[Federal Register Volume 77, Number 68 (Monday, April 9, 2012)]
[Proposed Rules]
[Pages 21018-21038]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-8332]
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Proposed Rules
Federal Register
________________________________________________________________________
This section of the FEDERAL REGISTER contains notices to the public of
the proposed issuance of rules and regulations. The purpose of these
notices is to give interested persons an opportunity to participate in
the rule making prior to the adoption of the final rules.
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Federal Register / Vol. 77, No. 68 / Monday, April 9, 2012 / Proposed
Rules
[[Page 21018]]
DEPARTMENT OF AGRICULTURE
Food and Nutrition Service
7 CFR Part 226
RIN 0584-AE12
Child and Adult Care Food Program: Amendments Related to the
Healthy, Hunger-Free Kids Act of 2010
AGENCY: Food and Nutrition Service, USDA.
ACTION: Proposed rule.
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SUMMARY: This rule proposes to codify several provisions of the
Healthy, Hunger-Free Kids Act of 2010 affecting the management of the
Child and Adult Care Food Program (CACFP). The Department is proposing
to require institutions to submit an initial CACFP application to the
State agency and, in subsequent years, periodically update the
information in lieu of submitting a new application; require sponsoring
organizations to vary the timing of reviews of sponsored facilities;
require State agencies to develop and provide for the use of a standard
permanent agreement between sponsoring organizations and day care
centers; allow tier II day care homes to collect household income
information and transmit it to the sponsoring organization; modify the
method of determining administrative payments to sponsoring
organizations of day care homes by basing payments on a formula; and
allow sponsoring organizations of day care homes to carry over up to 10
percent of their administrative funding from the previous fiscal year
into the next fiscal year. This rule also proposes to incorporate
several changes to the application and renewal process which are
expected to improve the management of CACFP and to make a number of
miscellaneous technical changes.
DATES: To be assured of consideration, comments must be received on or
before June 8, 2012.
ADDRESSES: The Food and Nutrition Service, USDA, invites interested
persons to submit comments on this proposed rule. Comments may be
submitted through one of the following methods:
Preferred method: Federal eRulemaking Portal at http://www.regulations.gov. Follow the online instructions for submitting
comments.
Mail: Comments should be addressed to Julie Brewer, Chief,
Policy and Program Development Branch, Child Nutrition Division, Food
and Nutrition Service, Department of Agriculture, 3101 Park Center
Drive, Room 640, Alexandria, Virginia 22302-1594.
Hand Delivery or Courier: Deliver comments to the Food and
Nutrition Service, Child Nutrition Division, 3101 Park Center Drive,
Room 640, Alexandria, Virginia 22302-1594, during normal business hours
of 8:30 a.m.-5 p.m.
Comments submitted in response to this proposed rule will be
included in the record and will be made available to the public. Please
be advised that the substance of the comments and the identity of the
individuals or entities submitting the comments will be subject to
public disclosure. The Department will make the comments publicly
available on the Internet via http://www.regulations.gov.
FOR FURTHER INFORMATION CONTACT: Julie Brewer at the above address or
telephone (703) 305-2590.
SUPPLEMENTARY INFORMATION:
I. Public Comment Procedures
II. Executive Summary
III. Background and Discussion of the Proposed Rule
IV. Procedural Matters
I. Public Comment Procedures
Your written comments on the proposed rule should be specific,
should be confined to issues pertinent to the proposed rule, and should
explain the reason(s) for any change you recommend or proposal(s) you
oppose. Where possible, you should reference the specific section or
paragraph of the proposal you are addressing. Comments received after
the close of the comment period (refer to DATES) will not be considered
or included in the Administrative Record for the final rule.
Executive Order 12866 requires each agency to write regulations
that are simple and easy to understand. We invite your comments on how
to make these proposed regulations easier to understand, including
answers to questions such as the following:
(1) Are the requirements in the proposed regulations clearly
stated?
(2) Does the rule contain technical language or jargon that
interferes with its clarity?
(3) Does the format of the rule (e.g., grouping and order of
sections, use of headings, and paragraphing) make it clearer or less
clear?
(4) Would the rule be easier to understand if it was divided into
more (but shorter) sections?
(5) Is the description of the rule in the preamble section entitled
``Background and Discussion of the Proposed Rule'' helpful in
understanding the rule? How could this description be more helpful in
making the rule easier to understand?
II. Executive Summary
Purpose of the Regulatory Action
The Department is proposing to amend the regulations for CACFP at 7
CFR part 226 to codify several of the provisions of the Healthy,
Hunger-Free Kids Act of 2010 (HHFKA). This proposed rule would affect
the management and administration of CACFP for State agencies, new and
renewing institutions, sponsoring organizations, and sponsored
facilities. This rule also proposes to incorporate several changes to
the application and renewal process which are expected to improve the
management of CACFP and to make a number of miscellaneous technical
changes to the organization of 7 CFR part 226.
Summary of the Major Provisions of the Regulatory Action
CACFP Initial Application Submission and Renewal Requirements
Current regulations require institutions to submit an initial
application for CACFP participation and then to reapply to the CACFP on
a schedule determined by the State agency, but not less than every one
to three years. Section 331(b) of the Act amended section 17(d) of the
Richard B. Russell National School Lunch Act (NSLA) (42 U.S.C. 1766(d))
to require, in lieu of submitting a renewal application, that renewing
institutions need only annually confirm that the institution is in
compliance with the licensing
[[Page 21019]]
requirements of subsection 17(a)(5) of the NSLA (42 U.S.C. 1766(a)(5))
and submit to the State agency any additional necessary information, as
specified by the Department.
This proposal would eliminate a renewal application for renewing
institutions; however, such institutions would be required to annually
certify that they still meet the program requirements for continued
participation and to provide an update of the information provided on
the initial application if the State agency has not already been
notified of the changes. The exception to this is the budget submission
for sponsoring organizations, which as in current regulations, must be
submitted annually rather than through the certification process.
Varied Timing of Reviews Conducted by Sponsoring Organizations
Section 331(b) of the Act amended section 17(d)(2) of the NSLA (42
U.S.C. 1766(d)(2)) to require that sponsoring organizations vary the
timing of unannounced reviews so they are unpredictable to sponsored
facilities. We anticipate unannounced reviews will be more effective in
detecting CACFP integrity issues. This proposed rule would require
sponsoring organizations to ensure that the timing of unannounced
reviews is varied in a way that would ensure they are unpredictable to
the facility under review.
Permanent Agreements Between Sponsoring Organizations and Sponsored
Centers
Section 331(c) of the Act amended section 17(j)(1) of the NSLA (42
U.S.C. 1766(j)(1)) to require State agencies to develop and provide for
the use of a standard permanent operating agreement between sponsoring
organizations of centers and their sponsored centers. This rule
proposes to require State agencies to develop standard permanent
agreements that sponsors of child care centers, adult day care centers,
emergency shelters, at-risk afterschool care centers, or outside school
hours care centers will enter into with their unaffiliated sponsored
centers.
Transmission of Income Information by Sponsored Day Care Homes
Current regulations require a sponsoring organization, upon the
request of a tier II day care home provider, to collect income
eligibility applications from households (7 CFR 226.18(b)(12)). Section
333 of the Act amended section 17(f)(3)(A)(iii)(III) of the NSLA (42
U.S.C. 1766(f)(3)(A)(iii)(III)) to require sponsoring organizations to
allow providers of tier II day care homes to assist in the transmission
of household income information with the written consent of the parents
or guardians of children in their care. This rule proposes to allow the
tier II day care home to assist in collecting income eligibility
applications from households and transmitting the applications to the
sponsoring organization. The addition would limit the provider's
assistance to collecting applications and transmitting them to the
sponsoring organization, and prohibits tier II day care home providers
from reviewing the applications.
Administrative Payment Rates to Sponsoring Organizations for Day Care
Homes
Current regulations found at 7 CFR 226.12(a) require that
administrative cost payments to a sponsoring organization of day care
homes may not exceed the lesser of: (1) Actual expenditures for the
costs of administering the CACFP less income to the CACFP, 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 number
of participating homes by the current administrative payment rate for
day care home sponsors. In addition, current regulations specify that
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.
Section 334 of the HHFKA amended section 17(f)(3) of the NSLA (42
U.S.C. 1766(f)(3)) to eliminate the ``lesser of'' cost and budget
comparisons for calculating administrative payments to day care home
sponsoring organizations. Instead, effective October 1, 2010,
administrative reimbursements are determined only by multiplying the
number of day care homes under the oversight of each sponsoring
organization by the appropriate annually adjusted administrative
reimbursement rate(s). This rule proposes to modify the method of
determining administrative payments to sponsoring organizations of day
care homes by basing payments on the formula specified in Section 17 of
the NSLA.
Carryover of Family or Group Day Care Home Sponsoring Organization
Administrative Payments
Section 334 of the HHFKA amended section 17(f)(3) of the NSLA (42
U.S.C. 1766(f)(3)) to permit day care home sponsors to carry over and
obligate a maximum of 10 percent of administrative payments into the
succeeding fiscal year. Under this proposal, the Department would
require the State agency to ensure that sponsoring organizations of day
care homes seeking to carryover administrative funds include, in their
annual budget submission for State agency review and approval,
estimates of the amount of administrative funds that will be carried
over and a description of the proposed purpose(s) for which those funds
will be used.
Miscellaneous Changes
This proposal would make a number of changes that complement the
requirements of the NSLA as amended by the HHFKA. Chief amongst these
changes is a proposed re-organization of Sec. 226.6, State agency
administrative responsibilities. The re-organization is expected to
improve the clarity of the regulations and to provide more uniformity
to application and renewal requirements. The proposal moves the
existing initial application requirements and the proposed renewal
requirements to new Sec. Sec. 226.6a and 226.6b, respectively.
Costs and Benefits
While CACFP institutions and State agencies administering CACFP
will be affected by this rulemaking, the economic effect will not be
significant.
III. Background and Discussion of the Proposed Rule
The Department is proposing to amend the regulations for CACFP at 7
CFR part 226. These changes are intended to implement several of the
provisions of the HHFKA affecting the management and administration of
CACFP for State agencies, new and renewing institutions, sponsoring
organizations, and sponsored facilities.
The Department is proposing to require institutions to submit an
initial CACFP application to the State agency and, in subsequent years,
periodically update the information in lieu of submitting a new
application; require sponsoring organizations to vary the timing of
reviews of sponsored facilities; require State agencies to develop and
provide for the use of a standard permanent agreement between
sponsoring organizations and day care centers; allow tier II day care
homes to
[[Page 21020]]
collect household income information and transmit it to the sponsoring
organization; modify the method of determining administrative payments
to sponsoring organizations of day care homes by basing payments on a
formula; and, allow sponsoring organizations of day care homes to carry
over up to 10 percent of their administrative funding from the previous
fiscal year into the next fiscal year. This rule also proposes to
incorporate several changes to the application and renewal process
which are expected to improve the management of CACFP and to make a
number of miscellaneous technical changes. The proposed amendments are
discussed in more detail below.
CACFP Initial Application Submission and Renewal Requirements
Current regulations require institutions to submit an initial
application for CACFP participation then reapply to the Program on a
schedule determined by the State agency, but not less than every one to
three years. As a result, the State agency must periodically re-
determine if an institution is eligible to participate in the CACFP
based on a renewal application process. Most of the requirements for
the initial application process are currently found at Sec. Sec.
226.6(b)(1) and 226.6(f) and most of the requirements for the renewal
application process are found at Sec. Sec. 226.6(b)(2) and 226.6(f).
Section 331(b) of the HHFKA amends section 17(d) of the NSLA (42
U.S.C. 1766(d)) to require, in lieu of submitting a renewal
application, that renewing institutions need only annually confirm that
the institution is in compliance with the licensing requirements of
subsection 17(a)(5) of the NSLA (42 U.S.C. 1766(a)(5)) and submit to
the State agency any additional necessary information, as specified by
the Department. State agencies were advised of these requirements in a
memorandum issued April 8, 2011, Child Nutrition Reauthorization 2010:
Child and Adult Care Food Program Applications (CACFP 19-2011).
