1 to 4 tablespoons of fruit or vegetable.
    (6) Infant meal pattern table. The minimum amounts of food 
components to serve to infants, as described in paragraph (o)(5) of this 
section, are:

[[Page 37]]



                        Lunch Pattern for Infants
------------------------------------------------------------------------
                                                         8 through 11
     Birth through 3 months       4 through 7 months        months
------------------------------------------------------------------------
4-6 fluid ounces of formula \1\  4-8 fluid ounces of  6-8 fluid ounces
 or breastmilk \2,3\.             formula \1\ or       of formula \1\ or
                                  breastmilk \2,3\;    breastmilk \2,3\;
                                  and                  and
                                 0-3 tablespoons of   2-4 tablespoons of
                                  infant cereal        infant cereal
                                  \1,4\; and.          \1\; and/or
                                 0-3 tablespoons of   1-4 tablespoons of
                                  fruit or vegetable   meat, fish,
                                  or both \4\.         poultry, egg
                                                       yolk, cooked dry
                                                       beans or peas; or
                                                      \1/2\-2 ounces of
                                                       cheese; or
                                                      1-4 ounces
                                                       (volume) of
                                                       cottage cheese;
                                                       or
                                                      1-4 ounces
                                                       (weight) of
                                                       cheese food or
                                                       cheese spread;
                                                       and
                                                      1-4 tablespoons of
                                                       fruit or
                                                       vegetable or
                                                       both.
------------------------------------------------------------------------
\1\ Infant formula and dry infant cereal must be iron-fortified.
\2\ Breastmilk or formula, or portions of both, may be served; however,
  it is recommended that breastmilk 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 breastmilk per feeding, a serving of less than the
  minimum amount of breastmilk may be offered, with additional
  breastmilk offered if the infant is still hungry.
\4\ A serving of this component is required only when the infant is
  developmentally ready to accept it.


[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; 67 FR 
36783, May 28, 2002; 69 FR 70872, Dec. 8, 2004; 70 FR 70033, Nov. 21, 
2005; 73 FR 52907, Sept. 12, 2008]



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 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.

[[Page 38]]

    (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. Schools shall obtain a minimum of two 
food safety inspections during each school year conducted by a State or 
local governmental agency responsible for food safety inspections. They 
shall post in a publicly visible location a report of the most recent 
inspection conducted, and provide a copy of the inspection report to a 
member of the public upon request. Sites participating in more than one 
child nutrition program shall only be required to obtain two food safety 
inspections per school year if the nutrition programs offered use the 
same facilities for the production and service of meals.
    (c) Food safety program. The school food authority must develop a 
written food safety program for each of its food preparation and service 
facilities that meets the requirements in paragraph (c)(1) or paragraph 
(c)(2) of this section.
    (1) A school food authority with a food safety program based on 
traditional hazard analysis and critical control point (HACCP) 
principles must:
    (i) Perform a hazard analysis;
    (ii) Decide on critical control points;
    (iii) Determine the critical limits;
    (iv) Establish procedures to monitor critical control points;
    (v) Establish corrective actions;
    (vi) Establish verification procedures; and
    (vii) Establish a recordkeeping system.
    (2) A school food authority with a food safety program based on the 
process approach to HACCP must ensure that its program includes:
    (i) Standard operating procedures to provide a food safety 
foundation;
    (ii) Menu items grouped according to process categories;
    (iii) Critical control points and critical limits;
    (iv) Monitoring procedures;
    (v) Corrective action procedures;
    (vi) Recordkeeping procedures; and
    (vii) Periodic program review and revision.
    (d) 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; 
70 FR 34630, June 15, 2005; 74 FR 66216, Dec. 15, 2009]



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).

[[Page 39]]

    (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 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;
    (6) Information on civil rights complaints, if any, and their 
resolution as required under Sec.210.23; and
    (7) The number of food safety inspections obtained per school year 
by each school under its jurisdiction.
    (b) Recordkeeping summary. In order to participate in the Program, a 
school food authority or a school, as applicable, must 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; and
    (5) Records from the food safety program for a period of six months 
following a month's temperature records to demonstrate compliance with 
Sec.210.13(c), and records from the most recent food safety inspection 
to demonstrate compliance with Sec.210.13(b).

[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; 70 FR 34630, June 15, 2005; 74 FR 66216, Dec. 15, 2009]



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

[[Page 40]]

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 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;
    (8) Establish an advisory board composed of parents, teachers, and 
students to assist in menu planning;
    (9) Obtain written approval of invitations for bids and requests for 
proposals before their issuance when required by the State agency. The 
school food authority must incorporate all State agency required changes 
to its solicitation documents before issuing those documents; and
    (10) Ensure that the State agency has reviewed and approved the 
contract terms and that the school food authority has incorporated all 
State agency required changes into the contract or amendment before any 
contract or amendment to an existing food service management company 
contract is executed. Any changes made by the school food authority or a 
food service management company to a State agency pre-approved prototype 
contract or State agency approved contract term must be approved in 
writing by the State agency before the contract is executed. When 
requested, the school food authority must submit all procurement 
documents, including responses submitted by potential contractors, to 
the State agency, by the due date established by the State agency.
    (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. A school food authority with no capability to 
prepare a cycle menu may, with State agency approval, require that each 
food service management company include a 21-day cycle menu, developed 
in accordance with the provisions of Sec.210.10, with its bid or 
proposal. 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:

[[Page 41]]

    (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 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; 72 FR 61491, Oct. 31, 2007]



          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 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)

[[Page 42]]

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, 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.

[[Page 43]]

    (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 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

[[Page 44]]

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.

    (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

[[Page 45]]

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 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

[[Page 46]]

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 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.

[[Page 47]]

    (iii) Determine that applications for verification are selected in 
accordance with the applicable procedures in Sec.245.6a(c) of this 
chapter and that no discrimination exists in the selection process.
    (iv) Establish that verification is completed by November 15 (or 
other date established in accordance with Sec.245.6a(b)(2)(i) or 
(b)(2)(ii) of this chapter) including any follow-up activities as 
required in Sec.245.6a(f)(6) of this chapter. If the administrative 
review occurs prior to the November 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(i) of this chapter.
    (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.
    (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.
    (6) Food safety. The State Agency must examine records to confirm 
that each school food authority under its jurisdiction meets the food 
safety requirements of Sec.210.13.
    (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

[[Page 48]]

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.

                                 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

[[Page 49]]

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 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

[[Page 50]]

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 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

[[Page 51]]

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 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

[[Page 52]]

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 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-

[[Page 53]]

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; 73 FR 76858, Dec. 18, 2008; 74 FR 66216, Dec. 15, 2009]



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 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. Sec.210.10 and 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

[[Page 54]]

agency must determine if the nutrition standards in Sec. Sec.210.10 
and 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. Sec.210.10(k) and 220.8(g) of this chapter 
and that conducts its own nutrient analysis under the criteria for such 
analysis established in Sec. Sec.210.10 and 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.
    (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, 7 CFR part 3015 and 7 CFR part 3016, or 7 CFR part 
3019, as applicable. All costs resulting from contracts that do not meet 
the requirements of this part are unallowable nonprofit school food 
service account expenses. When the school food authority fails to 
incorporate State agency required changes to solicitation or contract 
documents, all costs resulting from the subsequent contract award are 
unallowable charges to the nonprofit school food service account. 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

[[Page 55]]

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 (including all supporting documentation) 
between any school food authority and food service management company to 
ensure compliance with all the provisions and standards set forth in 
this part before execution of the contract by either party. When the 
State agency develops a prototype contract for use by the school food 
authority that meets the provisions and standards set forth in this 
part, this annual review may be limited to changes made to that 
contract. Each State agency shall review each contract amendment between 
a school food authority and food service management company to ensure 
compliance with all the provisions and standards set forth in this part 
before execution of the amended contract by either party. The State 
agency may establish due dates for submission of the contract or 
contract amendment documents. 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 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

[[Page 56]]

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.
    (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

[[Page 57]]

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 food stamp or TANF case numbers or FDPIR case 
numbers or other FDPIR identifiers but the applications are missing the 
information specified in paragraph (1)(ii) of the definition of 
Documentation in Sec.245.2 of this chapter; 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 in a fiscal year, the State 
agency, FNS, or OIG may disregard an overpayment if the overpayment does 
not exceed $600. A State agency may establish, through State law, 
regulation or procedure, an alternate disregard threshold that does not 
exceed $600. This disregard may be made once per each management 
evaluation, review, or audit per Program within a fiscal year. 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 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]

    Editorial Note: For Federal Register citations affecting Sec.
210.19, see the List of CFR Sections Affected, which appears in the 
Finding Aids section of the printed volume and at www.fdsys.gov.

[[Page 58]]



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;
    (7) Results of the commodity preference survey and recommendations 
for commodity purchases as required under Sec.250.13(k) of this 
chapter; and
    (8) Results of the State agency's review of schools' compliance with 
the food safety inspection requirement in Sec.210.13(b) by November 15 
following each of school years 2005-2006 through 2008-2009, beginning 
November 15, 2006. The report will be based on data supplied by the 
school food authorities in accordance with Sec.210.15(a)(7).
    (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);
    (11) Records pertaining to the annual food preference survey of 
school food authorities as required by Sec.250.13(k) of this chapter; 
and
    (12) Records supplied by the school food authorities showing the 
number of food safety inspections obtained by schools for each of school 
years 2005-2006 through 2008-2009.

[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; 70 FR 34630, June 
15, 2005]



    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 this part and 7 CFR part 3016 or 7 CFR part 
3019, as applicable, which implement the applicable Office of Management 
and Budget Circulars, concerning the procurement of all goods and 
services with nonprofit school food service account funds.
    (b) Contractual responsibilities. The standards contained in this 
part and 7 CFR part 3015, 7 CFR part 3016 and 7 CFR part 3019, as 
applicable, do not relieve the State agency or school food

[[Page 59]]

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) Procedures. The State agency may elect to follow either the 
State laws, policies and procedures as authorized by Sec. Sec.
3016.36(a) and 3016.37(a) of this title, or the procurement standards 
for other governmental grantees and all governmental subgrantees in 
accordance with Sec.3016.36(b) through (i) of this title. Regardless 
of the option selected, States must ensure that all contracts include 
any clauses required by Federal statutes and executive orders and that 
the requirements of Sec.3016.60(b) and (c) of this title are followed. 
A school food authority may use its own procurement procedures which 
reflect applicable State and local laws and regulations, provided that 
procurements made with nonprofit school food service account funds 
adhere to the standards set forth in this part and Sec. Sec.3016.36(b) 
through 3016.36(i), 3016.60 and 3019.40 through 3019.48 of this title, 
as applicable, and in the applicable Office of Management and Budget 
Circulars. School food authority procedures must include a written code 
of standards of conduct meeting the minimum standards of Sec.
3016.36(b)(3) or Sec.3019.42 of this title, as applicable.
    (1) Pre-issuance review requirement. The State agency may impose a 
pre-issuance review requirement on a school food authority's proposed 
procurement. The school food authority must make available, upon request 
by the State agency, its procurement documents, including but not 
limited to solicitation documents, specifications, evaluation criteria, 
procurement procedures, proposed contracts and contract terms. School 
food authorities shall comply with State agency requests for changes to 
procurement procedures and solicitation and contract documents to ensure 
that, to the State agency's satisfaction, such procedures and documents 
reflect applicable procurement and contract requirements and the 
requirements of this part.
    (2) Prototype solicitation documents and contracts. The school food 
authority must obtain the State agency's prior written approval for any 
change made to prototype solicitation or contract documents before 
issuing the revised solicitation documents or execution of the revised 
contract.
    (3) Prohibited expenditures. No expenditure may be made from the 
nonprofit school food service account for any cost resulting from a 
procurement failing to meet the requirements of this part.
    (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.
    (e) Restrictions on the sale of milk. A school food authority 
participating in the Program, or a person approved by a school 
participating in the Program, must not directly or indirectly restrict 
the sale or marketing of fluid milk (as described in paragraph 
(m)(1)(ii) of this

[[Page 60]]

section) at any time or in any place on school premises or at any 
school-sponsored event.
    (f) Cost reimbursable contracts--(1) Required provisions. The school 
food authority must include the following provisions in all cost 
reimbursable contracts, including contracts with cost reimbursable 
provisions, and in solicitation documents prepared to obtain offers for 
such contracts:
    (i) Allowable costs will be paid from the nonprofit school food 
service account to the contractor net of all discounts, rebates and 
other applicable credits accruing to or received by the contractor or 
any assignee under the contract, to the extent those credits are 
allocable to the allowable portion of the costs billed to the school 
food authority;
    (ii)(A) The contractor must separately identify for each cost 
submitted for payment to the school food authority the amount of that 
cost that is allowable (can be paid from the nonprofit school food 
service account) and the amount that is unallowable (cannot be paid from 
the nonprofit school food service account); or
    (B) The contractor must exclude all unallowable costs from its 
billing documents and certify that only allowable costs are submitted 
for payment and records have been established that maintain the 
visibility of unallowable costs, including directly associated costs in 
a manner suitable for contract cost determination and verification;
    (iii) The contractor's determination of its allowable costs must be 
made in compliance with the applicable Departmental and Program 
regulations and Office of Management and Budget cost circulars;
    (iv) The contractor must identify the amount of each discount, 
rebate and other applicable credit on bills and invoices presented to 
the school food authority for payment and individually identify the 
amount as a discount, rebate, or in the case of other applicable 
credits, the nature of the credit. If approved by the State agency, the 
school food authority may permit the contractor to report this 
information on a less frequent basis than monthly, but no less 
frequently than annually;
    (v) The contractor must identify the method by which it will report 
discounts, rebates and other applicable credits allocable to the 
contract that are not reported prior to conclusion of the contract; and
    (vi) The contractor must maintain documentation of costs and 
discounts, rebates and other applicable credits, and must furnish such 
documentation upon request to the school food authority, the State 
agency, or the Department.
    (2) Prohibited expenditures. No expenditure may be made from the 
nonprofit school food service account for any cost resulting from a cost 
reimbursable contract that fails to include the requirements of this 
section, nor may any expenditure be made from the nonprofit school food 
service account that permits or results in the contractor receiving 
payments in excess of the contractor's actual, net allowable costs.

[53 FR 29147, Aug. 2, 1988, as amended at 64 FR 50741, Sept. 20, 1999; 
70 FR 70033, Nov. 21, 2005; 71 FR 39516, July 13, 2006; 72 FR 61491, 
Oct. 31, 2007]



Sec.210.22  Audits.

    (a) General. Unless otherwise exempt, audits at the State and school 
food authority levels shall be conducted in accordance with Office of 
Management and Budget Circular A-133 and the Department's implementing 
regulations at 7 CFR part 3052. For availability of the OMB Circular 
mentioned in this paragraph, please refer to 5 CFR 1310.3.
    (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

[[Page 61]]

requirements set forth in 7 CFR part 3015.

[53 FR 29147, Aug. 2, 1988, as amended at 71 FR 39516, July 13, 2006]



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 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.
    (d) Data collection related to school food authorities. (1) Each 
State agency must collect data related to school food authorities that 
have an agreement with the State agency to participate in the program 
for each of Federal fiscal years 2006 through 2009, including those 
school food authorities that participated only for part of the fiscal 
year. Such data shall include:
    (i) The name of each school food authority;
    (ii) The city in which each participating school food authority was 
headquartered and the name of the state;
    (iii) The amount of funds provided to the participating 
organization, i.e., the amount of federal funds reimbursed to each 
participating school food authority; and
    (iv) The type of participating organization, e.g., government 
agency, educational institution, non-profit organization/secular, non-
profit organization/faith-based, and ``other.''
    (2) On or before August 31, 2007, and each subsequent year through 
2010, State agencies must report to FNS data as specified in paragraph 
(d)(1) of this section for the prior Federal fiscal year. State agencies 
must submit this data in a format designated by FNS.

[53 FR 29147, Aug. 2, 1988, as amended at 58 FR 42489, Aug. 10, 1993; 64 
FR 50741, Sept. 20, 1999; 72 FR 24183, May 2, 2007]



                     Subpart F_Additional Provisions



Sec.210.24  Withholding payments.

    In accordance with Departmental regulations at Sec. Sec.3016.43 
and 3019.62 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, as amended at 71 FR 39516, July 13, 2006; 
72 FR 61492, Oct. 31, 2007]



Sec.210.25  Suspension, termination and grant closeout procedures.

    Whenever it is determined that a State agency has materially failed 
to

[[Page 62]]

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 7 CFR 
part 3016 concerning grant suspension, termination and closeout 
procedures. Furthermore, the State agency shall apply these provisions, 
or the parallel provisions of 7 CFR part 3019, as applicable, 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, 
and amended at 71 FR 39516, July 13, 2006]



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]



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, 
And 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

[[Page 63]]

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 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

[[Page 64]]

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]



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,

[[Page 65]]

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, 
and further redesignated at 56 FR 32948, July 17, 1991, and further 
redesignated at 64 FR 50741, Sept. 20, 1999, as amended at 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, 
and further redesignated at 56 FR 32948, July 17, 1991, and further 
redesignated at 64 FR 50741, Sept. 20, 1999]



         Sec. 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 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

[[Page 66]]

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 at the National Archives and Records 
Administration (NARA). For information on the availability of this 
material at NARA, call 202-741-6030, or go to: http://www.archives.gov/
federal--register/code--of--federal--regulations/ibr--locations.html.
    (i) The protein content (Nx6.25) 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 National Archives and Records 
Administration (NARA). For information on the availability of this 
material at NARA, call 202-741-6030, or go to: http://www.archives.gov/
federal--register/code--of--federal--regulations/ibr--locations.html.
    (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.
    (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)

[[Page 67]]

    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 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.

[[Page 68]]

    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; 69 FR 18803, Apr. 9, 2004]



Sec. 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.
    (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

[[Page 69]]

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.
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]



      Sec. 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

[[Page 70]]

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, Sec. Sec.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:
    [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.

[[Page 71]]

    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, Sec. Sec.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.
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 Withholding payments.
215.16 Suspension, termination and grant closeout procedures.
215.17 Program information.
215.18 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-

[[Page 72]]

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:
    7 CFR part 3015 means the Uniform Federal Assistance Regulations 
published by the Department to implement certain policies applicable to 
all Department programs. The applicable provisions deal with competition 
for discretionary grants and cooperative agreements, costs requiring 
prior approval, acknowledgement of Department support in publications 
and audiovisuals produced under Department programs, intergovernmental 
review of Department programs under Executive Order 12372, and certain 
miscellaneous Department requirements.
    7 CFR part 3016 means the Department's Uniform Administrative 
Requirements for Grants and Cooperative Agreements to State and Local 
Governments. 7 CFR part 3016 covers requirements for awards and 
subawards to State and local governmental organizations under Department 
programs.
    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 3019 means the Department's Uniform Administrative 
Requirements for Grants and Agreements with Institutions of Higher 
Education, Hospitals, and Other Non-Profit Organizations. 7 CFR part 
3019 covers requirements for awards and subawards to nongovernmental, 
nonprofit organizations under Department programs.
    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.)
    Act means the Child Nutrition Act of 1966.
    Adults means those persons not included under the definition of 
children.
    Applicable credits shall have the meaning established in Office of 
Management and Budget Circulars A-87, C(4) and A-122, Attachment A, 
A(5), respectively. For availability of OMB circulars referenced in this 
definition, see 5 CFR 1310.3.
    Child and Adult Care Food Program means the program authorized by 
section 17 of the National School Lunch Act, as amended.
    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 in the institution. It does not include any institution 
falling within the definition of ``School'' of this section.
    Child means
    (1) A person under 19 chronological years of age in a Child care 
institution as defined in this section;

[[Page 73]]

    (2) A person under 21 chronological years of age attending a school 
as defined in paragraphs (3) and (4) of the definition of School in this 
section;
    (3) A student of high school grade or under attending school as 
defined in paragraphs (1) and (2) of the definition of School in this 
section; or
    (4) A student who is mentally or physically disabled as determined 
by the State and who is 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 paragraphs (1) and (2) 
of the definition of School in this section.
    CND means the Child Nutrition Division of the Food and Nutrition 
Service of the Department.
    Contractor means a commercial enterprise, public or nonprofit 
private organization or individual that enters into a contract with a 
school food authority.
    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.
    Cost reimbursable contract means a contract that provides for 
payment of incurred costs to the extent prescribed in the contract, with 
or without a fixed fee.
    Department means the U.S. Department of Agriculture.
    Disclosure means reveal or use individual children's program 
eligibility information obtained through the free milk eligibility 
process 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.
    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.
    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.
    Fixed fee means an agreed upon amount that is fixed at the inception 
of the contract. In a cost reimbursable contract, the fixed fee includes 
the contractor's direct and indirect administrative costs and profit 
allocable to the contract.
    FNS means the Food and Nutrition Service of the U.S. Department of 
Agriculture.
    FNSRO means Food and Nutrition Services Regional Offices, of the 
Food and Nutrition Service of the U.S. Department of Agriculture.
    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.
    Local educational agency means a public board of education or other 
public or private nonprofit authority legally constituted within a State 
for either administrative control or direction of, or to perform a 
service function for, public or private nonprofit elementary schools or 
secondary schools in a city, county, township, school district, or other 
political subdivision of a State, or for a combination of school 
districts or counties that is recognized in a State as an administrative 
agency for its public or private nonprofit elementary schools or 
secondary schools. The term also includes any other public or private 
nonprofit institution or agency having administrative control and 
direction of a public or private nonprofit elementary school or 
secondary school, including residential child care institutions, Bureau 
of Indian Affairs schools, and educational service agencies and 
consortia of those agencies, as well as the State educational agency in 
a State or territory in which the State educational agency is the sole 
educational agency for all public or private nonprofit schools.
    Medicaid means the State medical assistance program under title XIX 
of the Social Security Act (42 U.S.C. 1396 et seq.).
    Milk means pasteurized fluid types of unflavored or flavored whole 
milk, lowfat milk, skim milk, or cultured buttermilk which meet State 
and local

[[Page 74]]

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.
    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.
    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.
    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.
    Nonprofit means, when applied to schools or institutions eligible 
for the Program, exempt from income tax under section 501(c)(3) of the 
Internal Revenue Code of 1986.
    Nonprofit milk service means milk service maintained by or on behalf 
of 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.
    Nonprofit school food service account means the restricted account 
in which all of the revenue from the nonprofit milk service maintained 
for the benefit of children is retained and used only for the operation 
or improvement of the nonprofit milk service.
    OA means the Office of Audit of the United States Department of 
Agriculture.
    OIG means the Office of the Inspector General of the Department.
    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.
    Program means the Special Milk Program for Children.
    Reimbursement means financial assistance paid or payable to 
participating schools and child care institutions for milk served to 
eligible children.
    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 intended for the care of 
children confined for 30 days or more.
    School Breakfast Program means the program authorized by section 4 
of the

[[Page 75]]

Child Nutrition Act of 1966, as amended.
    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.
    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.
    Split-session means an educational program operating for 
approximately one-half of the normal school day.
    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.
    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.
    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.).
    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 at www.fdsys.gov.



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 
described in paragraph (3) of the definition of School in Sec.215.2 or 
in child care institutions.
    (c) FNSRO shall administer the Program in any School or any Child 
care institution as defined in Sec.215.2 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, 7 CFR parts 235, 245, 15, 15a, 15b and, as 
applicable, 7 CFR part 3015, 7 CFR part 3016 and 7 CFR part 3019, and 
with FNS Instructions. 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; 71 FR 39516, 
July 13, 2006; 72 FR 63791, Nov. 13, 2007]

[[Page 76]]



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, 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

[[Page 77]]

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 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.

[[Page 78]]

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 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 79]]



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 80]]

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. Sec.
215.8 and 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 81]]

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) Unless otherwise exempt, audits at the State and school food 
authority/child care institution levels shall be conducted in accordance 
with Office of Management and Budget Circular A-133 and the Department's 
implementing regulations at 7 CFR part 3052. For availability of the OMB 
Circular mentioned in this paragraph, please refer to 5 CFR 1310.3.
    (b) 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 OIG 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 OIG. OIG shall also have the right to

[[Page 82]]

make audits of the records and operations of any school or child-care 
institution.
    (c) 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; 71 FR 
39516, July 13, 2006]



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.
    (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.

[[Page 83]]

    (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) Privacy Act notice requirements. The free milk application 
provided to households must include a Privacy Act notice/statement 
informing households of how the social security number and other 
information provided on the application will be used. Each free milk 
application must include substantially the following statement, ``The 
Richard B. Russell National School Lunch Act requires the information on 
this application. You do not have to give the information, but if you do 
not, we cannot approve your child for free milk. You must include the 
social security number of the adult household member who signs the 
application. The social security number is not required when you apply 
on behalf of a foster child or you list a Food Stamp, Temporary 
Assistance for Needy Families (TANF) Program or Food Distribution 
Program on Indian Reservations (FDPIR) case number for your child or 
other FDPIR identifier or when you indicate that the adult household 
member signing the application does not have a social security number. 
We will use your information to determine if your child is eligible for 
free milk, and for administration and enforcement of the Program.'' When 
the State agency or child care institution, as appropriate, plans to use 
or disclose children's eligibility information for non-program purposes, 
additional information, as specified in paragraph (i) of this section 
must be added to the Privacy Act notice/statement. State agencies and 
child care institutions are responsible for drafting the appropriate 
notice and ensuring that the notice complies with section 7(b) of the 
Privacy Act of 1974 (5 U.S.C. 552a note (Disclosure of Social Security 
Number)).
    (g) Disclosure of children's free milk eligibility information to 
certain programs and individuals without parental consent. The State 
agency or child care institution, as appropriate, may disclose aggregate 
information about children eligible for free milk to any party without 
parental notification and consent when children cannot be identified 
through release of the aggregate data or by means of deduction. 
Additionally, the State agency or child care institution may disclose 
information that identifies children eligible for free milk to the 
programs and the individuals specified in this paragraph (g) without 
parent/guardian consent. The State agency or child care institution that 
makes the free milk eligibility determination is responsible for 
deciding whether to disclose program eligibility information.
    (1) Persons authorized to receive eligibility information. Only 
persons directly connected with the administration or enforcement of a 
program or activity listed in paragraphs (g)(2) or (g)(3) of this 
section may have access to children's free milk eligibility information, 
without parental consent. Persons considered directly connected with 
administration or enforcement of a program or activity listed in 
paragraphs (g)(2) or (g)(3) of this section are Federal, State, or local 
program operators responsible for the ongoing operation of the program 
or activity or persons responsible for program compliance. Program 
operators may include persons responsible for carrying out program 
requirements and monitoring, reviewing, auditing, or investigating the 
program. Program operators may include contractors, to the extent those 
persons have a need to know the information for program administration 
or enforcement. Contractors may include evaluators, auditors, and others 
with whom Federal or State agencies and program operators contract with 
to assist in the administration or enforcement of their program on their 
behalf.
    (2) Disclosure of children's names and free milk eligibility status. 
The State agency or child care institution, as appropriate, may 
disclose, without parental consent, only children's names and

[[Page 84]]

eligibility status (whether they are eligible for free milk) to persons 
directly connected with the administration or enforcement of:
    (i) A Federal education program;
    (ii) A State health program or State education program administered 
by the State or local education agency;
    (iii) A Federal, State, or local means-tested nutrition program with 
eligibility standards comparable to the National School Lunch Program 
(i.e., food assistance programs for households with incomes at or below 
185 percent of the Federal poverty level); or
    (iv) A third party contractor assisting in verification of 
eligibility efforts by contacting households who fail to respond to 
requests for verification of their eligibility.
    (3) Disclosure of all eligibility information. In addition to 
children's names and eligibility status, the State agency or child care 
institution, as appropriate, may disclose, without parental consent, all 
eligibility information obtained through the free milk eligibility 
process (including all information on the application or obtained 
through direct certification) to:
    (i) Persons directly connected with the administration or 
enforcement of programs authorized under the Richard B. Russell National 
School Lunch Act or the Child Nutrition Act of 1966. This means that all 
eligibility information obtained for the Special Milk Program may be 
disclosed to persons directly connected with administering or enforcing 
regulations under the National School Lunch Program, School Breakfast 
Program, Child and Adult Care Food Program, Summer Food Service Program 
and the Special Supplemental Nutrition Program for Women, Infants and 
Children (WIC) (Parts 210, 220, 226, 225, and 246, respectively, of this 
chapter);
    (ii) The Comptroller General of the United States for purposes of 
audit and examination; and
    (iii) Federal, State, and local law enforcement officials for the 
purpose of investigating any alleged violation of the programs listed in 
paragraphs (g)(2) and (g)(3) of this section.
    (4) Use of free milk eligibility information by programs other than 
Medicaid or the State Children's Health Insurance Program (SCHIP). State 
agencies and child care institutions may use children's free milk 
eligibility information for administering or enforcing the Special Milk 
Program. Additionally, any other Federal, State, or local agency charged 
with administering or enforcing the Special Milk Program may use the 
information for that purpose. Individuals and programs to which 
children's free milk eligibility information has been disclosed under 
this section may use the information only in the administration or 
enforcement of the receiving program. No further disclosure of the 
information may be made.
    (h) Disclosure of children's free milk eligibility information to 
Medicaid and/or SCHIP, unless parents decline. Children's free milk 
eligibility information only may 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 and the other provisions described in paragraph (h)(1) of this 
section are met. 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. Persons directly connected to the administration of 
Medicaid and SCHIP are 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 for Medicaid or SCHIP.
    (1) The State agency must ensure that:
    (i) The child care institution and health insurance program 
officials have a written agreement that requires the health insurance 
program agency to use the eligibility information to seek to enroll 
children in Medicaid and SCHIP; and
    (ii) Parents/guardians are notified that their eligibility 
information may be disclosed to Medicaid or SCHIP and given an 
opportunity to decline to have

[[Page 85]]

their children's eligibility information disclosed, prior to any 
disclosure.
    (2) Use of children's free milk eligibility information by Medicaid/
SCHIP. Medicaid and SCHIP agencies and health insurance program 
operators receiving children's free milk eligibility information must 
use the information to identify eligible children and enroll them 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. No further disclosure of the 
information may be made. Medicaid and SCHIP agencies and health 
insurance program operators also may verify children's eligibility in a 
program under the Child Nutrition Act of 1966 or the Richard B. Russell 
National School Lunch Act.
    (i) Notifying households of potential uses and disclosures of 
children's free milk eligibility information. Households must be 
informed that the information they provide on the free milk application 
will be used to determine eligibility for free milk and that their 
eligibility information may be disclosed to other programs.
    (1) For disclosures to programs, other than Medicaid or SCHIP, that 
are permitted access to children's eligibility information without 
parent/guardian consent, the State agency or child care institution, as 
appropriate, must notify parents/guardians at the time of application 
that their children's free milk eligibility information may be 
disclosed. The State agency or child care institution, as appropriate, 
must add substantially the following statement to the Privacy Act 
notice/statement required under paragraph (f) of this section, ``We may 
share your eligibility information with education, health, and nutrition 
programs to help them evaluate, fund, or determine benefits for their 
programs; auditors for program reviews; and law enforcement officials to 
help them look into violations of program rules.'' For children 
determined eligible for free milk 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 process.
    (2) For 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 and notifies the State agency or child care 
institution, as appropriate, by a date specified by the State agency or 
child care institution, as appropriate. Only the parent or guardian who 
is a member of the household or family for purposes of the free milk 
application may decline the disclosure of eligibility information to 
Medicaid or SCHIP. 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 eligible children 
and seek to enroll them in Medicaid or SCHIP, 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 if they do not want their 
information disclosed. The State agency or child care institution, as 
appropriate, must add substantially the following statement to the 
Privacy Act notice/statement required under paragraph (f) of this 
section, ``We may share your information with Medicaid or the State 
Children's Health Insurance Program, unless you tell us not to. The 
information, if disclosed, will be used to identify eligible children 
and seek to enroll them in Medicaid or SCHIP.'' For children determined 
eligible for free milk through direct certification, the notice of 
potential disclosure and opportunity to decline the disclosure may be 
included in the document informing parents/guardians of their children's 
eligibility for free milk through direct certification.
    (j) Other disclosures. State agencies and child care institutions 
that plan to use or disclose identifying information

[[Page 86]]

about children eligible for free milk to programs or individuals not 
specified in this section must obtain written consent from children's 
parents or guardians prior to the use or disclosure.
    (1) The consent must identify the information that will be shared 
and how the information will be used.
    (2) There must be a statement informing parents and guardians that 
failing to sign the consent will not affect the child's eligibility for 
free milk and that the individuals or programs receiving the information 
will not share the information with any other entity or program.
    (3) Parents/guardians must be permitted to limit the consent only to 
those programs with which they wish to share information.
    (4) The consent statement must be signed and dated by the child's 
parent or guardian who is a member of the household for purposes of the 
free milk application.
    (k) Agreements with programs/individuals receiving children's free 
milk eligibility information. Agreements or Memoranda of Understanding 
(MOU) are recommended or required as follows:
    (1) The State agency or child care institution, as appropriate, 
should have a written agreement or MOU with programs or individuals 
receiving eligibility information, prior to disclosing children's free 
milk eligibility information. The agreement or MOU should include 
information similar to that required for disclosures to Medicaid and 
SCHIP specified in paragraph (k)(2) of this section.
    (2) For disclosures to Medicaid or SCHIP, 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 to those 
agencies. 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 be used to seek to enroll 
children in Medicaid or SCHIP;
    (iv) Require that the Medicaid or SCHIP agency describe how they 
will use the information obtained;
    (v) Describe how the information will be protected from unauthorized 
uses and disclosures;
    (vi) Describe the penalties for unauthorized disclosure; and
    (vii) Be signed by both the Medicaid or SCHIP program or agency and 
the State agency or child care institution, as appropriate.
    (l) Penalties for unauthorized disclosure or misuse of children's 
free milk eligibility information. In accordance with section 9(b)(6)(C) 
of the Richard B. Russell National School Lunch Act (42 U.S.C. 
1758(b)(6)(C)), 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 section will be fined 
not more than $1,000 or imprisoned for up to 1 year, or both.