This provision enables the Department to determine the new renewal
process and the information that annually must be submitted to the
State agency. Reflecting the intent of the HHFKA, this provision to
eliminate the renewal application, this proposal would require
participating institutions to annually certify that they still meet the
CACFP requirements for continued participation and to provide an update
of the information provided on the initial application, if the State
agency has not already been notified of the changes. Thus, even though
management plans would be annually certified, the plans must be updated
as necessary to ensure they provide a current reflection of CACFP
operations. The exception to this is the budget submission for
sponsoring organizations, which must still be submitted annually rather
than through the certification process. These changes are expected to
reduce current application process burden, because renewing
institutions will no longer need to submit documentation demonstrating
they meet CACFP requirements, but simply provide certification that
they are still in compliance instead.
This proposed rule outlines the complete list of information that
institutions would need to certify as unchanged or indicate that it has
already updated with the State agency. All institutions would be
required to annually certify that they are not on the National
disqualified list; they are not ineligible for other publicly funded
programs; the institution's principals have not been convicted of a
crime in the past seven years indicating a lack of business integrity;
they are still compliant with performance standards; and, they are
licensed or approved or, if a sponsoring organization, that all of
their facilities are licensed or otherwise approved. Sponsoring
organizations would continue to submit an annual budget and would also
certify that: their management plan is up-to-date; their outside
employment policy is current; and their training has been provided for
all facilities. In addition this rule proposes to require renewing
institutions to certify that they have no unreported less-than-arms-
length transactions or other potential conflicts of interest have
occurred in the past year and that any anticipated less-than-arms-
length transactions or other potential conflicts of interest in the
upcoming year have been disclosed to the State agency--both of which
would be new requirements. If the institution cannot certify that all
of this required information is unchanged or has already been updated,
the institution would be required to submit any information necessary
to notify the State agency of the change at that time.
As noted above, two changes to the application and renewal process
are being added to this proposed rule in order to improve CACFP
management. In accordance with the Food and Nutrition Service (FNS)
Instruction 796-2 Financial Management--Child and Adult Care Food
Program, sponsoring organizations must disclose less-than-arms-length
transactions and potential conflicts of interest. Nevertheless, the
Department has found that this existing requirement has not adequately
addressed the continued problems associated with these types of
transactions. The Department's monitoring activities continue to find a
number of sponsoring organizations that have not properly disclosed
less-than-arms-length transactions and potential conflicts of interest,
and that have not received the required prior approval from their State
agencies. As a result, in many cases, CACFP funds have been used
improperly, resulting in large overclaims against sponsoring
organizations.
To better address this issue, this rule proposes to specifically
require the disclosure of anticipated less-than-arms-length
transactions and potential conflicts of interest in both the initial
application submitted by a new sponsoring organization and, for
renewing sponsors, in the annual information submission process.
Accordingly, Sec. Sec. 226.2, new 226.6a and 226.6b would incorporate
this addition.
The second addition would require that institutions provide State
agencies with the full legal names and any other names previously used,
for all principals in the initial application and whenever the
institution adds new principals. This change would also require a
sponsoring organization to provide the full legal names, and any other
names previously used, for all day care home providers and by the
principals of its sponsored centers. The proposal adds this change to
the regulations in every instance where institutions were previously
required to report the full names of their principals, and the
principals of their sponsored facilities, to the State agency. Thus,
the proposed language would require ``full legal names and any other
names previously used'' where it currently requires ``full names.''
This will ensure better identification of any individuals who may be
later placed on the National disqualified list. Accordingly, Sec. Sec.
226.2, 226.6a and 226.6b would incorporate this addition.
Another provision necessitated by these changes to the application
process is the addition of a serious deficiency dealing with
institutions that fail to submit acceptable or complete renewal
information. The amendments made to NSLA by the HHFKA significantly
modifying the current renewal application process means that renewing
institutions would continue to be considered ``participating
institutions.'' Under Sec. 226.6(c)(2) of this proposal, an
institution's failure to
[[Page 21021]]
properly submit renewal information would be considered a serious
deficiency and the State agency would be required to follow the normal
serious deficiency process for participating institutions. The
corrective action in this case would be for the institution to submit
the proper or corrected renewal information to the State agency in
accordance with established procedures. As is true under the current
renewal application process, State agencies would continue to have
discretion in declaring renewing institutions seriously deficient,
based on the type and magnitude of the missing information and the
institution's willingness to quickly submit any missing information.
While reviewing the current regulations relating to application
requirements, it became evident that the application and reapplication
requirements for institutions are found in various places throughout 7
CFR part 226. To clearly articulate the new renewal process and
distinguish it from the initial application process, the Department
undertook a re-organization of the application and renewal requirements
throughout 7 CFR part 226. Because the Department has received
complaints about the length of Sec. 226.6, the section in which the
current application and reapplication requirements are found, the
proposal moves the existing initial application requirements and the
proposed renewal requirements to new Sec. Sec. 226.6a and 226.6b,
respectively. New Sec. 226.6a is proposed to be titled ``State agency
application requirements for new institutions'' and Sec. 226.6b is
proposed to be titled ``State agency annual information submission
requirements for renewing institutions.'' This means that though
Sec. Sec. 226.6a and 226.6b do not look identical to current
Sec. Sec. 226.6(b)(1) and (b)(2), respectively, no requirements have
been changed except for those outlined in this preamble.
With this new re-organization, the proposal would move the
application or renewal requirements from the other sections in which
they are currently located (namely Sec. Sec. 226.6(b), 226.6(f),
226.16(b) and 226.17a(e)) to the relevant new sections. All application
requirements contained in these sections would be deleted and, where
necessary, would instead contain only cross references to Sec. Sec.
226.6a and 226.6b. To assist the reader, distribution and derivation
tables are posted on www.regs.gov and accompany this proposed rule. The
distribution table identifies each existing section and where it would
appear in the proposed amendatory language. The derivation table
identifies each proposed new section and where it appears in the
existing regulations.
Two additional proposed changes are included to provide a more
uniform application process for day care homes and other facilities.
Proposed Sec. Sec. 226.6a(c)(5) and Sec. 226.6b(d)(3) would require
the State agency to collect from each sponsoring organization a list of
all applicant day care homes, child care centers, outside-school-hours-
care centers, at-risk afterschool care centers, and adult day care
centers. Previously, this requirement appeared only in Sec. 226.17a,
although it is standard operating practice. Proposed Sec. 226.6a(c)(9)
would include requirements for facility applications for new
institutions, these requirements are not new requirements but are
proposed to be codified so that all application requirements are
available in one place. Currently, facility application requirements
are found at Sec. 226.16(b). Additionally, CACFP 01-2008, Facility
Applications and Agreements in the Child and Adult Care Food Program
(CACFP), published November 15, 2007 discusses CACFP application
requirements. These two proposed changes seek to provide a more uniform
application process.
Finally, this rule proposes a change outside of the CACFP
application process. In the proposed re-organization of Sec. 226.6,
paragraph (f)(4) restates existing regulations found at Sec.
226.6(f)(1)(viii) that require State agencies to obtain from the State
agency that administers the NSLP, a list of ``elementary'' schools in
the State in which at least one-half of the children enrolled are
certified to receive free or reduced-price meals. The State agency must
provide the list of ``elementary'' schools to sponsoring organizations
of day care homes. However, section 121 of the HHFKA amended section
17(f)(3)(A)(ii)(I)(bb) of the NSLA, to remove the word ``elementary''
from the definition of tier I day care homes. Since the proposed re-
organization at Sec. 226.6(f)(4) includes this provision, the
Department is proposing to remove the term ``elementary'' from the
regulatory text. The Department intends to issue a final rule that will
make this change permanent in the near future.
We encourage commenters to limit their comments to the new changes
proposed in this rule and to the proposed re-organization of Sec. Sec.
226.6, 226.6a, and 226.6b. We are interested in whether the re-
organization improves the clarity of the regulations.
Varied Timing of Reviews Conducted by Sponsoring Organizations
Current regulations require sponsoring organizations to conduct
three reviews per year per sponsored facility, two of which must be
unannounced. One of the unannounced reviews must include observation of
a meal service. No more than six months may elapse between reviews (7
CFR 226.16(d)(4)(iii)).
Unannounced reviews are an effective tool in ensuring CACFP
integrity. An unannounced review gives sponsoring organizations the
opportunity to document how the facility operates on any given day and
to offer technical assistance. In addition, unannounced reviews offer a
first-hand opportunity to detect and identify areas of mismanagement
(such as inaccurate meal counts, problems with recordkeeping, and menu
and enrollment discrepancies) and allow sponsoring organizations to
initiate immediate corrective action, up to and including declaring a
facility seriously deficient.
However, unannounced reviews that follow a consistent pattern are
predictable and, therefore, undermine the intent of the CACFP's
unannounced review requirements. Examples of consistent patterns are
unannounced reviews that always occur during the third week of January,
the third week of May, and the third week of September; reviews that
never occur during the first week of the month when claims are being
processed; meal service observations that always occur during the lunch
meal service or never occur on weekends or evenings. Such patterns
hinder the sponsoring organization's ability to uncover management
deficiencies and CACFP abuse by enabling facilities to predict when the
sponsor review will occur.
Section 331(b) of the HHFKA amended section 17(d)(2) of the NSLA
(42 U.S.C. 1766(d)(2)) to require that sponsoring organizations vary
the timing of unannounced reviews so they are unpredictable to
sponsored facilities. The expectation is that unannounced reviews would
be more effective in detecting CACFP integrity issues. State agencies
were advised of this requirement in a memorandum issued April 7, 2011,
Child Nutrition Reauthorization 2010: Varied Timing of Unannounced
Reviews in the Child and Adult Care Food Program (CACFP 16-2011).
The Department appreciates that it may be difficult for a
sponsoring organization to create separate review schedules for each
facility. However, as
[[Page 21022]]
required by the HHFKA amendments, sponsoring organizations can and
should vary the scheduling of reviews within each month and each year
and frequently change the intervals between reviews (e.g., 90, 105,
120, 135 days between reviews of facilities). Similarly, sponsoring
organizations should alternate reviews of the breakfast, lunch, and
supper meal service in facilities being reviewed.
To effect these changes, the proposal would revise Sec. 226.16,
Sponsoring organization provisions, by expanding the requirements
relating to the frequency and type of required facility reviews in
paragraph (d)(4)(iii) of that section. The additions would require
sponsoring organizations to ensure that the timing of unannounced
reviews is varied in a way that would ensure they are unpredictable to
the facility. The proposed language also makes it clear that always
reviewing the same meal service would be considered predictable and
would be inconsistent with the CACFP requirements.
In addition, Sec. 226.6, State agency administrative
responsibilities, would be amended at paragraph (m)(3) of that section
to expand the scope of the State agency review of sponsoring
organizations' monitoring of facilities. Under the proposal, State
agencies would be required to assess whether the timing of the
sponsoring organization's facility reviews are varied and
unpredictable, as required by Sec. 226.16(d)(4)(iii). This addition
ensures that State agencies, as part of their reviews of sponsoring
organizations, would evaluate the timing and pattern of the facility
reviews conducted by the sponsor to ensure that they are not
predictable, and are in compliance with this requirement. As is
currently the case, a sponsor's failure to comply with all of the
requirements of Sec. 226.16(d) could lead to a determination of a
serious deficiency.
Permanent Agreements Between Sponsoring Organizations and Sponsored
Centers
Current regulations require State agencies to develop and provide
for the use of permanent agreements between sponsoring organizations
and day care homes, but do not require such agreements for sponsoring
organizations of centers and their sponsored centers.