(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; 72 FR 10892, Mar. 12, 2007]



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

[[Page 87]]

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) General. State agencies and school food authorities shall comply 
with the requirements of this part and parts 3015, 3016 and 3019 of this 
title, as applicable, which implement the applicable Office of 
Management and Budget Circulars, concerning the procurement of all goods 
and services with nonprofit school food service account funds.
    (b) Contractual responsibilities. The standards contained in this 
part and 7 CFR part 3015, 7 CFR part 3016 and 7 CFR part 3019, as 
applicable, 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) Procedures. The State agency may elect to follow either the 
State laws, policies and procedures as authorized by Sec. Sec.
3016.36(a) and 3016.37(a) of this title, or the procurement standards 
for other governmental grantees and all governmental subgrantees in 
accordance with Sec.3016.36(b) through (i) of this title. Regardless 
of the option selected, States must ensure that all contracts include 
any clauses required by Federal statutes and executive orders and that 
the requirements of Sec.3016.60(b) and (c) of this title are followed. 
The school food authority or child care institution may use its own 
procurement procedures which reflect applicable State or local laws and 
regulations, provided that procurements made with nonprofit school food 
service account funds adhere to the standards set forth in this part and 
Sec. Sec.3016.36(b) through 3016.36(i), 3016.60 and Sec. Sec.3019.40 
through 3019.48 of this title, as applicable, and in the applicable 
Office of Management and Budget Circulars. School food authority 
procedures must include a written code of standards of conduct meeting 
the minimum standards of Sec.3016.36(b)(3) or Sec.3019.42 of this 
title, as applicable.
    (1) Pre-issuance review requirement. The State agency may impose a 
pre-issuance review requirement on a school food authority's proposed 
procurement. The school food authority must make available, upon request 
of the State agency, its procurement documents, including but not 
limited to solicitation documents, specifications, evaluation criteria, 
procurement procedures, proposed contracts and contract terms. School 
food authorities shall comply with State agency requests for changes to 
procurement procedures and solicitation and contract documents to ensure 
that, to the State agency's satisfaction, such procedures and documents 
reflect applicable procurement and contract requirements and the 
requirements of this part.
    (2) Prototype solicitation documents and contracts. The school food 
authority must obtain the State agency's prior written approval for any 
change made to prototype solicitation or contract documents before 
issuing the revised solicitation documents or execution of the revised 
contract.
    (3) Prohibited expenditures. No expenditure may be made from the 
nonprofit school food service account for any cost resulting from a 
procurement failing to meet the requirements of this part.
    (d) Cost reimbursable contracts--(1) Required provisions. The school 
food authority must include the following provisions in all cost 
reimbursable contracts, including contracts with cost reimbursable 
provisions, and in solicitation documents prepared to obtain offers for 
such contracts:
    (i) Allowable costs will be paid from the nonprofit school food 
service account to the contractor net of all discounts, rebates and 
other applicable credits accruing to or received by the contractor or 
any assignee under the

[[Page 88]]

contract, to the extent those credits are allocable to the allowable 
portion of the costs billed to the school food authority;
    (ii)(A) The contractor must separately identify for each cost 
submitted for payment to the school food authority the amount of that 
cost that is allowable (can be paid from the nonprofit school food 
service account) and the amount that is unallowable (cannot be paid from 
the nonprofit school food service account), or
    (B) The contractor must exclude all unallowable costs from its 
billing documents and certify that only allowable costs are submitted 
for payment and records have been established that maintain the 
visibility of unallowable costs, including directly associated costs in 
a manner suitable for contract cost determination and verification;
    (iii) The contractor's determination of its allowable costs must be 
made in compliance with the applicable Departmental and Program 
regulations and Office of Management and Budget cost circulars;
    (iv) The contractor must identify the amount of each discount, 
rebate and other applicable credit on bills and invoices presented to 
the school food authority for payment and identify the amount as a 
discount, rebate, or in the case of other applicable credits, the nature 
of the credit. If approved by the State agency, the school food 
authority may permit the contractor to report this information on a less 
frequent basis than monthly, but no less frequently than annually;
    (v) The contractor must identify the method by which it will report 
discounts, rebates and other applicable credits allocable to the 
contract that are not reported prior to conclusion of the contract; and
    (vi) The contractor must maintain documentation of costs and 
discounts, rebates and other applicable credits, and must furnish such 
documentation upon request to the school food authority, the State 
agency, or the Department.
    (2) Prohibited expenditures. No expenditure may be made from the 
nonprofit school food service account for any cost resulting from a cost 
reimbursable contract that fails to include the requirements of this 
section, nor may any expenditure be made from the nonprofit school food 
service account that permits or results in the contractor receiving 
payments in excess of the contractor's actual, net allowable costs.

(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, as amended at 71 FR 39516, July 
13, 2006; 72 FR 61492, Oct. 31, 2007]



Sec.215.15  Withholding payments.

    In accordance with Departmental regulations at Sec. Sec.3016.43 
and 3019.62 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 actions will be taken, or until the State agency terminates 
the grant in accordance with Sec.215.16. Subsequent to the State 
agency's acceptance of the corrective actions, payments will be released 
for any milk served in accordance with the provisions of this part 
during the period the payments were withheld.

[72 FR 61493, Oct. 31, 2007]



Sec.215.16  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 7 CFR 
part 3016, concerning grant suspension, termination and closeout 
procedures. Furthermore, the State agency, or FNSRO where applicable, 
shall apply these provisions, or the parallel provisions of 7

[[Page 89]]

CFR part 3019, as applicable, to suspension or termination of the 
Program in School Food Authorities.

[Amdt. 30, 49 FR 18987, May 4, 1984, as amended at 71 FR 39517, July 13, 
2006. Redesignated at 72 FR 61493, Oct. 31, 2007]



Sec.215.17  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. Redesignated at 72 FR 
61493, Oct. 31, 2007]



Sec.215.18  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. Redesignated at 72 FR 61493, Oct. 31, 2007]



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 Nutrition standards and menu planning approaches for breakfasts.
220.9 Reimbursement payments.
220.10 Effective date for reimbursement.

[[Page 90]]

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 Withholding payments.
220.19 Suspension, termination and grant closeout procedures.
220.20 Free and reduced price breakfasts.
220.21 Program information.
220.22 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:
    7 CFR part 3015 means the Uniform Federal Assistance Regulations 
published by the Department to implement certain policies applicable to 
all Department programs. The applicable provisions deal with competition 
for discretionary grants and cooperative agreements, costs requiring 
prior approval, acknowledgement of Department support in publications 
and audiovisuals produced under Department programs, intergovernmental 
review of Department programs under Executive Order 12372, and certain 
miscellaneous Department requirements.
    7 CFR part 3016 means the Department's Uniform Administrative 
Requirements for Grants and Cooperative Agreements to State and Local 
Governments. 7 CFR part 3016 covers requirements for awards and 
subawards to State and local governmental organizations under Department 
programs.
    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 3019 means the Department's Uniform Administrative 
Requirements for Grants and Agreements with Institutions of Higher 
Education, Hospitals, and Other Non-Profit Organizations. 7 CFR part 
3019 covers requirements for awards and subawards to nongovernmental, 
nonprofit organizations under Department programs.
    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.)
    Act means the Child Nutrition Act of 1966, as amended.
    Applicable credits shall have the meaning established in Office of 
Management and Budget Circulars A-87, C(4) and A-122, Attachment A, 
A(5), respectively. For availability of OMB circulars referenced in this 
definition see 5 CFR 1310.3.
    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.
    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 
paragraph (3) of the definition of School in this section.
    Competitive foods means any foods sold in competition with the 
School Breakfast Program to children in food

[[Page 91]]

service areas during the breakfast period.
    CND means the Child Nutrition Division of the Food and Nutrition 
Service of the Department.
    Contractor means a commercial enterprise, public or nonprofit 
private organization or individual that enters into a contract with a 
school food authority.
    Cost reimbursable contract means a contract that provides for 
payment of incurred costs to the extent prescribed in the contract, with 
or without a fixed fee.
    Department means the U.S. Department of Agriculture.
    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.
    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.
    Fixed fee means an agreed upon amount that is fixed at the inception 
of the contract. In a cost reimbursable contract, the fixed fee includes 
the contractor's direct and indirect administrative costs and profit 
allocable to the contract.
    FNS means the Food and Nutrition Service of the Department.
    FNSRO means the appropriate Food and Nutrition Service Regional 
Office of the Food and Nutrition Service of the Department.
    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 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.
    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.
    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.
    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.
    Local educational agency means a public board of education or other 
public or private nonprofit authority legally constituted within a State 
for either administrative control or direction of, or to perform a 
service function for, public or private nonprofit elementary schools or 
secondary schools in a city, county, township, school district, or other 
political subdivision of a State, or for a combination of school 
districts or counties that is recognized in a State as an administrative 
agency for its public or private nonprofit elementary schools or 
secondary schools. The term also includes any other public or private 
nonprofit institution or agency having administrative control and 
direction of a public or private nonprofit elementary school or 
secondary school, including residential child care institutions, Bureau 
of Indian Affairs schools, and educational service agencies and 
consortia of those agencies, as well as the State educational agency in 
a State or territory in which the State educational agency is the sole 
educational agency for all public or private nonprofit schools.
    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

[[Page 92]]

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 the definition of Foods of minimal nutritional value in this 
sectionwhich 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.
    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.
    National School Lunch Program means the Program authorized by the 
National School Lunch Act.
    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.
    Nonprofit means, when applied to schools or institutions eligible 
for the Program, exempt from income tax under section 501(c)(3) of the 
Internal Revenue Code of 1986.
    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.
    Nonprofit school food service account means the restricted account 
in which all of the revenue from all food service operations conducted 
by the school food authority principally for the benefit of school 
children is retained and used only for the operation or improvement of 
the nonprofit school food service.
    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.
    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).
    OA means the Office of Audit of the Department.
    OI means the Office of Investigation of the Department.
    OIG means the Office of the Inspector General of the Department.
    Program means the School Breakfast Program.
    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.
    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

[[Page 93]]

agency, or FNSRO where applicable. The term ``reimbursement'' also 
includes financial assistance made available through advances to School 
Food Authorities.
    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: (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.
    School Breakfast Program means the program authorized by section 4 
of the Child Nutrition Act of 1966.
    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).
    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.
    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.
    Secretary means the Secretary of Agriculture.
    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.
    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 
described in paragraph (3) of the definition of School in this section.
    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.
    Yogurt means commercially prepared coagulated milk products obtained 
by the fermentation of specific bacteria,

[[Page 94]]

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 at www.fdsys.gov.



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 described in paragraphs (1) and (2) of the 
definition of School in Sec.220.2 shall be in the State educational 
agency, except that FNSRO shall administer the Program with respect to 
nonprofit private schools and adding in their place the words ``as 
described in paragraph (1) of the definition of School in Sec.220.2 in 
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 described in paragraph (3) of the definition of 
School in Sec.220.2, 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 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, 7 CFR parts 235, 245, 15, 15a, 15b and, as 
applicable, 7 CFR part 3015, 7 CFR part 3016 and 7 CFR part 3019, and 
with FNS Instructions. 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; 71 FR 39517, July 13, 2006; 72 FR 63792, Nov. 13, 2007]



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.

[[Page 95]]

    (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.
    (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

[[Page 96]]

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.
    (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.
    (2) Schools shall obtain a minimum of two food safety inspections 
per school year conducted by a State or local governmental agency 
responsible for food safety inspections. Schools participating in more 
than one child nutrition program shall only be required to obtain a 
minimum of two food safety inspections per school year if the food 
preparation and service for all meal programs take place at the same 
facility. Schools shall post in a publicly visible location a report of 
the most recent inspection conducted, and provide a copy of the 
inspection report to a member of the public upon request.
    (3) A school food authority must implement a food safety program 
meeting the requirements of Sec.210.13(c) and Sec.210.15(b)(5) of 
this chapter at each of the food preparation and service facilities 
under its jurisdiction serving breakfasts.
    (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)(1) 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 breakfasts 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:
    (i) Adhere to the procurement standards specified in Sec.220.16 
when contracting with the food service management company;
    (ii) Ensure that the food service operation is in conformance with 
the school food authority's agreement under the Program;
    (iii) Monitor the food service operation through periodic on-site 
visits;
    (iv) Retain control of the quality, extent, and general nature of 
its food service, and the prices to be charged the children for meals;
    (v) Retain signature authority on the State agency-school food 
authority agreement, free and reduced price policy statement and claims;
    (vi) Ensure that all federally donated foods received by the school 
food authority and made available to the food

[[Page 97]]

service management company accrue only to the benefit of the school food 
authority's nonprofit school food service and are fully utilized 
therein;
    (vii) 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;
    (viii) Obtain written approval of invitations for bids and requests 
for proposals before their issuance when required by the State agency. 
The school food authority must incorporate all State agency required 
changes to its solicitation documents before issuing those documents; 
and
    (ix) Ensure that the State agency has reviewed and approved the 
contract terms and the school food authority has incorporated all State 
agency required changes into the contract or amendment before any 
contract or amendment to an existing food service management company 
contract is executed. Any changes made by the school food authority or a 
food service management company to a State agency pre-approved prototype 
contract or State agency approved contract term must be approved in 
writing by the State agency before the contract is executed. When 
requested, the school food authority must submit all procurement 
documents, including responses submitted by potential contractors, to 
the State agency, by the due date established by the State agency.
    (2) In addition to adhering to the procurement standards under this 
part, school food authorities contracting with food service management 
companies shall ensure that:
    (i) The invitation to bid or request for proposal contains a 21-day 
cycle menu developed in accordance with the provisions of Sec.220.8, 
to be used as a standard for the purpose of basing bids or estimating 
average cost per meal. A school food authority with no capability to 
prepare a cycle menu may, with State agency approval, require that each 
food service management company include a 21-day cycle menu, developed 
in accordance with the provisions of Sec.220.8, with its bid or 
proposal. 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; and
    (ii) 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.220.16.
    (3) 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 requirements:
    (i) 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 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 Government Accountability Office at any 
reasonable time and place. 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);
    (ii) 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

[[Page 98]]

this health certification for the duration of the contract; and
    (iii) 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.220.8, 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.
    (4) The contract between a school food authority and food service 
management company shall be of a duration of no longer than 1 year and 
options for the yearly renewal of the contract shall not exceed 4 
additional years. All contracts shall include a termination clause 
whereby either party may cancel for cause with 60-day notification.
    (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;
    (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, and comply with the 
food safety requirements in paragraph (a)(2) and paragraph (a)(3) of 
this section;
    (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;

[[Page 99]]

    (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 at www.fdsys.gov.



Sec.220.8  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:
    (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

[[Page 100]]

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:
    [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.

[[Page 101]]

    (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:
[GRAPHIC] [TIFF OMITTED] TR09MY00.010

    (d) Exceptions and variations allowed in reimbursable breakfasts--
(1) Exceptions for disability reasons. Schools must make substitutions 
in breakfasts for students who are considered to have a disability under 
7 CFR part 15b.3 and whose disability restricts their diet. 
Substitutions must be made on a case by case basis only when supported 
by a written statement of the need for substitutions that includes 
recommended alternate foods, unless otherwise exempted by FNS. Such 
statement must be signed by a licensed physician.
    (2) Exceptions for non-disability reasons. Schools may make 
substitutions for students without disabilities who cannot consume the 
breakfast because of medical or other special dietary needs. 
Substitutions must be made on a case by case basis only when supported 
by a written statement of the need for substitutions that includes 
recommended alternate foods, unless otherwise exempted by FNS. Except

[[Page 102]]

with respect to substitutions for fluid milk, such statement must be 
signed by a recognized medical authority.
    (i) Milk substitutions for non-disability reasons. Schools may make 
substitutions for fluid milk for non-disabled students who cannot 
consume fluid milk due to medical or special dietary needs. A school 
that selects this option may offer the nondairy beverage(s) of its 
choice, provided the beverage(s) meet the nutritional standards 
established in paragraph (i)(3) of this section. Expenses incurred in 
providing substitutions for fluid milk that exceed program 
reimbursements must be paid by the school food authority.
    (ii) Requisites for milk substitutions. (A) A school food authority 
must inform the State agency if any of its schools choose to offer fluid 
milk substitutes other than for students with disabilities; and
    (B) A medical authority or the student's parent or legal guardian 
must submit a written request for a fluid milk substitute, identifying 
the medical or other special dietary need that restricts the student's 
diet.
    (iii) Substitution approval. The approval for fluid milk 
substitution must remain in effect until the medical authority or the 
student's parent or legal guardian revokes such request in writing, or 
until such time as the school changes its substitution policy for non-
disabled students.
    (3) 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.
    (4) 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 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.

[[Page 103]]

    (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, 2009, 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 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

[[Page 104]]

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 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.

[[Page 105]]

    (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:

[[Page 106]]

[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 107]]

[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 108]]

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 the definition 
of Foods of minimal nutritional value in Sec.220.2, in Sec.220.12 
and in appendix B of 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. Sec.210.18 and 
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

[[Page 109]]

to monitor the alternate approach, a 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, 2009, 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.
    (3) Milk substitutes. If a school chooses to offer one or more 
substitutes for fluid milk for non-disabled students with medical or 
special dietary needs, the nondairy beverage(s) must provide the 
nutrients listed in the following table. Milk substitutes must be 
fortified in accordance with fortification guidelines issued by the Food 
and Drug Administration. A school need only offer the nondairy 
beverage(s) that it has identified as allowable fluid milk substitutes 
according to this paragraph (i)(3).

------------------------------------------------------------------------
                 Nutrient                             Per cup
------------------------------------------------------------------------
Calcium..................................  276 mg.
Protein..................................  8 g.
Vitamin A................................  500 IU.
Vitamin D................................  100 IU.
Magnesium................................  24 mg.
Phosphorus...............................  222 mg.
Potassium................................  349 mg.
Riboflavin...............................  0.44 mg.
Vitamin B-12.............................  1.1 mcg.
------------------------------------------------------------------------

    (j) What are the requirements for the infant breakfast pattern?--(1) 
Feeding breakfasts to infants. Breakfasts served to infants ages birth 
through 11 months must meet the requirements described in paragraph 
(j)(4) of this section. Foods included in the breakfast must be of a 
texture and a consistency that are appropriate for the age of the infant 
being served. The foods must be served during a span of time consistent 
with the infant's eating habits. For those infants whose dietary needs 
are more individualized, exceptions to the meal pattern must be made in 
accordance with the requirements found in paragraph (d)(1) of this 
section.
    (2) Breastmilk and iron-fortified formula. Either breastmilk or 
iron-fortified infant formula, or portions of both, must be served for 
the entire first year. Meals containing breastmilk and meals containing 
iron-fortified infant formula supplied by the school are eligible for 
reimbursement. However, infant formula provided by a parent (or 
guardian) and breastmilk fed directly by the infant's mother, during a 
visit to the school, contribute to a reimbursable breakfast only when 
the school supplies at least one component of the infant's meal.
    (3) Solid foods. For infants ages 4 through 7 months, solid foods of 
an appropriate texture and consistency are required only when the infant 
is developmentally ready to accept them. The school should consult with 
the infant's parent (or guardian) 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 the infant's health and 
nutritional well-being.
    (4) Infant meal pattern. Infant breakfasts must have, at a minimum, 
each of the food components indicated, in the

[[Page 110]]

amount that is appropriate for the infant's age. For some breastfed 
infants who regularly consume less than the minimum amount of breastmilk 
per feeding, a serving of less than the minimum amount of breastmilk may 
be offered. In these situations, additional breastmilk must be offered 
if the infant is still hungry. Breakfasts may include portions of 
breastmilk and iron-fortified infant formula as long as the total number 
of ounces meets, or exceeds, the minimum amount required of this food 
component. Similarly, to meet the component requirement for vegetables 
and fruit, portions of both may be served.
    (i) Birth through 3 months. 4 to 6 fluid ounces of breastmilk or 
iron-fortified infant formula--only breastmilk or iron-fortified formula 
is required to meet the infant's nutritional needs.
    (ii) 4 through 7 months. Breastmilk or iron-fortified formula is 
required. Some infants may be developmentally ready for solid foods of 
an appropriate texture and consistency. Breakfasts are reimbursable when 
schools provide all of the components in the meal pattern that the 
infant is developmentally ready to accept.
    (A) 4 to 8 fluid ounces of breastmilk or iron-fortified infant 
formula; and
    (B) 0 to 3 tablespoons of iron-fortified dry infant cereal.
    (iii) 8 through 11 months. Breastmilk or iron-fortified formula and 
solid foods of an appropriate texture and consistency are required.
    (A) 6 to 8 fluid ounces of breastmilk or iron-fortified infant 
formula; and
    (B) 2 to 4 tablespoons of iron-fortified dry infant cereal; and
    (C) 1 to 4 tablespoons of fruit or vegetable.
    (5) Infant meal pattern table. The minimum amounts of food 
components to serve to infants, as described in paragraph (j)(4) of this 
section, are:

                      Breakfast Pattern for Infants
------------------------------------------------------------------------
                                                         8 through 11
     Birth through 3 months       4 through 7 months        months
------------------------------------------------------------------------
4-6 fluid ounces of formula \1\   4-8 fluid ounces    6-8 fluid ounces
 or breastmilk 2,3.                of formula \1\ or   of formula \1\ or
                                   breastmilk 2,3;     breastmilk 2,3;
                                   and.                and
                                  0-3 tablespoons of  2-4 tablespoons of
                                   infant cereal 1,4.  infant cereal
                                                       \1\; and
                                                      1-4 tablespoons of
                                                       fruit or
                                                       vegetable or
                                                       both.
------------------------------------------------------------------------
\1\ Infant formula and dry infant cereal must be iron-fortified.
\2\ Breastmilk or formula, or portions of both, may be served; however,
  it is recommended that breastmilk 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 breastmilk per feeding, a serving of less than the
  minimum amount of breastmilk may be offered, with additional
  breastmilk offered if the infant is still hungry.
\4\ A serving of this component is required only when the infant is
  developmentally ready to accept it.

    (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

[[Page 111]]

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; 67 
FR 36785, May 28, 2002; 69 FR 70874, Dec. 8, 2004; 72 FR 63792, Nov. 13, 
2007; 73 FR 52907, Sept. 12, 2008]



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 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 schools not in severe need, and schools in severe need 
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) The State agency, or FNSRO where applicable, shall determine 
whether a school is in severe need based on the following eligibility 
criteria:
    (1) The school is participating in or desiring to initiate a 
breakfast program; and
    (2) At least 40 percent of the lunches served to students at the 
school in the second preceding school year were served free or at a 
reduced price. Schools that did not serve lunches in the second 
preceding year and that would like to receive reimbursement at the 
severe need rate may apply to their administering State agency. The 
administering State agency shall approve or deny such requests in 
accordance with guidance, issued by the Secretary, that determines that 
the second preceding school year requirement would otherwise have been 
met.

(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; 70 FR 66249, Nov. 2, 2005]



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 112]]

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 113]]

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 the definition of Foods of minimal 
nutritional value in Sec.220.2 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 the definition of Foods of minimal 
nutritional value in Sec.220.2 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 the definition of Foods of 
minimal nutritional value in Sec.220.2, 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 meeting the definition 
of Foods of minimal nutritional value in Sec.220.2. 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 
meeting the definition of Foods of minimal nutritional value in Sec.
220.2, 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

[[Page 114]]

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.

(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; 72 FR 63792, Nov. 13, 2007]



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.
    (3) For each of school years 2005-2006 through 2008-2009, each State 
agency shall monitor school food authority compliance with the food 
safety inspection requirement in Sec.220.7(a)(2) and submit an annual 
report to FNS documenting school compliance based on data supplied by 
the school food authorities. The report must be filed by November 15 
following each of school years 2005-2006 through 2008-2009, beginning 
November 15, 2006. The State agency shall keep the records supplied by 
the school food authorities showing the number of food safety 
inspections obtained by schools for each of school years 2005-2006 
through 2008-2009.
    (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

[[Page 115]]

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 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 7 CFR part 
3015, and 7 CFR part 3016 or 7 CFR part 3019, as applicable. 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.
    (l) Data collection related to school food authorities. (1) Each 
State agency must collect data related to school food authorities that 
have an agreement with the State agency to participate in the program 
for each of Federal fiscal years 2006 through 2009, including those

[[Page 116]]

school food authorities that participated only for part of the fiscal 
year. Such data shall include:
    (i) The name of each school food authority;
    (ii) The city in which each participating school food authority was 
headquartered and the name of the state;
    (iii) The amount of funds provided to the participating 
organization, i.e., the amount of federal funds reimbursed to each 
participating school food authority; and
    (iv) The type of participating organization, e.g., government 
agency, educational institution, non-profit organization/secular, non-
profit organization/faith-based, and ``other.''
    (2) On or before August 31, 2007, and each subsequent year through 
2010, State agencies must report to FNS data as specified in paragraph 
(l)(1) of this section for the prior Federal fiscal year. State agencies 
must submit this data in a format designated by FNS.

(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 at www.fdsys.gov.



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 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

[[Page 117]]

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) Unless otherwise exempt, audits at the State and institution 
levels shall be conducted in accordance with Office of Management and 
Budget Circular A-133 and the Department's implementing regulations at 7 
CFR part 3052. For availability of the OMB Circular mentioned in this 
paragraph, please refer to 5 CFR 1310.3.
    (b) 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 covered by this part 
and shall provide OIG 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 OIG. OIG shall also have the right 
to make audits of the records and operations of any school.
    (c) In conducting management evaluations, reviews, or audits in a 
fiscal year, the State agency, FNS, or OIG may disregard an overpayment 
if the overpayment does not exceed $600. A State agency may establish, 
through State law, regulation or procedure, an alternate disregard 
threshold that does not exceed $600. This disregard may be made once per 
each management evaluation, review, or audit per Program within a fiscal 
year. 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; 71 FR 30563, May 30, 2006; 71 FR 
39517, July 13, 2006]



Sec.220.16  Procurement standards.

    (a) General. State agencies and school food authorities shall comply 
with the requirements of this part and parts 3015, 3016 and 3019 of this 
title, as applicable, which implement the applicable Office of 
Management and Budget Circulars, concerning the procurement of all goods 
and services with nonprofit school food service account funds.
    (b) Contractual responsibilities. The standards contained in 7 CFR 
part 3016 or 7 CFR part 3019, as applicable, 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) Procedures. The State agency may elect to follow either the 
State laws, policies and procedures as authorized by Sec. Sec.
3016.36(a) and 3016.37(a) of this title, or the procurement standards 
for other governmental grantees and all governmental subgrantees in 
accordance with Sec.3016.36(b) through (i) of this

[[Page 118]]

title. Regardless of the option selected, States must ensure that all 
contracts include any clauses required by Federal statutes and executive 
orders and that the requirements of Sec.3016.60(b) and (c) of this 
title are followed. The school food authority may use its own 
procurement procedures which reflect applicable State and local laws and 
regulations, provided that procurements made with nonprofit school food 
service account funds adhere to the standards set forth in this part and 
Sec. Sec.3016.36(b) through 3016.36(i), 3016.60 and Sec. Sec.3019.40 
through 3019.48 of this title, as applicable, and the applicable Office 
of Management and Budget Circulars. School food authority procedures 
must include a written code of standards of conduct meeting the minimum 
standards of Sec.3016.36(b)(3) or Sec.3019.42 of this title, as 
applicable.
    (1) Pre-issuance review requirement. The State agency may impose a 
pre-issuance review requirement on a school food authority's proposed 
procurement. The school food authority must make available, upon request 
of the State agency, its procurement documents, including but not 
limited to solicitation documents, specifications, evaluation criteria, 
procurement procedures, proposed contracts and contract terms. School 
food authorities shall comply with State agency requests for changes to 
procurement procedures and solicitation and contract documents to ensure 
that, to the State agency's satisfaction, such procedures and documents 
reflect applicable procurement and contract requirements and the 
requirements of this part.
    (2) Prototype solicitation documents and contracts. The school food 
authority must obtain the State agency's prior written approval for any 
change made to prototype solicitation or contract documents before 
issuing the revised solicitation documents or execution of the revised 
contract.
    (3) Prohibited expenditures. No expenditure may be made from the 
nonprofit school food service account for any cost resulting from a 
procurement failing to meet the requirements of this part.
    (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 
school breakfast program under this part.
    (e) Cost reimbursable contracts--(1) Required provisions. The school 
food authority must include the following provisions in all cost 
reimbursable contracts, including contracts with cost reimbursable 
provisions, and in solicitation documents prepared to obtain offers for 
such contracts:
    (i) Allowable costs will be paid from the nonprofit school food 
service account to the contractor net of all discounts, rebates and 
other applicable credits accruing to or received by the contractor or 
any assignee under the contract, to the extent those credits are 
allocable to the allowable portion of the costs billed to the school 
food authority;
    (ii)(A) The contractor must separately identify for each cost 
submitted for payment to the school food authority the amount of that 
cost that is allowable (can be paid from the nonprofit school food 
service account) and the amount that is unallowable (cannot be paid from 
the nonprofit school food service account), or;

[[Page 119]]

    (B) The contractor must exclude all unallowable costs from its 
billing documents and certify that only allowable costs are submitted 
for payment and records have been established that maintain the 
visibility of unallowable costs, including directly associated costs in 
a manner suitable for contract cost determination and verification;
    (iii) The contractor's determination of its allowable costs must be 
made in compliance with the applicable Departmental and Program 
regulations and Office of Management and Budget cost circulars;
    (iv) The contractor must identify the amount of each discount, 
rebate and other applicable credit on bills and invoices presented to 
the school food authority for payment and identify the amount as a 
discount, rebate, or in the case of other applicable credits, the nature 
of the credit. If approved by the State agency, the school food 
authority may permit the contractor to report this information on a less 
frequent basis than monthly, but no less frequently than annually;
    (v) The contractor must identify the method by which it will report 
discounts, rebates and other applicable credits allocable to the 
contract that are not reported prior to conclusion of the contract; and
    (vi) The contractor must maintain documentation of costs and 
discounts, rebates, and other applicable credits, and must furnish such 
documentation upon request to the school food authority, the State 
agency, or the Department.
    (2) Prohibited expenditures. No expenditure may be made from the 
nonprofit school food service account for any cost resulting from a cost 
reimbursable contract that fails to include the requirements of this 
section, nor may any expenditure be made from the nonprofit school food 
service account that permits or results in the contractor receiving 
payments in excess of the contractor's actual, net allowable costs.

(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; 71 FR 39517, July 13, 2006; 72 FR 61494, Oct. 31, 2007]



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  Withholding payments.

    In accordance with Departmental regulations at Sec. Sec.3016.43 
and 3019.62 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 actions will be taken, or until the State agency terminates 
the grant in accordance with Sec.220.19. Subsequent to the State 
agency's acceptance of the corrective actions, payments will be released 
for any breakfasts served in accordance with the provisions of this part 
during the period the payments were withheld.

[72 FR 61495, Oct. 31, 2007]



Sec.220.19  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

[[Page 120]]

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 7 CFR part 3016 concerning grant suspension, 
termination and closeout procedures. Furthermore, the State agency or 
FNSRO were applicable, shall apply these provisions, or the parallel 
provisions of 7 CFR part 3019, as applicable, to suspension or 
termination of the Program in School Food Authorities.

[Amdt. 49, 49 FR 18988, May 4, 1984, as amended at 71 FR 39517, July 13, 
2006. Redesignated at 72 FR 61495, Oct. 31, 2007]



Sec.220.20  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. Redesignated at 72 FR 61495, Oct. 
31, 2007]



Sec.220.21  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.
    (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, and 
further redesignated at 72 FR 61495, Oct. 31, 2007]

    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 at www.fdsys.gov.



Sec.220.22  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

[[Page 121]]

 
220.15.....................................................    0584-0012
------------------------------------------------------------------------


[Amdt. 56, 54 FR 2990, Jan. 23, 1989. Redesignated at 72 FR 61495, Oct. 
31, 2007]



         Sec. 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 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 (Nx6.25)................  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.

[[Page 122]]

 
\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 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. Redesignated at 72 FR 61495, Oct. 31, 2007]



Sec. 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

[[Page 123]]

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. Sec.
210.15b(b) (1) or (2), and 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]



   Sec. 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 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).

[[Page 124]]

[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 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

[[Page 125]]

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, Richard B. Russell National School 
Lunch Act, as amended (42 U.S.C. 1758, 1761 and 1762a).

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



                            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.

[[Page 126]]

    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.
    Department means the U.S. Department of Agriculture.
    Disclosure means reveal or use individual children's program 
eligibility information obtained through the free and reduced price meal 
eligibility process 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/

[[Page 127]]

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 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.

[[Page 128]]

    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 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

[[Page 129]]

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, 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

[[Page 130]]

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.
    7 CFR part 3015 means the Uniform Federal Assistance Regulations 
published by the Department to implement certain policies applicable to 
all Department programs. The applicable provisions deal with competition 
for discretionary grants and cooperative agreements, costs requiring 
prior approval, acknowledgement of Department support in publications 
and audiovisuals produced under Department programs, intergovernmental 
review of Department programs under Executive Order 12372, and certain 
miscellaneous Department requirements.
    7 CFR part 3016 means the Department's Uniform Administrative 
Requirements for Grants and Cooperative Agreements to State and Local 
Governments. 7 CFR part 3016 covers requirements for awards and 
subawards to State and local governmental organizations under Department 
programs.
    7 CFR part 3019 means the Department's Uniform Administrative 
Requirements for Grants and Agreements with Institutions of Higher 
Education, Hospitals, and Other Non-Profit Organizations. 7 CFR part 
3019 covers requirements for awards and subawards to nongovernmental, 
nonprofit organizations under Department programs.
    7 CFR part 3052 means the Department's regulations implementing OMB 
Circular A-133. (To obtain the OMB circular referenced in this 
definition, see 5 CFR 1310.3.)

[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; 71 FR 
39518, July 13, 2006; 72 FR 10895, Mar. 12, 2007]



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

[[Page 131]]

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 
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.

[[Page 132]]

    (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 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

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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 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

[[Page 134]]

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 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

[[Page 135]]

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 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

[[Page 136]]

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) 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;

[[Page 137]]

    (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 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(h), 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

[[Page 138]]

new documentation of serving an area in which poor economic conditions 
exist;
    (C) For closed enrolled sites, the projected number of children 
enrolled and 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.

[[Page 139]]

    (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:
    (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

[[Page 140]]

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.
    (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;

[[Page 141]]

    (11) Have access to facilities necessary for storing, preparing, and 
serving food;
    (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 Sec. Sec.
225.15(h) 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

[[Page 142]]

changes in the approved level of meal service for a site. Such 
notification 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(h)(6) 
through (h)(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 143]]

    (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(h)(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; 72 FR 10895, 
Mar. 12, 2007]



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 144]]

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 145]]

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 7 CFR part 3015, and 7 
CFR part 3016 or 7 CFR part 3019, as applicable, 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; 71 FR 39518, 
July 13, 2006]



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 146]]

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 147]]

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 148]]

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 149]]

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 150]]

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. Unless otherwise 
exempt, audits at the State and sponsor levels shall be conducted in 
accordance with OMB Circular A-133 and the Department's implementing 
regulations at 7 CFR part 3052. (To obtain the OMB circular referenced 
in this paragraph, see 5 CFR 1310.3.) 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.

[54 FR 18208, Apr. 27, 1989, as amended at 71 FR 39518, July 13, 2006]



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

[[Page 151]]

sponsor identifiable through its corporate organization, officers, 
employees, or otherwise, as an institution which participated in any 
Federal child nutrition program and was seriously deficient in its 
operation of any such program. The State agency shall terminate the 
Program agreement with any sponsor which 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

[[Page 152]]

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 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

[[Page 153]]

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 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

[[Page 154]]

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 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 Sec. Sec.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

[[Page 155]]

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 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 Sec. Sec.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

[[Page 156]]

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 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

[[Page 157]]

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 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) A Privacy Act notice informing households of how the social 
security number and other information provided on the application will 
be used. Each free and reduced price meal application must include 
substantially the following statement, ``The Richard B. Russell National 
School Lunch Act requires the information on this application. You do 
not have to give the information, but if you do not, we cannot approve 
your child for free or reduced price meals. You must include the social 
security number of the adult household member who signs the application. 
The social security number is not required when you apply on behalf of a 
foster child or you list a Food Stamp, Temporary Assistance for Needy 
Families (TANF) Program or Food Distribution Program on Indian 
Reservations (FDPIR) case number for

[[Page 158]]

your child or other (FDPIR) identifier or when you indicate that the 
adult household member signing the application does not have a social 
security number. We will use your information to determine if your child 
is eligible for free or reduced price meals, and for administration and 
enforcement of the Program.'' When the State agency or sponsor, as 
appropriate, plans to use or disclose children's eligibility information 
for non-program purposes, additional information, as specified in 
paragraph (i) of this section, must be added to the Privacy Act notice/
statement. State agencies and sponsors are responsible for drafting the 
appropriate notice and ensuring that the notice complies with section 
7(b) of the Privacy Act of 1974 (5 U.S.C. 552a note (Disclosure of 
Social Security Number)).
    (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 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 children's free and reduced price meal eligibility 
information to certain programs and individuals without parental 
consent. The State agency or sponsor, as appropriate, may disclose 
aggregate information about children eligible for free and reduced price 
meals to any party without parental notification and consent when 
children cannot be identified through release of the aggregate data or 
by means of deduction. Additionally, the State agency or sponsor may 
disclose information that identifies children eligible for free and 
reduced price meals to the programs and the individuals specified in 
this paragraph (g) without parent/guardian consent. The State agency or

[[Page 159]]

sponsor that makes the free and reduced price meal eligibility 
determination is responsible for deciding whether to disclose program 
eligibility information.
    (1) Persons authorized to receive eligibility information. Only 
persons directly connected with the administration or enforcement of a 
program or activity listed in paragraphs (g)(2) or (g)(3) of this 
section may have access to children's free and reduced price meal 
eligibility information, without parental consent. Persons considered 
directly connected with administration or enforcement of a program or 
activity listed in paragraphs (g)(2) or (g)(3) of this section are 
Federal, State, or local program operators responsible for the ongoing 
operation of the program or activity or persons responsible for program 
compliance. Program operators may include persons responsible for 
carrying out program requirements and monitoring, reviewing, auditing, 
or investigating the program. Program operators may include contractors, 
to the extent those persons have a need to know the information for 
program administration or enforcement. Contractors may include 
evaluators, auditors, and others with whom Federal or State agencies and 
program operators contract with to assist in the administration or 
enforcement of their program in their behalf.
    (2) Disclosure of children's names and free or reduced price meal 
eligibility status. The State agency or sponsor, as appropriate, may 
disclose, without parental consent, only children's names and 
eligibility status (whether they are eligible for free meals or reduced 
price meals) to persons directly connected with the administration or 
enforcement of:
    (i) A Federal education program;
    (ii) A State health program or State education program administered 
by the State or local education agency;
    (iii) A Federal, State, or local means-tested nutrition program with 
eligibility standards comparable to the National School Lunch Program 
(i.e., food assistance programs for households with incomes at or below 
185 percent of the Federal poverty level); or
    (3) Disclosure of all eligibility information. In addition to 
children's names and eligibility status, the State agency or sponsor, as 
appropriate, may disclose, without parental consent, all eligibility 
information obtained through the free and reduced price meal eligibility 
process (including all information on the application or obtained 
through direct certification) to:
    (i) Persons directly connected with the administration or 
enforcement of programs authorized under the Richard B. Russell National 
School Lunch Act or the Child Nutrition Act of 1966. This means that all 
eligibility information obtained for the Summer Food Service Program may 
be disclosed to persons directly connected with administering or 
enforcing regulations under the National School Lunch Program, Special 
Milk Program, School Breakfast Program, Child and Adult Care Food 
Program, and the Special Supplemental Nutrition Program for Women, 
Infants and Children (WIC) (parts 210, 215, 220, 226 and 246, 
respectively, of this chapter);
    (ii) The Comptroller General of the United States for purposes of 
audit and examination; and
    (iii) Federal, State, and local law enforcement officials for the 
purpose of investigating any alleged violation of the programs listed in 
paragraphs (g)(2) and (g)(3) of this section.
    (4) Use of free and reduced price meals eligibility information by 
programs other than Medicaid or the State Children's Health Insurance 
Program (SCHIP). State agencies and sponsors may use children's free and 
reduced price meal eligibility information for administering or 
enforcing the Summer Food Service Program. Additionally, any other 
Federal, State, or local agency charged with administering or enforcing 
the Summer Food Service Program may use the information for that 
purpose. Individuals and programs to which children's free or reduced 
price meal eligibility information has been disclosed under this section 
may use the information only in the administration or enforcement of the 
receiving program. No further disclosure of the information may be made.
    (h) Disclosure of children's free or reduced price meal eligibility 
information to Medicaid and/or SCHIP, unless parents decline. Children's 
free or reduced price

[[Page 160]]

meal eligibility information only may be disclosed to Medicaid or SCHIP 
when both the State agency and the sponsor so elect, the parental/
guardian does not decline to have their eligibility information 
disclosed and the other provisions described in paragraph (h)(1) of this 
section are met. 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 applications or 
obtained through direct certification to persons directly connected with 
the administration of Medicaid or SCHIP. Persons directly connected to 
the administration of Medicaid and SCHIP are 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 for Medicaid or SCHIP.
    (1) The State agency must ensure that:
    (i) The sponsors and health insurance program officials have a 
written agreement that requires the health insurance program agency to 
use the eligibility information to seek to enroll children in Medicaid 
and SCHIP; and
    (ii) Parents/guardians are notified that their eligibility 
information may be disclosed to Medicaid or SCHIP and given an 
opportunity to decline to have their children's eligibility information 
disclosed, prior to any disclosure.
    (2) Use of children's free and reduced price meal eligibility 
information by Medicaid/SCHIP. Medicaid and SCHIP agencies and health 
insurance program operators receiving children's free and reduced price 
meal eligibility information must 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. No further 
disclosure of the information may be made. Medicaid and SCHIP agencies 
and health insurance program operators also may verify children's 
eligibility in a program under the Child Nutrition Act of 1966 or the 
Richard B. Russell National School Lunch Act.
    (i) Notifying households of potential uses and disclosures of 
children's free and reduced price meal eligibility information. 
Households must be informed that the information they provide on the 
free and reduced price meal application will be used to determine 
eligibility for free or reduced price meals and that their eligibility 
information may be disclosed to other programs.
    (1) For disclosures to programs, other than Medicaid or the State 
Children's Health Insurance Program (SCHIP), that are permitted access 
to children's eligibility information, without parental/guardian 
consent, the State agency or sponsor, as appropriate, must notify 
parents/guardians at the time of application that their children's free 
or reduced price meal eligibility information may be disclosed. The 
State agency or sponsor, as appropriate, must add substantially the 
following statement to the Privacy Act notice/statement required under 
paragraph (f)(4)(iv) of this section, ``We may share your eligibility 
information with education, health, and nutrition programs to help them 
evaluate, fund, or determine benefits for their programs; auditors for 
program reviews; and law enforcement officials to help them look into 
violations of program rules.'' For children determined eligible for free 
meals through the 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.
    (2) For 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 and notifies the State agency or 
sponsor, as appropriate, by a date specified by the State agency or 
sponsor, as appropriate. Only the parent or guardian who is a member of 
the household or family for purposes of the free and reduced price meal 
application

[[Page 161]]

may decline the disclosure of eligibility information to Medicaid or 
SCHIP. 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 eligible children and seek to enroll 
them in Medicaid or SCHIP, 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 meal application, on the 
application itself or in a separate notice provided to parents/
guardians. The notice must give parents/guardians adequate time to 
respond if they do not want their information disclosed. The State 
agency or sponsor, as appropriate, must add substantially the following 
statement to the Privacy Act notice/statement required under paragraph 
(f) of this section, ``We may share your information with Medicaid or 
the State Children's Health Insurance Program, unless you tell us not 
to. The information, if disclosed, will be used to identify eligible 
children and seek to enroll them in Medicaid or SCHIP.'' For children 
determined eligible for free meals through direct certification, the 
notice of potential disclosure and opportunity to decline the disclosure 
may be included in the document informing parents/guardians of their 
children's eligibility for free meals through direct certification 
process.
    (j) Other disclosures. State agencies and sponsors that plan to use 
or disclose information about children eligible for free and reduced 
price meals in ways not specified in this section must obtain written 
consent from children's parents or guardians prior to the use or 
disclosure.
    (1) The consent must identify the information that will be shared 
and how the information will be used.
    (2) There must be a statement informing parents and guardians that 
failing to sign the consent will not affect the child's eligibility for 
free meals and that the individuals or programs receiving the 
information will not share the information with any other entity or 
program.
    (3) Parents/guardians must be permitted to limit the consent only to 
those programs with which they wish to share information.
    (4) The consent statement must be signed and dated by the child's 
parent or guardian who is a member of the household for purposes of the 
free and reduced price meal application.
    (k) Agreements with programs/individuals receiving children's free 
or reduced price meal eligibility information. Agreements or Memoranda 
of Understanding (MOU) are recommended or required as follows:
    (1) The State agency or sponsor, as appropriate, should have a 
written agreement or MOU with programs or individuals receiving 
eligibility information, prior to disclosing children's free and reduced 
price meal eligibility information. The agreement or MOU should include 
information similar to that required for disclosures to Medicaid and 
SCHIP specified in paragraph (k)(2) of this section.
    (2) For disclosures to Medicaid or SCHIP, 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 or reduced price meal eligibility information 
to those agencies. 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 be used to seek to enroll 
children in Medicaid or SCHIP;
    (iv) Require that the Medicaid or SCHIP agency describe how they 
will use the information obtained;
    (v) Describe how the information will be protected from unauthorized 
uses and disclosures;
    (vi) Describe the penalties for unauthorized disclosure; and
    (vii) Be signed by both the Medicaid or SCHIP program or agency and 
the State agency or sponsor, as appropriate.
    (l) Penalties for unauthorized disclosure or misuse of children's 
free and reduced

[[Page 162]]

price meal eligibility information. In accordance with section 
9(b)(6)(C) of the Richard B. Russell National School Lunch Act (42 
U.S.C. 1758(b)(6)(C)), 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 section will be 
fined not more than $1,000 or imprisoned for up to 1 year, or both.
    (m) 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;
    (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

[[Page 163]]

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.
    (n) 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; 72 FR 
10895, Mar. 12, 2007]



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;
    (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

[[Page 164]]

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.
------------------------------------------------------------------------
                     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.

[[Page 165]]

 
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.

    (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.

[[Page 166]]

 
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. 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

[[Page 167]]

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.
    (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 requirements 
of 7 CFR

[[Page 168]]

part 3016 or 7 CFR part 3019, as applicable, concerning the procurement 
of supplies, food, equipment and other services 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. Sponsors may use their own 
procedures for procurement with Program funds to the extent that:
    (1) Procurements by public sponsors comply with applicable State or 
local laws and the standards set forth in 7 CFR part 3016; and
    (2) Procurements by private nonprofit sponsors comply with standards 
set forth in 7 CFR part 3019.
    (b) The State agency shall make available to sponsors information on 
7 CFR part 3016 or 7 CFR part 3019, as applicable.
    (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 each sponsor is aware of the 
following practices specified in 7 CFR part 3016 or 7 CFR part 3019, as 
applicable, 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.

[54 FR 18208, Apr. 27, 1989, as amended at 71 FR 39518, July 13, 2006]



Sec.225.18  Miscellaneous administrative provisions.

    (a) Grant closeout procedures. Grant closeout procedures for the 
Program shall be in accordance with 7 CFR part 3016 or 7 CFR part 3019, 
as applicable.
    (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 169]]

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.
    (i) Data collection related to sponsors. (1) Each State agency must 
collect data related to sponsors that have an agreement with the State 
agency to participate in the program for each of Federal fiscal years 
2006 through 2009, including those sponsors that participated only for 
part of the fiscal year. Such data shall include:
    (i) The name of each sponsor;
    (ii) The city in which each participating sponsor was headquartered 
and the name of the state;
    (iii) The amount of funds provided to the participating 
organization, i.e., the sum of the amount of federal funds reimbursed 
for operating and administrative cost; and
    (iv) The type of participating organization, e.g., government 
agency, educational institution, non-profit organization/secular, non-
profit organization/faith-based, and ``other.''
    (2) On or before August 31, 2007, and each subsequent year through 
2010, State agencies must report to FNS data as specified in paragraph 
(i)(1) of this section for the prior Federal fiscal year. State agencies 
must submit this data in a format designated by FNS.

[54 FR 18208, Apr. 27, 1989, as amended at 55 FR 13471, Apr. 10, 1990; 
64 FR 72488, Dec. 28, 1999; 71 FR 39518, July 13, 2006; 72 FR 24183, May 
2, 2007]



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.

[[Page 170]]

    (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 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]



         Sec. 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.

[[Page 171]]

    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]



                 Sec. Appendix B to Part 225 [Reserved]



   Sec. 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. 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:

[[Page 172]]

[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 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.

[[Page 173]]

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 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.
226.17a At-risk afterschool 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

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

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

    Editorial Note: Nomenclature changes to part 226 appear at 70 FR 
43261, July 27, 2005.



                            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.

    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.
    Administrative review means the fair hearing provided upon request 
to:
    (a) An institution that has been given notice by the State agency of 
any action or proposed action that will affect their participation or 
reimbursement under the Program, in accordance with Sec.226.6(k);
    (b) A principal or individual responsible for an institution's 
serious deficiency after the responsible principal or responsible 
individual has been given a notice of intent to disqualify them from the 
Program; and
    (c) A day care home that has been given a notice of proposed 
termination for cause.
    Administrative review official means the independent and impartial 
official who conducts the administrative review held in accordance with 
Sec.226.6(k).
    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

[[Page 174]]

any for-profit 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.
    At-risk afterschool care center means a public or private nonprofit 
organization that is participating or is eligible to participate in the 
CACFP as an institution or as a sponsored facility and that provides 
nonresidential child care to children after school through an approved 
afterschool care program located in an eligible area. However, an 
Emergency shelter, as defined in this section, may participate as an at-
risk afterschool care center without regard to location.
    At-risk afterschool meal means a meal that meets the requirements 
described in Sec.226.20(b)(6) and/or (c)(1), (c)(2), or (c)(3), that 
is reimbursed at the appropriate free rate and is served by an At-risk 
afterschool care center as defined in this section, which is located in 
a State designated by law or selected by the Secretary as directed by 
law.
    At-risk afterschool snack means a snack that meets the requirements 
described in Sec.226.20(b)(6) and/or (c)(4) that is reimbursed at the 
free rate for snacks and is served by an At-risk afterschool care center 
as defined in this section.
    Block claim means a claim for reimbursement submitted by a facility 
on which the number of meals claimed for one or more meal type 
(breakfast, lunch, snack, or supper) is identical for 15 consecutive 
days within a claiming period.
    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, and day care homes by the State agency 
under the provisions of Sec.226.6(d)(3) and (4).
    Center means a child care center, at-risk afterschool care center, 
an adult day care center, an emergency shelter, or an outside-school-
hours care center.
    Child care center means any public or private nonprofit institution 
or facility (except day care homes), or any for-profit center, as 
defined in this section, that is 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 care services for children with disabilities. 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, 
at-risk afterschool care center, day care home, emergency shelter, or 
outside-school-hours care center under the auspices of a sponsoring 
organization.
    Children means:
    (a) Persons age 12 and under;
    (b) Persons age 15 and under who are children of migrant workers;
    (c) Persons with disabilities as defined in this section;
    (d) For emergency shelters, persons age 18 and under; and
    (e) For at-risk afterschool care centers, persons age 18 and under 
at the start of the school year.
    Claiming percentage means the ratio of the number of enrolled 
participants in an institution in each reimbursement category (free, 
reduced-price or

[[Page 175]]

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.
    Days means calendar days unless otherwise specified.
    Department means the U.S. Department of Agriculture.
    Disclosure means reveal or use individual children's program 
eligibility information obtained through the free and reduced price meal 
eligibility process 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.
    Disqualified means the status of an institution, a responsible 
principal or responsible individual, or a day care home that is 
ineligible for participation.
    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 who is a TANF recipient, ``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 TANF 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 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.
    Eligible area means:
    (a) For the purpose of determining the eligibility of at-risk 
afterschool care centers, the attendance area of an

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elementary, middle, or high school in which at least 50 percent of the 
enrolled children are certified eligible for free or reduced-price 
school meals; or
    (b) For the purpose of determining the tiering status of day care 
homes, the area served by an elementary school in which at least 50 
percent of the total number of children are certified eligible to 
receive free or reduced-price meals, or the area based on census data in 
which at least 50 percent of the children residing in the area are 
members of households that meet the income standards for free or 
reduced-price meals.
    Emergency shelter means a public or private nonprofit organization 
or its site that provides temporary shelter and food services to 
homeless children, including a residential child care institution (RCCI) 
that serves a distinct group of homeless children who are not enrolled 
in the RCCI's regular program.
    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 Sec. Sec.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. For at-risk afterschool care centers, outside-school-
hours care centers, or emergency shelters, the term ``enrolled child'' 
or ``enrolled participant'' does not apply.
    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.
    Facility means a sponsored center or a family day care home.
    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.
    For-profit center means a child care center, outside-school-hours 
care center, or adult day care center providing nonresidential care to 
adults or children that does not qualify for tax-exempt status under the 
Internal Revenue Code of 1986. For-profit centers serving adults must 
meet the criteria described in paragraph (a) of this definition. For-
profit centers serving children must meet the criteria described

[[Page 177]]

in paragraphs (b)(1) or (b)(2) of this definition, except that children 
who only participate in the at-risk afterschool snack and/or meal 
component of the Program must not be considered in determining the 
percentages under paragraphs (b)(1) or (b)(2) of this definition.
    (a) A for-profit center serving adults must meet the definition of 
Adult day care center as defined in this section and, during the 
calendar month preceding initial application or reapplication, the 
center receives compensation from amounts granted to the States under 
title XIX or title XX and twenty-five percent of the adults enrolled in 
care are beneficiaries of title XIX, title XX, or a combination of 
titles XIX and XX of the Social Security Act.
    (b) A for-profit center serving children must meet the definition of 
Child care center or Outside-school-hours care center as defined in this 
section and one of the following conditions during the calendar month 
preceding initial application or reapplication:
    (1) Twenty-five percent of the children in care (enrolled or 
licensed capacity, whichever is less) are eligible for free or reduced-
price meals; or
    (2) Twenty-five percent of the children in care (enrolled or 
licensed capacity, whichever is less) receive benefits from title XX of 
the Social Security Act and the center receives compensation from 
amounts granted to the States under title XX.
    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 TANF recipiency; or to a child who is a Head Start 
participant; or to a child who is receiving temporary housing and meal 
services from an approved emergency shelter; a child participating in an 
approved at-risk afterschool care program; 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 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.
    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.
    Household means ``family'', as defined in Sec.226.2 (``Family'').
    Household contact means a contact made by a sponsoring organization 
or a State agency to an adult member of a household with a child in a 
family day care home or a child care center in order to verify the 
attendance and enrollment of the child and the specific meal service(s) 
which the child routinely receives while in care.
    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.

[[Page 178]]

    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, at-risk afterschool 
care center, emergency shelter, 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, at-
risk afterschool care center, outside-school-hours care center, 
emergency shelter or adult day care center which enters into an 
agreement with the State agency to assume final administrative and 
financial responsibility for Program operations.
    Internal controls means the policies, procedures, and organizational 
structure of an institution designed to reasonably assure that:
    (a) The Program achieves its intended result;
    (b) Program resources are used in a manner that protects against 
fraud, abuse, and mismanagement and in accordance with law, regulations, 
and guidance; and
    (c) Timely and reliable Program information is obtained, maintained, 
reported, and used for decision-making.
    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. However, 
children participating in at-risk afterschool care centers, emergency 
shelters, or outside-schools-hours care centers do not have to be 
enrolled.
    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, 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.
    National disqualified list means the list, maintained by the 
Department, of institutions, responsible principals and responsible 
individuals, and day care homes disqualified from participation in the 
Program.
    New institution means an institution applying to participate in the 
Program

[[Page 179]]

for the first time, or an institution applying to participate in the 
Program after a lapse in participation.
    Nonpricing program means an institution, child care facility, or 
adult day care facility 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.
    Notice means a letter sent by certified mail, return receipt (or the 
equivalent private delivery service), by facsimile, or by email, that 
describes an action proposed or taken by a State agency or FNS with 
regard to an institution's Program reimbursement or participation. 
Notice also means a letter sent by certified mail, return receipt (or 
the equivalent private delivery service), by facsimile, or by email, 
that describes an action proposed or taken by a sponsoring organization 
with regard to a day care home's participation. The notice must specify 
the action being proposed or taken and the basis for the action, and is 
considered to be received by the institution or day care home when it is 
delivered, sent by facsimile, or sent by email. If the notice is 
undeliverable, it is considered to be received by the institution, 
responsible principal or responsible individual, or day care home five 
days after being sent to the addressee's last known mailing address, 
facsimile number, or email address.
    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 
institution or facility (except day care homes), or a For-profit center 
as defined in this section, that is licensed or approved in accordance 
with Sec.226.6(d)(1) to provide organized nonresidential child care 
services to children during hours outside of school. 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.
    Persons with disabilities means persons of any age who have one or 
more disabilities, as determined by the State, and who are enrolled in 
an institution or child care facility serving a majority of persons who 
are age 18 and under.
    Pricing program means an institution, child care facility, or adult 
day care facility in which a separate identifiable charge is made for 
meals served to participants.
    Principal means any individual who holds a management position 
within, or is an officer of, an institution or a sponsored center, 
including all members of the institution's board of directors or the 
sponsored center's board of directors.
    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.
    Reduced-price meal means a meal served under the Program to a 
participant from a family that meets the income standards for reduced-
price school meals. Any separate charge imposed must 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 snack. Neither the 
participant nor any member of his family may be required to work in the 
food service program for a reduced-price meal.

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    Reimbursement means Federal financial assistance paid or payable to 
institutions for Program costs within the rates assigned by the State 
agency.
    Renewing institution means an institution that is participating in 
the Program at the time it submits a renewal application.
    Responsible principal or responsible individual means:
    (a) A principal, whether compensated or uncompensated, who the State 
agency or FNS determines to be responsible for an institution's serious 
deficiency;
    (b) Any other individual employed by, or under contract with, an 
institution or sponsored center, who the State agency or FNS determines 
to be responsible for an institution's serious deficiency; or
    (c) An uncompensated individual who the State agency or FNS 
determines to be responsible for an institution's serious deficiency.
    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.
    Seriously deficient means the status of an institution or a day care 
home that has been determined to be non-compliant in one or more aspects 
of its operation of the Program.
    Snack means a meal supplement that meets the meal pattern 
requirements specified in Sec.226.20(b)(6) or (c)(4).
    Sponsoring organization means a public or nonprofit private 
organization that is entirely responsible for the administration of the 
food program in:
    (a) One or more day care homes;
    (b) A child care center, emergency shelter, at-risk afterschool care 
center, outside-school-hours care center, or adult day care center which 
is a legally distinct entity from the sponsoring organization;
    (c) Two or more child care centers, emergency shelters, at-risk 
afterschool care centers, outside-school-hours care center, or adult day 
care centers; or
    (d) Any combination of child care centers, emergency shelters, at-
risk afterschool care centers, outside-school-hours care centers, adult 
day care centers, and day care homes. The term ``sponsoring 
organization'' also includes an organization that is entirely 
responsible for administration of the Program in any combination of two 
or more child care centers, at-risk afterschool care centers, adult day 
care centers or outside-school-hours care centers, which meet the 
definition of For-profit center in this section and are part of the same 
legal entity as the sponsoring organization.
    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 agency list means an actual paper or electronic list, or the 
retrievable paper records, maintained by the

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State agency, that includes a synopsis of information concerning 
seriously deficient institutions and providers terminated for cause in 
that State. The list must be made available to FNS upon request, and 
must include the following information:
    (a) Institutions determined to be seriously deficient by the State 
agency, including the names and mailing addresses of the institutions, 
the basis for each serious deficiency determination, and the status of 
the institutions as they move through the possible subsequent stages of 
corrective action, proposed termination, suspension, agreement 
termination, and/or disqualification, as applicable;
    (b) Responsible principals and responsible individuals who have been 
disqualified from participation by the State agency, including their 
names, mailing addresses, and dates of birth; and
    (c) Day care home providers whose agreements have been terminated 
for cause by a sponsoring organization in the State, including their 
names, mailing addresses, and dates of birth.
    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.).
    Suspended means the status of an institution or day care home that 
is temporarily ineligible for participation (including Program 
payments).
    Suspension review means the review provided, upon the institution's 
request, to an institution that has been given a notice of intent to 
suspend participation (including Program payments), based on a 
determination that the institution has knowingly submitted a false or 
fraudulent claim.
    Suspension review official means the independent and impartial 
official who conducts the suspension review.
    Termination for cause means the termination of a day care home's 
Program agreement by the sponsoring organization due to the day care 
home's violation of the agreement.
    TANF recipient means an individual or household receiving assistance 
(as defined in 45 CFR 260.31) under a State-administered Temporary 
Assistance to Needy Families program.
    Termination for convenience means termination of a day care home's 
Program agreement by either the sponsoring organization or the day care 
home, due to considerations unrelated to either party's performance of 
Program responsibilities under the agreement.
    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 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.
    Unannounced review means an on-site review for which no prior 
notification is given to the facility or institution.
    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

[[Page 182]]

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 TANF 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 is a TANF recipient. 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.
    7 CFR part 3015 means the Uniform Federal Assistance Regulations 
published by the Department to implement certain policies applicable to 
all Department programs. The applicable provisions deal with competition 
for discretionary grants and cooperative agreements, costs requiring 
prior approval, acknowledgement of Department support in publications 
and audiovisuals produced under Department programs, intergovernmental 
review of Department programs under Executive Order 12372, and certain 
miscellaneous Department requirements.
    7 CFR part 3016 means the Department's Uniform Administrative 
Requirements for Grants and Cooperative Agreements to State and Local 
Governments. 7 CFR part 3016 covers requirements for awards and 
subawards to State and local governmental organizations under USDA 
programs.
    7 CFR part 3019 means the Department's Uniform Administrative 
Requirements for Grants and Agreements with Institutions of Higher 
Education, Hospitals, and Other Non-Profit Organizations. 7 CFR part 
3019 covers requirements for awards and subawards to nongovernmental, 
nonprofit organizations.
    7 CFR part 3052 means the Department's regulations implementing OMB 
Circular A-133. (To obtain the OMB circular referenced in this 
definition, see 5 CFR 1310.3.)