Section 331(c) of the HHFKA amended section 17(j)(1) of the NSLA
(42 U.S.C. 1766(j)(1)) to require State agencies to develop and provide
for the use of permanent operating agreements between sponsoring
organizations of centers and their sponsored centers and day care
homes. To effect these changes, Sec. 226.2, Definitions, would be
amended by adding a definition of sponsored center. The definition
would distinguish between affiliated and unaffiliated centers.
Differentiating between affiliated and unaffiliated centers is
necessary because only unaffiliated centers would be required to have
an agreement with their sponsoring organization.
Unlike affiliated sponsored day care centers, unaffiliated
sponsored day care centers are legally distinct from their sponsoring
organization. For this reason, an agreement between the sponsoring
organization and unaffiliated sponsored centers is essential to a clear
understanding of responsibilities for participation in the CACFP.
Because affiliated centers are not legally distinct from their
sponsoring organization, the Department deems a requirement for an
agreement unnecessary for affiliated centers. However, sponsoring
organizations may, at their discretion, require an agreement with their
affiliated centers.
Section 226.6, State agency administrative responsibilities, is
proposed to be amended to include the requirement for State agencies to
develop and provide for the use of a standard agreement between
sponsoring organizations and unaffiliated child care centers. It also
allows State agencies to approve an agreement developed by the
sponsoring organization.
Section 226.16, Sponsoring organization provisions, is proposed to
be amended to include the requirement for sponsors of child care
centers, adult day care centers, emergency shelters, at-risk
afterschool care centers, or outside school hours care centers to enter
into a permanent agreement with their unaffiliated sponsored centers.
At a minimum, the agreement would embody the requirements and the
rights and responsibilities of both parties as currently set forth in
Sec. 226.17, Child care center provisions, Sec. 226.17a, At-risk
afterschool care center provisions, Sec. 226.19, Outside-school-hours
care center provisions and Sec. 226.19a, Adult day care center
provisions, as applicable. Corresponding changes were also made to
update and align the requirements and responsibilities set forth in
Sec. Sec. 226.17, 226.17a, 226.19, and 226.19a. These include: (a)
Requiring centers to permit visits by sponsoring organizations or State
agencies to the center to review meal service and records and inform
sponsoring organizations about changes in licensing status; (b)
requiring sponsored child care centers to promptly inform the
sponsoring organization about any change in its licensing or approval
status; (c) establishing the right of centers to receive in a timely
manner reimbursement from the sponsoring organizations for meals
served; (d) requiring child care centers to meet any State agency
approved time limit for submission of meal records; and (e) requiring
sponsored child care centers to distribute to parents a copy of the
sponsoring organization's notice to parents if directed to do so by the
sponsoring organization.
Transmission of Income Information by Sponsored Day Care Homes
Current regulations require sponsoring organizations, upon the
request of a tier II day care home provider, to collect income
eligibility applications from households (7 CFR Sec. 226.18(b)(12)).
To eliminate any concerns households may have about sharing their
income information with their provider, the current regulations
prohibit providers from collecting the applications directly from
households.
Section 333 of the HHFKA amended section 17(f)(3)(A)(iii)(III) of
the NSLA (42 U.S.C. 1766(f)(3)(A)(iii)(III)) to require sponsoring
organizations to allow providers of tier II day care homes to assist in
the transmission of household income information with the written
consent of the parents or guardians of children in their care. State
agencies were advised of this requirement in a memorandum issued April
7, 2011, Child Nutrition Reauthorization 2010: Transmission of
Household Income Information by Tier II Family Day Care Homes in the
Child and Adult Care Food Program (CACFP 17-2011).
To effect these changes, the Department proposes to amend Sec.
226.18, Day care home provisions, by revising paragraph (b)(12) of that
section to allow the tier II day care home to assist in collecting
completed income eligibility applications from households and
transmitting the applications to the sponsoring organization. As
proposed, the addition would limit the provider's assistance to
collecting applications and transmitting them to the sponsoring
organization, and would prohibit tier II day care home providers from
reviewing the completed applications.
In addition, Sec. 226.23, Free and reduced-price meals, paragraph
(e)(2) is proposed to be amended to specify the steps a tier II day
care home must take when assisting in the collection and transmission
of applications. Sponsoring organizations would be required to explain
in the letter to the household, that the household can return the
application to either the sponsoring organization or the day care
[[Page 21023]]
home provider. Under the proposal, the household would give written
consent for the provider to collect and transmit the household's
application to the sponsoring organization by signing the letter sent
by the sponsoring organization and returning it, along with the
application, to the tier II day care home. To ensure that tier II day
care home providers would not be able to view the applications, the
Department suggests that the sponsoring organization's letter to the
household encourage households to place their applications in a sealed
envelope prior to giving it to their provider.
Administrative Payment Rates to Sponsoring Organizations for Day Care
Homes
Current regulations found at 7 CFR 226.12(a) require that
administrative cost payments to a sponsoring organization of day care
homes may not exceed the lesser of: (1) Actual expenditures for the
costs of administering the CACFP less income to the CACFP, 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 number
of participating homes by the current administrative payment rate for
day care home sponsors. In addition, current regulations specify that
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.
Section 334 of the HHFKA amended section 17(f)(3) of the NSLA (42
U.S.C. 1766(f)(3)) to eliminate the ``lesser of'' cost and budget
comparisons for calculating administrative payments to day care home
sponsoring organizations. Instead, effective October 1, 2010,
administrative reimbursements are determined only by multiplying the
number of day care homes under the oversight of each sponsoring
organization by the appropriate annually adjusted administrative
reimbursement rate(s). As a result of this change, the expenditures for
cost, the amount of costs approved in the administrative budget, or the
30 percent restriction no longer apply.
State agencies were advised of this change in a memorandum issued
December 22, 2010, Child Nutrition Reauthorization 2010: Administrative
Payments to Family Day Care Home Sponsoring Organizations (CACFP 06-
2011). While this new provision will help streamline administrative
payments to day care home sponsoring organizations and reduce reporting
requirements, State agencies and sponsoring organizations are reminded
that sponsoring organizations must continue to submit annual budgets
that must be approved by the State agency. Further, sponsoring
organizations remain responsible for correctly accounting for costs and
for maintaining records and sufficient supporting documentation to
demonstrate that costs charged to the Program: have actually been
incurred; are allowable and allocable to the Program; and comply with
applicable Program regulations and policies. State agencies must
continue to recover reimbursements received for unallowable costs.
To effect this provision, paragraph (a) of Sec. 226.12,
Administrative payments to sponsoring organizations for day care homes,
would be proposed to be revised to reflect the new formula. The
proposal would also make technical changes to the administrative
payment rates formula to reflect annual adjustments. These changes are
intended only to clarify the base administrative payment rates without
making any substantive changes to the adjustment process. In accordance
with NSLA, the base reimbursement rates, which were published in the
Federal Register on January 26, 1982 at 47 FR 3539, are the sum of the
products obtained by multiplying each month the sponsoring
organization's: Initial 50 day care homes by 42 dollars; Next 150 day
care homes by 32 dollars; Next 800 day care homes by 25 dollars; and
Additional day care homes by 22 dollars. The administrative payment
rates will continue to be adjusted annually to reflect changes in the
series for all items of the Consumer Price Index for All Urban
Consumers, published by the Department of Labor.
Carryover of Family or Group Day Care Home Sponsoring Organization
Administrative Payments
Section 334 of the HHFKA amends section 17(f)(3) of the NSLA (42
U.S.C. 1766(f)(3)) to permit day care home sponsors to carry over a
maximum of 10 percent of administrative payments into the succeeding
fiscal year. In accordance with the HHFKA, the 10 percent maximum on
the amount of administrative funds that may be carried over must be
based on the administrative payments received by the day care home
sponsoring organization for the fiscal year. Administrative funds
remaining at the end of the fiscal year that exceed 10 percent of that
fiscal year's administrative payments must be returned to the State
agency. If any remaining carryover funds are not obligated or expended
by the sponsoring organization in the succeeding fiscal year, the
sponsor is required to return the remaining funds to the State agency.
State agencies were advised of this new authority in a memorandum
issued April 8, 2011, Child Nutrition Reauthorization 2010: Carry Over
of Unused Child and Adult Care Food Program Administrative Payments
(CACFP 18-2011). In that memorandum, State agencies were reminded that
day care home sponsoring organizations continue to remain responsible
for annual budget submissions, budget amendments, correctly accounting
for costs, and maintaining records and sufficient supporting
documentation to demonstrate that costs charged to the CACFP have
actually been incurred, are allowable and allocable, and comply with
all applicable CACFP regulations and policies.
Under this proposal, Sec. 226.6b(c) proposes to require the State
agency to ensure that sponsoring organizations of day care homes
seeking to carryover administrative funds include, in their annual
budget submission for State agency review and approval, estimates of
the amount of administrative funds that will be carried over and a
description of the proposed purpose(s) for which those funds will be
used. Because the final administrative claims will often not be known
when the annual budget is submitted to the State agency, the sponsor
should use its best estimate of the carryover amount when preparing the
annual budget. Thus, when the budget is being prepared and submitted,
the carryover estimate would be based on a comparison of the
administrative payments the sponsoring organization expects to receive
under the homes-times-rates formula with the amount of anticipated
allowable administrative costs incurred in the current fiscal year.
Much of the current regulatory budget approval process remains the
same. However, this proposed rule would provide that as soon as
possible after fiscal year closeout, the sponsoring organization would
be required to submit an amended budget to the State agency for review
and approval. The amended budget would identify the amount of
administrative funds actually carried over and a description of the
purpose(s) for which those funds have been or will be used. The
sponsoring organization would be required to maintain documentation of
obligations and expenditures associated with approved administrative
carryover funds for review by the State agency. Consistent with current
regulations, it is
[[Page 21024]]
still necessary for sponsoring organizations to use accrual accounting
for the final claim of each fiscal year so that the end-of-year
reconciliation and close-out can be performed.
Under proposed amendments to Sec. 226.7, State agency
responsibilities for financial management, paragraphs (g) and (j) of
that section, State agencies would require the annual budget submission
to include an estimate of the requested administrative fund carryover
amounts and a description of the proposed purpose(s) for which those
funds would be obligated or expended.
In approving a sponsoring organization's carryover request, a State
agency would be required to take into consideration whether the day
care home sponsoring organization has a financial management system
that meets all CACFP requirements and whether the State agency is
satisfied that the system is capable of controlling the custody,
documentation and disbursement of carryover funds. The State agency
would require a sponsoring organization carrying over administrative
funds to submit an amended budget for State agency review and approval
as soon as possible after fiscal year close-out. The amended budget
would identify the amount of administrative funds actually carried over
and describe the purpose(s) for which the carryover funds have been or
will be used.
In addition, this rule proposes to require each State agency to
establish procedures to recover administrative funds from sponsoring
organizations of day care homes which are in excess of the 10 percent
maximum carryover amount at the end of each fiscal year. Additionally,
each State agency would also be required to establish procedures to
recover any carryover amount not expended or obligated by the end of
the fiscal year following the fiscal year in which the administrative
funds were earned. As a result, State agencies would include a review
of the documentation supporting carryover requests, obligations and
expenditures when conducting a review of a sponsoring organization's
administrative costs as currently required under Sec.
226.6(m)(3)(iii). In addition, in implementing this proposed provision,
State agencies would maintain a system that monitors the sponsoring
organization's documentation of nonprofit status, and ensures that
CACFP administrative funds are used principally for the benefit of
participants. The accumulation of excessive balances in the sponsor's
nonprofit food service account remains inconsistent with CACFP
requirements, as described in FNS Instruction 796-2, Rev. 3, Section
VI.
Finally, State agencies and sponsoring organizations are reminded
that day care home sponsoring organizations are not required to carry
over administrative funds. Any unexpended funds remaining at the end of
the fiscal year, which could be carried over into the succeeding fiscal
year, may be returned to the State agency at the sponsoring
organization's option. In addition, nothing in this provision in any
way limits or changes the requirements that a State agency: determine
that all institutions are financially viable; establish an overclaim if
the sponsor has used CACFP administrative funds improperly; or declare
an institution seriously deficient on the basis of its improper use of
CACFP administrative funds.
IV. Procedural Matters
A. Executive Order 12866 and Executive Order 13563
Executive Orders 12866 and 13563 direct agencies to assess all
costs and benefits of available regulatory alternatives and, if
regulation is necessary, to select regulatory approaches that maximize
net benefits (including potential economic, environmental, public
health and safety effects, distributive impacts, and equity). Executive
Order 13563 emphasizes the importance of quantifying both costs and
benefits, of reducing costs, of harmonizing rules, and of promoting
flexibility.
This rule has been determined to be not significant and was not
reviewed by the Office Management and Budget (OMB) in conformance with
Executive Order 12866.
B. Regulatory Flexibility Act
This proposed rule has been reviewed with regard to the
requirements of the Regulatory Flexibility Act of 1980 (5 U.S.C. 601-
612). It has been certified that this rule will not have a significant
impact on a substantial number of small entities. While CACFP
institutions and State agencies administering CACFP will be affected by
this rulemaking, the economic effect will not be significant. This rule
is expected to reduce administrative burdens and provide additional
flexibility.
C. Unfunded Mandates Reform Act
Title II of the Unfunded Mandates Reform Act of 1995 (UMRA), Public
Law 104-4, establishes requirements for Federal agencies to assess the
effects of their regulatory actions on State, local, and Tribal
governments and the private sector. Under section 202 of the UMRA, the
Department generally must prepare a written statement, including a
cost/benefit analysis, for proposed and final rules with Federal
mandates that may result in expenditures by State, local, or Tribal
governments, in the aggregate, or by the private sector, of $100
million or more in any one year. When such a statement is needed for a
rule, section 205 of the UMRA generally requires the Department to
identify and consider a reasonable number of regulatory alternatives
and adopt the least costly, more cost-effective, or least burdensome
alternative that achieves the objectives of the rule.
This rule contains no Federal mandates (under the regulatory
provisions of Title II of the UMRA) that impose on State, local and
Tribal governments or the private sector of $100 million or more in any
one year. This rule is, therefore, not subject to the requirements of
sections 202 and 205 of the UMRA.
D. Executive Order 12372
The Program addressed in this action is listed in the Catalog of
Federal Domestic Assistance under No. 10.558. For the reasons set forth
in the final rule in 7 CFR part 3015, Subpart V, and related Notice
published at 48 FR 29115, June 24, 1983, this is included in the scope
of Executive Order 12372, which requires intergovernmental consultation
with State and local officials.
E. Executive Order 13132
Executive Order 13132 requires Federal agencies to consider the
impact of their regulatory actions on State and local governments.
Where such actions have federalism implications, agencies are directed
to provide a statement for inclusion in the preamble to the regulations
describing the agency's considerations in terms of the three categories
called for under section (6)(b)(2)(B) of Executive Order 13132. USDA
has considered the impact of this rule on State and local governments
and has determined that this rule does not have federalism
implications. This rule does not impose substantial or direct
compliance costs on State and local governments. Therefore, under
Section 6(b) of the Executive Order, a federalism summary impact
statement is not required.
F. Executive Order 12988
This proposed rule has been reviewed under Executive Order 12988,
``Civil Justice Reform.'' Although the provisions of this rule are not
expected
[[Page 21025]]
to conflict with any State or local law, regulations, or policies, the
rule is intended to have preemptive effect with respect to any State or
local laws, regulations, or policies that conflict with its provisions
or that would otherwise impede its full implementation. This rule is
not intended to have retroactive effect. Prior to any judicial
challenge to the provisions of this rule or the applications of its
provisions, all applicable administrative procedures must be exhausted.
G. Civil Rights Impact Analysis
This proposed rule has been reviewed in accordance with Department
Regulation 4300-4, ``Civil Rights Impact Analysis,'' to identify any
major civil rights impacts this rule might have on children on the
basis of age, race, color, national origin, sex, or disability. A
careful review of the rule revealed that the rule's intent does not
affect the participation of protected individuals in CACFP.
H. Paperwork Reduction Act
The Paperwork Reduction Act of 1995 (44 U.S.C. Chap. 35; see 5 CFR
1320), requires that OMB approve all collections of information by a
Federal agency from the public before they can be implemented.
Respondents are not required to respond to any collection of
information unless it displays a current, valid OMB control number.
This is a new collection. The new provisions in this rule, which
decreases current burden hours, by 595 will be merged into CACFP, OMB
Control Number 0584-0055, expiration date 8/31/2013. The
current collection burden inventory for CACFP is 7,006,434. These
changes are contingent upon OMB approval under the Paperwork Reduction
Act of 1995. When the information collection requirements have been
approved, the Department will publish a separate action in the Federal
Register announcing OMB's approval.
Comments on the information collection in this proposed rule must
be received by June 8, 2012. Send comments to the Office of Information
and Regulatory Affairs, OMB, Attention: Desk Officer for FNS,
Washington, DC 20503. Please also send a copy of your comments to Lynn
Rodgers-Kuperman, Program Analysis and Monitoring Branch, Child
Nutrition Division, 3101 Park Center Drive, Alexandria, VA 22302. For
further information, or for copies of the information collection
requirements, please contact Lynn Rodgers-Kuperman at the address
indicated above. Comments are invited on: (1) Whether the proposed
collection of information is necessary for the proper performance of
the Agency's functions, including whether the information will have
practical utility; (2) the accuracy of the Agency's estimate of the
proposed information collection burden, including the validity of the
methodology and assumptions used; (3) ways to enhance the quality,
utility and clarity of the information to be collected; and (4) ways to
minimize the burden of the collection of information on those who are
to respond, including use of appropriate automated, electronic,
mechanical, or other technological collection techniques or other forms
of information technology.
All responses to this request for comments will be summarized and
included in the request for OMB approval. All comments will also become
a matter of public record.
Title: Child and Adult Care Food Program: Amendments Related to the
Healthy Hunger-Free Kids Act of 2010.
OMB Number: 0584-New.
Expiration Date: Not Yet Determined.
Type of Request: New Collection.
Abstract: This rule proposes to codify several provisions of the
Healthy, Hunger-Free Kids Act of 2010 (HHFKA) affecting the management
of CACFP. The Department is proposing to: require institutions to
submit an initial CACFP application to the State agency and, in
subsequent years, periodically update the information in lieu of
submitting a new application; require sponsoring organizations to vary
the timing of reviews of sponsored facilities; require State agencies
to develop and provide for the use of a standard permanent agreement
between sponsoring organizations and day care centers; allow tier II
day care homes to collect household income information and transmit it
to the sponsoring organization; modify the method of determining
administrative payments to sponsoring organizations of day care homes
by basing payments on a formula; and allow sponsoring organizations of
day care homes to carry over up to 10 percent of their administrative
funding from the previous fiscal year into the next fiscal year. These
changes were effective October 1, 2010. This rule also proposes to
incorporate several changes to the application and renewal process
which are expected to improve the management of CACFP and to make a
number of miscellaneous technical changes.
The average burden per response and the annual burden hours are
explained below and summarized in the charts which follow.
Respondents for this Proposed Rule: (Business' for and not-for-
profit) Institutions.
Estimated Number of Respondents for this Proposed Rule: 250.
Estimated Number of Responses per Respondent for this Proposed
Rule: (1).
Estimated Total Annual Responses: 250.
Estimated Total Annual Burden on Respondents for this Proposed
Rule: (595)*.
*This represents an overall decrease from the existing burden for
institutions.
Estimated Annual Burden for 0584--New, Child and Adult Care Food Program 7 CFR 226
--------------------------------------------------------------------------------------------------------------------------------------------------------
Reporting
---------------------------------------------------------------------------------------------------------------------------------------------------------
Estimated Average Average
Section number of Frequency of annual burden per Annual burden hours
respondents response responses response
--------------------------------------------------------------------------------------------------------------------------------------------------------
Each new institution must 7 CFR 226.15(b)...... 250 1 250 8 2000
submit to the State agency *Approved in OMB# 0584-0055,
with its application all remains unchanged
information required for its
approval. Renewing
institutions must certify
that they are capable of
operating the Program.
[[Page 21026]]
(119) (1) (119) (5) (595)
**decrease of 595 from existing
burden as a result of eliminating
burden associated with renewing
institutions.)
Total Reporting for Proposed ..................... (119) 1 (119) (5) (595)
Rule.
Total Existing Reporting ..................... .............. .............. .............. .............. 6,274,964
Burden for 0584-0055, Part
226.
Total Reporting Burden ..................... .............. .............. .............. .............. -595
Decrease with Proposed Rule.
Total Reporting Burden for ..................... .............. .............. .............. .............. 6,274,369
0584-0055, Part 226 with
Proposed Rule.
--------------------------------------------------------------------------------------------------------------------------------------------------------
Prior to the issuance of this Rule entitled ``Child and Adult Care
Food Program: Amendments Related to the Healthy Hunger-Free Kids Act of
2010,'' 7 CFR 226.15(b) required that, all institutions submit to the
State agency with its application all information required for its
approval as set forth in 226.6(b) and 226.6(f). This rule eliminates
the requirement for renewing institutions to submit an annual
application for renewal; however, these institutions must demonstrate
that they are capable of operating the Program in accordance with this
part as set forth in Sec. 226.6b(b).
Therefore, the burden associated with the renewing institutions to
submit an annual application has been removed as a result of this Rule.
A program adjustment will be made to the 7 CFR Part 226 Child and Adult
Care Food Program information collection package (OMB control number
0584-0055) prior to its renewal date of August 31, 2013.
Recordkeeping
--------------------------------------------------------------------------------------------------------------------------------------------------------
Estimated Average Average
Section number of Frequency of annual burden per Annual burden
respondents response responses response hours
--------------------------------------------------------------------------------------------------------------------------------------------------------
Sponsoring organizations maintain 7 CFR 226.16(h)(1).......... 200 1 200 *0 *0
agreements with unaffiliated sponsored
centers.
Total Recordkeeping for Proposed Rule..... ............................ 200 1 200 *0 *0
Total Existing Recordkeeping Burden for ............................ .............. .............. .............. .............. 731,470
0584-0055, Part 226.
Total Recordkeeping Burden for 0584-0055, ............................ .............. .............. .............. .............. 731,470
Part 226 with Proposed Rule.
--------------------------------------------------------------------------------------------------------------------------------------------------------
* The amount of additional burden is negligible.
7 CFR 226.6, 226.15 and 226.16 require that, in order to
participate in CACFP, State agencies and institutions must maintain
records to demonstrate compliance with Program requirements. The
regulations further require that State agencies and institutions
maintain records for a period of three years.
Summary of Burden (OMB 0584-NEW)
------------------------------------------------------------------------
------------------------------------------------------------------------
Total number of respondents................................. 250
Average number of responses per respondent.................. (1)
Total annual responses...................................... 250
Average hours per response.................................. 8
Total burden hours for part 226 with proposed rule.......... 7,005,839
Current OMB inventory for part 226.......................... 7,006,434
Difference (new burden decrease requested with proposed *(595)
rule)......................................................
------------------------------------------------------------------------
* Burden is decreased from existing burden (595) due to the elimination
of burden associated with renewing institutions.
I. E-Government Act Compliance
The Department is committed to complying with the E-Government Act
2002 to promote the use of the Internet and other information
technologies to provide increased opportunities for citizen access to
Government information and services, and for other purposes.
J. Executive Order 13175
Executive Order 13175 requires Federal agencies to consult and
coordinate with Tribes on a government-to-government basis on policies
that have Tribal implications,
[[Page 21027]]
including regulations, legislative comments or proposed legislation,
and other policy statements or actions that have substantial direct
effects on one or more Indian Tribes, on the relationship between the
Federal Government and Indian Tribes, or on the distribution of power
and responsibilities between the Federal Government and Indian Tribes.