[47 FR 36527, Aug. 20, 1982; 47 FR 46072, Oct. 15, 1982]

    Editorial Note: For Federal Register citations affecting Sec.
226.2, see the List of CFR Sections Affected, which appears in the 
Finding Aids section of the printed volume and at www.fdsys.gov.



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.

[[Page 183]]



                     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 must 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 must be made available in an amount no less than the sum of the 
totals obtained under paragraphs (b), (c), (d), (e), (f), (g), and (j) 
of this section. However, in any fiscal year, the aggregate amount of 
assistance provided to a State under this part must 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 (j) and (l) 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 snacks 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 snacks 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 snacks 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) Emergency shelter funds. For meals and snacks served to children 
in emergency shelters, funds will be made available to each State agency 
in an amount equal to the total calculated by multiplying the number of 
meals and snacks served in the Program within the State to such children 
by the national average payment rate for free meals and free snacks 
under section 11 of the National School Lunch Act.
    (d) At-risk afterschool care center funds. For snacks served to 
children in at-risk afterschool care centers, funds will be made 
available to each State agency in an amount equal to the total 
calculated by multiplying the number of snacks served in the Program 
within

[[Page 184]]

the State to such children by the national average payment rate for free 
snacks under section 11 of the National School Lunch Act. For at-risk 
afterschool meals and at-risk afterschool snacks served to children, 
funds will be made available to each eligible State agency in an amount 
equal to the total calculated by multiplying the number of at-risk 
afterschool meals and the number of at-risk afterschool snacks served in 
the Program within the State by the national average payment rate for 
free meals and free snacks, respectively, under section 11 of the 
Richard B. Russell National School Lunch Act.
    (e) 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 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 snacks 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 snacks;
    (8) The number of snacks 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 snacks; and
    (9) The number of snacks 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 snacks.
    (f) 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).
    (g) 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.
    (h) 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.
    (i) 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, including snacks, served in tier I and tier 
II day

[[Page 185]]

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 rates for meals, including snacks, served in child care 
centers, emergency shelters, at-risk afterschool care centers, adult day 
care centers and outside-school-hours care centers will 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 adjustment must be rounded to the 
nearest lower cent, based on changes measured over the most recent 
twelve-month period for which data are available. The adjustment to the 
rates must be computed using the unrounded rate in effect for the 
preceding year.
    (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.
    (j) 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 one and one-half 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. In fiscal years 2005-2007, 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 one 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 State's 
expenditures under Sec.226.8 during such fiscal year.
    (k) Method of funding. FNS shall authorize funds for State agencies 
in accordance with 7 CFR part 3016.
    (l) 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; 69 FR 53536, Sept. 1, 2004; 71 FR 4, Jan. 3, 2006; 71 FR 39518, 
July 13, 2006; 72 FR 41603, 41604, July 31, 2007; 75 FR 16327, Apr. 1, 
2010]

    Editorial Note: At 75 FR 16327, Apr. 1, 2010, Sec.226 was amended 
in paragraph (d) by inserting ``Richard B. Russell'' before ``National 
School Lunch Program'' in the first sentence;; however, the amendment 
could not be incorporated due to inaccurate amendatory instruction.



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

[[Page 186]]

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 must provide 
sufficient consultative, technical, and managerial personnel to:
    (1) Administer the Program;
    (2) Provide sufficient training and technical assistance to 
institutions;
    (3) Monitor Program performance;
    (4) Facilitate expansion of the Program in low-income and rural 
areas; and
    (5) Ensure effective operation of the Program by participating 
institutions.
    (b) Program applications and agreements. Each State agency must 
establish application review procedures, in accordance with paragraphs 
(b)(1) through (b)(3) of this section, to determine the eligibility of 
new institutions, renewing institutions, and facilities for which 
applications are submitted by sponsoring organizations. The State agency 
must enter into written agreements with institutions in accordance with 
paragraph (b)(4) of this section.
    (1) Application procedures for new institutions. Each State agency 
must establish application procedures to determine the eligibility of 
new institutions under this part. At a minimum, such procedures must 
require that institutions submit information to the State agency in 
accordance with paragraph (f) of this section. For new private nonprofit 
and proprietary child care institutions, such procedures must also 
include a pre-approval visit by the State agency to confirm the 
information in the institution's application and to further assess its 
ability to manage the Program. The State agency must establish factors, 
consistent with Sec.226.16(b)(1), that it will consider in determining 
whether a new sponsoring organization has sufficient staff to perform 
required monitoring responsibilities at all of its sponsored facilities. 
As part of the review of the sponsoring organization's management plan, 
the State agency must determine the appropriate level of staffing for 
each sponsoring organization, consistent with the staffing range of 
monitors set forth at Sec.226.16(b)(1) and the factors it has 
established. The State agency must ensure that each new sponsoring 
organization applying for participation after July 29, 2002 meets this 
requirement. In addition, the State agency's application review 
procedures must ensure that the following information is included in a 
new institution's application:
    (i) Participant eligibility information. Centers must submit current 
information on the number of enrolled participants who are eligible for 
free, reduced-price and paid meals;
    (ii) Enrollment information. Sponsoring organizations of day care 
homes must submit current information on:
    (A) The total number of children enrolled in all homes in the 
sponsorship;
    (B) An assurance that day care home providers' own children whose 
meals are claimed for reimbursement in the Program are eligible for free 
or reduced-price meals;
    (C) The total number of tier I and tier II day care homes that it 
sponsors;
    (D) The total number of children enrolled in tier I day care homes;
    (E) The total number of children enrolled in tier II day care homes; 
and
    (F) The total number of children in tier II day care homes that have 
been identified as eligible for free or reduced-price meals;
    (iii) Nondiscrimination statement. Institutions must submit their 
nondiscrimination policy statement and a media release, unless the State 
agency

[[Page 187]]

has issued a Statewide media release on behalf of all institutions;
    (iv) Management plan. Sponsoring organizations must submit a 
complete management plan that includes:
    (A) Detailed information on the organization's management and 
administrative structure;
    (B) A list or description of the staff assigned to Program 
monitoring, in accordance with the requirements set forth at Sec.
226.16(b)(1);
    (C) An administrative budget that includes projected CACFP 
administrative earnings and expenses;
    (D) The procedures to be used by the organization to administer the 
Program in, and disburse payments to, the child care facilities under 
its sponsorship; and
    (E) For sponsoring organizations of family day care homes, a 
description of the system for making tier I day care home 
determinations, and a description of the system of notifying tier II day 
care homes of their options for reimbursement;
    (v) Budget. An institution must submit a budget that the State 
agency must review in accordance with Sec.226.7(g);
    (vi) Documentation of licensing/approval. All centers and family day 
care homes must document that they meet Program licensing/approval 
requirements;
    (vii) Documentation of tax-exempt status. All private nonprofit 
institutions must document their tax-exempt status;
    (viii) At-risk afterschool care centers. Institutions (independent 
at-risk afterschool care centers and sponsoring organizations of at-risk 
afterschool care centers) must submit documentation sufficient to 
determine that each at-risk afterschool care center meets the program 
eligibility requirements in Sec.226.17a(a), and sponsoring 
organizations must submit documentation that each sponsored at-risk 
afterschool care center meets the area eligibility requirements in Sec.
226.17a(i).
    (ix) Documentation of for-profit center eligibility. Institutions 
must document that each for-profit center for which application is made 
meets the definition of a For-profit center, as set forth at Sec.
226.2;
    (x) Preference for commodities/cash-in-lieu of commodities. 
Institutions must state their preference to receive commodities or cash-
in-lieu of commodities;
    (xi) Providing benefits to unserved facilities or participants--(A) 
Criteria. The State agency must develop criteria for determining whether 
a new sponsoring organization's participation will help ensure the 
delivery of benefits to otherwise unserved facilities or participants, 
and must disseminate these criteria to new sponsoring organizations when 
they request information about applying to the Program; and
    (B) Documentation. The new sponsoring organization must submit 
documentation that its participation will help ensure the delivery of 
benefits to otherwise unserved facilities or participants in accordance 
with the State agency's criteria;
    (xii) Presence on National disqualified list. If an institution or 
one of its principals is on the National disqualified list and submits 
an application, the State agency must deny the application. If a 
sponsoring organization submits an application on behalf of a facility, 
and either the facility or any of its principals is on the National 
disqualified list, the State agency must deny the application;
    (xiii) Ineligibility for other publicly funded programs--(A) 
General. A State agency is prohibited from approving an institution's 
application if, during the past seven years, the institution or any of 
its principals have been declared ineligible for any other publicly 
funded program by reason of violating that program's requirements. 
However, this prohibition does not apply if the institution or the 
principal has been fully reinstated in, or determined eligible for, that 
program, including the payment of any debts owed;
    (B) Certification. Institutions must submit:
    (1) A statement listing the publicly funded programs in which the 
institution and its principals have participated in the past seven 
years; and
    (2) A certification that, during the past seven years, neither the 
institution nor any of its principals have been declared ineligible to 
participate in any other publicly funded program by

[[Page 188]]

reason of violating that program's requirements; or
    (3) In lieu of the certification, documentation that the institution 
or the principal previously declared ineligible was later fully 
reinstated in, or determined eligible for, the program, including the 
payment of any debts owed; and
    (C) Follow-up. If the State agency has reason to believe that the 
institution or its principals were determined ineligible to participate 
in another publicly funded program by reason of violating that program's 
requirements, the State agency must follow up with the entity 
administering the publicly funded program to gather sufficient evidence 
to determine whether the institution or its principals were, in fact, 
determined ineligible;
    (xiv) Information on criminal convictions. (A) A State agency is 
prohibited from approving an institution's application if the 
institution or any of its principals has been convicted of any activity 
that occurred during the past seven years and that indicated a lack of 
business integrity. A lack of business integrity includes fraud, 
antitrust violations, embezzlement, theft, forgery, bribery, 
falsification or destruction of records, making false statements, 
receiving stolen property, making false claims, obstruction of justice, 
or any other activity indicating a lack of business integrity as defined 
by the State agency; and
    (B) Institutions must submit a certification that neither the 
institution nor any of its principals has been convicted of any activity 
that occurred during the past seven years and that indicated a lack of 
business integrity. A lack of business integrity includes fraud, 
antitrust violations, embezzlement, theft, forgery, bribery, 
falsification or destruction of records, making false statements, 
receiving stolen property, making false claims, obstruction of justice, 
or any other activity indicating a lack of business integrity as defined 
by the State agency;
    (xv) Certification of truth of applications and submission of names 
and addresses. Institutions must submit a certification that all 
information on the application is true and correct, along with the name, 
mailing address, and date of birth of the institution's executive 
director and chairman of the board of directors;
    (xvi) Outside employment policy. Sponsoring organizations must 
submit an outside employment policy. The policy must restrict other 
employment by employees that interferes with an employee's performance 
of Program-related duties and responsibilities, including outside 
employment that constitutes a real or apparent conflict of interest. 
Sponsoring organizations that are participating on July 29, 2002, must 
submit an outside employment policy not later than September 27, 2002. 
The policy will be effective unless disapproved by the State agency;
    (xvii) Bond. Sponsoring organizations applying for initial 
participation on or after June 20, 2000, must submit a bond, if such 
bond is required by State law, regulation, or policy. If the State 
agency requires a bond for sponsoring organizations pursuant to State 
law, regulation, or policy, the State agency must submit a copy of that 
requirement and a list of sponsoring organizations posting a bond to the 
appropriate FNSRO on an annual basis; and
    (xviii) Compliance with performance standards. Each new institution 
must submit information sufficient to document that it is financially 
viable, is administratively capable of operating the Program in 
accordance with this part, and has internal controls in effect to ensure 
accountability. To document this, any new institution must demonstrate 
in its application that it is capable of operating in conformance with 
the following performance standards. The State agency must only approve 
the applications of those new institutions that meet these performance 
standards, and must deny the applications of those new institutions that 
do not meet the standards.
    (A) Performance Standard 1--Financial viability and financial 
management. The new institution must be financially viable. Program 
funds must be expended and accounted for in accordance with the 
requirements of this part, FNS Instruction 796-2 (``Financial Management 
in the Child and Adult Care Food Program''), and parts 3015, 3016, and 
3019 of this title. To demonstrate financial viability, the new 
institution

[[Page 189]]

must document that it meets the following criteria:
    (1) Description of need/recruitment. A new sponsoring organization 
must demonstrate in its management plan that its participation will help 
ensure the delivery of Program benefits to otherwise unserved facilities 
or participants, in accordance with criteria developed by the State 
agency pursuant to paragraph (b)(1)(x) of this section. A new sponsoring 
organization must demonstrate that it will use appropriate practices for 
recruiting facilities, consistent with paragraph (p) of this section and 
any State agency requirements;
    (2) Fiscal resources and financial history. A new institution must 
demonstrate that it has adequate financial resources to operate the 
CACFP on a daily basis, has adequate sources of funds to withstand 
temporary interruptions in Program payments and/or fiscal claims against 
the institution, and can document financial viability (for example, 
through audits, financial statements, etc.); and
    (3) Budgets. Costs in the institution's budget must be necessary, 
reasonable, allowable, and appropriately documented;
    (B) Performance Standard 2--Administrative capability. The new 
institution must be administratively capable. Appropriate and effective 
management practices must be in effect to ensure that the Program 
operates in accordance with this part. To demonstrate administrative 
capability, the new institution must document that it meets the 
following criteria:
    (1) Has an adequate number and type of qualified staff to ensure the 
operation of the Program in accordance with this part;
    (2) If a sponsoring organization, documents in its management plan 
that it employs staff sufficient to meet the ratio of monitors to 
facilities, taking into account the factors that the State agency will 
consider in determining a sponsoring organization's staffing needs, as 
set forth in Sec.226.16(b)(1); and
    (3) If a sponsoring organization, has Program policies and 
procedures in writing that assign Program responsibilities and duties, 
and ensure compliance with civil rights requirements; and
    (C) Performance Standard 3--Program accountability. The new 
institution must have internal controls and other management systems in 
effect to ensure fiscal accountability and to ensure that the Program 
will operate in accordance with the requirements of this part. To 
demonstrate Program accountability, the new institution must document 
that it meets the following criteria:
    (1) Board of directors. Has adequate oversight of the Program by its 
governing board of directors;
    (2) Fiscal accountability. Has a financial system with management 
controls specified in writing. For new sponsoring organizations, these 
written operational policies must assure:
    (i) Fiscal integrity and accountability for all funds and property 
received, held, and disbursed;
    (ii) The integrity and accountability of all expenses incurred;
    (iii) That claims will be processed accurately, and in a timely 
manner;
    (iv) That funds and property are properly safeguarded and used, and 
expenses incurred, for authorized Program purposes; and
    (v) That a system of safeguards and controls is in place to prevent 
and detect improper financial activities by employees;
    (3) Recordkeeping. Maintains appropriate records to document 
compliance with Program requirements, including budgets, accounting 
records, approved budget amendments, and, if a sponsoring organization, 
management plans and appropriate records on facility operations;
    (4) Sponsoring organization operations. If a new sponsoring 
organization, documents in its management plan that it will:
    (i) Provide adequate and regular training of sponsoring organization 
staff and sponsored facilities in accordance with Sec. Sec.
226.15(e)(12) and (e)(14) and 226.16(d)(2) and (d)(3);
    (ii) Perform monitoring in accordance with Sec.226.16(d)(4), to 
ensure that sponsored facilities accountably and appropriately operate 
the Program;
    (iii) If a sponsor of family day care homes, accurately classify day 
care

[[Page 190]]

homes as tier I or tier II in accordance with Sec.226.15(f); and
    (iv) Have a system in place to ensure that administrative costs 
funded from Program reimbursements do not exceed regulatory limits set 
forth at Sec. Sec.226.12(a) and 226.16(b)(1); and
    (5) Meal service and other operational requirements. Independent 
centers and facilities will follow practices that result in the 
operation of the Program in accordance with the meal service, 
recordkeeping, and other operational requirements of this part. These 
practices must be documented in the independent center's application or 
in the sponsoring organization's management plan and must demonstrate 
that independent centers or sponsored facilities will:
    (i) Provide meals that meet the meal patterns set forth in Sec.
226.20;
    (ii) Comply with licensure or approval requirements set forth in 
paragraph (d) of this section;
    (iii) Have a food service that complies with applicable State and 
local health and sanitation requirements;
    (iv) Comply with civil rights requirements;
    (v) Maintain complete and appropriate records on file; and
    (vi) Claim reimbursement only for eligible meals.
    (2) Application procedures for renewing institutions. Each State 
agency must establish application procedures to determine the 
eligibility of renewing institutions under this part. Renewing 
institutions must not be required to submit a free and reduced-price 
policy statement or a nondiscrimination statement unless they make 
substantive changes to either statement. The State agency must require 
each renewing institution participating in the Program to reapply for 
participation at a time determined by the State agency, except that no 
institution may be allowed to participate for less than 12 or more than 
36 calendar months under an existing application, except when the State 
agency determines that unusual circumstances warrant reapplication in 
less than 12 months. The State agency must establish factors, consistent 
with Sec.226.16(b)(1), that it will consider in determining whether a 
renewing sponsoring organization has sufficient staff to perform 
required monitoring responsibilities at all of its sponsored facilities. 
As part of the review of the renewing sponsoring organization's 
management plan, the State agency must determine the appropriate level 
of staffing for the sponsoring organization, consistent with the 
staffing range of monitors set forth at Sec.226.16(b)(1) and the 
factors it has established. The State agency must ensure that each 
currently participating sponsoring organization meets this requirement 
no later than July 29, 2003. At a minimum, the application review 
procedures established by the State agency must require that renewing 
institutions submit information to the State agency in accordance with 
paragraph (f) of this section. In addition, the State agency's 
application review procedures must ensure that the following information 
is included in a renewing institution's application:
    (i) Management plan. For renewing sponsoring organizations, a 
complete management plan that meets the requirements of paragraphs 
(b)(1)(iv), (b)(1)(v), (f)(1)(vi), and (f)(3)(i) of this section and 
Sec.226.7(g);
    (ii) Presence on National disqualified list. A renewing institution 
is prohibited from submitting a renewal application if it or any of its 
principals is currently on the National disqualified list. If such an 
institution submits an application, the State agency must deny the 
application. A renewing sponsoring organization is also prohibited from 
submitting a renewal application on behalf of a facility if the facility 
or any of its principals is on the National disqualified list. If a 
renewing sponsoring organization submits an application on behalf of 
such a facility, the State agency must deny the facility's application;
    (iii) Ineligibility for other publicly funded programs--(A) General. 
A State agency is prohibited from approving a renewing institution's 
application if, during the past seven years, the institution or any of 
its principals have been declared ineligible for any other publicly 
funded program by reason of violating that program's requirements. 
However, this prohibition does not apply if the institution or the 
principal

[[Page 191]]

has been fully reinstated in, or determined eligible for, that program, 
including the payment of any debts owed;
    (B) Certification. Renewing institutions must submit:
    (1) A statement listing the publicly funded programs in which the 
institution and its principals have participated in the past seven 
years; and
    (2) A certification that, during the past seven years, neither the 
institution nor any of its principals have been declared ineligible to 
participate in any other publicly funded program by reason of violating 
that program's requirements; or
    (3) In lieu of the certification, documentation that the institution 
or the principal previously declared ineligible was later fully 
reinstated in, or determined eligible for, the program, including the 
payment of any debts owed; and
    (C) Follow-up. If the State agency has reason to believe that the 
renewing institution or any of its principals were determined ineligible 
to participate in another publicly funded program by reason of violating 
that program's requirements, the State agency must follow up with the 
entity administering the publicly funded program to gather sufficient 
evidence to determine whether the institution or its principals were, in 
fact, determined ineligible;
    (iv) Information on criminal convictions. (A) A State agency is 
prohibited from approving a renewing institution's application if the 
institution or any of its principals have been convicted of any activity 
that occurred during the past seven years and that indicated a lack of 
business integrity. A lack of business integrity includes fraud, 
antitrust violations, embezzlement, theft, forgery, bribery, 
falsification or destruction of records, making false statements, 
receiving stolen property, making false claims, obstruction of justice, 
or any other activity indicating a lack of business integrity as defined 
by the State agency; and
    (B) Renewing institutions must submit a certification that neither 
the institution nor any of its principals have been convicted of any 
activity that occurred during the past seven years and that indicated a 
lack of business integrity. A lack of business integrity includes fraud, 
antitrust violations, embezzlement, theft, forgery, bribery, 
falsification or destruction of records, making false statements, 
receiving stolen property, making false claims, obstruction of justice, 
or any other activity indicating a lack of business integrity as defined 
by the State agency;
    (v) Certification of truth of applications and submission of names 
and addresses. Renewing institutions must submit a certification that 
all information on the application is true and correct, along with the 
name, mailing address, and date of birth of the institution's executive 
director and chairman of the board of directors;
    (vi) Outside employment policy. Renewing sponsoring organizations 
must submit an outside employment policy. The policy must restrict other 
employment by employees that interferes with an employee's performance 
of Program-related duties and responsibilities, including outside 
employment that constitutes a real or apparent conflict of interest. 
Sponsoring organizations that are participating on July 29, 2002, must 
submit an outside employment policy not later than September 27, 2002. 
The policy will be effective unless disapproved by the State agency;
    (vii) Compliance with performance standards. Each renewing 
institution must submit information sufficient to document that it is 
financially viable, is administratively capable of operating the Program 
in accordance with this part, and has internal controls in effect to 
ensure accountability. To document this, any renewing institution must 
demonstrate in its application that it is capable of operating in 
conformance with the following performance standards. The State agency 
must only approve the applications of those renewing institutions that 
meet these performance standards, and must deny the applications of 
those that do not meet the standards.
    (A) Performance Standard 1--Financial viability and financial 
management. The renewing institution must be financially viable. Program 
funds must be expended and accounted for in accordance with the 
requirements of this part, FNS Instruction 796-2 (``Financial Management 
in the Child and Adult Care Food Program''), and parts 3015,

[[Page 192]]

3016 and 3019 of this title. To demonstrate financial viability, the 
renewing institution must document that it meets the following criteria:
    (1) Description of need/recruitment. A renewing sponsoring 
organization must demonstrate that it will use appropriate practices for 
recruiting facilities, consistent with paragraph (p) of this section and 
any State agency requirements;
    (2) Fiscal resources and financial history. A renewing institution 
must demonstrate that it has adequate financial resources to operate the 
CACFP on a daily basis, has adequate sources of funds to withstand 
temporary interruptions in Program payments and/or fiscal claims against 
the institution, and can document financial viability (for example, 
through audits, financial statements, etc.); and
    (3) Budgets. Costs in the renewing institution's budget must be 
necessary, reasonable, allowable, and appropriately documented;
    (B) Performance Standard 2--Administrative capability. The renewing 
institution must be administratively capable. Appropriate and effective 
management practices must be in effect to ensure that the Program 
operates in accordance with this part. To demonstrate administrative 
capability, the renewing institution must document that it meets the 
following criteria:
    (1) Has an adequate number and type of qualified staff to ensure the 
operation of the Program in accordance with this part;
    (2) If a sponsoring organization, documents in its management plan 
that it employs staff sufficient to meet the ratio of monitors to 
facilities, taking into account the factors that the State agency will 
consider in determining a sponsoring organization's staffing needs, as 
set forth in Sec.226.16(b)(1); and
    (3) If a sponsoring organization, has Program policies and 
procedures in writing that assign Program responsibilities and duties, 
and ensure compliance with civil rights requirements; and
    (C) Performance Standard 3--Program accountability. The renewing 
institution must have internal controls and other management systems in 
effect to ensure fiscal accountability and to ensure that the Program 
operates in accordance with the requirements of this part. To 
demonstrate Program accountability, the renewing institution must 
document that it meets the following criteria:
    (1) Board of directors. Has adequate oversight of the Program by its 
governing board of directors;
    (2) Fiscal accountability. Has a financial system with management 
controls specified in writing. For sponsoring organizations, these 
written operational policies must assure:
    (i) Fiscal integrity and accountability for all funds and property 
received, held, and disbursed;
    (ii) The integrity and accountability of all expenses incurred;
    (iii) That claims are processed accurately, and in a timely manner;
    (iv) That funds and property are properly safeguarded and used, and 
expenses incurred, for authorized Program purposes; and
    (v) That a system of safeguards and controls is in place to prevent 
and detect improper financial activities by employees;
    (3) Recordkeeping. Maintains appropriate records to document 
compliance with Program requirements, including budgets, accounting 
records, approved budget amendments, and, if a sponsoring organization, 
management plans and appropriate records on facility operations;
    (4) Sponsoring organization operations. A renewing sponsoring 
organization must document in its management plan that it will:
    (i) Provide adequate and regular training of sponsoring organization 
staff and sponsored facilities in accordance with Sec. Sec.
226.15(e)(12) and (e)(14) and 226.16(d)(2) and (d)(3);
    (ii) Perform monitoring in accordance with Sec.226.16(d)(4), to 
ensure that sponsored facilities accountably and appropriately operate 
the Program;
    (iii) If a sponsor of family day care homes, accurately classify day 
care homes as tier I or tier II in accordance with Sec.226.15(f); and
    (iv) Have a system in place to ensure that administrative costs 
funded from Program reimbursements do not exceed regulatory limits set 
forth at Sec. Sec.226.12(a) and 226.16(b)(1); and

[[Page 193]]

    (5) Meal service and other operational requirements. All independent 
centers and facilities must follow practices that result in the 
operation of the Program in accordance with the meal service, 
recordkeeping, and other operational requirements of this part. These 
practices must be documented in the independent center's application or 
in the sponsoring organization's management plan and must demonstrate 
that independent centers or sponsored facilities:
    (i) Provide meals that meet the meal patterns set forth in Sec.
226.20;
    (ii) Comply with licensure or approval requirements set forth in 
paragraph (d) of this section;
    (iii) Have a food service that complies with applicable State and 
local health and sanitation requirements;
    (iv) Comply with civil rights requirements;
    (v) Maintain complete and appropriate records on file; and
    (vi) Claim reimbursement only for eligible meals.
    (3) State agency notification requirements. Any new or renewing 
institution applying for participation in the Program must be notified 
in writing of approval or disapproval by the State agency, within 30 
calendar days of the State agency's receipt of a complete application. 
Whenever possible, State agencies should provide assistance to 
institutions that have submitted an incomplete application. Any 
disapproved applicant institution or family day care home must be 
notified of the reasons for its disapproval and its right to appeal 
under paragraph (k) or (l), respectively, of this section.
    (4) Program agreements. (i) The State agency must require each 
institution that has been approved for participation in the Program to 
enter into an agreement governing the rights and responsibilities of 
each party. The State agency may allow a renewing institution to amend 
its existing Program agreement in lieu of executing a new agreement. The 
existence of a valid agreement, however, does not eliminate the need for 
an institution to comply with the reapplication and related provisions 
at paragraphs (b) and (f) of this section.
    (ii) State agencies may elect to enter into permanent agreements 
with institutions. However, if they elect not to enter into permanent 
agreements with institutions, the length of time during which such 
agreements are in effect must be no less than one and no more than three 
years, except that:
    (A) The State agency and an institution that is a school food 
authority must enter into a single permanent agreement for all child 
nutrition programs administered by the school food authority and the 
State agency;
    (B) If a State agency denies the application of a renewing 
institution, it must temporarily extend its agreement with that 
institution in accordance with paragraph (c)(2)(iii)(D) of this section;
    (C) If the State agency determines that unusual circumstances 
warrant reapplication in less than 12 months, the State agency may 
approve the agreement with the institution for a period of less than one 
year.
    (iii) Any agreement that extends from one fiscal year into the 
following fiscal year must stipulate that, in subsequent years, the 
agreement is in effect contingent upon the availability of Program 
funds. However, this does not limit the State agency's ability to 
terminate the agreement in accordance with paragraph (c) of this 
section.
    (iv) The Program agreement must provide that the institution accepts 
final financial and administrative responsibility for management of a 
proper, efficient, and effective food service, and will comply with all 
requirements under this part. In addition, the agreement must state that 
the sponsor must comply with all requirements of title VI of the Civil 
Rights Act of 1964, title IX of the Education Amendments of 1972, 
section 504 of the Rehabilitation Act of 1973, the Age Discrimination 
Act of 1975 and the Department's regulations concerning 
nondiscrimination (parts 15, 15a and 15b of this title), including 
requirements for racial and ethnic participation data collection, public 
notification of the nondiscrimination policy, and reviews to assure 
compliance with such policy, to the end that no person may, on the 
grounds of race, color, national origin, sex, age, or disability, be 
excluded from

[[Page 194]]

participation in, be denied the benefits of, or be otherwise subjected 
to discrimination under, the Program.
    (v) The Program agreement must also notify the institution of the 
right of the State agency, the Department, and other State or Federal 
officials to make announced or unannounced reviews of their operations 
during the institution's normal hours of child or adult care operations, 
and that anyone making such reviews must show photo identification that 
demonstrates that they are employees of one of these entities.
    (c) Denial of applications and termination of agreements--(1) Denial 
of a new institution's application--(i) General. If a new institution's 
application does not meet all of the requirements in paragraph (b) of 
this section and in Sec. Sec.226.15(b) and 226.16(b), the State agency 
must deny the application. If, in reviewing a new institution's 
application, the State agency determines that the institution has 
committed one or more serious deficiency listed in paragraph (c)(1)(ii) 
of this section, the State agency must initiate action to:
    (A) Deny the new institution's application; and
    (B) Disqualify the new institution and the responsible principals 
and responsible individuals (e.g., the person who signs the 
application).
    (ii) List of serious deficiencies for new institutions. The list of 
serious deficiencies is not identical for each category of institution 
(new, renewing, participating) because the type of information likely to 
be available to the State agency is different, depending on whether the 
State agency is reviewing a new or renewing institution's application or 
is conducting a review of a participating institution. Serious 
deficiencies for new institutions are:
    (A) Submission of false information on the institution's 
application, including but not limited to a determination that the 
institution has concealed a conviction for any activity that occurred 
during the past seven years and that indicates a lack of business 
integrity. A lack of business integrity includes fraud, antitrust 
violations, embezzlement, theft, forgery, bribery, falsification or 
destruction of records, making false statements, receiving stolen 
property, making false claims, obstruction of justice, or any other 
activity indicating a lack of business integrity as defined by the State 
agency; or
    (B) Any other action affecting the institution's ability to 
administer the Program in accordance with Program requirements.
    (iii) Serious deficiency notification procedures for new 
institutions. If the State agency determines that a new institution has 
committed one or more serious deficiency listed in paragraph (c)(1)(ii) 
of this section, the State agency must use the following procedures to 
provide the institution and the responsible principals and responsible 
individuals with notice of the serious deficiency(ies) and an 
opportunity to take corrective action.
    (A) Notice of serious deficiency. The State agency must notify the 
institution's executive director and chairman of the board of directors 
that the institution has been determined to be seriously deficient. The 
notice must identify the responsible principals and responsible 
individuals (e.g., for new institutions, the person who signed the 
application) and must be sent to those persons as well. The State agency 
may specify in the notice different corrective action, and time periods 
for completing the corrective action, for the institution and the 
responsible principals and responsible individuals. At the same time the 
notice is issued, the State agency must add the institution to the State 
agency list, along with the basis for the serious deficiency 
determination, and provide a copy of the notice to the appropriate 
FNSRO. The notice must also specify:
    (1) The serious deficiency(ies);
    (2) The actions to be taken to correct the serious deficiency(ies);
    (3) The time allotted to correct the serious deficiency(ies) in 
accordance with paragraph (c)(4) of this section.
    (4) That the serious deficiency determination is not subject to 
administrative review;
    (5) That failure to fully and permanently correct the serious 
deficiency(ies) within the allotted time will result in denial of the 
institution's application and the disqualification of the institution 
and the responsible