In the spring of 2011, FNS offered opportunities for consultation
with Tribal officials or their designees to discuss the impact of the
HHFKA on tribes or Indian Tribal governments. The consultation sessions
were coordinated by FNS and held on the following dates and locations:
1. HHFKA Consultation Webinar & Conference Call--April 12, 2011
2. HHFKA Consultation In-Person--Rapid City, SD--March 23, 2011
3. HHFKA Consultation Webinar & Conference Call--June, 22, 2011
4. Tribal Self-Governance Annual Conference In-Person Consultation
in Palm Springs, CA--May 2, 2011
5. National Congress of American Indians Mid-Year Conference In-
Person Consultation, Milwaukee, WI--June 14, 2011
The five consultation sessions in total provided the opportunity to
address Tribal concerns related to school meals. There were no comments
about this regulation during any of the aforementioned Tribal
Consultation sessions. Reports from these consultations are part of the
USDA annual reporting on Tribal consultation and collaboration. FNS
will respond in a timely and meaningful manner to Tribal government
requests for consultation concerning this rule. Currently, FNS provides
regularly scheduled quarterly consultation sessions through the end of
FY2012 as a venue for collaborative conversations with Tribal officials
or their designees.
List of Subjects in 7 CFR Part 226
Accounting, Aged, Day care, Food assistance programs, Grant
programs, Grant programs--health, American Indians, Individuals with
disabilities, Infants and children, Intergovernmental relations, Loan
programs, Reporting and recordkeeping requirements, Surplus
agricultural commodities.
Accordingly, 7 CFR part 226 is proposed to be amended as follows:
PART 226--CHILD AND ADULT CARE FOOD PROGRAM
1. The authority citation for 7 CFR Part 226 continues to read as
follows:
Authority: Secs. 9, 11, 14, 16, and 17, Richard B. Russell
National School Lunch Act, as amended (42 U.S.C. 1758, 1759a, 1762a,
1765 and 1766).
2. In Sec. 226.2,
a. Revise definitions of ``For-profit center'', ``New
institution'', ``Renewing institution'', and ``State agency list''; and
b. Add new definitions ``Less-than-arms-length transaction'',
``Participating institution'', and ``Sponsored center''.
The additions and revisions read as follows:
Sec. 226.2 Definitions.
* * * * *
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 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 and during any month that
it claims reimbursement, 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 and during any month that it claims
reimbursement:
(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.
* * * * *
Less-than-arms-length transaction means a transaction under which
one party to the transaction is able to control or substantially
influence the actions of the other(s), as defined in FNS Instruction
796-2 (``Financial Management--Child and Adult Care Food Program'').
* * * * *
New institution means an institution making an initial application
to participate in the Program or an institution applying to participate
in the Program after a lapse in participation.
* * * * *
Participating institution means an institution that holds a current
Program agreement with the State agency to operate the Program. This
includes renewing institutions.
* * * * *
Renewing institution means an institution that is participating in
the Program at the time it submits renewal information.
* * * * *
Sponsored center means a child care center, at-risk afterschool
care center, adult day care center, emergency shelter, or outside-
school-hours care center that operates the Program under the auspices
of a sponsoring organization. The two types of sponsored centers are as
follows:
(a) An affiliated center is a part of the same legal entity as
CACFP sponsoring organization; or
(b) An unaffiliated center is legally distinct from the sponsoring
organization.
* * * * *
State agency list means an actual paper or electronic list, or the
retrievable paper records, maintained by the 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 full legal names and any other names previously used, mailing
addresses, and dates of birth; and
(c) Day care home providers whose agreements have been terminated
for cause by a sponsoring organization in
[[Page 21028]]
the State, including their full legal names and any other names
previously used, mailing addresses, and dates of birth.
* * * * *
Sec. 226.4 [Amended]
3. In Sec. 226.4, amend paragraph (f) by revising the citation
``Sec. 226.12(a)(3)'' to read ``Sec. 226.12(a)''.
4. In Sec. 226.6:
a. Remove paragraph (b) introductory text and revise paragraphs
(b)(1) through (3) and (b)(4)(i);
b1. Amend paragraph (b)(4)(ii) introductory text by removing the
words ``,except that:'' and adding a period in their place; and by
adding a third sentence.
b2. Remove paragraphs (b)(4)(ii)(A) through (C);
c. Amend paragraph (c)(1)(i) by removing the words ``paragraph (b)
of this section and in Sec. Sec. 226.15(b) and 226.16(b)'' in the
first sentence and adding the citation ``Sec. 226.6a'' in its place;
d. Amend paragraph (c)(1)(ii) introductory text by revising the
first sentence;
e. Amend paragraph (c)(1)(iii)(A)(8) by adding the words ``full
legal names and any other names previously used and'' both after the
phrase ``possess the'' and after the word ``person's'';
f. Amend paragraph (c)(1)(iii)(B)(1)(i) by removing the word
``defer'' and adding the word ``deferred'' in its place;
g. Amend paragraphs (c)(1)(iii)(C) introductory text and
(c)(1)(iii)(C)(1) by removing the words ``the institution's'' each time
they appear and adding the words ``the new institution's'' in their
place ;
h. Amend paragraph (c)(1)(iii)(E) in the last sentence by adding
the words ``full legal names and any other names previously used,''
before the word ``mailing''.
i. Revise paragraph (c)(2);
j. Revise paragraphs (c)(3)(ii) introductory text and
(c)(3)(ii)(A);
k. Redesignate paragraphs (c)(3)(ii)(B) through (c)(3)(ii)(U) as
paragraphs (c)(3)(ii)(C) through (c)(3)(ii)(V) and add new paragraph
(c)(3)(ii)(B);
l. Amend newly redesignated paragraph (c)(3)(ii)(D) by removing the
words ``paragraphs (b)(1)(xviii) and (b)(2)(vii) of this section'' and
adding the citation ``Sec. 226.6a(b)(6)'' in its place;
m. Amend newly redesignated paragraph (c)(3)(ii)(U) by removing the
period at the end of the first sentence and adding ``, as defined in
paragraph (c)(1)(ii)(A) of this section; or'' in its place; and by
removing the second sentence;
n. Amend paragraph (c)(3)(iii)(A)(7) by adding the words ``full
legal names and any other names previously used and the'' before the
word ``date'' each time it appears in the paragraph;
o. Revise paragraph (c)(3)(iii)(B);
p. Amend paragraph (c)(3)(iii)(C)(4) by removing the words
``application denial'' and adding the words ``proposed termination'' in
its place;
q. Amend paragraph (c)(3)(iii)(D) introductory text by removing the
phrase ``institution must renew its application, or its'' and adding
the word ``institution's'' in its place;
r. Revise paragraph (c)(3)(iii)(D)(2);
s. Amend paragraph (c)(3)(iii)(D)(3) by removing the semicolon at
the end of the sentence and adding a period in its place;
t. Amend paragraph (c)(3)(iii)(E)(3) by adding the words ``full
legal names and any other names previously used,'' before the word
``mailing'';
u. Amend paragraph (c)(5)(i)(C)(3) by adding the words ``full legal
names and any other names previously used,'' before the word
``mailing'';
v. Amend the second sentence of paragraph (c)(7)(ii) by removing
the phrase ``paragraphs (b)(1)(xii) and (b)(2)(ii) of this section''
and adding the citation ``Sec. 226.6a(b)(2)'' in its place; removing
the word ``must'' the first time it appears; and removing the words
``or renewing'' between the words ``new'' and ``institution'';
w. Revise the second sentence of paragraph (c)(7)(iii);
x. Amend the first sentence of paragraph (c)(7)(iv)(A) by removing
the phrase ``paragraphs (b)(1)(xii) and (b)(2)(ii) of this section''
and adding the citation ``Sec. 226.6a(b)(2)''in its place; by removing
the word ``must'' the first time it appears; by removing the words ``or
renewing'' between the words ``new'' and ``institution''; and by
removing the citation ``(c)(3)(ii)(B)'' and adding the citation
``(c)(3)(ii)(C)'' in its place;
y. Amend paragraph (c)(7)(iv)(B) by removing the phrase ``Sec.
226.16(b) and paragraphs (b)(1)(xii) and (b)(2)(ii) of this section''
and adding the citation ``Sec. 226.6a(b)(2)'' in its place;
z. Amend paragraph (c)(7)(C) by removing the phrase ``Sec.
226.16(b) and paragraphs (b)(1)(xii) and (b)(2)(ii) of this section''
and adding the citation ``Sec. 226.6a(b)(2)'' in its place;
aa. Amend paragraph (c)(8)(i)(B) by removing the word ``names'' and
adding the words ``full legal names and any other names previously
used'' in its place;
bb. Amend paragraph (c)(8)(i)(C) by removing the word ``names'' and
adding the words ``full legal names and any other names previously
used'' in its place;
cc. Amend paragraph (c)(8)(ii) by removing the word ``name'' and
adding the words ``full legal names and any other names previously
used'' in its place;
dd. Revise paragraph (f);
ee. Revise paragraph (k)(2)(i);
ff. Amend paragraph (k)(2)(iii) by removing the citation
``(c)(2)(iii)(C),'' and removing the words ``renewing institutions,'';
gg. Amend paragraph (k)(2)(iv) by removing the citation
``(c)(2)(iii)(C),'' and ``, renewing,'';
hh. Amend paragraph (k)(3)(ii) by removing the citation
``(c)(2)(iii)(A),''; removing ``, renewing,''; and removing the word
``participating'' the last time it appears;
ii. Amend paragraph (k)(3)(iv) by removing the citation
``(c)(2)(iii)(E),'' and removing ``, renewing,'';
jj. Revise paragraph (k)(9);
kk. Amend paragraph (k)(10)(iii) by removing the words ``denial of
a renewing institution's application,'' and removing the citation
``(c)(2)(iii)(D),'';
ll. Amend paragraph (m)(3), by redesignating paragraphs (m)(3)(vii)
through (xii) as paragraphs (viii) through (xiii), respectively;
mm. Add new paragraph (m)(3)(vii);
nn. Amend newly redesignated paragraph (m)(3)(ix) by removing the
semicolon and adding at the end, the words ``, including whether the
timing of its facility reviews was varied and unpredictable, as
required by Sec. 226.16(d)(4)(iii);''; and
oo. Revise paragraph (p).
The revisions and additions read as follows:
Sec. 226.6 State agency administrative responsibilities.
* * * * *
(b) Program applications and agreements. (1) Application
requirements for new institutions. Each State agency must establish
application review procedures, as described in Sec. 226.6a, to
determine the eligibility of new 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.
(2) Information submission requirements for renewing institutions.
Each State agency must establish renewal information review procedures,
as described in Sec. 226.6b, to determine the continued eligibility of
renewing institutions.
(3) State agency notification requirements. (i) Any new institution
applying for participation in the
[[Page 21029]]
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 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.
(ii) Any renewing institution must be provided written notification
indicating whether it has completely and sufficiently met all renewal
information requirements within 30 days of the submission of renewal
information.
(4) * * *
(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 a renewing
institution to comply with the information submission requirements and
related provisions of Sec. 226.6b.
(ii) * * * 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.
* * * * *
(c) * * *
(1) * * *
(ii) * * * The list of serious deficiencies is not identical for
each category of institution (new or participating) because the type of
information likely to be available to the State agency is different for
new and participating institutions.* * *
* * * * *
(2) Insufficient renewal information submissions. If an institution
submits renewal information that is incomplete, deficient, unapprovable
or contains false information, this is considered a serious deficiency,
and the State agency should follow the procedures for serious
deficiencies committed by participating institutions outlined in
paragraph (c)(3)(iii) of this section.
(3) * * *
(ii) List of serious deficiencies for participating institutions.
The list of serious deficiencies is not identical for each category of
institution (new or participating) because the type of information
likely to be available to the State agency is different for new and
participating institutions. Serious deficiencies for participating
institutions are:
(A) Submission of false information on the institution's
application or in its annual renewal submission, 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, as defined in
paragraph (c)(1)(ii)(A) of this section.