[[Page 195]]

principals and responsible individuals; and
    (6) That the State agency will not pay any claims for reimbursement 
for eligible meals served or allowable administrative expenses incurred 
until the State agency has approved the institution's application and 
the institution has signed a Program agreement.
    (B) Successful corrective action. (1) If corrective action has been 
taken to fully and permanently correct the serious deficiency(ies) 
within the allotted time and to the State agency's satisfaction, the 
State agency must:
    (i) notify the institution's executive director and chairman of the 
board of directors, and the responsible principals and responsible 
individuals, that the State agency has rescinded its serious deficiency 
determination; and
    (ii) offer the new institution the opportunity to resubmit its 
application. If the new institution resubmits its application, the State 
agency must complete its review of the application within 30 days after 
receiving a complete and correct application.
    (2) If corrective action is complete for the institution but not for 
all of the responsible principals and responsible individuals (or vice 
versa), the State agency must:
    (i) continue with the actions (as set forth in paragraph 
(c)(1)(iii)(C) of this section) against the remaining parties;
    (ii) at the same time the notice is issued, the State agency must 
also update the State agency list to indicate that the serious 
deficiency(ies) has(ve) been corrected and provide a copy of the notice 
to the appropriate FNSRO; and
    (iii) if the new institution has corrected the serious 
deficiency(ies), offer it the opportunity to resubmit its application. 
If the new institution resubmits its application, the State agency must 
complete its review of the application within 30 days after receiving a 
complete and correct application.
    (C) Application denial and proposed disqualification. If timely 
corrective action is not taken to fully and permanently correct the 
serious deficiency(ies), the State agency must notify the institution's 
executive director and chairman of the board of directors, and the 
responsible principals and responsible individuals, that the 
institution's application has been denied. At the same time the notice 
is issued, the State agency must also update the State agency list and 
provide a copy of the notice to the appropriate FNSRO. The notice must 
also specify:
    (1) That the institution's application has been denied and the State 
agency is proposing to disqualify the institution and the responsible 
principals and responsible individuals;
    (2) The basis for the actions; and
    (3) The procedures for seeking an administrative review (in 
accordance with paragraph (k) of this section) of the application denial 
and proposed disqualifications.
    (D) Program payments. The State agency is prohibited from paying any 
claims for reimbursement from a new institution for eligible meals 
served or allowable administrative expenses incurred until the State 
agency has approved its application and the institution and State agency 
have signed a Program agreement.
    (E) Disqualification. When the time for requesting an administrative 
review expires or when the administrative review official upholds the 
State agency's denial and proposed disqualifications, the State agency 
must notify the institution's executive director and chairman of the 
board of directors, and the responsible principals and responsible 
individuals that the institution and the responsible principal and 
responsible individuals have been disqualified. At the same time the 
notice is issued, the State agency must also update the State agency 
list and provide a copy of the notice and the mailing address and date 
of birth for each responsible principal and responsible individual to 
the appropriate FNSRO.
    (2) Denial of a renewing institution's application--(i) General. If 
a renewing institution's application does not meet all of the 
requirements in paragraph (b) of this section and in Sec. Sec.
226.15(b) and 226.16(b), the State agency must deny the application. If, 
in reviewing a renewing institution's application, the State agency 
determines that the institution has committed one or more serious 
deficiency listed in paragraph

[[Page 196]]

(c)(2)(ii) of this section, the State agency must initiate action to 
deny the renewing institution's application and initiate action to 
disqualify the renewing institution and the responsible principals and 
responsible individuals.
    (ii) List of serious deficiencies for renewing institutions. The 
list of serious deficiencies is not identical for each category of 
institution (new, renewing, participating) because the type of 
information likely to be available to the State agency is different, 
depending on whether the State agency is reviewing a new or renewing 
institution's application or is conducting a review of a participating 
institution. Serious deficiencies for renewing institutions are:
    (A) Submission of false information on the institution's 
application, including but not limited to a determination that the 
institution has concealed a conviction for any activity that occurred 
during the past seven years and that indicates a lack of business 
integrity. A lack of business integrity includes fraud, antitrust 
violations, embezzlement, theft, forgery, bribery, falsification or 
destruction of records, making false statements, receiving stolen 
property, making false claims, obstruction of justice, or any other 
activity indicating a lack of business integrity as defined by the State 
agency;
    (B) Failure to operate the Program in conformance with the 
performance standards set forth in paragraphs (b)(1)(xviii) and 
(b)(2)(vii) of this section;
    (C) Failure to comply with the bid procedures and contract 
requirements of applicable Federal procurement regulations;
    (D) Use of a food service management company that is in violation of 
health codes;
    (E) Failure by a sponsoring organization of day care homes to 
properly classify day care homes as tier I or tier II in accordance with 
Sec.226.15(f);
    (F) Failure by a sponsoring organization to properly train or 
monitor sponsored facilities in accordance with Sec.226.16(d);
    (G) Failure to perform any of the other financial and administrative 
responsibilities required by this part;
    (H) Failure to properly implement and administer the day care home 
termination and administrative review provisions set forth at paragraph 
(l) of this section and Sec.226.16(l); or
    (I) any other action affecting the institution's ability to 
administer the Program in accordance with Program requirements.
    (iii) Serious deficiency notification procedures for renewing 
institutions. If the State agency determines that a renewing institution 
has committed one or more serious deficiency listed in paragraph 
(c)(2)(ii) of this section, the State agency must use the following 
procedures to provide the institution and the responsible principals and 
responsible individuals notice of the serious deficiency(ies) and an 
opportunity to take corrective action.
    (A) Notice of serious deficiency. The State agency must notify the 
institution's executive director and chairman of the board of directors 
that the institution has been determined to be seriously deficient. The 
notice must identify the responsible principals and responsible 
individuals and must be sent to those persons as well. The State agency 
may specify in the notice different corrective action, and time periods 
for completing the corrective action, for the institution and the 
responsible principals and responsible individuals. At the same time the 
notice is issued, the State agency must add the institution to the State 
agency list, along with the basis for the serious deficiency 
determination, and provide a copy of the notice to the appropriate 
FNSRO. The notice must also specify:
    (1) The serious deficiency(ies);
    (2) The actions to be taken to correct the serious deficiency(ies);
    (3) The time allotted to correct the serious deficiency(ies) in 
accordance with paragraph (c)(4) of this section;
    (4) That the serious deficiency determination is not subject to 
administrative review.
    (5) That failure to fully and permanently correct the serious 
deficiency(ies) within the allotted time will result in the State 
agency's denial of the institution's application, the proposed 
termination of the institution's agreement (if the State agency has 
temporarily extended the agreement pursuant to paragraph

[[Page 197]]

(c)(2)(iii)(D) of this section) and the proposed disqualification of the 
institution and the responsible principals and responsible individuals; 
and
    (6) That the institution's voluntary termination of its agreement 
with the State agency after having been notified that it is seriously 
deficient will still result in the instituion's formal termination by 
the State agency and placement of the institution and its responsible 
principals and responsible individuals on the National disqualified 
list.
    (B) Successful corrective action. (1) If corrective action has been 
taken to fully and permanently correct the serious deficiency(ies) 
within the allotted time and to the State agency's satisfaction, the 
State agency must:
    (i) Notify the institution's executive director and chairman of the 
board of directors, and the responsible principals and responsible 
individuals, that the State agency has rescinded its serious deficiency 
determination; and
    (ii) Offer the renewing institution the opportunity to resubmit its 
application. If the renewing institution resubmits its application, the 
State agency must complete its review of the application within 30 days 
after receiving a complete and correct application.
    (2) If corrective action is complete for the institution but not for 
all of the responsible principals and responsible individuals (or vice 
versa), the State agency must:
    (i) continue with the actions (as set forth in paragraph 
(c)(2)(iii)(C) of this section) against the remaining parties;
    (ii) at the same time the notice is issued, the State agency must 
also update the State agency list to indicate that the serious 
deficiency(ies) has(ve) been corrected and provide a copy of the notice 
to the appropriate FNSRO; and
    (iii) if the renewing institution has corrected the serious 
deficiency(ies), offer it the opportunity to resubmit its application. 
If the renewing institution resubmits its application, the State agency 
must complete its review of the application within 30 days after 
receiving a complete and correct application.
    (C) Application denial and proposed disqualification. If timely 
corrective action is not taken to fully and permanently correct the 
serious deficiency(ies), the State agency must notify the institution's 
executive director and chairman of the board of directors, and the 
responsible principals and responsible individuals, that the 
institution's application has been denied. At the same time the notice 
is issued, the State agency must update the State agency list and 
provide a copy of the notice to the appropriate FNSRO. The notice must 
also specify:
    (1) That the institution's application has been denied and the State 
agency is proposing to terminate the institution's temporarily-extended 
agreement and to disqualify the institution and the responsible 
principals and responsible individuals;
    (2) The basis for the actions;
    (3) That, if the institution voluntarily terminates its agreement 
after receiving the notice of the proposed termination, the institution 
and the responsible principals and responsible individuals will be 
disqualified;
    (4) The procedures for seeking an administrative review (in 
accordance with paragraph (k) of this section) of the application denial 
and proposed disqualifications; and
    (5) That the institution may continue to participate in the Program 
and receive Program reimbursement for eligible meals served and 
allowable administrative costs incurred until its administrative review 
is completed.
    (D) Program payments and extended agreement. If the renewing 
institution's agreement expires before the end of the time allotted for 
corrective action, and/or the conclusion of any administrative review 
requested by the renewing institution:
    (1) The State agency must temporarily extend its current agreement 
with the renewing institution and continue to pay any valid unpaid 
claims for reimbursement for eligible meals served and allowable 
administrative expenses incurred; and
    (2) The actions set forth in paragraph (c)(2)(iii)(D)91) of this 
section must be taken either until the serious deficiency(ies) is 
corrected or until the institution's agreement is terminated, including 
the period of any administrative review;

[[Page 198]]

    (E) Agreement termination and disqualification. When the time for 
requesting an administrative review expires or when the administrative 
review official upholds the State agency's denial of the institution's 
application, the proposed termination, and the proposed 
disqualifications, the State agency must:
    (1) Notify the institution's executive director and chairman of the 
board of directors, and the responsible principals and responsible 
individuals, that the temporarily-extended agreement has been terminated 
and that the institution and the responsible principals and responsible 
individuals have been disqualified;
    (2) Update the State agency list at the time such notice is issued; 
and
    (3) Provide a copy of the notice and the mailing address and date of 
birth for each responsible principal and responsible individual to the 
appropriate FNSRO.
    (3) Termination of a participating institution's agreement. (i) 
General. If the State agency holds an agreement with an institution 
operating in more than one State that has been disqualified from the 
Program by another State agency and placed on the National disqualified 
list, the State agency must terminate the institution's agreement 
effective no later than 45 days of the date of the institution's 
disqualification by the other State agency. At the same time the notice 
of termination is issued, the State agency must add the institution to 
the State agency list and indicate that the institution's agreement has 
been terminated and provide a copy of the notice to the appropriate 
FNSRO. If the State agency determines that a participating institution 
has committed one or more serious deficiency listed in paragraph 
(c)(3)(ii) of this section, the State agency must initiate action to 
terminate the agreement of a participating institution and initiate 
action to disqualify the institution and any responsible principals and 
responsible individuals.
    (ii) List of serious deficiencies for participating institutions. 
The list of serious deficiencies is not identical for each category of 
institution (new, renewing, participating) because the type of 
information likely to be available to the State agency is different, 
depending on whether the State agency is reviewing a new or renewing 
institution's application or is conducting a review of a participating 
institution. Serious deficiencies for participating institutions are:
    (A) Submission of false information on the institution's 
application, including but not limited to a determination that the 
institution has concealed a conviction for any activity that occurred 
during the past seven years and that indicates a lack of business 
integrity. A lack of business integrity includes fraud, antitrust 
violations, embezzlement, theft, forgery, bribery, falsification or 
destruction of records, making false statements, receiving stolen 
property, making false claims, obstruction of justice, or any other 
activity indicating a lack of business integrity as defined by the State 
agency;
    (B) Permitting an individual who is on the National disqualified 
list to serve in a principal capacity with the institution or, if a 
sponsoring organization, permitting such an individual to serve as a 
principal in a sponsored center or as a day care home;
    (C) Failure to operate the Program in conformance with the 
performance standards set forth in paragraphs (b)(1)(xviii) and 
(b)(2)(vii) of this section;
    (D) Failure to comply with the bid procedures and contract 
requirements of applicable Federal procurement regulations;
    (E) Failure to return to the State agency any advance payments that 
exceeded the amount earned for serving eligible meals, or failure to 
return disallowed start-up or expansion payments;
    (F) Failure to maintain adequate records;
    (G) Failure to adjust meal orders to conform to variations in the 
number of participants;
    (H) Claiming reimbursement for meals not served to participants;
    (I) Claiming reimbursement for a significant number of meals that do 
not meet Program requirements;
    (J) Use of a food service management company that is in violation of 
health codes;

[[Page 199]]

    (K) Failure of a sponsoring organization to disburse payments to its 
facilities in accordance with the regulations at Sec.226.16(g) and (h) 
or in accordance with its management plan;
    (L) Claiming reimbursement for meals served by a for-profit child 
care center or a for-profit outside-school-hours care center during a 
calendar month in which less than 25 percent of the children in care 
(enrolled or licensed capacity, whichever is less) were eligible for 
free or reduced-price meals or were title XX beneficiaries;
    (M) Claiming reimbursement for meals served by a for-profit adult 
day care center during a calendar month in which less than 25 percent of 
its enrolled adult participants were title XIX or title XX 
beneficiaries;
    (N) Failure by a sponsoring organization of day care homes to 
properly classify day care homes as tier I or tier II in accordance with 
Sec.226.15(f);
    (O) Failure by a sponsoring organization to properly train or 
monitor sponsored facilities in accordance with Sec.226.16(d);
    (P) Use of day care home funds by a sponsoring organization to pay 
for the sponsoring organization's administrative expenses;
    (Q) Failure to perform any of the other financial and administrative 
responsibilities required by this part;
    (R) Failure to properly implement and administer the day care home 
termination and administrative review provisions set forth at paragraph 
(l) of this section and Sec.226.16(l);
    (S) The fact the institution or any of the institution's principals 
have been declared ineligible for any other publicly funded program by 
reason of violating that program's requirements. However, this 
prohibition does not apply if the institution or the principal has been 
fully reinstated in, or is now eligible to participate in, that program, 
including the payment of any debts owed;
    (T) Conviction of the institution or any of its principals for any 
activity that occurred during the past seven years and that indicates a 
lack of business integrity. A lack of business integrity includes fraud, 
antitrust violations, embezzlement, theft, forgery, bribery, 
falsification or destruction of records, making false statements, 
receiving stolen property, making false claims, obstruction of justice, 
or any other activity indicating a lack of business integrity as defined 
by the State agency; or
    (U) Any other action affecting the institution's ability to 
administer the Program in accordance with Program requirements.
    (iii) Serious deficiency notification procedures for participating 
institutions. If the State agency determines that a participating 
institution has committed one or more serious deficiency listed in 
paragraph (c)(3)(ii) of this section, the State agency must use the 
following procedures to provide the institution and the responsible 
principals and responsible individuals notice of the serious 
deficiency(ies) and an opportunity to take corrective action. However, 
if the serious deficiency(ies) constitutes an imminent threat to the 
health or safety of participants, or the institution has engaged in 
activities that threaten the public health or safety, the State agency 
must follow the procedures in paragraph (c)(5)(i) of this section 
instead of the procedures below. Further, if the serious deficiency is 
the submission of a false or fraudulent claim, in addition to the 
procedures below, the State agency may suspend the institution's 
participation in accordance with paragraph (c)(5)(ii) of this section.
    (A) Notice of serious deficiency. The State agency must notify the 
institution's executive director and chairman of the board of directors 
that the institution has been determined seriously deficient. The notice 
must identify the responsible principals and responsible individuals and 
must be sent to those persons as well. The State agency may specify in 
the notice different corrective action and time periods for completing 
the corrective action for the institution and the responsible principals 
and responsible individuals. At the same time the notice is issued, the 
State agency must add the institution to the State agency list, along 
with the basis for the serious deficiency determination, and provide a 
copy of the notice to the appropriate FNSRO. The notice must also 
specify:
    (1) The serious deficiency(ies);

[[Page 200]]

    (2) The actions to be taken to correct the serious deficiency(ies);
    (3) The time allotted to correct the serious deficiency(ies) in 
accordance with paragraph (c)(4) of this section;
    (4) That the serious deficiency determination is not subject to 
administrative review.
    (5) That failure to fully and permanently correct the serious 
deficiency(ies) within the allotted time will result in the State 
agency's proposed termination of the institution's agreement and the 
proposed disqualification of the institution and the responsible 
principals and responsible individuals; and
    (6) That the institution's voluntary termination of its agreement 
with the State agency after having been notified that it is seriously 
deficient will still result in the instituion's formal termination by 
the State agency and placement of the institution and its responsible 
principals and responsible individuals on the National disqualified 
list.
    (B) Successful corrective action. (1) If corrective action has been 
taken to fully and permanently correct the serious deficiency(ies) 
within the allotted time and to the State agency's satisfaction, the 
State agency must:
    (i) Notify the institution's executive director and chairman of the 
board of directors, and the responsible principals and responsible 
individuals, that the State agency has rescinded its serious deficiency 
determination; and
    (ii) Offer the renewing institution the opportunity to resubmit its 
application. If the renewing institution resubmits its application, the 
State agency must complete its review of the application within 30 days 
after receiving a complete and correct application.
    (2) If corrective action is complete for the institution but not for 
all of the responsible principals and responsible individuals (or vice 
versa), the State agency must:
    (i) Continue with the actions (as set forth in paragraph 
(c)(3)(iii)(C) of this section) against the remaining parties;
    (ii) At the same time the notice is issued, the State agency must 
also update the State agency list to indicate that the serious 
deficiency(ies) has(ve) been corrected and provide a copy of the notice 
to the appropriate FNSRO; and
    (iii) If the renewing institution has corrected the serious 
deficiency(ies), offer it the opportunity to resubmit its application. 
If the renewing institution resubmits its application, the State agency 
must complete its review of the application within 30 days after 
receiving a complete and correct application.
    (C) Proposed termination and proposed disqualification. If timely 
corrective action is not taken to fully and permanently correct the 
serious deficiency(ies), the State agency must notify the institution's 
executive director and chairman of the board of directors, and the 
responsible principals and responsible individuals, that the State 
agency is proposing to terminate the institution's agreement and to 
disqualify the institution and the responsible principals and 
responsible individuals. At the same time the notice is issued, the 
State agency must also update the State agency list and provide a copy 
of the notice to the appropriate FNSRO. The notice must also specify:
    (1) That the State agency is proposing to terminate the 
institution's agreement and to disqualify the institution and the 
responsible principals and responsible individuals;
    (2) The basis for the actions;
    (3) That, if the institution voluntarily terminates its agreement 
after receiving the notice of proposed termination, the institution and 
the responsible principals and responsible individuals will be 
disqualified.
    (4) The procedures for seeking an administrative review (in 
accordance with paragraph (k) of this section) of the application denial 
and proposed disqualifications; and
    (5) That, unless participation has been suspended, the institution 
may continue to participate and receive Program reimbursement for 
eligible meals served and allowable administrative costs incurred until 
its administrative review is completed.
    (D) Program payments. Unless participation has been suspended, the 
State agency must continue to pay any valid unpaid claims for 
reimbursement for eligible meals served and allowable administrative 
expenses incurred until the serious deficiency(ies) is corrected

[[Page 201]]

or the institution's agreement is terminated, including the period of 
any administrative review.
    (E) Agreement termination and disqualification. When the time for 
requesting an administrative review expires or when the administrative 
review official upholds the State agency's proposed termination and 
disqualifications, the State agency must:
    (1) Notify the institution's executive director and chairman of the 
board of directors, and the responsible principals and responsible 
individuals, that the institution's agreement has been terminated and 
that the institution and the responsible principals and responsible 
individuals have been disqualified;
    (2) Update the State agency list at the time such notice is issued; 
and
    (3) Provide a copy of the notice and the mailing address and date of 
birth for each responsible principal and responsible individual to the 
appropriate FNSRO.
    (4) Corrective action timeframes--(i) General. Except as noted in 
this paragraph (c)(4), the State agency is prohibited from allowing more 
than 90 days for corrective action from the date the institution 
receives the serious deficiency notice.
    (ii) Unlawful practices. If the State agency determines that the 
institution has engaged in unlawful practices, submitted false or 
fraudulent claims or other information to the State agency, or been 
convicted of or concealed a criminal background, the State agency is 
prohibited from allowing more than 30 days for corrective action.
    (iii) Long-term changes. For serious deficiencies requiring the 
long-term revision of management systems or processes, the State agency 
may permit more than 90 days to complete the corrective action as long 
as a corrective action plan is submitted to and approved by the State 
agency within 90 days (or such shorter deadline as the State agency may 
establish). The corrective action must include milestones and a definite 
completion date that the State agency will monitor. The determination of 
serious deficiency will remain in effect until the State agency 
determines that the serious deficiency(ies) has(ve) been fully and 
permanently corrected within the allotted time.
    (5) Suspension of an institution's participation. A State agency is 
prohibited from suspending an institution's participation (including all 
Program payments) except for the reasons set forth in this paragraph 
(c)(5).
    (i) Public health or safety--(A) General. If State or local health 
or licensing officials have cited an institution for serious health or 
safety violations, the State agency must immediately suspend the 
institution's Program participation, initiate action to terminate the 
institution's agreement, and initiate action to disqualify the 
institution and the responsible principals and responsible individuals 
prior to any formal action to revoke the institution's licensure or 
approval. If the State agency determines that there is an imminent 
threat to the health or safety of participants at an institution, or 
that the institution has engaged in activities that threaten the public 
health or safety, the State agency must immediately notify the 
appropriate State or local licensing and health authorities and take 
action that is consistent with the recommendations and requirements of 
those authorities. An imminent threat to the health or safety of 
participants and engaging in activities that threaten the public health 
or safety constitute serious deficiencies; however, the State agency 
must use the procedures in this paragraph (c)(5)(i) (instead of the 
procedures in paragraph (c)(3) of this section) to provide the 
institution notice of the suspension of participation, serious 
deficiency, proposed termination of the institution's agreement, and 
proposed disqualification of the responsible principals and responsible 
individuals.
    (B) Notice of suspension, serious deficiency, proposed termination, 
and proposed disqualification. The State agency must notify the 
institution's executive director and chairman of the board of directors 
that the institution's participation (including Program payments) has 
been suspended, that the institution has been determined to be seriously 
deficient, and that the State agency proposes to terminate the 
institution's agreement and to disqualify the institution and the 
responsible

[[Page 202]]

principals and responsible individuals. The notice must also identify 
the responsible principals and responsible individuals and must be sent 
to those persons as well. At the same time this notice is sent, the 
State agency must add the institution and the responsible principals and 
responsible individuals to the State agency list, along with the basis 
for the serious deficiency determination and provide a copy of the 
notice to the appropriate FNSRO. The notice must also specify:
    (1) That the State agency is suspending the institution's 
participation (including Program payments), proposing to terminate the 
institution's agreement, and proposing to disqualify the institution and 
the responsible principals and responsible individuals;
    (2) The serious deficiency(ies);
    (3) That, if the institution voluntary terminates its agreement with 
the State agency after having been notified of the proposed termination, 
the institution and the responsible principals and responsible 
individuals will be disqualified;
    (4) That the serious deficiency determination is not subject to 
administrative review;
    (5) The procedures for seeking an administrative review (consistent 
with paragraph (k) of this section) of the suspension, proposed 
termination, and proposed disqualifications; and
    (6) That, if the administrative review official overturns the 
suspension, the institution may claim reimbursement for eligible meals 
served and allowable administrative costs incurred during the suspension 
period.
    (C) Agreement termination and disqualification. When the time for 
requesting an administrative review expires or when the administrative 
review official upholds the State agency's proposed termination and 
disqualifications, the State agency must:
    (1) Notify the institution's executive director and chairman of the 
board of directors, and the responsible principals and responsible 
individuals, that the institution's agreement has been terminated and 
that the institution and the responsible principals and responsible 
individuals have been disqualified;
    (2) update the State agency list at the time such notice is issued; 
and
    (3) provide a copy of the notice and the mailing address and date of 
birth for each responsible principal and responsible individual to the 
appropriate FNSRO.
    (D) Program payments. The State agency is prohibited from paying any 
claims for reimbursement from a suspended institution. However, if the 
suspended institution prevails in the administrative review of the 
proposed termination, the State agency must pay any claims for 
reimbursement for eligible meals served and allowable administrative 
costs incurred during the suspension period.
    (ii) False or fraudulent claims--(A) General. If the State agency 
determines that an institution has knowingly submitted a false or 
fraudulent claim, the State agency may initiate action to suspend the 
institution's participation and must initiate action to terminate the 
institution's agreement and initiate action to disqualify the 
institution and the responsible principals and responsible individuals 
(in accordance with paragraph (c)(3) of this section). The submission of 
a false or fraudulent claim constitutes a serious deficiency as set 
forth in paragraph (c)(3)(ii) of this section, which lists serious 
deficiencies for participating institutions. If the State agency wishes 
to suspend the institution's participation, it must use the following 
procedures to issue the notice of proposed suspension of participation 
at the same time it issues the serious deficiency notice, which must 
include the information described in paragraph (c)(3)(iii)(A) of this 
section.
    (B) Proposed suspension of participation. If the State agency 
decides to propose to suspend an institution's participation due to the 
institution's submission of a false or fraudulent claim, it must notify 
the institution's executive director and chairman of the board of 
directors that the State agency intends to suspend the institution's 
participation (including all Program payments) unless the institution 
requests a review of the proposed suspension. At the same time the 
notice is issued, the State agency must also update the State agency 
list and provide a copy of

[[Page 203]]

the notice to the appropriate FNSRO. The notice must identify the 
responsible principals and responsible individuals and must be sent to 
those persons as well. The notice must also specify:
    (1) That the State agency is proposing to suspend the institution's 
participation;
    (2) That the proposed suspension is based on the institution's 
submission of a false or fraudulent claim, as described in the serious 
deficiency notice;
    (3) The effective date of the suspension (which may be no earlier 
than 10 days after the institution receives the suspension notice);
    (4) The name, address and telephone number of the suspension review 
official who will conduct the suspension review; and
    (5) That if the institution wishes to have a suspension review, it 
must request a review and submit to the suspension review official 
written documentation opposing the proposed suspension within 10 days of 
the institution's receipt of the notice.
    (C) Suspension review. If the institution requests a review of the 
State agency's proposed suspension of participation, the suspension 
review must be heard by a suspension review official who must:
    (1) Be an independent and impartial person other than, and not 
accountable to, any person involved in the decision to initiate 
suspension proceedings;
    (2) Immediately notify the State agency that the institution has 
contested the proposed suspension and must obtain from the State agency 
its notice of proposed suspension of participation, along with all 
supporting documentation; and
    (3) Render a decision on suspension of participation within 10 days 
of the deadline for receiving the institution's documentation opposing 
the proposed suspension.
    (D) Suspension review decision. If the suspension review official 
determines that the State agency's proposed suspension is not 
appropriate, the State agency is prohibited from suspending 
participation. If the suspension review official determines, based on a 
preponderance of the evidence, that the State agency's action was 
appropriate, the State agency must suspend the institution's 
participation (including all Program payments), effective on the date of 
the suspension review decision. The State agency must notify the 
institution's executive director and chairman of the board of directors, 
and the responsible principals and responsible individuals, that the 
institution's participation has been suspended. At the same time the 
notice is issued, the State agency must also update the State agency 
list and provide a copy of the notice to the appropriate FNSRO. The 
notice must also specify:
    (1) That the State agency is suspending the institution's 
participation (including Program payments);
    (2) The effective date of the suspension (the date of the suspension 
review decision);
    (3) The procedures for seeking an administrative review (in 
accordance with paragraph (k) of this section) of the suspension; and
    (4) That if the administrative review official overturns the 
suspension, the institution may claim reimbursement for eligible meals 
served and allowable administrative costs incurred during the suspension 
period.
    (E) Program payments. A State agency is prohibited from paying any 
claims for reimbursement submitted by a suspended institution. However, 
if the institution suspended for the submission of false or fraudulent 
claims is a sponsoring organization, the State agency must ensure that 
sponsored facilities continue to receive reimbursement for eligible 
meals served during the suspension period. If the suspended institution 
prevails in the administrative review of the proposed termination, the 
State agency must pay any valid unpaid claims for reimbursement for 
eligible meals served and allowable administrative costs incurred during 
the suspension period.
    (F) Maximum time for suspension. Under no circumstances may the 
suspension of participation remain in effect for more than 120 days 
following the suspension review decision.
    (6) FNS determination of serious deficiency. (i) General. FNS may 
determine independently that a participating institution has committed 
one or more serious deficiency listed in paragraph

[[Page 204]]

(c)(3)(ii) of this section, which lists serious deficiencies for 
participating institutions.
    (ii) Serious deficiency notification procedures. If FNS determines 
that an institution has committed one or more serious deficiency listed 
in paragraph (c)(3)(ii) of this section (the list of serious 
deficiencies for participating institutions), FNS will use the following 
procedures to provide the institution and the responsible principals and 
responsible individuals with notice of the serious deficiency(ies) and 
an opportunity to take corrective action.
    (A) Notice of serious deficiency. FNS will notify the institution's 
executive director and chairman of the board of directors that the 
institution has been found to be seriously deficient. The notice will 
identify the responsible principals and responsible individuals and will 
be sent to them as well. FNS may specify in the notice different 
corrective action and time periods for completing the corrective action, 
for the institution and the responsible principals and responsible 
individuals. The notice will also specify:
    (1) The serious deficiency(ies);
    (2) The actions to be taken to correct the serious deficiency(ies);
    (3) The time allotted to correct the serious deficiency(ies) in 
accordance with paragraph (c)(4) of this section;
    (4) That failure to fully and permanently correct the serious 
deficiency(ies) within the allotted time, or the institution's voluntary 
termination of its agreement(s) with any State agency after having been 
notified that it is seriously deficient, will result in the proposed 
disqualification of the institution and the responsible principals and 
responsible individuals and the termination of its agreement(s) with all 
State agencies; and
    (5) That the serious deficiency determination is not subject to 
administrative review.
    (B) Suspension of participation. If FNS determines that there is an 
imminent threat to the health or safety of participants at an 
institution, or that the institution has engaged in activities that 
threaten the public health or safety, any State agency that holds an 
agreement with the institution must suspend the participation of the 
institution. If FNS determines that the institution has submitted a 
false or fraudulent claim, it may require any State agency that holds an 
agreement with the institution to initiate action to suspend the 
institution's participation for false or fraudulent claims in accordance 
with paragraph (c)(5)(ii) of this section (which deals with an 
institution's suspension by a State agency for submission of false or 
fraudulent claims). In both cases, FNS will provide the State agency the 
information necessary to support these actions and, in the case of a 
false and fraudulent claim, will provide an individual to serve as the 
suspension review official if requested by the State agency.
    (C) Successful corrective action. (1) If corrective action has been 
taken to fully and permanently correct the serious deficiency(ies) 
within the allotted time and to FNS's satisfaction, FNS will notify the 
institution's executive director and chairman of the board of directors, 
and the responsible principals and responsible individuals, that it has 
rescinded its serious deficiency determination; and
    (2) If corrective action is complete for the institution but not for 
all of the responsible principals and responsible individuals (or vice 
versa), FNS will continue with the actions (as set forth in paragraph 
(c)(6)(ii)(D) of this section) against the remaining parties.
    (D) Proposed disqualification. If timely corrective action is not 
taken to fully and permanently correct the serious deficiency(ies), FNS 
will notify the institution's executive director and chairman of the 
board of directors, and the responsible principals and responsible 
individuals, that FNS is proposing to disqualify them. The notice will 
also specify:
    (1) That FNS is proposing to disqualify the institution and the 
responsible principals and responsible individuals;
    (2) The basis for the actions;
    (3) That, if the institution seeks to voluntarily terminate its 
agreement after receiving the notice of proposed disqualification, the 
institution and the responsible principals and responsible individuals 
will be disqualified;
    (4) The procedures for seeking an administrative review (in 
accordance