(B) Failure to provide complete, adequate, or approvable
information as part of the information submission process for renewing
institutions;
* * * * *
(iii) * * *
(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 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 temporarily deferred
its serious deficiency determination.
(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; and
(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.
(3) If the State agency initially determines that the institution's
corrective action is complete, but later determines that the serious
deficiency(ies) has recurred, the State agency must move immediately to
issue a notice of intent to terminate and disqualify the institution,
in accordance with paragraph (c)(2)(iii)(C) of this section.
* * * * *
(D) * * *
(2) During this period, the State agency must base administrative
payments on the formula set forth in Sec. 226.12(a); and
* * * * *
(7) * * *
(iii) * * * As noted in Sec. 226.6a(b)(2), a State agency is
prohibited from approving an application submitted by a sponsoring
organization on behalf of a sponsored facility, and either the facility
or any of its principals is on the National disqualified list.
* * * * *
(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.
Each State agency must:
(1) Annually 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;
(2) Annually 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;
(3) Annually require each institution to issue a media release,
unless the State agency has issued a Statewide media release on behalf
of all its institutions;
(4) Comply with the following requirements for tiering of day care
homes:
(i) Coordinate with the State agency that administers the National
School Lunch Program (the NSLP State agency) to ensure the receipt of a
list of 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 schools to sponsoring
organizations of day care homes by February 15th 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.
(ii) 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).
(iii) 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).
(iv) The State agency must provide all sponsoring organizations of
day care homes in the State with a listing of State-funded programs,
participation in which by a parent or child will qualify a meal served
to a child in a tier II home for the tier I rate of reimbursement.
[[Page 21030]]
(v) The State agency must require each sponsoring organization of
day care homes to submit to the State agency a list of day care home
providers receiving tier I benefits on the basis of their participation
in the SNAP. Within 30 days of receiving this list, the State agency
will provide this list to the State agency responsible for the
administration of the SNAP.
(vi) 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 are 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 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.
(5) Comply with the following requirements for determining the
eligibility of at-risk afterschool care centers:
(i) 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.
(ii) The State agency must determine the area eligibility for each
independent at-risk afterschool care center and each sponsored at-risk
afterschool center based on the documentation submitted by the
sponsoring organization in accordance with Sec. 226.15(g). The State
agency must use the most recent data available, as described in
paragraph (f)(5)(i) of this section. 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. 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 not routinely require annual redeterminations of area
eligibility based on updated school data during the five-year period.
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) The State agency must determine whether the afterschool care
programs of at-risk afterschool care centers meet the at-risk
eligibility requirements of Sec. 226.17a(b) before the centers begin
participating in the Program.
(iv) The State agency must determine whether institutions already
participating as at-risk afterschool care centers continue to meet the
eligibility requirements, described in Sec. 226.17a(b).
(6) 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.
(7) At intervals and in a manner specified by the State agency, but
not more frequently than annually, the State agency may:
(i) 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--Child and Adult Care Food Program''), and parts 3015, 3016,
and 3019 of this title and applicable Office of Management and Budget
circulars;
(ii) Request institutions to report their commodity preference;
(iii) Require a private nonprofit institution to submit evidence of
tax exempt status in accordance with Sec. 226.15(a);
(iv) Require for-profit institutions to submit documentation on
behalf of their centers of:
(A) Eligibility of at least 25 percent of children in care
(enrolled or licensed capacity, whichever is less) for free or reduced-
price meals; or
(B) 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.
(v) 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;
(vi) 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
(vii) 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.
* * * * *
(k) * * *
(2) * * *
(i) Application denial. Denial of a new institution's application
for participation (see Sec. 226.6a, for State agency review of an
institution's application, and paragraph (c)(1) of this section, for
State agency denial of a new institution's application);
* * * * *
(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 (refer
to paragraphs (c)(1)(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 (refer to Sec. 226.6a(b)(2));
(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 (refer to paragraph (c)(3)(ii)(T) of
this section and Sec. 226.6a(b)(3)); or
(iv) The institution, one of its sponsored facilities, or one of
the
[[Page 21031]]
principals of the institution or its facilities has been convicted for
any activity that indicates a lack of business integrity (refer to
paragraph (c)(3)(ii)(U) of this section and Sec. 226.6a(b)(4)).
* * * * *
(m) * * *
(3) * * *
(vii) Compliance with the requirements for submitting and ensuring
the accuracy of the annual renewal information;
* * * * *
(p) Sponsoring organization agreement. (1) Each State agency shall
develop and provide for the use of a standard form of written permanent
agreement between each sponsoring organization and the day care homes
or unaffiliated child care centers participating in the Program under
such organization. The agreement shall specify the rights and
responsibilities of both parties. The State agency may, at the request
of the sponsor, approve an agreement developed by the sponsor. Nothing
in this paragraph 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).
(2) 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.
* * * * *
5. Add Sec. Sec. 226.6a and 226.6b to read as follows:
Sec. 226.6a State agency application requirements for new
institutions.
(a) Application procedures for new institutions. Each State agency
must establish application procedures to determine the eligibility of
new institutions under this part. For new private nonprofit and for-
profit 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 the institution's
ability to manage the Program. In addition, the State agency's
application review procedures must ensure that the institution complies
with the provisions in this section.
(b) Institution application requirements. The State agency's
application review procedures must ensure that the following
information is included in a new institution's application:
(1) Budget. The State agency must review and approve each
institution's budget. The budget must demonstrate the institution's
ability to manage Program funds in accordance with Sec. 226.7, FNS
Instruction 796-2, (``Financial Management--Child and Adult Care Food
Program''), parts 3015, 3016, and 3019 of this title, and applicable
Office of Management and Budget circulars. If the institution does not
intend to use non-CACFP funds to support any required CACFP functions,
the institution's budget must identify a source of non-Program funds
that could be used to pay overclaims or other unallowable costs. If the
institution intends to use any non-Program resources to meet CACFP
requirements, these non-Program funds should be accounted for in the
institution's budget, and the institution's budget must identify a
source of non-Program funds that could be used to pay overclaims or
other unallowable costs. Other information that must be in the budget
includes:
(i) For sponsors, projected CACFP administrative earnings and
expenses.
(ii) For sponsoring organizations of centers, 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
be lower than that estimated in its administrative budget, the
sponsoring organization must amend its administrative budget to stay
within 15 percent of meal reimbursements estimated or actually earned
during the budget year, unless the State agency grants a waiver in
accordance with Sec. 226.7(g)(1). Failure to do so will result in
appropriate fiscal action in accordance with Sec. 226.14(a).
(2) Presence on the National disqualified list. If an institution
or one of its principals is on the National disqualified list and
submits an application, the State agency may not approve 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 may not approve
the application. In accordance with Sec. 226.6(k)(3)(vii), in this
circumstance, the State agency's refusal to consider the application is
not subject to administrative review.
(3) Ineligibility for other publicly funded programs. (i) 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.
(ii) State agencies must collect from institutions:
(A) A statement listing the publicly funded programs in which the
institution and its principals have participated in the past seven
years; and
(B) 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
(C) 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.
(iii) 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.
(4) Information on criminal convictions. (i) A State agency is
prohibited from approving an institution's application if any of the
institution's principals have been convicted of any activity during the
past seven years that indicated a lack of business integrity, as
defined in Sec. 226.6(c)(1)(ii)(A); and
(ii) State agencies must collect from institutions a certification
that neither the institution nor any of its principals have been
convicted of any activity during the past seven years that indicated a
lack of business integrity, as defined in Sec. 226.6(c)(1)(ii)(A);
(5) Certification of truth of applications and submission of names
and addresses. State agencies must collect from institutions a
certification that all information on the application is true and
correct, along with the full legal names and any other names previously
used, mailing address, and date of birth of the institution's executive
director and chairman of the board of directors or, in the case of a
for-profit center that does not have an
[[Page 21032]]
executive director or is not required to have a board of directors, the
owner of the for-profit center;
(6) Compliance with performance standards. State agencies must
collect from each new institution, 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. In ensuring compliance
with these performance standards, the State agency should use its
discretion in determining whether the institution's application, in
conjunction with its past performance in CACFP, establishes to the
State agency's satisfaction that the institution meets the following
performance standards.
(i) 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--Child and Adult Care Food Program''), and parts 3015, 3016,
and 3019 of this title. To demonstrate financial viability, the new
institution must document that it meets the following criteria:
(A) Description of need and 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 (c)(6) of
this section. A new sponsoring organization must demonstrate that it
will use appropriate practices for recruiting facilities, consistent
with Sec. 226.6(p) and any State agency requirements;
(B) Fiscal resources and financial history. A new institution must
demonstrate that it has adequate financial resources to operate CACFP
on a daily basis, has adequate sources of funds to continue to pay
employees and suppliers during periods of temporary interruptions in
Program payments and/or to pay debts when fiscal claims have been
assessed against the institution, and can document financial viability
(for example, through audits, financial statements, etc.); and
(C) Budgets. Costs in the institution's budget must be necessary,
reasonable, allowable, and appropriately documented;
(ii) 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:
(A) Has an adequate number and type of qualified staff to ensure
the operation of the Program in accordance with this part;
(B) 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 (c)(1) of this section; and
(C) 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
(iii) 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:
(A) Governing board of directors. Has adequate oversight of the
Program by an independent governing board of directors as defined at
Sec. 226.2;
(B) Fiscal accountability. Has a financial system with management
controls specified in writing. For new sponsoring organizations, these
written operational policies must assure:
(1) Fiscal integrity and accountability for all funds and property
received, held, and disbursed;
(2) The integrity and accountability of all expenses incurred;
(3) That claims will be processed accurately, and in a timely
manner;
(4) That funds and property are properly safeguarded and used, and
expenses incurred, for authorized Program purposes; and
(5) That a system of safeguards and controls is in place to prevent
and detect improper financial activities by employees;
(C) 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;
(D) Sponsoring organization operations. If a new sponsoring
organization, documents in its management plan that it will:
(1) 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);
(2) Perform monitoring in accordance with Sec. 226.16(d)(4), to
ensure that sponsored facilities accountably and appropriately operate
the Program;
(3) If a sponsor of day care homes, accurately classify day care
homes as tier I or tier II in accordance with Sec. 226.15(f); and
(4) Have a system in place to ensure that administrative costs
funded from Program reimbursements do not exceed regulatory limits set
forth in Sec. Sec. 226.6a(b)(1) and 226.12(a).
(E) 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:
(1) Provide meals that meet the meal patterns set forth in Sec.
226.20;
(2) Comply with licensing or approval requirements set forth in
Sec. 226.6(d);
(3) Have a food service that complies with applicable State and
local health and sanitation requirements;
(4) Comply with civil rights requirements;
(5) Maintain complete and appropriate records on file; and
(6) Claim reimbursement only for eligible meals.
(7) Nondiscrimination statement. Institutions must submit their
nondiscrimination policy statement and a media release, unless the
State agency has issued a Statewide media release on behalf of all
institutions;
(8) Documentation of tax-exempt status. All private nonprofit
institutions must document their tax-exempt status; and
(9) Preference for commodities or cash-in-lieu of commodities.
Institutions must state their preference to receive
[[Page 21033]]
commodities or cash-in-lieu of commodities.
(c) Sponsoring organization application requirements. In addition
to the application requirements contained in paragraph (b) of this
section, the State agency's application review procedures must ensure
that the following information is included in a new sponsoring
organization's application:
(1) Management plan. The State agency must establish factors,
consistent with this section, 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. State agencies must collect from sponsoring organizations a
complete management plan that includes:
(i) Detailed information on the organization's management and
administrative structure;
(ii) A list or description of the staff assigned to Program
monitoring. Each 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. 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;
(iii) The procedures to be used by the organization to administer
the Program in, and disburse payments to, the child care facilities
under its sponsorship;
(iv) For sponsoring organizations of 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; and
(v) Any additional information necessary to document the sponsoring
organization's compliance with the performance standards set forth at
paragraph (b)(6) of this section.
(2) Outside employment policy. State agencies must collect from
sponsoring organizations 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. The policy will be effective unless disapproved
by the State agency;
(3) Bond. Sponsoring organizations 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;
(4) Day care home enrollment information. State agencies must
collect from sponsoring organizations of day care homes current
information on:
(i) The total number of children enrolled in all homes in the
sponsorship;
(ii) 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;
(iii) The total number of tier I and tier II day care homes that it
sponsors;
(iv) The total number of children enrolled in tier I day care
homes;
(v) The total number of children enrolled in tier II day care
homes; and
(vi) The total number of children in tier II day care homes that
have been identified as eligible for free or reduced-price meals;
(5) Facility lists. The State agency must collect from each
sponsoring organization a list of all their applicant day care homes,
child care centers, outside-school-hours-care centers, at-risk
afterschool care centers, and adult day care centers;
(6) Providing benefits to unserved facilities or participants. (i)
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
(ii) Documentation. The State agency must collect from the new
sponsoring organization 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;
(7) Notice to parents. The State agency must collect 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;
(8) Serious deficiency procedures. If the sponsoring organization
chooses to establish procedures for determining a day care home
seriously deficient that supplement the procedures in paragraph Sec.
226.16(l), the State agency must collect a copy of those supplemental
procedures in the application. 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), the State agency must collect a copy of the
sponsoring organization's administrative review procedures. The
sponsoring organization's supplemental serious deficiency and
administrative review procedures must comply with Sec. Sec. 226.16(l)
and 226.6(l);
(9) Facility applications. The State agency must ensure collection
and review of the following information for every sponsored facility:
(i) An application for participation for each child care and adult
day care facility accompanied by all necessary supporting
documentation;
(ii) Timely information concerning the eligibility status of child
care and adult day care facilities (such as licensing or approval
actions);
(iii) For sponsoring organizations of day care homes, the full
legal names and any other names previously used, mailing address, and
date of birth of each provider;
(iv) Documentation that all day care homes and sponsored centers
meet Program licensing or approval requirements; and
(v) The State agency must ensure that no facilities are
participating under more than one sponsoring organization; and
(10) Disclosure of potential conflicts of interest. The State
agency must require sponsoring organizations to disclose any less-than-
arms-length transactions in the operation of CACFP that are anticipated
in the upcoming year. The State agency approval of such transactions
must be consistent with FNS Instruction 796-2 (``Financial
[[Page 21034]]
Management--Child and Adult Care Food Program''). Sponsoring
organizations also must disclose to the State agency any other
potential conflicts of interest, such as relationships among officers,
board members, and employees.
(d) Application requirements for independent and sponsored centers.
State agencies must obtain and review the following additional
information from centers:
(1) Participant eligibility information. State agencies must
collect current information on the number of enrolled participants
eligible for free, reduced-price and paid meals;
(2) Documentation of licensing/approval. State agencies must
collect documentation demonstrating that each center meets Program
licensing or approval requirements;
(3) Documentation of for-profit center eligibility. State agencies
must collect documentation that each for-profit center meets the
definition set forth in Sec. 226.2, For-profit center; and
(4) At-risk afterschool care centers. In addition to the general
CACFP application requirements, State agencies must collect
documentation from at-risk institutions demonstrating that each at-risk
afterschool care center meets the program eligibility requirements in
Sec. Sec. 226.17a(a) and 226.17a(b), and sponsoring organizations must
submit documentation that each sponsored at-risk afterschool care
center meets the area eligibility requirements in Sec. 226.17a(f).
Sec. 226.6b State agency annual information submission requirements
for renewing institutions.
(a) Annual information submission requirements for renewing
institutions. Each State agency must establish annual information
submission procedures to confirm the continued eligibility of renewing
institutions under this part. Renewing institutions must not be
required to submit a free and reduced-price policy statement or a
nondiscrimination statement unless substantive changes are made to
either statement. In addition, the State agency's review procedures
must ensure that institutions annually submit information or certify
that certain information is still true based on the requirements of
this section. For information that must be certified, any new changes
made in the past year and not previously reported to the State agency
must be updated in the renewal information submission. Any additional
information submitted in the renewal must be certified by the
institution to be true. This section contains the information that must
be submitted, certified or updated annually.
(b) Eligibility certification for institutions. The State agency
must ensure that all renewing institutions certify the following:
(1) Presence on National disqualified list. The State agency must
ensure that renewing institutions certify that neither the institution
nor its principals are on the National disqualified list. The State
agency must also ensure that renewing sponsoring organizations certify
that no sponsored facility or facility principal is on the National
disqualified list. The State agency must compare the institution's
certification with the National disqualified list to ensure its
accuracy at the time of renewal;
(2) Ineligibility for other publicly funded programs. The State
agency must ensure that renewing institutions submit a list of the
publicly funded programs in which the institution and its principals
have participated in the past seven years that have not been previously
reported to the State agency. Institutions must certify that the
institution and the institution's principals have not been declared
ineligible for any other publicly funded program by reason of violating
that program's requirements in the past seven years. In lieu of
certification, if not previously submitted, the institution may submit
documentation that the institution or the principal previously declared
ineligible has been fully reinstated in, or determined eligible for,
that program and has repaid any debts owed. 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;
(3) Information on criminal convictions. The State agency must
ensure that renewing institutions certify that the institution's
principals have not been convicted of any activity that occurred during
the past seven years and that indicates a lack of business integrity,
as defined in Sec. 226.6(c)(1)(ii)(A);
(4) Submission of names and addresses. The State agency must ensure
that renewing institutions submit a certification that the full legal
names and any other names previously used, mailing address, and date of
birth of the institution's executive director and chairman of the board
of directors or, in the case of a for-profit center that does not have
an executive director or is not required to have a board of directors,
the owner of the for-profit center;
(5) Compliance with performance standards. The State agency must
ensure that each renewing institution certifies that it is still in
compliance with the performance standards described in Sec.
226.6a(b)(6), meaning it is financially viable, is administratively
capable of operating the Program, and has internal controls in effect
to ensure accountability;
(6) Licensing. The State agency must ensure that each independent
center certifies that its licensing or approval status is up-to-date
and that it continues to meet the licensing requirements outlined in
Sec. Sec. 226.6(d) and (e). Sponsoring organizations must certify that
the licensing/approval status of their facilities is up-to-date and
that they continue to meet the licensing requirements outlined in
Sec. Sec. 226.6(d) and (e). If the independent center or facility has
a new license not previously on file with the State agency, a copy must
be submitted unless the State agency has other means of confirming the
licensing or approval status of any independent center or facility
providing care; and
(7) At-risk information. The State agency must ensure that
independent at-risk afterschool care centers or sponsoring
organizations of at-risk afterschool care centers certify that they
still meet the requirements of Sec. 226.17a(b). 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)(5)(ii), State agencies must determine
the area eligibility of each independent at-risk afterschool care
center that is already participating in the Program.
(c) Administrative budget submission for sponsoring organizations.
The State agency must ensure that renewing sponsoring organizations
submit an administrative budget for the upcoming year with sufficiently
detailed information concerning projected CACFP administrative earnings
and expenses, as well as other non-Program funds to be used in Program
administration, 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
[[Page 21035]]
requirements, FNS Instruction 796-2, (``Financial Management--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)(1). For sponsoring
organizations of day care homes seeking to carry over administrative
funds in accordance with Sec. 226.12(a)(3), the budget must include an
estimate of requested administrative fund carryover amounts and a
description of the proposed purpose(s) for which those funds will be
obligated or expended.
(d) Eligibility certification for sponsoring organizations. In
addition to the certification requirements in paragraph (b) of this
section, the State agency must ensure that renewing sponsoring
organizations certify the following:
(1) Management plan. The State agency must ensure that renewing
sponsoring organizations certify that the sponsor has reviewed its
current management plan on file with the State agency and that it is
complete and up-to-date. If the management plan has changed, the
sponsor must submit updates that meet the requirements of Sec.
226.6a(c)(1). The State agency must establish factors, consistent with
Sec. 226.6a(c)(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 annual 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.
226.6a(c)(1) and the factors the State agency has established.
(2) Outside employment policy. The State agency must ensure that
renewing sponsoring organizations certify that the outside employment
policy most recently submitted to the State agency remains current and
in effect or the sponsor must submit an updated outside employment
policy at the time of renewal. The policy must restrict other
employment by employees that interferes with an employee's performance
of Program-related duties and responsibilities, including outside
employment that constitutes a real or apparent conflict of interest.
(3) Facility lists. The State agency must ensure that each
sponsoring organization certifies that the list of all of their
applicant day care homes, child care centers, outside-school-hours care
centers, at-risk afterschool care centers, and adult day care centers
on file with the State agency is current and up-to-date.
(4) Facility training. The State agency must ensure that renewing
sponsoring organizations certify that all facilities under their
sponsorships have adhered to the training requirements set forth in
Program regulations.
(5) Disclosure of potential conflicts of interest. The State agency
must ensure that sponsoring organizations certify that no unreported
less-than-arms-length transactions or any other potential conflicts of
interest have occurred in the last year and disclose any that are
anticipated in the upcoming year. The State agency approval of
anticipated less-than-arms-length transactions must be consistent with
FNS Instruction 796-2 (``Financial Management--Child and Adult Care
Food Program'').
6. In Sec. 226.7 by revising paragraph (g) and adding a sentence
at the end of paragraph (j) to read as follows:
Sec. 226.7 State agency responsibilities for financial management.
* * * * *
(g) Budget approval. The State agency must review institution
budgets as described in Sec. Sec. 226.6a(b)(1) and 226.6b(c) and must
limit allowable administrative claims by each sponsoring organization
to the administrative costs approved in its budget, except as provided
in this section. The budget must demonstrate the institution's ability
to manage Program funds in accordance with this part, FNS Instruction
796-2 (``Financial Management--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. If the institution does not intend to use non-CACFP funds
to support any required CACFP functions, the institution's budget must
identify a source of non-Program funds that could be used to pay
overclaims or other unallowable costs. If the institution intends to
use any non-Program resources to meet CACFP requirements, these non-
Program funds should be accounted for in the institution's budget, and
the institution's budget must identify a source of non-Program funds
that could be used to pay overclaims or other unallowable costs.
(1) For sponsoring organizations of centers, the State agency is
prohibited from approving the sponsoring organization's administrative
budget, or any amendments to the budget, if the administrative budget
shows the Program will be charged for administrative costs in excess of
15 percent of the meal reimbursements estimated to be earned during the
budget year. However, the State agency may waive this limit if the
sponsoring organization provides justification that it requires Program
funds in excess of 15 percent to pay its administrative costs and if
the State agency is convinced that the institution will have adequate
funding to provide meals meeting the requirements of Sec. 226.20. The
State agency must document all waiver approvals and denials in writing,
and must provide a copy of all such letters to the appropriate FNSRO.
(2) For sponsoring organizations of day care homes seeking to carry
over administrative funds in accordance with Sec. 226.12(a)(3), the
State agency must require the budget to include an estimate of the
requested administrative fund carryover amount and a description of the
proposed purpose(s) for which those funds will be obligated or expended
by the end of the fiscal year following the fiscal year in which they
were received. In approving a carryover request, State agencies must
consider whether the sponsoring organization has a financial management
system that meets Program requirements and is capable of controlling
the custody, documentation and disbursement of carryover funds. As soon
as possible after fiscal year close-out, the State agency must require
sponsoring organizations carrying over administrative funds to submit
an amended budget for State agency review and approval. The amended
budget must identify the amount of administrative funds actually
carried over and describe the purpose(s) for which the carryover funds
have been or will be used.
* * * * *
(j) * * * In addition, each State agency must establish procedures
to recover administrative funds from sponsoring organizations of day
care homes which are not properly payable under FNS Instruction 796-2
(``Financial Management--Child and
[[Page 21036]]
Adult Care Food Program''), are in excess of the 10 percent maximum
carryover amount, or any carryover amounts not expended or obligated by
the end of the fiscal year following the fiscal year in which they were
received.