[[Page 205]]

with paragraph (k) of this section) of the proposed disqualifications;
    (5) That unless participation has been suspended, the institution 
may continue to participate and receive Program reimbursement for 
eligible meals served and allowable administrative costs incurred until 
its administrative review is completed; and
    (6) That if the institution does not prevail in the administrative 
review, any State agency holding an agreement with the institution will 
be required to terminate that agreement and the institution is 
prohibited from seeking an administrative review of the termination of 
the agreement by the State agency(ies).
    (E) Disqualification. When the time for requesting an administrative 
review expires or when the administrative review official upholds FNS's 
proposed disqualifications, FNS will notify the institution's executive 
director and chairman of the board of directors, and the responsible 
principals and responsible individuals, that the institution and the 
responsible principal or responsible individual have been disqualified.
    (F) Program payments. If the State agency holds an agreement with an 
institution that FNS has determined to be seriously deficient, the State 
agency must continue to pay any valid unpaid claims for reimbursement 
for eligible meals served and allowable administrative expenses incurred 
until the serious deficiency(ies) is corrected or the State agency 
terminates the institution's agreement, including the period of any 
administrative review, unless participation has been suspended.
    (G) Required State agency action. (1) Disqualified institutions. If 
the State agency holds an agreement with an institution that FNS 
determines to be seriously deficient and subsequently disqualifies, the 
State agency must terminate the institution's agreement effective no 
later than 45 days after the date of the institution's disqualification 
by FNS. As noted in paragraph (k)(3)(iv) of this section, the 
termination is not subject to administrative review. At the same time 
the notice of termination is issued, the State agency must add the 
institution to the State agency list and provide a copy of the notice to 
the appropriate FNSRO.
    (2) Disqualified principals. If the State agency holds an agreement 
with an institution whose principal FNS determines to be seriously 
deficient and subsequently disqualifies, the State agency must determine 
the institution to be seriously deficient and initiate action to 
terminate and disqualify the institution in accordance with the 
procedures in paragraph (c)(3) of this section. The State agency must 
initiate these actions no later than 45 days after the date of the 
principal's disqualification by FNS.
    (7) National disqualified list--(i) Maintenance and availability of 
list. FNS will maintain the National disqualified list and make it 
available to all State agencies and all sponsoring organizations.
    (ii) Effect on institutions. No organization on the National 
disqualified list may participate in the Program as an institution. As 
noted in paragraphs (b)(1)(xii) and (b)(2)(ii) of this section, the 
State agency must deny the application of a new or renewing institution 
if the institution is on the National disqualified list. In addition, as 
noted in paragraphs (c)(3)(i) and (c)(6)(ii)(G)(1) of this section, the 
State agency must terminate the agreement of any participating 
institution that is disqualified by another State agency or by FNS.
    (iii) Effect on sponsored centers. No organization on the National 
disqualified list may participate in the Program as a sponsored center. 
As noted in Sec.226.16(b) and paragraphs (b)(1)(xii) and (b)(2)(ii) of 
this section, a sponsoring organization is prohibited from submitting an 
application on behalf of a sponsored facility (and a State agency is 
prohibited from approving such an application) if the facility is on the 
National disqualified list.
    (iv) Effect on individuals. No individual on the National 
disqualified list may serve as a principal in any institution or 
facility or as a day care home provider.
    (A) Principal for an institution or a sponsored facility. As noted 
in paragraphs (b)(1)(xii) and (b)(2)(ii) of this section, the State 
agency must deny the application of a new or renewing

[[Page 206]]

institution if any of the institution's principals is on the National 
disqualified list. As noted in paragraphs (c)(3)(ii)(B) and 
(c)(6)(ii)(G)(2) of this section, the State agency must declare an 
institution seriously deficient and initiate action to terminate the 
institution's agreement and disqualify the institution if the 
institution permits an individual who is on the National disqualified 
list to serve in a principal capacity for the institution or one of its 
facilities.
    (B) Principal for a sponsored facility. As noted in Sec.226.16(b) 
and paragraphs (b)(1)(xii) and (b)(2)(ii) of this section, a sponsoring 
organization is prohibited from submitting an application on behalf of a 
sponsored facility (or a State agency from approving such an 
application) if any of the facility's principals are on the National 
disqualified list.
    (C) Serving as a day care home. As noted in Sec.226.16(b) and 
paragraphs (b)(1)(xii) and (b)(2)(ii) of this section, a sponsoring 
organization is prohibited from submitting an application on behalf of a 
sponsored facility (and a State agency is prohibited from approving such 
an application) if the facility is on the National disqualified list.
    (v) Removal of institutions, principals, and individuals from the 
list. Once included on the National disqualified list, an institution 
and responsible principals and responsible individuals remain on the 
list until such time as FNS, in consultation with the appropriate State 
agency, determines that the serious deficiency(ies) that led to their 
placement on the list has(ve) been corrected, or until seven years have 
elapsed since they were disqualified from participation. However, if the 
institution, principal or individual has failed to repay debts owed 
under the Program, they will remain on the list until the debt has been 
repaid.
    (vi) Removal of day care homes from the list. Once included on the 
National disqualified list, a day care home will remain on the list 
until such time as the State agency determines that the serious 
deficiency(ies) that led to its placement on the list has(ve) been 
corrected, or until seven years have elapsed since its agreement was 
terminated for cause. However, if the day care home has failed to repay 
debts owed under the Program, it will remain on the list until the debt 
has been repaid.
    (8) State agency list. (i) Maintenance of the State agency list. The 
State agency must maintain a State agency list (in the form of an actual 
paper or electronic list or retrievable paper records). The list must be 
made available to FNS upon request, and must include the following 
information:
    (A) Institutions determined to be seriously deficient by the State 
agency, including the names and mailing addresses of the institutions 
and the status of the institutions as they move through the possible 
subsequent stages of corrective action, proposed termination, 
suspension, agreement termination, and/or disqualification, as 
applicable;
    (B) Responsible principals and individuals who have been 
disqualified from participation by the State agency, including their 
names, mailing addresses, and dates of birth; and
    (C) Day care home providers whose agreements have been terminated 
for cause by a sponsoring organization in the State, including their 
names, mailing addresses, and dates of birth.
    (ii) Referral of disqualified day care homes to FNS. Within 10 days 
of receiving a notice of termination and disqualification from a 
sponsoring organization, the State agency must provide the appropriate 
FNSRO the name, mailing address, and date of birth of each day care home 
provider whose agreement is terminated for cause on or after July 29, 
2002.
    (iii) Prior lists of disqualified day care homes. If on July 29, 
2002 the State agency maintains a list of day care homes that have been 
disqualified from participation, the State agency may continue to 
prohibit participation by those day care homes. However, the State 
agency must remove a day care home from its prior list no later than the 
time at which the State agency determines that the serious 
deficiency(ies) that led to the day care home's placement on the list 
has(ve) been corrected or July 29, 2009 (unless the day care home has 
failed to repay debts owed under the Program). If the day care home has 
failed to repay its debt, the State agency may keep the

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day care home on its prior list until the debt has been repaid.
    (d) Licensing/approval for institutions or facilities providing 
child care. This section prescribes State agency responsibilities to 
ensure that child care centers, at-risk afterschool care centers, 
outside-school-hours care centers, and day care homes meet the 
licensing/approval criteria set forth in this part. Emergency shelters 
are exempt from licensing/approval requirements contained in this 
section but must meet the requirements of paragraph (d)(2) to be 
eligible to participate in the Program. Independent centers shall submit 
such documentation to the State agency on their own behalf.
    (1) General. Each State agency must establish procedures to annually 
review information submitted by institutions to ensure that all 
participating child care centers, at-risk afterschool care centers, 
outside-school hours care centers, and day care homes:
    (i) Are licensed or approved by Federal, State, or local 
authorities, provided that institutions that are approved for Federal 
programs on the basis of State or local licensing are not 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) Demonstrate compliance with applicable State or local child 
care standards to the State agency, if licensing is not available; or
    (iv) Demonstrate compliance with CACFP child care standards to the 
State agency, if licensing or approval is not available; or
    (v) If Federal, State or local licensing or approval is not 
otherwise required, at-risk afterschool care centers and outside-school-
hours care centers must meet State or local health and safety standards. 
When State or local health and safety standards have not been 
established, State agencies are encouraged to work with appropriate 
State and local officials to create such standards. Meeting these 
standards will remain a precondition for any afterschool center's 
eligibility for CACFP nutrition benefits.
    (2) Health and safety requirements for emergency shelters. To be 
eligible to participate in the Program, emergency shelters must meet 
applicable State or local health and safety standards.
    (3) CACFP child care standards. 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 other standards specified in paragraph (d)(4) of this 
section:
    (i) Staff/child ratios. (A) 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.
    (B) Child care centers do not fall below the following staff/child 
ratios:
    (1) For children under 6 weeks of age--1:1;
    (2) For children ages 6 weeks up to 3 years--1:4;
    (3) For children ages 3 years up to 6 years--1:6;
    (4) For children ages 6 years up to 10 years--1:15; and
    (5) For children ages 10 and above--1:20.
    (ii) Nondiscrimination. Day care services are available without 
discrimination on the basis of race, color, national origin, sex, age, 
or handicap.
    (iii) Safety and sanitation. (A) A current health/sanitation permit 
or satisfactory report of an inspection conducted by local authorities 
within the past 12 months shall be submitted.
    (B) A current fire/building safety permit or satisfactory report of 
an inspection conducted by local authorities within the past 12 months 
shall be submitted.
    (C) Fire drills are held in accordance with local fire/building 
safety requirements.
    (iv) Suitability of facilities. (A) Ventilation, temperature, and 
lighting are

[[Page 208]]

adequate for children's safety and comfort.
    (B) Floors and walls are cleaned and maintained in a condition safe 
for children.
    (C) Space and equipment, including rest arrangements for preschool 
age children, are adequate for the number of age range of participating 
children.
    (v) 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.
    (vi) Health services. (A) Each child is observed daily for 
indications of difficulties in social adjustment, illness, neglect, and 
abuse, and appropriate action is initiated.
    (B) 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.
    (C) Health records, including records of medical examinations and 
immunizations, are maintained for each enrolled child. (Not applicable 
to day care homes.)
    (D) At least one full-time staff member is currently qualified in 
first aid, including artificial respiration techniques. (Not applicable 
to day care homes.)
    (E) First aid supplies are available.
    (F) Staff members undergo initial and periodic health assessments.
    (vii) Staff training. The institution provides for orientation and 
ongoing training in child care for all caregivers.
    (viii) Parental involvement. Parents are afforded the opportunity to 
observe their children in day care.
    (ix) Self-evaluation. The institution has established a procedure 
for periodic self-evaluation on the basis of CACFP child care standards.
    (4) 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 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, 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(o).
    (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

[[Page 209]]

    (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) Miscellaneous responsibilities. State agencies must require 
institutions to comply with the applicable provisions of this part and 
must provide or collect the information specified in this paragraph (f).
    (1) Annual responsibilities. In addition to its other 
responsibilities under this part, each State agency must annually:
    (i) Inform institutions that are pricing programs of their 
responsibility to ensure that free and reduced-price meals are served to 
participants unable to pay the full price;
    (ii) 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;
    (iii) Require centers to submit current eligibility information on 
enrolled participants, in order to calculate a blended rate or claiming 
percentage in accordance with Sec.226.9(b);
    (iv) Require each sponsoring organization to submit an 
administrative budget with sufficiently detailed information concerning 
projected CACFP administrative earnings and expenses, as well as other 
non-Program funds to be used in Program administration, for the State 
agency to determine the allowability, necessity, and reasonableness of 
all proposed expenditures, and to assess the sponsoring organization's 
capability to manage Program funds. The administrative budget must 
demonstrate that the sponsoring organization will expend and account for 
funds in accordance with regulatory requirements, FNS Instruction 796-2 
(``Financial Management in the Child and Adult Care Food Program''), 
parts 3015, 3016, and 3019 of this title, and applicable Office of 
Management and Budget circulars. In addition, the administrative budget 
submitted by a sponsor of centers must demonstrate that the 
administrative costs to be charged to the Program do not exceed 15 
percent of the meal reimbursements estimated or actually earned during 
the budget year, unless the State agency grants a waiver in accordance 
with Sec.226.7(g);
    (v) Require each institution to issue a media release, unless the 
State agency has issued a Statewide media release on behalf of all its 
institutions;
    (vi) Require each independent center to provide information 
concerning its licensing/approval status, and require each sponsoring 
organization to provide information concerning the licensing/approval 
status of its facilities, unless the State agency has other means of 
confirming the licensing/approval status of any independent center or 
facility providing care;
    (vii) Require each sponsoring organization to submit verification 
that all facilities under its sponsorship have adhered to the training 
requirements set forth in Program regulations; and
    (viii) Comply with the following requirements for tiering of day 
care homes:
    (A) Coordinate with the State agency that administers the National 
School Lunch Program (the NSLP State agency) 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 must provide the list of elementary 
schools to sponsoring organizations of day care homes by February 15 
each year unless the NSLP State agency has elected to base data for the 
list on a month other than October. In that case, the State agency must 
provide the list to sponsoring organizations of day care homes within 15 
calendar days of its receipt from the NSLP State agency.
    (B) For tiering determinations of day care homes that are based on 
school or census data, the State agency must ensure that sponsoring 
organizations of day care homes use the most recent available data, as 
described in Sec.226.15(f).
    (C) For tiering determinations of day care homes that are based on 
the provider's household income, the State agency must ensure that 
sponsoring organizations annually determine the eligibility of each day 
care home, as described in Sec.226.15(f).
    (D) The State agency must provide all sponsoring organizations of 
day care homes in the State with a listing

[[Page 210]]

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.
    (E) The State agency must require each sponsoring organization of 
family day care homes to submit to the State agency a list of family day 
care home providers receiving tier I benefits on the basis of their 
participation in the Food Stamp Program. Within 30 days of receiving 
this list, the State agency will provide this list to the State agency 
responsible for the administration of the Food Stamp Program.
    (ix) Comply with the following requirements for determining the 
eligibility of at-risk afterschool care centers:
    (A) Coordinate with the NSLP State agency to ensure the receipt of a 
list of elementary, middle, and high 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 must provide the 
list of elementary, middle, and high schools to independent at-risk 
afterschool care centers and sponsoring organizations of at-risk 
afterschool care centers upon request. The list must represent data from 
the preceding October, unless the NSLP State agency has elected to base 
data for the list on a month other than October. If the NSLP State 
agency chooses a month other than October, it must do so for the entire 
State.
    (B) The State agency must determine the area eligibility for each 
independent at-risk afterschool care center. The State agency must use 
the most recent data available, as described in Sec.
226.6(f)(1)(ix)(A). The State agency must use attendance area 
information that it has obtained, or verified with the appropriate 
school officials to be current, within the last school year.
    (C) The State agency must determine the area eligibility of each 
sponsored at-risk afterschool care center based on the documentation 
submitted by the sponsoring organization in accordance with Sec.
226.15(g).
    (D) The State agency must determine whether the afterschool care 
programs of at-risk afterschool care centers meet the requirements of 
Sec.226.17a(b) before the centers begin participating in the Program.
    (2) Triennial Responsibilities--(i) General reapplication 
requirements. At intervals not to exceed 36 months, each State agency 
must require participating institutions to reapply to continue their 
participation and must require sponsoring organizations to submit a 
management plan with the elements set forth in Sec.226.6(b)(1)(iv).
    (ii) Redeterminations of afterschool program eligibility. The State 
agency must determine whether institutions reapplying as at-risk 
afterschool care centers continue to meet the eligibility requirements, 
as described in Sec.226.17a(b).
    (3) Responsibilities at other time intervals--(i) Day care home 
tiering redeterminations based on school data. As described in Sec.
226.15(f), tiering determinations are valid for five years if based on 
school data. The State agency must 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 data. The State agency must 
not routinely require annual redeterminations of the tiering status of 
tier I day care homes based on updated elementary school data. However, 
a sponsoring organization, the State agency, or FNS may change the 
determination if information becomes available indicating that a day 
care home is no longer in a qualified area.
    (ii) Area eligibility redeterminations for at-risk afterschool care 
centers. Area eligibility determinations are valid for five years for 
at-risk afterschool care centers that are already participating in the 
Program. The State agency may determine the date in the fifth year when 
the next five-year cycle of area eligibility will begin. The State 
agency must redetermine the area eligibility for each independent at-
risk afterschool care center in accordance with Sec.
226.6(f)(1)(ix)(B). The State agency must redetermine the area 
eligibility of each sponsored at-risk afterschool care center based on 
the documentation submitted by the sponsoring organization in accordance 
with Sec.226.15(g). The State agency must not routinely require annual 
redeterminations of area eligibility based on updated

[[Page 211]]

school data during the five-year period, except in cases where the State 
agency has determined it is most efficient to incorporate area 
eligibility decisions into the three-year application cycle. However, a 
sponsoring organization, the State agency, or FNS may change the 
determination if information becomes available indicating that an at-
risk afterschool care center is no longer area eligible.
    (iii) State agency transmittal of census data. Upon receipt of 
census data from FNS (on a decennial basis), the State agency must 
provide each sponsoring organization of day care homes with census data 
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.
    (iv) Additional institution requirements. At intervals and in a 
manner specified by the State agency, but not more frequently than 
annually, the State agency may:
    (A) Require independent centers to submit a budget with sufficiently 
detailed information and documentation to enable the State agency to 
make an assessment of the independent center's qualifications to manage 
Program funds. Such budget must demonstrate that the independent center 
will expend and account for funds in accordance with regulatory 
requirements, FNS Instruction 796-2 (``Financial Management in the Child 
and Adult Care Food Program''), and parts 3015, 3016, and 3019 of this 
title and applicable Office of Management and Budget circulars;
    (B) Request institutions to report their commodity preference;
    (C) Require a private nonprofit institution to submit evidence of 
tax exempt status in accordance with Sec.226.16(a);
    (D) Require for-profit institutions to submit documentation on 
behalf of their centers of:
    (1) Eligibility of at least 25 percent of children in care (enrolled 
or licensed capacity, whichever is less) for free or reduced-price 
meals; or
    (2) Compensation received under title XX of the Social Security Act 
of nonresidential day care services and certification that at least 25 
percent of children in care (enrolled or licensed capacity, whichever is 
less) were title XX beneficiaries during the most recent calendar month.
    (E) Require for-profit adult care centers to submit 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 participants in each such center during the most recent 
calendar month were title XIX or title XX beneficiaries;
    (F) Request each institution to indicate its choice to receive all, 
part or none of advance payments, if the State agency chooses to make 
advance payments available; and
    (G) Perform verification in accordance with Sec.226.23(h) and 
paragraph (m)(4) of this section. State agencies verifying the 
information on free and reduced-price applications must ensure that 
verification activities are conducted without regard to the 
participant's race, color, national origin, sex, age, or disability.
    (g) Program expansion. Each State agency must take action to expand 
the availability of benefits under this Program, and must conduct 
outreach to potential sponsoring organizations of family day care homes 
that might administer the Program in low-income or rural areas.
    (h) Commodity distribution. The State agency must require new 
institutions to state their preference to receive commodities or cash-
in-lieu of commodities when they apply, and may periodically inquire as 
to participating institutions' preference to receive commodities or 
cash-in-lieu of commodities. State agencies must annually provide 
institutions with information on foods available in plentiful supply, 
based on information provided by the Department. 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

[[Page 212]]

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, 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

[[Page 213]]

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 must require institutions 
to adhere to the procurement provisions set forth in Sec.226.22 and 
must determine that all meal procurements with food service management 
companies are in conformance with bid and contractual requirements of 
Sec.226.22.
    (k) Administrative reviews for institutions and responsible 
principals and responsible individuals--(1) General. The State agency 
must develop procedures for offering administrative reviews to 
institutions and responsible principals and responsible individuals. The 
procedures must be consistent with paragraph (k) of this section.
    (2) Actions subject to administrative review. Except as provided in 
Sec.226.8(g), the State agency must offer an administrative review for 
the following actions:
    (i) Application denial. Denial of a new or renewing institution's 
application for participation (see paragraph (b) of this section, on 
State agency review of an institution's application; and paragraphs 
(c)(1) and (c)(2) of this section, on State agency denial of a new or 
renewing institution's application);
    (ii) Denial of sponsored facility application. Denial of an 
application submitted by a sponsoring organization on behalf of a 
facility;
    (iii) Notice of proposed termination. Proposed termination of an 
institution's agreement (see paragraphs (c)(2)(iii)(C), (c)(3)(iii)(C), 
and (c)(5)(i)(B) of this section, dealing with proposed termination of 
agreements with renewing institutions, participating institutions, and 
participating institutions suspended for health or safety violations);
    (iv) Notice of proposed disqualification of a responsible principal 
or responsible individual. Proposed disqualification of a responsible 
principal or responsible individual (see paragraphs (c)(1)(iii)(C), 
(c)(2)(iii)(C), (c)(3)(iii)(C), and (c)(5)(i)(B) of this section, 
dealing with proposed disqualification of responsible principals or 
responsible individuals in new, renewing, and participating 
institutions, and participating institutions suspended for health or 
safety violations);
    (v) Suspension of participation. Suspension of an institution's 
participation (see paragraphs (c)(5)(i)(B) and (c)(5)(ii)(D) of this 
section, dealing with suspension for health or safety reasons or 
submission of a false or fraudulent claim);
    (vi) Start-up or expansion funds denial. Denial of an institution's 
application for start-up or expansion payments (see Sec.226.7(h));
    (vii) Advance denial. Denial of a request for an advance payment 
(see Sec.226.10(b));
    (viii) Recovery of advances. Recovery of all or part of an advance 
in excess of the claim for the applicable period. The recovery may be 
through a demand for full repayment or an adjustment of subsequent 
payments (see Sec.226.10(b)(3));
    (ix) Claim denial. Denial of all or a part of an institution's claim 
for reimbursement (except for a denial based on a late submission under 
Sec.226.10(e)) (see Sec. Sec.226.10(f) and 226.14(a));
    (x) Claim deadline exceptions and requests for upward adjustments to 
a claim. Decision by the State agency not to forward to FNS an exception 
request by an institution for payment of a late claim, or a request for 
an upward adjustment to a claim (see Sec.226.10(e));
    (xi) Overpayment demand. Demand for the remittance of an overpayment 
(see Sec.226.14(a)); and
    (xii) Other actions. Any other action of the State agency affecting 
an institution's participation or its claim for reimbursement.
    (3) Actions not subject to administrative review. The State agency 
is prohibited from offering administrative reviews of the following 
actions:
    (i) FNS decisions on claim deadline exceptions and requests for 
upward adjustments to a claim. A decision by FNS to deny an exception 
request by an institution for payment of a late claim, or for an upward 
adjustment to a claim (see Sec.226.10(e));
    (ii) Determination of serious deficiency. A determination that an 
institution is

[[Page 214]]

seriously deficient (see paragraphs (c)(1)(iii)(A), (c)(2)(iii)(A), 
(c)(3)(iii)(A), and (c)(5)(i)(B) of this section, dealing with proposed 
disqualification of responsible principals or responsible individuals in 
new, renewing, and participating institutions, and participating 
institutions suspended for health or safety violations);
    (iii) Disqualification and placement on State agency list and 
National disqualified list. Disqualification of an institution or a 
responsible principal or responsible individual, and the subsequent 
placement on the State agency list and the National disqualified list 
(see paragraphs (c)(1)(iii)(E), (c)(2)(iii)(E), (c)(3)(iii)(E), and 
(c)(5)(i)(C) of this section, dealing with proposals to disqualify 
related to new, renewing, and participating institutions, and in 
institutions suspended for health or safety violations); or
    (iv) Termination. Termination of a participating institution's 
agreement, including termination of a participating institution's 
agreement based on the disqualification of the institution by another 
State agency or FNS (see paragraphs (c)(3)(i) and (c)(7)(ii) of this 
section).
    (4) Provision of administrative review procedures to institutions 
and responsible principals and responsible individuals. The State 
agency's administrative review procedures must be provided:
    (i) Annually to all institutions;
    (ii) To an institution and to each responsible principal and 
responsible individual when the State agency takes any action subject to 
an administrative review as described in paragraph (k)(2) of this 
section; and
    (iii) Any other time upon request.
    (5) Procedures. Except as described in paragraph (k)(9) of this 
section, which sets forth the circumstances under which an abbreviated 
administrative review is held, the State agency must follow the 
procedures in this paragraph (k)(5) when an institution or a responsible 
principal or responsible individual appeals any action subject to 
administrative review as described in paragraph (k)(2) of this section.
    (i) Notice of action. The institution's executive director and 
chairman of the board of directors, and the responsible principals and 
responsible individuals, must be given notice of the action being taken 
or proposed, the basis for the action, and the procedures under which 
the institution and the responsible principals or responsible 
individuals may request an administrative review of the action.
    (ii) Time to request administrative review. The request for 
administrative review must be submitted in writing not later than 15 
days after the date the notice of action is received, and the State 
agency must acknowledge the receipt of the request for an administrative 
review within 10 days of its receipt of the request.
    (iii) Representation. The institution and the responsible principals 
and responsible individuals may retain legal counsel, or may be 
represented by another person.
    (iv) Review of record. Any information on which the State agency's 
action was based must be available to the institution and the 
responsible principals and responsible individuals for inspection from 
the date of receipt of the request for an administrative review.
    (v) Opposition. The institution and the responsible principals and 
responsible individuals may refute the findings contained in the notice 
of action in person or by submitting written documentation to the 
administrative review official. In order to be considered, written 
documentation must be submitted to the administrative review official 
not later than 30 days after receipt of the notice of action.
    (vi) Hearing. A hearing must be held by the administrative review 
official in addition to, or in lieu of, a review of written information 
only if the institution or the responsible principals and responsible 
individuals request a hearing in the written request for an 
administrative review. If the institution's representative, or the 
responsible principals or responsible individuals or their 
representative, fail to appear at a scheduled hearing, they waive the 
right to a personal appearance before the administrative review 
official, unless the administrative review official agrees to reschedule 
the hearing. A representative of the State agency must be allowed to 
attend the hearing to respond to the testimony of the institution and

[[Page 215]]

the responsible principals and responsible individuals and to answer 
questions posed by the administrative review official. If a hearing is 
requested, the institution, the responsible principals and responsible 
individuals, and the State agency must be provided with at least 10 days 
advance notice of the time and place of the hearing.
    (vii) Administrative review official. The administrative review 
official must be independent and impartial. This means that, although 
the administrative review official may be an employee of the State 
agency, he/she must not have been involved in the action that is the 
subject of the administrative review, or have a direct personal or 
financial interest in the outcome of the administrative review. The 
institution and the responsible principals and responsible individuals 
must be permitted to contact the administrative review official directly 
if they so desire.
    (viii) Basis for decision. The administrative review official must 
make a determination based solely on the information provided by the 
State agency, the institution, and the responsible principals and 
responsible individuals, and based on Federal and State laws, 
regulations, policies, and procedures governing the Program.
    (ix) Time for issuing a decision. Within 60 days of the State 
agency's receipt of the request for an administrative review, the 
administrative review official must inform the State agency, the 
institution's executive director and chairman of the board of directors, 
and the responsible principals and responsible individuals, of the 
administrative review's outcome. This timeframe is an administrative 
requirement for the State agency and may not be used as a basis for 
overturning the State agency's action if a decision is not made within 
the specified timeframe.
    (x) Final decision. The determination made by the administrative 
review official is the final administrative determination to be afforded 
the institution and the responsible principals and responsible 
individuals.
    (6) Federal audit findings. FNS may assert a claim against the State 
agency, in accordance with the procedures set forth in Sec.226.14(c), 
when an administrative review results in the dismissal of a claim 
against an institution asserted by the State agency based upon Federal 
audit findings.
    (7) Record of result of administrative reviews. The State agency 
must maintain searchable records of all administrative reviews and their 
disposition.
    (8) Combined administrative reviews for responsible principals and 
responsible individuals. The State agency must conduct the 
administrative review of the proposed disqualification of the 
responsible principals and responsible individuals as part of the 
administrative review of the application denial, proposed termination, 
and/or proposed disqualification of the institution with which the 
responsible principals or responsible individuals are associated. 
However, at the administrative review official's discretion, separate 
administrative reviews may be held if the institution does not request 
an administrative review or if either the institution or the responsible 
principal or responsible individual demonstrates that their interests 
conflict.
    (9) Abbreviated administrative review. The State agency must limit 
the administrative review to a review of written submissions concerning 
the accuracy of the State agency's determination if the application was 
denied or the State agency proposes to terminate the institution's 
agreement because:
    (i) The information submitted on the application was false (see 
paragraphs (c)(1)(ii)(A), (c)(2)(ii)(A), and (c)(3)(ii)(A) of this 
section);
    (ii) The institution, one of its sponsored facilities, or one of the 
principals of the institution or its facilities is on the national 
disqualified list (see paragraph (b)(12) of this section);
    (iii) The institution, one of its sponsored facilities, or one of 
the principals of the institution or its facilities is ineligible to 
participate in any other publicly funded program by reason of violation 
of the requirements of the program (see paragraph (b)(13) and 
(c)(3)(ii)(S) of this section); or
    (iv) The institution, one of its sponsored facilities, or one of the 
principals of the institution or its facilities has been convicted for 
any activity that indicates a lack of business integrity (see paragraphs 
(b)(14) and (c)(3)(ii)(T) of this section).