* * * * *
7. In Sec. 226.9, redesignate paragraphs (c) and (d) as paragraphs
(d) and (e), respectively; and add new paragraph (c) to read as
follows:
Sec. 226.9 Assignment of rates of reimbursement for centers.
* * * * *
(c) If the State agency is allowing the use of claiming percentages
or a blended per-meal rate of reimbursement as described in paragraph
(b) of this section, the State agency must require centers to submit
current eligibility information on enrolled participants, in order to
calculate a blended rate or claiming percentage.
* * * * *
Sec. 226.10 [Amended]
8. In Sec. 226.10, amend paragraph (a) by removing the
citation``Sec. 226.6(f)(3)(iv)(F)'' in the first sentence and adding
the citation ``Sec. 226.6(f)(7)(vi)'' in its place.
9. In Sec. 226.12, revise paragraph (a) to read as follows:
Sec. 226.12 Administrative payments to sponsoring organizations for
day care homes.
(a) General. Sponsoring organizations of day care homes receive
payments for administrative costs, subject to the following conditions:
(1) Sponsoring organizations shall receive reimbursement for the
administrative costs of the sponsoring organization in an amount that
is not less than the product obtained each month by multiplying:
(i) The number of day care homes of the sponsoring organization
submitting a claim for reimbursement during the month, by
(ii) The appropriate administrative rate(s) announced annually in
the Federal Register.
(2) FNS determines these administrative reimbursement rates by
annually adjusting the following base administrative rates as set forth
in Sec. 226.4(i):
(i) Initial 50 day care homes, 42 dollars;
(ii) Next 150 day care homes, 32 dollars;
(iii) Next 800 day care homes, 25 dollars;
(iv) Additional day care homes, 22 dollars.
(3) With State agency approval, a sponsoring organization may carry
over a maximum of 10 percent of administrative funds received under
paragraph (a)(1) of this section for use in the following fiscal year.
If such funds are not obligated or expended in the following fiscal
year, they must be returned to the State agency in accordance with
Sec. 226.7(j).
(4) State agencies must recover any administrative funds not
properly payable in accordance with FNS Instruction 796-2 (``Financial
Management--Child and Adult Care Food Program'').
* * * * *
10. In Sec. 226.15:
a. Revise paragraphs (b) and (e)(1); and
b. Amend paragraph (g) by removing ``Sec. 226.6(f)(1)(ix)'' in the
last sentence and adding ``Sec. 226.6(f)(5)'' in its place.
The revisions read as follows:
Sec. 226.15 Institution provisions.
* * * * *
(b) New applications and renewals. Each new institution must submit
to the State agency with its application all information required for
its approval as set forth in Sec. 226.6a. 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. 226.6a(b)(6). Renewing
institutions must certify that they are capable of operating the
Program in accordance with this part and as set forth in Sec.
226.6b(b).
* * * * *
(e) * * *
(1) Copies of the initial application, renewal information
submissions, and supporting documents submitted to the State agency;
* * * * *
11. In Sec. 226.16:
a. Revise paragraph (b);
b. Amend paragraph (d) introductory text by removing the words
``paragraph (b)(1) of this section'' in the second sentence and adding
``Sec. 226.6a(c)(1)'' in its place;
c. Amend paragraph (d)(4)(iii)(C) by removing the word ``and'' from
the end of paragraph;
d. Amend paragraph (d)(4)(iii)(D) by removing the period from the
end of the paragraph and adding a semicolon in its place;
e. Add new paragraphs (d)(4)(iii)(E) and (F);
f. Amend paragraph (f) by revising the citation ``Sec.
226.6(b)(4)(ii)(A)'' to read ``Sec. 226.6(b)(4)(ii)'';
g. Revise paragraph (h); and
h. Revise paragraph (l)(2)(vii).
The additions and revisions read as follows:
Sec. 226.16 Sponsoring organization provisions.
* * * * *
(b) Each new 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. 226.6a. The application must demonstrate that the institution
has the administrative and financial capability to operate the Program
in accordance with the Program regulations. Renewing sponsoring
organizations must submit information in accordance with Sec. 226.6b.
* * * * *
(d) * * *
(4) * * *
(iii) * * *
(E) The timing of unannounced reviews must be varied so that they
are unpredictable to the facility; and
(F) All types of meal service must be subject to review and
sponsoring organizations must vary the meal service reviewed.
* * * * *
(h) Sponsoring organizations of child care centers, adult day care
centers, emergency shelters, at-risk afterschool care centers, or
outside-school-hours care centers shall:
(1) Enter into a permanent agreement with unaffiliated sponsored
centers and sponsored day care homes that at a minimum addresses the
requirements set forth in the provisions of Sec. Sec. 226.17, 226.17a,
226.18, 226.19, and 226.19a, as applicable. 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 this part; and
(2) Make payments of program funds 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.
* * * * *
(l) * * *
(2) * * *
(vii) A determination that the day care home has been convicted of
any activity
[[Page 21037]]
that occurred during the past seven years and that indicated a lack of
business integrity, as defined in Sec. 226.6(c)(1)(ii)(A).
* * * * *
12. Section 226.17 is revised to read as follows:
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, 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
CACFP child care standards or any applicable State or local child care
standards to the State agency. At-risk afterschool care centers shall
comply with licensing requirements set forth in Sec. 226.17a(d).
(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. At-
risk afterschool care centers shall comply with limits on daily
reimbursement set forth in Sec. 226.17a(h).
(4) Each child care center participating in the Program shall claim
only the meal types specified in its approved application in accordance
with the meal pattern requirements specified in Sec. 226.20. 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 or meal to school-age children participating
in an at-risk 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 must be addressed 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) Each child care center, except at-risk afterschool 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 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, except at-risk afterschool care
centers, 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.
At-risk afterschool care centers must maintain records as required by
Sec. 226.17a(k).
(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.
(11) Each child care center must permit the Department, the State
agency, and the sponsoring organization, if applicable, to visit the
child care center and review its meal service and records during its
hours of child care operations.
(12) Sponsored child care centers must promptly inform the
sponsoring organization about any change in its licensing or approval
status.
(13) Unaffiliated sponsored child care centers have the right to
receive in a timely manner reimbursement for meals served to eligible
children for which the sponsoring organization has received payment
from the State agency. However, if, with the child care center's
consent, the sponsoring organization will incur costs for the provision
of program foodstuffs or meals on behalf of the center, and subtract
such costs from Program payments to the center, the particulars of this
arrangement shall be specified in the agreement. The sponsoring
organization must not withhold Program payments to any child care
center for any other reason, except that the sponsoring organization
may withhold from the child care center any amounts that the sponsoring
organization has reason to believe are invalid, due to the child care
center having submitted a false or erroneous meal count.
(14) The State agency and an independent child care center have the
right to terminate the agreement for cause or, subject to Sec.
226.6(c), convenience. Sponsoring organizations and unaffiliated
sponsored centers have the right to terminate the agreement for cause
or convenience.
(15) If the State agency has approved a time limit for submission
of meal records by child care centers, child care centers must be in
compliance.
(16) If so instructed by its sponsoring organization, sponsored
child care centers must distribute a copy of the sponsoring
organization's notice to parents.
(c) Unaffiliated sponsored child care centers shall enter into a
written permanent agreement with the sponsoring organization which
specifies the rights and responsibilities of both parties. At a
minimum, the agreement
[[Page 21038]]
shall embody the provisions set forth in paragraph (b) of this section.
(d) Independent child care centers shall enter into a written
permanent agreement with the State agency which specifies the rights
and responsibilities of both parties as required by Sec. 226.6(b)(4).
At a minimum, the agreement shall embody the applicable provisions set
forth in paragraph (b) of this section.
(e) Each child care center shall comply with the recordkeeping
requirements established in Sec. 226.10(d), paragraph (b) of this
section and, if applicable, Sec. 226.15(e). Failure to maintain such
records shall be grounds for the denial of reimbursement.
(f) Nothing in this section shall be construed to limit the ability
to terminate the permanent agreement with an independent or
unaffiliated sponsored center in accordance with this part.
13. In Sec. 226.17a:
a. Revise paragraph (a)(1) introductory text;
b. Remove paragraphs (a)(1)(v), (e), (f), (g), and (l), redesignate
paragraphs (h) through (k) as paragraphs (e) through (h), respectively,
and redesignate paragraphs (m) through (q) as paragraphs (i) through
(m) respectively;
c. Amend paragraph (b)(1)(iv) by removing the words ``paragraph
(i)'' and adding ``paragraph (f)'' in their place;
d. Amend newly redesignated paragraph (f)(3) by removing the words
``, except in cases where the State agency has determined it is most
efficient to incorporate area eligibility decisions into the three-year
application cycle'' from the third sentence; and
e. Add new paragraph (n).
The addition and revision read as follows:
Sec. 226.17a At-risk afterschool care center provisions.
(a) * * *
(1) Eligible organizations. To receive reimbursement for at-risk
afterschool snacks and at-risk afterschool meals, organizations must
meet the criteria below.
* * * * *
(n) Permanent agreements. Unaffiliated sponsored at-risk
afterschool care centers shall enter into a written permanent agreement
with the sponsoring organization which specifies the rights and
responsibilities of both parties. At a minimum, the agreement shall
embody the provisions set forth in Sec. 226.17(b).
14. In Sec. 226.18, revise paragraph (b)(12) as follows:
Sec. 226.18 Day care home provisions.
* * * * *
(b) * * *
(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 and the ability of the tier II day care home to assist in
collecting applications from households and transmitting the
applications to the sponsoring organization. However a tier II day care
home may not review the collected applications and sponsoring
organizations may prohibit a tier II day care home from assisting in
collection and transmittal of applications if the day care home does
not comply with the process as described in Sec. 226.23(e)(2)(viii);
* * * * *
15. In Sec. 226.19, add paragraph (d) as follows:
Sec. 226.19 Outside-school-hours care center provisions.
* * * * *
(d) Unaffiliated sponsored outside-school-hours-care centers shall
enter into a written permanent agreement with the sponsoring
organization which specifies the rights and responsibilities of both
parties. At a minimum, the agreement must address the provisions set
forth in Sec. 226.17(b).
16. In Sec. 226.19a, add paragraph (d) as follows:
Sec. 226.19a Adult day care center provisions.
* * * * *
(d) Unaffiliated sponsored adult day care centers shall enter into
a written permanent agreement with the sponsoring organization which
specifies the rights and responsibilities of both parties. At a
minimum, the agreement must address the provisions set forth in Sec.
226.17(b).
17. In Sec. 226.23,
a. Amend paragraph (e)(2)(vi), by removing the word ``and'' from
the end of the paragraph;
b. Amend paragraph (e)(2)(vii)(B), by removing the period and
adding ``; and'' in its place; and
c. Add paragraph (e)(2)(viii).
The addition reads as follows:
Sec. 226.23 Free and reduced-price meals.
* * * * *
(e) * * *
(2) * * *
(viii) If a tier II day care home elects to assist in collecting
and transmitting the applications to the sponsoring organization, it is
the responsibility of the sponsoring organization to establish
procedures to ensure the provider does not review or alter the
application. The household consent form must explain that:
(A) The household is not required to complete the income
eligibility form in order for their children to participate in CACFP;
(B) The household may return the application to either the
sponsoring organization or the day care home provider;
(C) By signing the letter and giving it the day care home provider,
the household has given the day care home provider written consent to
collect and transmit the household's application to the sponsoring
organization; and
(D) The application will not be reviewed by the day care home
provider.
* * * * *
Dated: April 2, 2012.
Robin D. Bailey, Jr.,
Acting Administrator, Food and Nutrition Service.
[FR Doc. 2012-8332 Filed 4-6-12; 8:45 am]
BILLING CODE 3410-30-P