[[Page 216]]

    (10) Effect of State agency action. The State agency's action must 
remain in effect during the administrative review. The effect of this 
requirement on particular State agency actions is as follows.
    (i) Overpayment demand. During the period of the administrative 
review, the State agency is prohibited from taking action to collect or 
offset the overpayment. However, the State agency must assess interest 
beginning with the initial demand for remittance of the overpayment and 
continuing through the period of administrative review unless the 
administrative review official overturns the State agency's action.
    (ii) Recovery of advances. During the administrative review, the 
State agency must continue its efforts to recover advances in excess of 
the claim for reimbursement for the applicable period. The recovery may 
be through a demand for full repayment or an adjustment of subsequent 
payments.
    (iii) Program payments. The availability of Program payments during 
an administrative review of the denial of a new institution's 
application, denial of a renewing institution's application, proposed 
termination of a participating institution's agreement, and suspension 
of an institution are addressed in paragraphs (c)(1)(iii)(D), 
(c)(2)(iii)(D), (c)(3)(iii)(D), (c)(5)(i)(D), and (c)(5)(ii)(E), 
respectively, of this section.
    (l) Administrative reviews for day care homes--(1) General. The 
State agency must ensure that, when a sponsoring organization proposes 
to terminate its Program agreement with a day care home for cause, the 
day care home is provided an opportunity for an administrative review of 
the proposed termination. The State agency may do this either by 
electing to offer a State-level administrative review, or by electing to 
require the sponsoring organization to offer an administrative review. 
The State agency must notify the appropriate FNSRO of its election under 
this option, or any change it later makes under this option, by 
September 25, 2002 or within 30 days of any subsequent change under this 
option. The State agency must make the same election with regard to who 
offers the administrative review to any day care home in the Program in 
that State. The State agency or the sponsoring organization must develop 
procedures for offering and providing these administrative reviews, and 
these procedures must be consistent with this paragraph (l).
    (2) Actions subject to administrative review. The State agency or 
sponsoring organization must offer an administrative review to a day 
care home that appeals a notice of intent to terminate their agreement 
for cause or a suspension of their participation (see Sec. Sec.
226.16(l)(3)(iii) and (l)(4)(ii)).
    (3) Actions not subject to administrative review. Neither the State 
agency nor the sponsoring organization is required to offer an 
administrative review for reasons other than those listed in paragraph 
(l)(2) of this section.
    (4) Provision of administrative review procedures to day care homes. 
The administrative review procedures must be provided:
    (i) Annually to all day care homes;
    (ii) To a day care home when the sponsoring organization takes any 
action subject to an administrative review as described in paragraph 
(l)(2) of this section; and
    (iii) Any other time upon request.
    (5) Procedures. The State agency or sponsoring organization, as 
applicable (depending on the State agency's election pursuant to 
paragraph (l)(1) of this section) must follow the procedures in this 
paragraph (l)(5) when a day care home requests an administrative review 
of any action described in paragraph (l)(2) of this section.
    (i) Uniformity. The same procedures must apply to all day care 
homes.
    (ii) Representation. The day care home may retain legal counsel, or 
may be represented by another person.
    (iii) Review of record and opposition. The day care home may review 
the record on which the decision was based and refute the action in 
writing. The administrative review official is not required to hold a 
hearing.
    (iv) Administrative review official. The administrative review 
official must be independent and impartial. This means that, although 
the administrative review official may be an employee of the State 
agency or an employee or board

[[Page 217]]

member of the sponsoring organization, he/she must not have been 
involved in the action that is the subject of the administrative review 
or have a direct personal or financial interest in the outcome of the 
administrative review;
    (v) Basis for decision. The administrative review official must make 
a determination based on the information provided by the sponsoring 
organization and the day care home and on Federal and State laws, 
regulations, polices, and procedures governing the Program.
    (vi) Time for issuing a decision. The administrative review official 
must inform the sponsoring organization and the day care home of the 
administrative review's outcome within the period of time specified in 
the State agency's or sponsoring organization's administrative review 
procedures. This timeframe is an administrative requirement for the 
State agency or sponsoring organization and may not be used as a basis 
for overturning the termination if a decision is not made within the 
specified timeframe.
    (vii) Final decision. The determination made by the administrative 
review official is the final administrative determination to be afforded 
the day care home.
    (m) Program assistance--(1) General. The State agency must provide 
technical and supervisory assistance to institutions and facilities to 
facilitate effective Program operations, monitor progress toward 
achieving Program goals, and ensure compliance with all requirements of 
title VI of the Civil Rights Act of 1964, title IX of the Education 
amendments of 1972, section 504 of the Rehabilitation Act of 1973, the 
Age Discrimination Act of 1975, and the Department's regulations 
concerning nondiscrimination (parts 15, 15a, and 15b of this title). The 
State agency must maintain documentation of supervisory assistance 
activities, including reviews conducted, corrective actions prescribed, 
and follow-up efforts.
    (2) Review priorities. In choosing institutions for review, in 
accordance with paragraph (m)(6) of this section, the State agency must 
target for more frequent review institutions whose prior review included 
a finding of serious deficiency.
    (3) Review content. As part of its conduct of reviews, the State 
agency must assess each institution's compliance with the requirements 
of this part pertaining to:
    (i) Recordkeeping;
    (ii) Meal counts;
    (iii) Administrative costs;
    (iv) Any applicable instructions and handbooks issued by FNS and the 
Department to clarify or explain this part, and any instructions and 
handbooks issued by the State agency which are not inconsistent with the 
provisions of this part;
    (v) Facility licensing and approval;
    (vi) Compliance with the requirements for annual updating of 
enrollment forms;
    (vii) If an independent center, observation of a meal service;
    (viii) If a sponsoring organization, training and monitoring of 
facilities;
    (ix) If a sponsoring organization of day care homes, implementation 
of the serious deficiency and termination procedures for day care homes 
and, if such procedures have been delegated to sponsoring organizations 
in accordance with paragraph (l)(1) of this section, the administrative 
review procedures for day care homes;
    (x) If a sponsoring organization, implementation of the household 
contact system established by the State agency pursuant to paragraph 
(m)(5) of this section;
    (xi) If a sponsoring organization of day care homes, the 
requirements for classification of tier I and tier II day care homes; 
and
    (xii) All other Program requirements.
    (4) Review of sponsored facilities. As part of each required review 
of a sponsoring organization, the State agency must select a sample of 
facilities, in accordance with paragraph (m)(6) of this section. As part 
of such reviews, the State agency must conduct verification of Program 
applications in accordance with Sec.226.23(h) and must compare 
available enrollment and attendance records and the sponsoring 
organization's review results for that facility to meal counts submitted 
by those facilities for five days.
    (5) Household contacts. As part of their monitoring of institutions, 
State agencies must establish systems for

[[Page 218]]

making household contacts to verify the enrollment and attendance of 
participating children. Such systems must specify the circumstances 
under which household contacts will be made, as well as the procedures 
for conducting household contacts. In addition, State agencies must 
establish a system for sponsoring organizations to use in making 
household contacts as part of their review and oversight of 
participating facilities. Such systems must specify the circumstances 
under which household contacts will be made, as well as the procedures 
for conducting household contacts. State agencies must submit to FNSROs, 
no later than April 1, 2005, the policies and procedures they have 
developed governing household contacts conducted by both the State 
agency, as part of institution and facility reviews conducted in 
accordance with this paragraph (m), and by sponsoring organizations as 
part of the facility review process described in Sec.226.16(d)(5).
    (6) Frequency and number of required institution reviews. The State 
agency must annually review at least 33.3 percent of all institutions. 
At least 15 percent of the total number of facility reviews required 
must be unannounced. The State agency must review institutions according 
to the following schedule:
    (i) Independent centers and sponsoring organizations of 1 to 100 
facilities must be reviewed at least once every three years. A review of 
such a sponsoring organization must include reviews of 10 percent of the 
sponsoring organization's facilities;
    (ii) Sponsoring organizations with more than 100 facilities must be 
reviewed at least once every two years. These reviews must include 
reviews of 5 percent of the first 1,000 facilities and 2.5 percent of 
the facilities in excess of 1,000; and
    (iii) New institutions that are sponsoring organizations of five or 
more facilities must be reviewed within the first 90 days of Program 
operations.
    (n) 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.
    (o) Child care standards compliance. The State agency shall, when 
conducting administrative reviews of child care centers, and day care 
homes approved by the State agency under paragraph (d)(3) of this 
section, determine compliance with the child care standards used to 
establish eligibility, and the institution shall ensure that all 
violations are corrected and the State shall ensure that the institution 
has corrected all violations. If violations are not corrected within the 
specified timeframe for corrective action, the State agency must issue a 
notice of serious deficiency in accordance with paragraph (c) of this 
section or Sec.226.16(l), as appropriate. However, if the health or 
safety of the children is imminently threatened, the State agency or 
sponsoring organization must follow the procedures set forth at 
paragraph (c)(5)(i) of this section, or Sec.226.16(l)(4), as 
appropriate. The State agency may deny reimbursement for meals served to 
attending children in excess of authorized capacity.
    (p) Sponsoring organization agreement. Each State agency shall 
develop and provide for the use of a standard form of written permanent 
agreement between each day care home sponsoring organization and all day 
care homes participating in the Program under such organization. Nothing 
in the preceding sentence shall be construed to limit the ability of the 
sponsoring organization to suspend or terminate the permanent agreement 
in accordance with Sec.226.16(l). The State agency must also include 
in this agreement its policy to restrict transfers of day care homes 
between sponsoring organizations. The policy must restrict the transfers 
to no more frequently than once per year, except under extenuating 
circumstances, such as termination of the sponsoring organization's 
agreement or other circumstances defined by the State agency. However, 
the State agency may, at the request of the sponsor, approve an 
agreement

[[Page 219]]

developed by the sponsor. State agencies may develop a similar form for 
use between sponsoring organizations and other types of facilities.
    (q) Following its reviews of institutions and facilities under 
Sec. Sec.226.6(m) 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.
    (r) WIC program information. State agencies must provide information 
on the importance and benefits of the Special Supplemental Nutrition 
Program for Women, Infants, and Children (WIC) and WIC income 
eligibility guidelines, to participating institutions. In addition, the 
State agency must ensure that:
    (1) Participating family day care homes and sponsored child care 
centers receive this information, and periodic updates of this 
information, from their sponsoring organizations or the State agency; 
and
    (2) The parents of enrolled children also receive this information.

[47 FR 36527, Aug. 20, 1982]

    Editorial Note: For Federal Register citations affecting Sec.
226.6, see the List of CFR Sections Affected, which appears in the 
Finding Aids section of the printed volume and at www.fdsys.gov.



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 in accordance with 7 
CFR part 3015, 7 CFR part 3016 and 7 CFR part 3019, as applicable. 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

[[Page 220]]

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 must require institutions 
(other than emergency shelters, at-risk afterschool care centers, and 
sponsoring organizations of emergency shelters, at-risk afterschool care 
centers, or day care homes) to submit, not less frequently than 
annually, information necessary to assign rates of reimbursement as 
outlined in Sec.226.9.
    (g) Budget approval. The State agency must review institution 
budgets and must limit allowable administrative claims by each 
sponsoring organization to the administrative costs approved in its 
budget. The budget must demonstrate the institution's ability to manage 
Program funds in accordance with this part, FNS Instruction 796-2 
(``Financial Management in the Child and Adult Care Food Program''), 
parts 3015, 3016, and 3019 of this title, and applicable Office of 
Management and Budget circulars. Sponsoring organizations must submit an 
administrative budget to the State agency annually, and independent 
centers must submit budgets as frequently as required by the State 
agency. Budget levels may be adjusted to reflect changes in Program 
activities. For sponsoring organizations of centers, the State agency is 
prohibited from approving the sponsoring organization's administrative 
budget, or any amendments to the budget, if the administrative budget 
shows the Program will be charged for administrative costs in excess of 
15 percent of the meal reimbursements estimated to be earned during the 
budget year. However, the State agency may waive this limit if the 
sponsoring organization provides justification that it requires Program 
funds in excess of 15 percent to pay its administrative costs and if the 
State agency is convinced that the institution will have adequate 
funding to provide meals meeting the requirements of Sec.226.20. The 
State agency must document all waiver approvals and denials in writing, 
and must provide a copy of all such letters to the appropriate FNSRO.
    (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

[[Page 221]]

for reimbursement. Such procedures must include State agency edit 
checks, including but not limited to ensuring that payments are made 
only for approved meal types and that the number of meals for which 
reimbursement is provided does not exceed the product of the total 
enrollment times operating days times approved meal types. 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 7 CFR part 3015, 7 CFR 
part 3016 and 7 CFR part 3019, as applicable, 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; 67 FR 43490, June 27, 2002; 69 
FR 53542, Sept. 1, 2004; 71 FR 5, Jan. 3, 2006; 71 FR 39518, July 13, 
2006; 72 FR 41606, July 31, 2007]



Sec.226.8  Audits.

    (a) Unless otherwise exempt, audits at the State and institution 
levels must be conducted in accordance with Office of Management and 
Budget circular A-133 and the Department's implementing regulations at 
part 3052 of this title. State agencies must establish audit policy for 
for-profit institutions. However, the audit policy established by the 
State agency must not conflict with the authority of the State agency or 
the Department to perform, or cause to be performed, audits, reviews, 
agreed-upon procedures engagements, or other monitoring activities.
    (b) The funds provided to the State agency under Sec.226.4(j) may 
be made available to institutions to fund a portion of organization-wide 
audits made in accordance with part 3052 of this title. The funds 
provided to an institution for an organization-wide audit must be 
determined in accordance with Sec.3052.230(a) of this title.
    (c) Funds provided under Sec.226.4(j) 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 required program-specific audits have been performed 
to conduct administrative reviews or agreed-upon procedures engagements 
of institutions.
    (d) Funds provided under Sec.226.4(j) may only be obligated during 
the fiscal year for which those funds are allocated. If funds provided 
under Sec.226.4(i) 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, reviews, or audits in a 
fiscal year, the State agency, FNS, or OIG may disregard an overpayment 
if the overpayment does not exceed $600. A State agency may establish, 
through State law, regulation or procedure, an alternate disregard 
threshold that does not exceed $600. This disregard may be

[[Page 222]]

made once per each management evaluation, review, or audit per Program 
within a fiscal year. However, no overpayment is to be disregarded where 
there is substantial evidence of violations 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(k).

[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; 67 FR 43490, June 27, 2002; 
69 FR 53543, Sept. 1, 2004; 70 FR 43261, July 27, 2005; 71 FR 5, Jan. 3, 
2006; 71 FR 30563, May 30, 2006; 72 FR 41607, July 31, 2007]



                      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. However, no rates should be 
assigned for emergency shelters and at-risk afterschool care centers. 
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) Except for emergency shelters and at-risk afterschool care 
centers, the State agency must 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 than 
annually, for each institution on the basis of the number of enrolled 
participants eligible for free, reduced-price, and paid meals, except 
that children who only participate in emergency shelters or the at-risk 
afterschool care component of the Program must not be considered to be 
enrolled participants for the purpose of establishing claiming 
percentages; 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 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

[[Page 223]]

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; 71 FR 5, 
Jan. 3, 2006; 72 FR 41607, July 31, 2007; 75 FR 16327, Apr. 1, 2010]



Sec.226.10  Program payment procedures.

    (a) If a State agency elects to issue advance payments to all or 
some of the participating institutions in the State, it must provide 
such advances no later than the first day of each month to those 
eligible institutions electing to receive advances in accordance with 
Sec.226.6 (f)(3)(iv)(F). 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 7 CFR 
part 3016 or 7 CFR part 3019, as applicable, 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. For each month in which independent for-profit child care centers 
and independent for-profit outside-school-hours care centers claim 
reimbursement, they must submit the number and percentage of children in 
care (enrolled or licensed capacity, whichever is less) that documents 
at least 25 percent are eligible for free or reduced-price meals or are 
title XX beneficiaries. However, children who only receive at-risk 
afterschool snacks and/or at-risk afterschool meals must not be 
considered in determining this eligibility. Sponsoring organizations of 
for-profit child care centers or for-profit outside-school-hours care 
centers must submit the number and percentage of children in care 
(enrolled or licensed capacity, whichever is less) that documents that 
at least 25 percent are eligible for free or reduced-price meals or are 
title XX beneficiaries. Sponsoring organizations of such centers must 
not submit a claim for any for-profit center

[[Page 224]]

in which less than 25 percent of the children in care (enrolled or 
licensed capacity, whichever is less) during the claim month were 
eligible for free or reduced-price meals or were title XX beneficiaries. 
Independent for-profit 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. Prior to 
submitting its consolidated monthly claim to the State agency, each 
sponsoring organization must perform edit checks on each facility's meal 
claim. At a minimum, the sponsoring organization's edit checks must:
    (1) Verify that each facility has been approved to serve the types 
of meals claimed;
    (2) Compare the number of children enrolled for care at each 
facility, multiplied by the number of days on which the facility is 
approved to serve meals, to the total number of meals claimed by the 
facility for that month. Discrepancies between the facility's meal claim 
and its enrollment must be subjected to more thorough review to 
determine if the claim is accurate; and
    (3) Detect block claiming (as defined in Sec.226.2) by any 
facility. If block claiming is detected, the sponsoring organization 
must not include that facility among those facilities receiving less 
than three reviews during the current year, in accordance with Sec.
226.16(d)(4), and must ensure that any facility submitting a block claim 
receives an unannounced review within 60 days of the discovery of the 
block claim. If, in the course of conducting this review, the sponsoring 
organization determines that there is a logical explanation for the 
facility to regularly submit a block claim, the sponsoring organization 
must note this in the facility's review file and is not required to 
conduct an unannounced visit after other block claims detected during 
the current year. In addition, if a State agency determines that the 
conduct of all required unannounced reviews within 60 days will impose 
unwarranted burdens on a particular sponsoring organization, the State 
agency may provide that sponsoring organization with up to 30 additional 
days to complete the required unannounced reviews.
    (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

[[Page 225]]

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, based on the results of audits, investigations, or other 
reviews, a State agency has reason to believe that an institution, child 
or adult care facility, or food service management company has engaged 
in unlawful acts with respect to Program operations, the evidence found 
in audits, investigations, or other reviews is 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; 69 FR 53543, Sept. 
1, 2004; 70 FR 43261, July 27, 2005; 71 FR 39519, July 13, 2006; 72 FR 
41607, July 31, 2007; 75 FR 16327, Apr. 1, 2010]



Sec.226.11  Program payments for centers.

    (a) Requirement for agreements. Payments must 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, at-risk afterschool care centers, adult day care centers, 
emergency shelters, and outside-school-hours care centers. A State 
agency may develop a policy under which centers are reimbursed for meals 
served in accordance with provisions of the Program in the calendar 
month preceding the calendar month in which the agreement is executed, 
or the State agency may develop a policy under which centers receive 
reimbursement only for meals served in approved centers on and after the 
effective date of the Program agreement. If the State agency's policy 
permits centers to earn reimbursement for meals served prior to the 
execution of a Program agreement, program reimbursement must not be 
received by the center until the agreement is executed.
    (b) Institutions--(1) Edit checks of sponsored centers. Prior to 
submitting its consolidated monthly claim to the State agency, each 
sponsoring organization must conduct reasonable edit checks on the 
sponsored centers' meal claims, which at a minimum, must include those 
edit checks specified at Sec.226.10(c).
    (2) Child and adult care institutions. Each child care institution 
and each adult day care institution must report each month to the State 
agency the total number of Program meals, by type (breakfasts, lunches, 
suppers, and snacks), served to children or adult participants, 
respectively, except as provided in paragraph (b)(3) of this section.
    (3) For-profit center exception. For-profit child care centers, 
including for-profit at-risk afterschool care centers and outside-
school-hours care centers, must provide the reports required in 
paragraph (b)(2) of this section only for calendar months during which 
at least 25 percent of the children in care (enrolled or licensed 
capacity, whichever is less) were eligible for free or reduced-price 
meals or were title XX beneficiaries. However, children who only receive 
at-risk afterschool snacks and/or at-risk afterschool meals must not be 
considered in determining this eligibility. For-profit adult day care 
centers must provide the reports required in paragraph (b)(2) of this 
section only for calendar months during which at least 25 percent of 
enrolled adult participants were beneficiaries of title XIX, title XX, 
or a combination of titles XIX and XX.
    (c) Reimbursement--(1) Child and adult care institutions. Each State 
agency must base reimbursement to each approved child care institution 
and adult day care institution on actual time of service meal counts of 
meals, by type, served to children or adult participants multiplied by 
the assigned rates of reimbursement, except as provided in paragraph 
(c)(4) of this section.

[[Page 226]]

    (2) At-risk afterschool care institutions. Except as provided in 
paragraph (c)(4) of this section, State agencies must base reimbursement 
to each at-risk afterschool care center on the number of at-risk 
afterschool snacks and/or at-risk afterschool meals that are served to 
children.
    (3) Emergency shelters. Each State agency must base reimbursement to 
each emergency shelter on the number of meals served to children 
multiplied by the free rates for meals and snacks.
    (4) For-profit center exception. For-profit child care centers, 
including for-profit at-risk and outside-school-hours care centers, must 
be reimbursed only for the calendar months during which at least 25 
percent of the children in care (enrolled or licensed capacity, 
whichever is less) were eligible for free or reduced-price meals or were 
title XX beneficiaries. However, children who only receive at-risk 
afterschool snacks and/or at-risk afterschool meals must not be 
considered in determining this eligibility. For-profit adult day care 
centers must be reimbursed only for the calendar months during which at 
least 25 percent of enrolled adult participants were beneficiaries of 
title XIX, title XX, or a combination of titles XIX and XX.
    (5) Computation of reimbursement. Except for at-risk afterschool 
care centers and emergency shelters, the State agency must compute 
reimbursement by either:
    (i) Actual counts. Base reimbursement to institutions on actual time 
of service counts of meals served, and multiply the number of meals, by 
type, served to participants that are eligible to receive free meals, 
participants eligible to receive reduced-price meals, and participants 
not eligible for free or reduced-price meals by the applicable national 
average payment rate; or
    (ii) Claiming percentages. 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
    (iii) Blended rates. Multiply the assigned blended per meal rate of 
reimbursement by the total number of meals, by type, served to 
participants.
    (d) Limits on reimbursement. 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) Institution recordkeeping. 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; 69 FR 53543, Sept. 1, 2004; 70 FR 43262, July 27, 2005; 71 FR 5, 
Jan. 3, 2006; 72 FR 41607, July 31, 2007; 75 FR 16327, Apr. 1, 2010]



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;
    (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.

[[Page 227]]

    (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 status or tax exempt status under the Internal Revenue 
Code of 1986;
    (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;
    (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.

[[Page 228]]

    (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; 67 FR 43490, June 
27, 2002]



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 snacks) and by category (tier I and tier II), served to 
children enrolled in approved day care homes. Prior to submitting its 
consolidated monthly claim to the State agency, each sponsoring 
organization must conduct reasonable edit checks on the day care homes' 
meal claims which, at a minimum, include those edit checks specified at 
Sec.226.10(c).
    (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 based on daily meal counts 
taken in the home, 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 of the home and with the home provider's written consent.

[[Page 229]]

    (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; 69 FR 53544, Sept. 1, 
2004; 72 FR 41603, July 31, 2007]



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. The State 
agency may permit institutions to pay overclaims over a period of one or 
more years. However, the State agency must assess interest beginning 
with the initial demand for remittance. Further, when an institution 
requests and is granted an administrative review of the State agency's 
overpayment demand, the State agency is prohibited from taking action to 
collect or offset the overpayment until the administrative review is 
concluded. The State agency must maintain searchable records of funds 
recovery activities. If the State agency determines that a sponsoring 
organization of centers has spent more than 15 percent of its meal 
reimbursements for a budget year for administrative costs (or more than 
any higher limit established pursuant to a waiver granted under Sec.
226.7(g)), the State agency must take appropriate fiscal action. In 
addition,

[[Page 230]]

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 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; 67 FR 43490, June 27, 2002; 69 FR 
53544, Sept. 1, 2004]



                    Subpart E_Operational Provisions



Sec.226.15  Institution provisions.

    (a) Tax exempt status. Except for for-profit centers and sponsoring 
organizations of such centers, institutions must be public, or have tax 
exempt status under the Internal Revenue Code of 1986.
    (b) New applications and renewals. Each institution must submit to 
the State agency with its application all information required for its 
approval as set forth in Sec.226.6(b) and 226.6(f). Such information 
must demonstrate that a new institution has the administrative and 
financial capability to operate the Program in accordance with this part 
and with the performance standards set forth in Sec.
226.6(b)(1)(xviii), and that a renewing institution has the 
administrative and financial capability to operate the Program in 
accordance with this part and with the performance standards set forth 
in Sec.226.6(b)(2)(vii).
    (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

[[Page 231]]

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 centers 
(except for outside-school-hours care centers, emergency shelters, and 
at-risk afterschool care centers). All types of centers, except for 
emergency shelters and at-risk afterschool care centers, must maintain 
information used to determine eligibility for free or reduced-price 
meals in accordance with Sec.226.23(e)(1). For child care centers, 
such documentation of enrollment must be updated annually, signed by a 
parent or legal guardian, and include information on each child's normal 
days and hours of care and the meals normally received while in care.
    (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). Such documentation of 
enrollment must be updated annually, signed by a parent or legal 
guardian, and include information on each child's normal days and hours 
of care and the meals normally received while in care.
    (4) Daily records indicating the number of participants in 
attendance and the daily meal counts, by type (breakfast, lunch, supper, 
and snacks), served to family day care home participants, or the time of 
service meal counts, by type (breakfast, lunch, supper, and snacks), 
served to center participants. State agencies may require family day 
care homes to record meal counts at the time of meal service only in day 
care homes providing care for more than 12 children in a single day, or 
in day care homes that have been found seriously deficient due to 
problems with their meal counts and claims.
    (5) Except at day care homes, daily records indicating the number of 
meals, by type, served to adults performing labor necessary to the food 
service;
    (6) 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.
    (7) Copies of all claims for reimbursement submitted to the State 
agency;
    (8) Receipts for all Program payments received from the State 
agency;
    (9) If applicable, information concerning the dates and amounts of 
disbursement to each child care facility or adult day care facility 
under its auspices;
    (10) Copies of menus, and any other food service records required by 
the State agency;
    (11) 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;
    (12) Information on training session date(s) and location(s), as 
well as topics presented and names of participants; and
    (13) 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.
    (14) For sponsoring organizations, records documenting the 
attendance at training of each staff member with monitoring 
responsibilities. Training must include instruction, appropriate

[[Page 232]]

to the level of staff experience and duties, on the Program's meal 
patterns, meal counts, claims submission and claim review procedures, 
recordkeeping requirements, and an explanation of the Program's 
reimbursement system.
    (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, five 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) Area eligibility determinations for at-risk afterschool care 
centers. Sponsoring organizations of at-risk afterschool care centers 
must provide information, as required by the State agency, which permits 
the State agency to determine whether the centers they sponsor are 
located in eligible areas. Such information may include the most recent 
free and reduced-price school data available pursuant to Sec.
226.6(f)(1)(ix) and attendance area information that it has obtained, or 
verified with the appropriate school officials to be current, within the 
last school year.
    (h) Payment to employees. No institution that is a sponsoring 
organization of family day care homes and that employs more than one 
person is permitted to base payment (including bonuses or gratuities) to 
its employees, contractors, or family day care home providers solely on 
the number of new family day care homes recruited for the sponsoring 
organization's Program.
    (i) Claims submission. Each institution shall submit claims for 
reimbursement to the State agency in accordance with Sec.226.10.
    (j) Program agreement. Each institution shall enter into a Program 
agreement with the State agency in accordance with Sec.226.6(b)(4).

[[Page 233]]

    (k) Commodities. Each institution receiving commodities shall ensure 
proper commodity utilization.
    (l) Special Milk Program. No institution may participate in both the 
Child and Adult Care Food Program and the Special Milk Program at the 
same time.
    (m) 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.).
    (n) Regulations and guidance. Each institution must comply with all 
regulations issued by FNS and the Department, all instructions and 
handbooks issued by FNS and the Department to clarify or explain 
existing regulations, and all regulations, instructions and handbooks 
issued by the State agency that are consistent with the provisions 
established in Program regulations.
    (o) Information on WIC. Each institution must ensure that parents of 
enrolled children are provided with current information on the benefits 
and importance of the Special Supplemental Nutrition Program for Women, 
Infants, and Children (WIC) and the eligibility requirements for WIC 
participation.

[47 FR 36527, Aug. 20, 1982]

    Editorial Note: For Federal Register citations affecting Sec.
226.15, see the List of CFR Sections Affected, which appears in the 
Finding Aids section of the printed volume and at www.fdsys.gov.



Sec.226.16  Sponsoring organization provisions.

    (a) Each sponsoring organization shall comply with all provisions of 
Sec.226.15.
    (b) Each sponsoring organization must submit to the State agency 
with its application all information required for its approval, and the 
approval of the facilities under its jurisdiction, as set forth in 
Sec. Sec.226.6(b) and 226.6(f). The application must demonstrate that 
the institution has the administrative and financial capability to 
operate the Program in accordance with the Program regulations. In 
addition to the information required in Sec. Sec.226.6(b) and 
226.6(f), the application must include:
    (1) A sponsoring organization management plan and administrative 
budget, in accordance with Sec. Sec.226.6(b)(1)(iv), 226.6(b)(1)(v), 
226.6(b)(2)(i), 226.6(f)(2)(i), and 226.7(g), which includes information 
sufficient to document the sponsoring organization's compliance with the 
performance standards set forth at Sec.226.6(b)(1)(xviii) and 
226.6(b)(2)(vii). As part of its management plan, a sponsoring 
organization of day care homes must document that, to perform 
monitoring, it will employ the equivalent of one full-time staff person 
for each 50 to 150 day care homes it sponsors. As part of its management 
plan, a sponsoring organization of centers must document that, to 
perform monitoring, it will employ the equivalent of one full-time staff 
person for each 25 to 150 centers it sponsors. It is the State agency's 
responsibility to determine the appropriate level of staffing for 
monitoring for each sponsoring organization, consistent with these 
specified ranges and factors that the State agency will use to determine 
the appropriate level of monitoring staff for each sponsor. The 
monitoring staff equivalent may include the employee's time spent on 
scheduling, travel time, review time, follow-up activity, report 
writing, and activities related to the annual updating of children's 
enrollment forms. Sponsoring organizations that were participating in 
the Program on July 29, 2002, were to have submitted, no later than July 
29, 2003, a management plan or plan amendment that meets the monitoring 
staffing requirement. For sponsoring organizations of centers, the 
portion of the administrative costs to be charged to the Program may not 
exceed 15 percent of the meal reimbursements estimated or actually 
earned during the budget year, unless the State agency grants a waiver 
in accordance with Sec.226.7(g). A sponsoring organization of centers 
must include in the administrative budget all administrative costs, 
whether incurred by the sponsoring organization or its sponsored 
centers. If at any point a sponsoring organization determines that the 
meal reimbursements estimated to be earned during the budget year will

[[Page 234]]

be lower than that estimated in its administrative budget, the 
sponsoring organization must amend its administrative budget to stay 
within the 15 percent limitation (or any higher limit established 
pursuant to a waiver granted under Sec.226.7(g)) or seek a waiver. 
Failure to do so will result in appropriate fiscal action in accordance 
with Sec.226.14(a).
    (2) An application for participation, or renewal materials, for each 
child care and adult day care facility accompanied by all necessary 
supporting documentation;
    (3) Timely information concerning the eligibility status of child 
care and adult day care facilities (such as licensing/approval actions);
    (4) For sponsoring organizations applying for initial participation 
on or after June 20, 2000, if required by State law, regulation, or 
policy, a bond in the form prescribed by such law, regulation, or 
policy;
    (5) A copy of the sponsoring organization's notice to parents, in a 
form and, to the maximum extent practicable, language easily 
understandable by the participant's parents or guardians. The notice 
must inform them of their facility's participation in CACFP, the 
Program's benefits, the name and telephone number of the sponsoring 
organization, and the name and telephone number of the State agency 
responsible for administration of CACFP;
    (6) If the sponsoring organization chooses to establish procedures 
for determining a day care home seriously deficient that supplement the 
procedures in paragraph (l) of this section, a copy of those 
supplemental procedures. If the State agency has made the sponsoring 
organization responsible for the administrative review of a proposed 
termination of a day care home's agreement for cause, pursuant to Sec.
226.6(l)(1), a copy of the sponsoring organization's administrative 
review procedures. The sponsoring organization's supplemental serious 
deficiency and administrative review procedures must comply with 
paragraph (l) of this section and Sec.226.6(l);
    (7) A copy of their outside employment policy. The policy must 
restrict other employment by employees that interferes with an 
employee's performance of Program-related duties and responsibilities, 
including outside employment that constitutes a real or apparent 
conflict of interest; and
    (8) For sponsoring organizations of day care homes, the name, 
mailing address, and date of birth of each provider.
    (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 must provide adequate supervisory 
and operational personnel for the effective management and monitoring of 
the program at all facilities it sponsors. Each sponsoring organization 
must employ monitoring staff sufficient to meet the requirements of 
paragraph (b)(1) of this section. At a minimum, Program assistance must 
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) Training on Program duties and responsibilities to key staff 
from all sponsored facilities prior to the beginning of Program 
operations. At a minimum, such training must include instruction, 
appropriate to the level of staff experience and duties, on the 
Program's meal patterns, meal counts, claims submission and review 
procedures, recordkeeping requirements, and reimbursement system. 
Attendance by key staff, as defined by the State agency, is mandatory;
    (3) Additional mandatory training sessions for key staff from all 
sponsored child care and adult day care facilities not less frequently 
than annually. At a minimum, such training must include instruction, 
appropriate to the level of staff experience and duties, on the 
Program's meal patterns, meal counts, claims submission and review 
procedures, recordkeeping requirements, and reimbursement system. 
Attendance by key staff, as defined by the State agency, is mandatory;

[[Page 235]]

    (4)(i) Review elements. Reviews that assess whether the facility has 
corrected problems noted on the previous review(s), a reconciliation of 
the facility's meal counts with enrollment and attendance records for a 
five-day period, as specified in paragraph (d)(4)(ii) of this section, 
and an assessment of the facility's compliance with the Program 
requirements pertaining to:
    (A) The meal pattern;
    (B) Licensing or approval;
    (C) Attendance at training;
    (D) Meal counts;
    (E) Menu and meal records; and
    (F) The annual updating and content of enrollment forms (if the 
facility is required to have enrollment forms on file, as specified in 
Sec. Sec.226.15(e)(2) and 226.15(e)(3)).
    (ii) Reconciliation of meal counts. Reviews must examine the meal 
counts recorded by the facility for five consecutive days during the 
current and/or prior claiming period. For each day examined, reviewers 
must use enrollment and/or attendance records to determine the number of 
children in care during each meal service and attempt to reconcile those 
numbers to the numbers of breakfasts, lunches, suppers, and/or snacks 
recorded in the facility's meal count for that day. Based on that 
comparison, reviewers must determine whether the meal counts were 
accurate. If there is a discrepancy between the number of children 
enrolled or in attendance on the day of review and prior meal counting 
patterns, the reviewer must attempt to reconcile the difference and 
determine whether the establishment of an overclaim is necessary.
    (iii) Frequency and type of required facility reviews. Sponsoring 
organizations must review each facility three times each year, except as 
described in paragraph (d)(4)(iv) of this section. In addition:
    (A) At least two of the three reviews must be unannounced;
    (B) At least one unannounced review must include observation of a 
meal service;
    (C) At least one review must be made during each new facility's 
first four weeks of Program operations; and
    (D) Not more than six months may elapse between reviews.
    (iv) Averaging of required reviews. If a sponsoring organization 
conducts two unannounced reviews of a facility in a year and finds no 
serious deficiencies (as described in paragraph (l)(2) of this section, 
regardless of the type of facility), the sponsoring organization may 
choose not to conduct a third review of the facility that year, provided 
that the sponsoring organization conducts an average of three reviews of 
all of its facilities that year. When the sponsoring organization uses 
this averaging provision, and a specific facility receives two reviews 
in one review year, its first review in the next review year must occur 
no more than nine months after the previous review. Sponsoring 
organizations may not review a sponsored facility fewer than three times 
per year if the facility has submitted a block claim during the year.
    (v) Follow-up reviews. If, in conducting a facility review, a 
sponsoring organization detects one or more serious deficiency, the next 
review of that facility must be unannounced. Serious deficiencies are 
those described at paragraph (l)(2) of this section, regardless of the 
type of facility.
    (vi) Notification of unannounced reviews. Sponsoring organizations 
of centers must provide each center with written notification of the 
right of the sponsoring organization, the State agency, the Department, 
and other State and Federal officials to make announced or unannounced 
reviews of its operations during the center's normal hours of operation, 
and must also notify sponsored centers that anyone making such reviews 
must show photo identification that demonstrates that they are employees 
of one of these entities. For sponsored centers participating on July 
29, 2002, the sponsoring organization was to have provided this notice 
no later than August 29, 2002. For sponsored centers that are approved 
after July 29, 2002, the sponsoring organization must provide the notice 
before meal service under the Program begins. Sponsoring organizations 
must provide day care homes notification of unannounced visits in 
accordance with Sec.226.18(b)(1).

[[Page 236]]

    (vii) Other requirements pertaining to unannounced reviews. 
Unannounced reviews must be made only during the facility's normal hours 
of operation, and monitors making such reviews must show photo 
identification that demonstrates that they are employees of the 
sponsoring organization, the State agency, the Department, or other 
State and Federal agencies authorized to audit or investigate Program 
operations.
    (viii) Imminent threat to health or safety. Sponsoring organizations 
that discover in a facility conduct or conditions that pose an imminent 
threat to the health or safety of participating children or the public, 
must immediately notify the appropriate State or local licensing or 
health authorities and take action that is consistent with the 
recommendations and requirements of those authorities.
    (5) For sponsoring organizations, as part of their monitoring of 
facilities, compliance with the household contact requirements 
established pursuant to Sec.226.6(m)(5) of this part.
    (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 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, 
emergency shelters, at-risk afterschool care centers, and outside-
school-hours care centers). However, if a school food authority provides 
child care and is applying to participate in the Program, the State 
agency must enter into a single permanent agreement, as specified in 
Sec.226.6(b)(4)(ii)(A).
    (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, emergency shelters, at-risk 
afterschool 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.

[[Page 237]]

    (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 for-profit centers which have the same legal 
identity as the organization, but shall not be eligible to sponsor for-
profit 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.
    (l) Termination of agreements for cause--(1) General. The sponsoring 
organization must initiate action to terminate the agreement of a day 
care home for cause if the sponsoring organization determines the day 
care home has committed one or more serious deficiency listed in 
paragraph (l)(2) of this section.
    (2) List of serious deficiencies for day care homes. Serious 
deficiencies for day care homes are:
    (i) Submission of false information on the application;
    (ii) Submission of false claims for reimbursement;
    (iii) Simultaneous participation under more than one sponsoring 
organization;
    (iv) Non-compliance with the Program meal pattern;
    (v) Failure to keep required records;
    (vi) Conduct or conditions that threaten the health or safety of a 
child(ren) in care, or the public health or safety;
    (vii) A determination that the day care home has been convicted of 
any activity that occurred during the past seven years and that 
indicated a lack of business integrity. A lack of business integrity 
includes fraud, antitrust violations, embezzlement, theft, forgery, 
bribery, falsification or destruction of records, making false 
statements, receiving stolen property, making false claims, obstruction 
of justice, or any other activity indicating a lack of business 
integrity as defined by the State agency, or the concealment of such a 
conviction;
    (viii) Failure to participate in training; or
    (ix) Any other circumstance related to non-performance under the 
sponsoring organization-day care home agreement, as specified by the 
sponsoring organization or the State agency.
    (3) Serious deficiency notification procedures. If the sponsoring 
organization determines that a day care home has committed one or more 
serious deficiency listed in paragraph (l)(2) of this section, the 
sponsoring organization must use the following procedures to provide the 
day care home notice of the serious deficiency(ies) and offer it an 
opportunity to take corrective action. However, if the serious 
deficiency(ies) constitutes an imminent threat to the health or safety 
of participants, or the day care home has engaged in activities that 
threaten the public health or safety, the sponsoring organization must 
follow the procedures in paragraph (l)(4) of this section instead of 
those in this paragraph (l)(3).
    (i) Notice of serious deficiency. The sponsoring organization must 
notify the day care home that it has been found to be seriously 
deficient. The sponsoring organization must provide a copy of the 
serious deficiency notice to the State agency. The notice must specify:
    (A) The serious deficiency(ies);
    (B) The actions to be taken by the day care home to correct the 
serious deficiency(ies);
    (C) The time allotted to correct the serious deficiency(ies) (as 
soon as possible, but not to exceed 30 days);
    (D) That the serious deficiency determination is not subject to 
administrative review.
    (E) That failure to fully and permanently correct the serious 
deficiency(ies) within the allotted time will result in the 
institution's proposed

[[Page 238]]

termination of the day care home's agreement and the proposed 
disqualification of the day care home and its principals; and
    (F) That the day care home's voluntary termination of its agreement 
with the institution after having been notified that it is seriously 
deficient will still result in the day care home's formal termination by 
the State institution and placement of the day care home and its 
principals on the National disqualified list.
    (ii) Successful corrective action. If the day care home corrects the 
serious deficiency(ies) within the allotted time and to the sponsoring 
organization's satisfaction, the sponsoring organization must notify the 
day care home that it has rescinded its determination of serious 
deficiency. The sponsoring organization must also provide a copy of the 
notice to the State agency.
    (iii) Proposed termination of agreement and proposed 
disqualification. If timely corrective action is not taken to fully and 
permanently correct the serious deficiency(ies) cited, the sponsoring 
organization must issue a notice proposing to terminate the day care 
home's agreement for cause. The notice must explain the day care home's 
opportunity for an administrative review of the proposed termination in 
accordance with Sec.226.6(l). The sponsoring organization must provide 
a copy of the notice to the State agency. The notice must:
    (A) Inform the day care home that it may continue to participate and 
receive Program reimbursement for eligible meals served until its 
administrative review is concluded;
    (B) Inform the day care home that termination of the day care home's 
agreement will result in the day care home's termination for cause and 
disqualification; and
    (C) State that if the day care home seeks to voluntarily terminate 
its agreement after receiving the notice of intent to terminate, the day 
care home will still be placed on the National disqualified list.
    (iv) Program payments. The sponsoring organization must continue to 
pay any claims for reimbursement for eligible meals served until the 
serious deficiency(ies) is corrected or the day care home's agreement is 
terminated, including the period of any administrative review.
    (v) Agreement termination and disqualification. The sponsoring 
organization must immediately terminate the day care home's agreement 
and disqualify the day care home when the administrative review official 
upholds the sponsoring organization's proposed termination and proposed 
disqualification, or when the day care home's opportunity to request an 
administrative review expires. At the same time the notice is issued, 
the sponsoring organization must provide a copy of the termination and 
disqualification letter to the State agency.
    (4) Suspension of participation for day care homes.
    (i) General. If State or local health or licensing officials have 
cited a day care home for serious health or safety violations, the 
sponsoring organization must immediately suspend the home's CACFP 
participation prior to any formal action to revoke the home's licensure 
or approval. If the sponsoring organization determines that there is an 
imminent threat to the health or safety of participants at a day care 
home, or that the day care home has engaged in activities that threaten 
the public health or safety, and the licensing agency cannot make an 
immediate onsite visit, the sponsoring organization must immediately 
notify the appropriate State or local licensing and health authorities 
and take action that is consistent with the recommendations and 
requirements of those authorities. An imminent threat to the health or 
safety of participants and engaging in activities that threaten the 
public health or safety constitute serious deficiencies; however, the 
sponsoring organization must use the procedures in this paragraph (l)(4) 
(and not the procedures in paragraph (l)(3) of this section) to provide 
the day care home notice of the suspension of participation, serious 
deficiency, and proposed termination of the day care home's agreement.
    (ii) Notice of suspension, serious deficiency, and proposed 
termination. The sponsoring organization must notify the day care home 
that its participation has been suspended, that the day

[[Page 239]]

care home has been determined seriously deficient, and that the 
sponsoring organization proposes to terminate the day care home's 
agreement for cause, and must provide a copy of the notice to the State 
agency. The notice must:
    (A) Specify the serious deficiency(ies) found and the day care 
home's opportunity for an administrative review of the proposed 
termination in accordance with Sec.226.6(l);
    (B) State that participation (including all Program payments) will 
remain suspended until the administrative review is concluded;
    (C) Inform the day care home that if the administrative review 
official overturns the suspension, the day care home may claim 
reimbursement for eligible meals served during the suspension;
    (D) Inform the day care home that termination of the day care home's 
agreement will result in the placement of the day care home on the 
National disqualified list; and
    (E) State that if the day care home seeks to voluntarily terminate 
its agreement after receiving the notice of proposed termination, the 
day care home will still be terminated for cause and disqualified.
    (iii) Agreement termination and disqualification. The sponsoring 
organization must immediately terminate the day care home's agreement 
and disqualify the day care home when the administrative review official 
upholds the sponsoring organization's proposed termination, or when the 
day care home's opportunity to request an administrative review expires.
    (iv) Program payments. A sponsoring organization is prohibited from 
making any Program payments to a day care home that has been suspended 
until any administrative review of the proposed termination is 
completed. If the suspended day care home prevails in the administrative 
review of the proposed termination, the sponsoring organization must 
reimburse the day care home for eligible meals served during the 
suspension period.
    (m) Sponsoring organizations of family day care homes must not make 
payments to employees or contractors solely on the basis of the number 
of homes recruited. However, such employees or contractors may be paid 
or evaluated on the basis of recruitment activities accomplished.

[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; 67 FR 43490, June 27, 2002; 69 FR 53544, Sept. 1, 
2004; 71 FR 5, Jan. 3, 2006; 72 FR 41608, July 31, 2007]



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 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 must 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 that indicates that 
renewal will be denied. If licensing or approval is not available, a 
child care center may participate if 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 for-profit centers, child care centers shall be 
public, or have tax exempt status under the Internal Revenue Code of 
1986.
    (3) Each child care center participating in the Program must serve 
one or more of the following meal types--breakfast; lunch; supper; and 
snack. Reimbursement must not be claimed for more than two meals and one 
snack or one meal and two snacks provided daily to each child.
    (4) Each child care center participating in the Program shall claim 
only the meal types specified in its approved

[[Page 240]]

application in accordance with the meal pattern requirements specified 
in Sec.226.20. For-profit child care centers may not claim 
reimbursement for meals served to children in any month in which less 
than 25 percent of the children in care (enrolled or licensed capacity, 
whichever is less) were eligible for free or reduced price meals or were 
title XX beneficiaries. However, children who only receive at-risk 
afterschool snacks and/or at-risk afterschool meals must not be included 
in this percentage.. 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 preschool children may also be approved 
to serve a breakfast, snack, and supper to school-age children 
participating in an outside-school-hours care program meeting the 
criteria of Sec.226.19(b) that is distinct from its day care program 
for preschool-age children. The State agency may authorize the service 
of lunch to such participating children who attend a school that does 
not offer a lunch program, provided that the limit of two meals and one 
snack, or one meal and two snacks, per child per day is not exceeded.
    (6) A child care center with preschool children may also be approved 
to serve a snack to school age children participating in an afterschool 
care program meeting the requirements of Sec.226.17a that is distinct 
from its day care program for preschool children, provided that the 
limit of two meals, and one snack, or one meal and two snacks, per child 
per day is not exceeded.
    (7) 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.
    (8) 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. Such documentation of enrollment 
must be updated annually, signed by a parent or legal guardian, and 
include information on each child's normal days and hours of care and 
the meals normally received while in care.
    (9) Each child care center must maintain daily records of time of 
service meal counts by type (breakfast, lunch, supper, and snacks) 
served to enrolled children, and to adults performing labor necessary to 
the food service.
    (10) Each child care center must require key staff, as defined by 
the State agency, to attend Program training prior to the center's 
participation in the Program, and at least annually thereafter, on 
content areas established by the State agency.
    (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.
    (d) If so instructed by its sponsoring organization, a sponsored 
center must distribute to parents a copy of the sponsoring 
organization's notice to parents.

[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; 67 FR 
43493, June 27, 2002; 69 FR 53546, Sept. 1, 2004; 70 FR 43262, July 27, 
2005; 72 FR 41608, July 31, 2007; 75 FR 16328, Apr. 1, 2010]



Sec.226.17a  At-risk afterschool care center provisions.

    (a) Organizations eligible to receive reimbursement for at-risk 
afterschool snacks and at-risk afterschool meals. (1) Eligible 
organizations. To receive reimbursement for at-risk afterschool snacks, 
organizations must meet the criteria in paragraphs (a)(1)(i) through 
(a)(1)(iv) of this section. To receive reimbursement

[[Page 241]]

for at-risk afterschool meals, organizations must meet the criteria in 
paragraphs (a)(1)(i) through (a)(1)(v) of this section.
    (i) Organizations must meet the definition of an At-risk afterschool 
care center in Sec.226.2. An organization may participate in the 
Program either as an independent center or as a child care facility 
under the auspices of a sponsoring organization. Public and private 
nonprofit centers may not participate under the auspices of a for-profit 
sponsoring organization.
    (ii) Organizations must operate an eligible afterschool care 
program, as described in paragraph (b) of this section.
    (iii) Organizations must meet the licensing/approval requirements in 
Sec.226.6(d)(1).
    (iv) Except for for-profit centers, at-risk afterschool care centers 
must be public, or have tax-exempt status under the Internal Revenue 
Code of 1986 or be currently participating in another Federal program 
requiring nonprofit status.
    (v) Organizations eligible to be reimbursed for at-risk afterschool 
meals must be located in one of the eligible States designated by law or 
selected by the Secretary as directed by law.
    (2) Limitations. (i) To be reimbursed for at-risk afterschool snacks 
and/or at-risk afterschool meals, all organizations must:
    (A) Serve the at-risk afterschool snacks and/or at-risk afterschool 
meals to children who are participating in an approved afterschool care 
program; and
    (B) Not exceed the authorized capacity of the at-risk afterschool 
care center.
    (ii) In any calendar month, a for-profit center must be eligible to 
participate in the Program as described in the definition of For-profit 
center in Sec.226.2. However, children who only receive at-risk 
afterschool snacks and/or at-risk afterschool meals must not be 
considered in determining this eligibility.
    (b) Eligible at-risk afterschool care programs--(1) Eligible 
programs. To be eligible for reimbursement, an afterschool care program 
must:
    (i) Be organized primarily to provide care for children after school 
or on weekends, holidays, or school vacations during the regular school 
year (an at-risk afterschool care center may not claim snacks during 
summer vacation, unless it is located in the attendance area of a school 
operating on a year-round calendar);
    (ii) Have organized, regularly scheduled activities (i.e., in a 
structured and supervised environment);
    (iii) Include education or enrichment activities; and
    (iv) Except for Emergency shelters as defined in Sec.226.2, be 
located in an eligible area, as described in paragraph (i) of this 
section.
    (2) Eligibility limitation. Organized athletic programs engaged in 
interscholastic or community level competitive sports are not eligible 
afterschool care programs.
    (c) Eligibility requirements for children. At-risk afterschool 
snacks and/or at-risk afterschool meals are reimbursable only if served 
to children who are participating in an approved afterschool care 
program and who either are age 18 or under at the start of the school 
year or meet the definition of Persons with disabilities in Sec.226.2.
    (d) Licensing requirements for at-risk afterschool care centers. In 
accordance with Sec.226.6(d)(1), if Federal, State or local licensing 
or approval is not otherwise required, at-risk afterschool care centers 
must meet State or local health and safety standards. When State or 
local health and safety standards have not been established, State 
agencies are encouraged to work with appropriate State and local 
officials to create such standards. Meeting these standards will remain 
a precondition for any afterschool center's eligibility for CACFP 
nutrition benefits. In cases where Federal, State or local licensing or 
approval is required, at-risk afterschool care centers that 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 that indicates the renewal will be denied.
    (e) Application procedures--(1) Application. An official of the 
organization must make written application to the State agency for any 
afterschool care program that it wants to operate as an at-risk 
afterschool care center.

[[Page 242]]

    (2) Required information. At a minimum, an organization must submit:
    (i) An indication that the applicant organization meets the 
eligibility criteria for organizations as specified in paragraph (a) of 
this section;
    (ii) A description of how the afterschool care program(s) meets the 
eligibility criteria in paragraph (b) of this section;
    (iii) In the case of a sponsoring organization, a list of all 
applicant afterschool care centers;
    (iv) Documentation that permits the State agency to confirm that all 
applicant afterschool care centers are located in an eligible area, as 
described in paragraph (i) of this section; and
    (v) Other information required as a condition of eligibility in the 
CACFP must be submitted with an application for participation in 
accordance with Sec.226.6(b)(1).
    (f) State agency action on applications--(1) State agency approval. 
The State agency must determine the eligibility of the afterschool care 
program for each sponsored afterschool care center based on the 
information submitted by the sponsoring organization in accordance with 
Sec. Sec.226.6(b)(1) and 226.15(g) and the requirements of this 
section. The State agency must determine the eligibility of the 
afterschool care programs of independent afterschool care centers based 
on the information submitted by the independent center in accordance 
with Sec.226.6(b)(1) and the requirements of this section. The State 
agency must determine the area eligibility of independent at-risk 
afterschool care centers in accordance with the requirements of Sec.
226.6(f)(1)(ix)(B). An approved organization must enter into an 
agreement with the State agency as described in paragraph (f)(2) of this 
section.
    (2) Agreement. The State agency must enter into an agreement or 
amend an existing agreement with an institution approved to operate one 
or more at-risk afterschool care centers pursuant to Sec.226.6(b)(4). 
The agreement must describe the approved afterschool care program(s) and 
list the approved center(s). The agreement must also require the 
institution to comply with the applicable requirements of this part. If 
the institution is a school food authority that is applying to 
participate as an at-risk afterschool care center, the State agency must 
enter into a single permanent agreement, as specified in Sec.
226.6(b)(4)(ii)(A).
    (g) Application process in subsequent years. To continue 
participating in the Program, independent at-risk afterschool care 
centers or sponsoring organizations of at-risk afterschool care centers 
must reapply at time intervals required by the State agency, as 
described in Sec.226.6(b)(3) and (f)(2). Sponsoring organizations of 
at-risk afterschool care centers must provide area eligibility data in 
compliance with the provisions of Sec.226.15(g). In accordance with 
Sec.226.6(f)(3)(ii), State agencies must determine the area 
eligibility of each independent at-risk afterschool care center that is 
reapplying to participate in the Program.
    (h) Changes to participating centers. Independent at-risk 
afterschool care centers or sponsors of at-risk afterschool care centers 
must advise the State agency of any substantive changes to the 
afterschool care program. Sponsoring organizations that want to add new 
at-risk afterschool care centers must provide the State agency with the 
information sufficient to demonstrate that the new centers meet the 
requirements of this section.
    (i) Area eligibility. Except for emergency shelters, at-risk 
afterschool care centers must be located in an area described in 
paragraph (a) of the Eligible area definition in Sec.226.2 and in 
paragraph (i)(1) of this section.
    (1) Definition. An at-risk afterschool care center is in an eligible 
area if it is located in the attendance area of an elementary, middle, 
or high school in which at least 50 percent of the enrolled children are 
certified eligible for free or reduced-price school meals.
    (2) Data used. Area eligibility determinations must be based on the 
total number of children approved for free and reduced-price school 
meals for the preceding October, or another month designated by the 
State agency that administers the National School Lunch Program (the 
NSLP State agency). If the NSLP State agency chooses a month other than 
October, it must do so for the entire State.

[[Page 243]]

    (3) Frequency of area eligibility determinations. Area eligibility 
determinations are valid for five years. The State agency may determine 
the date in the fifth year in which the next five-year cycle of area 
eligibility will begin. The State agency must not routinely require 
redeterminations of area eligibility based on updated school data during 
the five-year period, except in cases where the State agency has 
determined it is most efficient to incorporate area eligibility 
decisions into the three-year application cycle. However, a sponsoring 
organization, the State agency, or FNS may change the determination of 
area eligibility if information becomes available indicating that an at-
risk afterschool care center is no longer area eligible.
    (j) Cost of at-risk afterschool snacks and meals. All at-risk 
afterschool snacks and at-risk afterschool meals served under this 
section must be provided at no charge to participating children.
    (k) Limit on daily reimbursements. Only one at-risk afterschool 
snack and, in eligible States, one at-risk afterschool meal per child 
per day may be claimed for reimbursement. An at-risk afterschool care 
center that provides care to a child under another component of the 
Program during the same day may not claim reimbursement for more than 
two meals and one snack, or one meal and two snacks, per child per day, 
including the at-risk afterschool snack and the at-risk afterschool 
meal. All meals and snacks must be claimed in accordance with the 
requirements for the applicable component of the Program.
    (l) Meal pattern requirements for at-risk afterschool snacks and at-
risk afterschool meals. At-risk afterschool snacks must meet the meal 
pattern requirements for snacks in Sec.226.20(b)(6) and/or (c)(4); at-
risk afterschool meals must meet the meal pattern requirements for meals 
in Sec.226.20(b)(6) and/or (c)(1), (c)(2), or (c)(3).
    (m) Time periods for snack and meal services--(1) At-risk 
afterschool snacks. When school is in session, the snack must be served 
after the child's school day. With State agency approval, the snack may 
be served at any time on weekends and vacations during the regular 
school year. Afterschool snacks may not be claimed during summer 
vacation, unless an at-risk afterschool care center is located in the 
attendance area of a school operating on a year-round calendar.
    (2) At-risk afterschool meals. When school is in session, the meal 
must be served after the child's school day. With State agency approval, 
any one meal may be served (breakfast, lunch, or supper) per day on 
weekends and vacations during the regular school year. Afterschool meals 
may not be claimed during summer vacation, unless an at-risk afterschool 
care center is located in the attendance area of a school operating on a 
year-round calendar.
    (n) Reimbursement rates. At-risk afterschool snacks are reimbursed 
at the free rate for snacks. At-risk afterschool meals are reimbursed at 
the respective free rates for breakfast, lunch, or supper
    (o) Recordkeeping requirements. In addition to the other records 
required by this part, at-risk afterschool care centers must maintain:
    (1) Daily attendance rosters, sign-in sheets or, with State agency 
approval, other methods which result in accurate recording of daily 
attendance;
    (2) The number of at-risk afterschool snacks prepared or delivered 
for each snack service and/or, in eligible States, the number of at-risk 
afterschool meals prepared or delivered for each meal service;
    (3) The number of at-risk afterschool snacks served to participating 
children for each snack service and/or, in eligible States, the number 
of at-risk afterschool meals served to participating children for each 
meal service; and
    (4) Menus for each at-risk afterschool snack service and each at-
risk afterschool meal service.
    (p) Reporting requirements. In addition to other reporting 
requirements under this part, at-risk afterschool care centers must 
report the total number of at-risk afterschool snacks and/or (in 
eligible States) the total number of at-risk afterschool meals served to 
eligible children based on daily attendance rosters or sign-in sheets.
    (q) Monitoring requirements. State agencies must monitor independent 
centers in accordance with Sec.226.6(m).

[[Page 244]]

Sponsoring organizations of at-risk afterschool care centers must 
monitor their centers in accordance with Sec.226.16(d)(4).

[72 FR 41608, July 31, 2007, as amended at 75 FR 16328, Apr. 1, 2010]



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. The agreement must be signed by the sponsoring organization and 
the provider and must include the provider's full name, mailing address, 
and date of birth. 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) The right of the sponsoring organization, the State agency, the 
Department, and other State and Federal officials to make announced or 
unannounced reviews of the day care home's operations and to have access 
to its meal service and records during its normal hours of child care 
operations. For day care homes participating July 29, 2002, the 
sponsoring organization must amend the current agreement no later than 
August 29, 2002;
    (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 permanent agreement 
with each sponsored day care home which specifies the rights and 
responsibilities of both parties. Nothing in the preceding sentence 
shall be construed to limit the ability of the sponsoring organization 
to suspend or terminate the permanent agreement in accordance with Sec.
226.16(l). 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 require key 
staff, as defined by the State agency, to receive Program training prior 
to the day care home's participation in the Program, and at least 
annually thereafter, on content areas established by the State agency, 
and the responsibility of the day care home to participate in that 
training;
    (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, and subtract such costs from Program

[[Page 245]]

payments to the home, the particulars of this arrangement shall be 
specified in the agreement. The sponsoring organization must not 
withhold Program payments to any family day care home for any other 
reason, except that the sponsoring organization may withhold from the 
provider any amounts that the sponsoring organization has reason to 
believe are invalid, due to the provider having submitted a false or 
erroneous meal count;
    (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;
    (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;
    (13) The State agency's policy to restrict transfers of day care 
homes between sponsoring organizations;
    (14) The responsibility of the day care home to notify their 
sponsoring organization in advance whenever they are planning to be out 
of their home during the meal service period. The agreement must also 
state that, if this procedure is not followed and an unannounced review 
is conducted when the children are not present in the day care home, 
claims for meals that would have been served during the unannounced 
review will be disallowed;
    (15) The day care home's opportunity to request an administrative 
review if a sponsoring organization issues a notice of proposed 
termination of the day care home's Program agreement, or if a sponsoring 
organization suspends participation due to health and safety concerns, 
in accordance with Sec.226.6(1)(2); and
    (16) If so instructed by its sponsoring organization, the day care 
home's responsibility to distribute to parents a copy of the sponsoring 
organization's notice to parents.
    (c) Each day care home must serve one or more of the following meal 
types--breakfast, lunch, supper, and snack. Reimbursement may not be 
claimed for more than two meals and one snack, or one meal and two 
snacks, 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 must maintain on file documentation of each 
child's enrollment and must maintain daily records of the number of 
children in attendance and the number of meals, by type, served to 
enrolled children. Such documentation of enrollment must be updated 
annually, signed by a parent or legal guardian, and include information 
on each child's normal days and hours of care and the meals normally 
received while in care. Each

[[Page 246]]

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 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; 67 FR 43493, June 27, 2002; 69 FR 53546, Sept. 1, 2004; 
70 FR 34633, June 15, 2005; 72 FR 41610, July 31, 2007]



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) In accordance with Sec.226.6(d)(1), if Federal, State or local 
licensing or approval is not otherwise required, outside-school-hours 
care centers must meet State or local health and safety standards. When 
State or local health and safety standards have not been established, 
State agencies are encouraged to work with appropriate State and local 
officials to create such standards. Meeting these standards will remain 
a precondition for any outside-school-hours care center's eligibility 
for CACFP nutrition benefits. In cases where Federal, State or local 
licensing or approval is required, outside-school-hours care centers 
that 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 that indicates the renewal will 
be denied.
    (2) Except for for-profit centers, outside-school-hours care centers 
shall be public, or have tax-exempt status under the Internal Revenue 
Code of 1986.
    (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 participate in a regularly scheduled program that meets 
the criteria of paragraph (b)(1) of this section. The program is 
organized for the purpose of providing services to children and is 
distinct from any extracurricular programs organized primarily for 
scholastic, cultural, or 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, snacks and suppers. In 
addition, outside-school-hours care centers shall be eligible to serve 
lunches to enrolled

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children during periods of school vacation, including weekends and 
holidays, and to 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 may not be claimed for more than two 
meals and one snack provided daily to each child or for meals served to 
children at any one time in excess of authorized capacity. For-profit 
centers may not claim reimbursement for meals served to children in any 
month in which less than 25 percent of the children in care (enrolled or 
licensed capacity, whichever is less) were eligible for free or reduced 
price meals or were title XX beneficiaries.
    (6) Each outside-school-hours care center must require key 
operational staff, as defined by the State agency, to attend Program 
training prior to the center's participation in the Program, and at 
least annually thereafter, on content areas established by the State 
agency. Each meal service must be supervised by an adequate number of 
operational personnel who have been trained in Program requirements as 
outlined in this section. Operational personnel must ensure that:
    (i) Meals are served only to children and to adults who perform 
necessary food service labor;
    (ii) Meals served to children meet the meal pattern requirements 
specified in Sec.226.20;
    (iii) Meals served are consumed on the premises of the centers;
    (iv) Accurate records are maintained; and
    (v) The number of meals prepared or ordered is promptly adjusted on 
the basis of participation trends.
    (7) Each outside-school-hours care center shall accurately maintain 
the following records:
    (i) 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 children at each meal service;
    (v) Number of 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.
    (8) 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; 67 FR 43493, June 27, 2002; 69 FR 
53546, Sept. 1, 2004; 70 FR 43262, July 27, 2005; 72 FR 41603, 41610, 
July 31, 2007]



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.

[[Page 248]]

    (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 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 for-profit centers, adult day care centers shall be 
public, or have tax-exempt status under the Internal Revenue Code of 
1986.
    (5) Each adult day care center participating in the Program must 
serve one or more of the following meal types--breakfast, lunch, supper, 
and snack. Reimbursement may not be claimed for more than two meals and 
one snack, or one snack and two meals, 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. 
Reimburs